Following a period of regulatory change, the Philippines’ gaming business is entering ‘a crucial phase’ if it is to maintain its place as a center for large operators.
Keith McDonnell, Director at the KMI Group with a wealth of experience in the Asian market, explained that President Marcos’ decision to outlaw POGOs was well received by politicians and the general public, with the decision receiving a standing ovation during his State of the Nation address in July.
With the rules governing the issuance of POGO licenses originally introduced by former President Rodrigo Duterte, McDonnell emphasized that Marcos believed that licenses were granted too liberally, resulting in POGOs being plagued by a slew of illicit ventures such as money laundering, prostitution, trafficking, kidnapping, scam businesses, and even murder, eventually leading to their demise.
Regarding the sector that Marcos inherited, McDonnell stated: “It caused a lot of issues for Marcos and provided political capital if he addressed them.
Operators try to understand what prohibition means
“Operators have been rushing about since July, attempting to figure out what the prohibition truly means. Some say it is another of those ‘Philippine government’ pronouncements that will never come to fulfillment. However, he stated openly that if significant reforms did not occur, his credibility would suffer.
“I do believe that by the end of the year, all internet gaming licences (IGL’s), including PAGCOR issued POGO’s, will be banned.”
However, McDonnell believes that the existence of tier one providers in the Philippines would not disappear completely.
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“There have been numerous attorneys engaged, and senators have visited various BPO customer service centers in the Philippines. It is my impression that with 95% of the workers being Filipino, Senators are comfortable with the presence of these centers, subject to certain limitations.”
He predicted that if a company has Special Class BPO accreditation or partners with an accredited outsourcing company, operators will be able to continue all aspects of running a gambling business, as long as they have a tier one licence somewhere else in the world that is credible. They also cannot participate in a betting transaction, which must take place in a Tier 1 jurisdiction and employ at least 90-95% of local Filipino labor.”
Nonetheless, given the genuine reasons to prohibit POGOs, due diligence for new BPO certification will be difficult, ensuring that only “good actors” prevail. Working with existing authorized firms is a highly appealing alternative for entrepreneurs. Many legal operators are looking at some really interesting solutions.
POGO licences continues to be enforced
As the restriction on POGO licences continues to be enforced, there is a possibility that the underground market could expand, which McDonnell believes the government must actively monitor.
“Action has already begun against current POGO licensed operators. I’ve seen papers about this. It is not the case that an announcement will be made in July and everything will be completed by the end of year. While an Executive Order outlining what will and will not be permitted is coming in November, a staged approach is underway, with existing POGO license holders being requested to report periodically on what they are doing to ensure they are closed down by December. Meanwhile, other operators have already divided their teams and moved key activities elsewhere to reduce business risk.”
“Others hope that they can retain a lot of their highly educated and experienced workforce in the Philippines by getting special class BPO accreditation or partnering with an outsourcing business that has it” .
While the country undergoes substantial upheaval, PIGO licenses, which allow operators to target the native Philippine market, remain untouched by the current verdict.
McDonnell stated that the decision by President Marcos may result in an increase in the number of PIGO licensing applications as corporations seek to exploit the local knowledgeable workforce pool for additional purposes.
Reflecting on the lessons learned from the failure of POGOs in the Philippines, McDonnell stated that the activities of a few unscrupulous players had tarnished the reputation of the whole sector, which resulted in a standing ovation at the announcement of the ban.
“We are in an industry where you can do things right 99% of the time, but it takes just 1% to leave a stain and it takes a while to get over it.”
In a recent panel discussion in Lisbon and Macau, the speaker mentioned the prospect of new markets emerging in Asia, but little progress has been made.While the area as a whole remains heavily unregulated, with the exception of the Philippines, perhaps these improvements will encourage others to develop an acceptable framework for operators in the future.”
“It is critical that when regulators step in and implement frameworks and taxation, they should not overregulate or overtax. We are now seeing it in the United States, the United Kingdom, and other regulated markets. Regulated enterprises cannot compete with offshore businesses on betting rates, bonuses, or general marketing and Opex if they are required to pay 40 to 50% in taxes.”
“For decades, the Philippines has served as an excellent site for numerous enterprises in our field. In implementing additional procedures to counter the illegal actions of some Internet Gaming License holders, it is envisaged that possibilities for resectable firms would continue to develop while employing thousands of locally knowledgeable and skilled Filipinos.”
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