Duterte and the POGO dilemma

By: Bob Herrera-Lim (www.rappler.com)

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Beijing has asked that POGOs be closed, but their departure would in the near term adversely affect the bottom line of several of the Philippines’ largest real estate firms. It’s for President Duterte to save the sector.
When President Rodrigo Duterte visits China this week, he is expected to intercede on behalf of POGOs, which are the Philippine-based backroom operations of online gambling sites that service Chinese players on the mainland.
Beijing has asked that they be closed, but their departure would in the near term adversely affect the bottom line of several of the country’s largest real estate firms. The burden will be on him – unfairly, it must be emphasized – to save the sector.

Fundamentally, the POGOs are in a bind.
Gambling is officially illegal in China, and Chinese officials know that these firms target the mainland and thus skirt the core of the Chinese gambling ban. This makes it difficult for them to formulate policy on POGOs outside of the binary outcomes of tolerance or closure.
But the rise of the POGOs is also a lesson for the Philippine government and industry on how to not disregard the social effects of large flows of migrant workers, whether for temporary employment or otherwise – especially in sectors such as tourism or construction.
POGOs primarily provide marketing, customer service and IT support for online gambling sites, mainly by hiring Chinese employees. The Philippine government estimates that there are about 130,000 of these imported workers in the country, but the number could easily be twice that. POGOs are primarily located in Manila and Makati. They can be found clustered in large condominium developments, residential subdivisions or re-purposed buildings, and are driven around in dedicated staff vehicles.
Under the policy radar
POGOs started taking off around 2016, but for much of the past 3 years have largely flown under the policy radar. This suited the industry. The Philippine Amusement and Gaming Corporation (Pagcor) earned its fees, and real estate developers and property owners benefited from the higher demand. It also meant fewer regulations and less public and media attention.
But this view was too narrow and neglected the political and social dynamics that now drive perceptions of the industry.
When China looks at gambling, it sees mainly social and financial risks. Beijing is averse to people and families losing their savings or falling into debt. It is also likely concerned about the domestic backlash if Chinese workers here become victims of crime and extortion, in much the same way that the treatment of Filipino OFWs can become a national rallying cry.
The Philippine proposal to create POGO hubs may also be generating images of ghettos for its citizens, which is inconsistent with its rise as a global power.
On the financial side, since it cannot officially license gambling, no revenues accrue to the Chinese government, with the money of its citizens leaking into unknown cracks of gaming or corruption, instead of consumption or saving. Beijing may also be worried that the financial infrastructure for online gaming can be used for money laundering or fraud as well.
The belief that POGOs would remain uncontroversial in the Philippines was also fanciful. The large-scale influx of people will always have a social effect.
Impact on communities
Improperly managed, it can trigger nationalism or worse, xenophobia. POGO workers have settled in the densest parts of the metropolis where many people live cheek by jowl and in a country where a large percentage of the population – and even the military – is distrustful of their home country’s geopolitical intentions. Thus, the interaction between the locals and newcomers, or the lack of it, often magnifies perceptions.
Although POGO workers do not take jobs from Filipinos because of the language requirement, this is not the only context for their stay. Their demand for staff housing has driven up housing and rental prices, which is a sore point for Filipino workers or their families wanting to rent or buy near their workplaces.
Until recently, income taxes were not being collected from POGO workers, which stoked a sense of unfairness. And then there are the cultural differences which can become exaggerated. It is unfair to taint Chinese workers or tourists as a whole because of how some of them have behaved, in the same way that our OFWs should not be judged because of the inevitable bad apples.
But in a world of Instagram or Facebook, viral videos of Chinese tourists and POGO workers become the focal point of emotional online discussions. Some of them have bordered on racism.
Addressing these issues needs effort and coordination. Our government has learned to provide cultural and social briefings for OFWs traveling abroad, and our embassies and foreign services officers are primed to respond to conflicts between employers and OFWs in their host countries.
What government needs to do
Pagcor should have encouraged POGOs to be similarly mindful of the potential for cultural conflict. They could have warned against Chinese language-only restaurants, even if they may not be illegal. And they could have worked out a way for POGO workers to pay taxes from the outset, instead of waiting for the Department of Finance to come chasing.
Western foreign investors often engage in community relations to build local ties, but POGOs try as much as they can to insulate themselves from local communities.
Not everything that matters to a local population has to do with economic numbers, but with the sense of fairness and community. – Rappler.com
Bob Herrera-Lim is the Southeast Asia analyst for the New York-based firm Teneo.