The Philippines are known for their beautiful beaches, fascinating underwater worlds, warm hospitality and rich culture. However, it also has a reputation for being a veritable Mecca for offshore gambling providers. Countless companies that market online casinos and digital sports betting internationally - with or without a licence - are based there. The government now wants to put a stop to this by banning Philippine offshore gaming operators. This is a blatant break with previous policy, but there is a catch.

On 22 July 2024, Philippine President Ferdinand Marcos Jr. caused a stir with a sharp State of the Nation address. He declared in no uncertain terms the end of Philippine offshore gaming operators (POGOs), an industry worth billions that has long served as a global hub for online gambling. German Bundesliga clubs also work with these sometimes highly dubious companies - even the current champions Bayer Leverkusen.

According to Executive Order 74 signed on 5 November, the POGOs, which have been described as ‘hotbeds of corruption and criminality’, will be completely shut down by the end of the year. In addition to the actual gambling operators, supporting service providers are also affected - from IT support companies to live casino studios and gaming software providers. The decision is seen as a historic turning point in Philippine economic policy, but also raises serious questions.

The government justifies the move by citing the considerable risks posed by the industry.

  • According to Marcos Jr., POGOs are not only responsible for rising crime rates and social tensions, but also for the country's poor international image.
  • A study by the Philippine Department of Finance backs this up: The disadvantages, including money laundering, human trafficking and rising violence, clearly outweigh the economic benefits of the industry, according to the study.
  • In recent years in particular, the sector has been increasingly associated with illegal activities that could even deter tourism and foreign investment.
  • Last but not least, the Philippines has been on the grey list of the Financial Action Task Force (FATF) for two years. This characterises it as potentially susceptible to money laundering and terrorist financing - a burden that the ban is intended to alleviate.

These are undoubtedly weighty arguments, but unfortunately the implementation of the new directive is not without controversy. Critics criticise the fact that Marcos Jr. is merely enforcing the ban by means of a regulation instead of turning it into a binding law. This would leave loopholes and call into question the long-term legitimacy of the measure, they fear. Incidentally, Ireland recently passed a new gambling law - with pretty tough rules.

Criticism: Why isn't the decree being enshrined in law?

President Ferdinand Marcos Jr. defends his decision to merely implement the ban on POGOs through an executive order as sufficient. According to Marcos, the decree is intended to strengthen public security, promote the rule of law and deter future illegal operations.

However, critics complain that such an order is not legally binding enough. It could allow POGOs to return in a modified form through loopholes. In a statement, Senator Risa Hontiveros, Chair of the Committee for Monitoring POGO Activities, emphasized that the ordinance in its current form leaves important questions unanswered.

The key points of criticism at a glance

  1. Unclear demarcation: According to Hontiveros, key aspects of the ban remain unclear. In particular, this concerns the handling of online gambling that takes place in casinos operated or licensed by the Philippine Gaming Authority PAGCOR. The senator asks whether this means that offshore gambling activities in integrated resorts such as “City of Dreams” or “Fontana” could continue to be permitted.
  2. Loopholes through special economic zones: Of particular concern is the possibility that Special Economic Zones could serve as havens for modified POGO operations. These zones are often subject to less stringent regulations, which creates room for interpretation and potential abuse.
  3. Securing the future: Senator Sherwin Gatchalian calls for further steps to prevent the return of POGOs under a future government. He proposes revising existing laws on the taxation of POGOs to remove any legal basis for the industry.
Marcos dismisses these concerns, arguing that the ban is not just about licensing or location, but targets the entire nature of offshore gambling activity. “It's not about whether they run under PAGCOR or not,” he explained in an interview.

Critics nevertheless remain skeptical as to whether the regulation is sufficient to sustainably regulate the complex structures of the industry without a legal resolution.

How the executive order is to be implemented in practice

Executive Order 74 provides for a comprehensive and phased strategy to completely remove Philippine offshore gaming operators from the country by December 31, 2024. As part of this, specific tools for monitoring, enforcement and mitigating the economic impact have also been enacted. Speaking of which, Switzerland recently reported a new high in blocked foreign casinos of around 2,000 entries.

Regulatory and termination measures:

  • Cessation of new licenses: Application for new licenses or permits for POGOs and related offshore service providers is prohibited with immediate effect.
  • Non-renewal of existing licenses: Licenses already issued may not be renewed, which means that all currently operating POGO activities must cease by the end of the year at the latest.
  • Increased law enforcement: Law enforcement agencies such as the Presidential Anti-Organized Crime Commission (PAOCC), the Philippine Drug Enforcement Agency (PDEA) and the Philippine National Police (PNP) play a central role. In cooperation with the National Bureau of Investigation (NBI), they are to take targeted action against illegal gambling operations.

Protective measures for residential and commercial areas:

A particular focus of the ordinance is the prevention of illegal gambling activities in residential and commercial areas. The Department of Human Settlements and Urban Development (DHSUD) has been tasked with working closely with homeowners associations and property managers to identify and report potentially unauthorized operations at an early stage.

Support for affected workers:

The abolition of the POGO industry affects not only the operators but also their employees - both Filipino and foreign. In order to minimize the economic damage, a special working group has been set up that:

  1. Organized training and retraining programs to qualify laid-off Filipino workers for other industries.
  2. Introduces reintegration measures to help employees find new jobs as quickly as possible.
  3. Provides support networks to ease the transition for affected families and communities.

Economic impact

Although POGOs contributed less than 0.5 percent to the Philippines' gross domestic product by 2022, as reported in the international press, the scale of the employment loss is significant. According to an analysis by the Department of Finance, the operators employed a total of 66,547 people in 2023, including 41,347 foreign employees and 25,200 Filipinos. The government emphasizes that the economic loss caused by POGOs is small and will be offset in the long term by the positive effects of the abolition - such as improved public safety and international reputation.

Conclusion

With Executive Order 74, the Philippines is aiming to make a clear break with its previous role as a center for offshore gambling operators. The decree aims to curb corruption, crime and negative social effects. Overall, the aim is to strengthen public safety and the country's international reputation.

However, critics warn that the lack of a legal basis could massively jeopardize the sustainability of this project. The decision to issue an ordinance instead of a law could have tactical reasons - such as faster implementation and more political flexibility. However, this leaves an increased risk that POGO-like structures will regain a foothold under new pretexts.

The success of the ambitious plan to completely exclude such gambling companies will ultimately depend on how consistently the government pursues the measures and whether more legal clarity is created in the long term.

Interesting complete bans have also been introduced in Europe this year: In Romania, gaming arcades in the countryside have been banned and Prague has banned all gaming machines from the city.

Image source: https://pixabay.com/photos/mockup-typewriter-word-offshore-5285842/

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