PHILIPPINES

POGO sector seen as stabilizing

The outflow of online gambling operators from the Philippines is expected to slow, at least for the time being, following amendments to tax regulations and due to uncertainties in neighbouring jurisdictions.

Taxation of Philippine Offshore Gaming Operators (POGOs) has become a politically contentious issue after legislators sought to squeeze more revenue out of the companies to make up for budget shortfalls caused by the pandemic.

An attempt to impose a 5 percent franchise tax on overall turnover last year was met with howls of protest from the industry, with many choosing to vote with their feet and leaving the country in droves. The tax added to already rising costs of doing business in the Philippines at a time the firms had also been forced to shut up shop due to Covid.

That tax was suspended in January following a petition to the Supreme Court from foreign gaming groups, but swiftly reintroduced in February. This time however, there is a crucial difference. It will now be 5 percent of gross gambling revenue and not total turnover.

“It is more “acceptable” but still ridiculously high,” said Danny Too, general manager of Cherry Interactive. “That is why everything is still very much “negotiable,” though I don’t foresee an immediate exodus of all the POGO operators from the Philippines.”

Too said the House of Representatives has already given its final approval for the new tax and the bill will now be transmitted to the Senate, where it must undergo another three successful readings before being sent to President Rodrigo Duterte for a final signature.

The 5 percent tax is payable to the national government and only applies to master operators and not service providers. The firms will still need to pay all applicable fees and charges to the Philippine Amusement and Gaming Association (PAGCOR).

There is also a 25 percent withholding tax on the income of POGO employees.

The Bureau of Internal Revenue has said it expects tax collections from POGOs to be just PHP3.93 billion this year, which is half the PHP7.18 billion raised in 2020.

BIR Deputy Commissioner Arnel Guballa said this is based on January revenue of PHP327.2 million multiplied by 12 months.

His estimate is more downbeat than that of PAGCOR Chair Andrea Domingo, who at the end of last year predicted POGO revenue would return to 2019 levels by Q2 of this year. She said the situation had stabilized with companies leaving the country and that the regulator was in discussions with four potential new entrants.

The number of POGO license holders that are currently operating is just 33 compared with 61 prior to the Covid crisis, as of February 23, according to PAGCOR’s website.

Philippines-based iGaming consultant Mark Gilbert agreed any further departures will not be due to taxation if the bill goes through in its current form. Though there are still major issues facing the sector.

“A more prevalent issue for POGOs is personnel. As long as the Philippine government continues to restrict foreign access into the country, POGOs cannot fill backlogged positions requiring specific lingual skills, payments experience or customer acquisition background,” he said. “Thus, POGOs are looking at other countries where entry is not as restrictive, such as Dubai or Malaysia, to set up shop.”

Many Mainland Chinese fled the country during the first wave of the pandemic to return to China, which was seen as a more secure location from a health perspective. That said, there is significant uncertainty as to how many workers POGOs are employing and how many of them are foreign nationals.

PAGCOR has reported the number of POGO employees as standing at about 118,000, although Senator Ralph Recto estimates that the number is at least three times that amount at about 470,000. He bases his estimates on surveys of property in Metro Manila and contributions made to the Department of Finance, among others.

POGOs are looking at other countries where entry is not as restrictive, such as Dubai or Malaysia, to set up shop.

The Philippines Inquirer cited Dominique Tutay, Assistant Secretary at the Department of Labor and Employment (DOLE), as saying more than 200,000 Pogo workers have been issued alien working permitsin the last two years.

Another factor slowing the departures from Manila is uncertainty over other potential jurisdictions. February’s coup in Myanmar has significantly changed the outlook for that country’s burgeoning iGaming hubs, while officially online gambling remains banned in Cambodia.

Malaysia is another option that has been actively considered, although ongoing political uncertainty in that country is also clouding its potential and hopes for some kind of regulation in the near term.

As a result, remaining in the Philippines becomes a case of better the devil you know.

Bloomberry says recovery “well underway”

Bloomberry Resorts said its recovery is “well underway” after posting positive EBITDA for Q4 due to strength in the local mass market.

The company, which operates the Solaire Resort & Casino in Manila’s Entertainment City and a property on Jeju in South Korea, posted EBITDA of PHP129.3 million, compared with a loss on that basis of PHP203.7 million the prior quarter.

Total gross gambling revenue at Solaire was PHP5.3 billion, which was down 63 percent from the prior year, but up 22 percent sequentially.

“I am encouraged by our performance in the final quarter of 2020, particularly as we saw domestic mass gaming revenues increase by 75 percent from the previous quarter and EBITDA hitting positive territory,” Chairman and CEO Enrique Razon said.

Universal eyes U.S. listing for Philippines business

Universal Entertainment is planning to test U.S. investor appetite for the Philippines by listing the holding company for its integrated resort business in Manila.

The Japan-listed company said it has taken on multiple advisors in both the U.S. and Japan to help prepare for a listing on either the Nasdaq or the New York Stock Exchange some time in fiscal 2021. Universal, which operates Okada Manila through its Tiger Resort Leisure and Entertainment unit, said that business had been slow over the past year due to Covid-19-mandated restrictions.

However, the group has used the time to cut fixed costs and reinforce marketing, which had been areas of concern.

Jade CEO talks diversification, India and opportunities in the Philippines

Twelve months ago, Jade Entertainment and Gaming Technologies was primarily a land-based gaming supplier, based in the Philippines. Then along came Covid-19, which forced the company to swiftly change tack and reinvent itself over the course of the year.

Jade CEO Joe Pisano told us in a recent interview that it was a choice of changing the way the company worked or shutting up shop.

“Instead of closing the doors we have expanded, both geographically and with our products. We’ve become much more creative. We’ve signed deals with AI companies and are looking at bringing in more AI, both in the land-based and online segments, which will help us to better understand the games and what players want in the future.”

Earlier this year, the company went live with its new India-facing online site. The site has been specifically designed for the local market with the Hindi language and features designed to appeal to the Indian player.

“We have kabaddi, which is a very popular sport, live dealer, virtual and TV games. We cover casinos, sports and soon will also introduce games betting on lotteries, such as Euromillions. We are very excited about it.”

Pisano said the site started in India, but will likely be rolled out in other jurisdictions down the road. Jade chose India as it’s one of the world’s fastest growing gambling markets, with a population of 1.3 billion people with rising income levels.

He decided not to target the Chinese player base, which has for so long been the golden goose, due to a conviction that the market is likely to die out within the next year or so.

“The government is putting measures in place to stop online gambling,” he said, adding that Beijing is able to influence a lot of smaller jurisdictions from taking bets from Chinese players. “We didn’t want to be part of that.”

Moving closer to home, Jade is gearing up to take advantage of the domestic online market in the Philippines under the so-called PIGO licenses. The company currently has a sports book license and is live in Okada Manila.

Over the next few months, it plans to roll out a number of retail sites on the sports betting side.

“As part of the retail offering, we also have what we call “privileged betting,” which allows us to accept bets if a player maintains an account of PHP10,000. Once we identify the player, we can set up an account and he can place bets online.”

The identification process can be via video or other biometrics and Jade is looking into iris recognition technology.

We can take a casino live online within a two-week period.

“Casinos and properties licensed by PAGCOR will be able to apply for an online license and our platform is ready for these companies. We would like to become a service provider to those properties,” he said.

“Our platform is casino ready, it’s live dealer ready and our virtuals are ready, so as they prepare themselves we’ll be ready to go live. We can take a casino live online within a twoweek period. We’re just waiting for PAGCOR to finalize some details.”

“We will then submit our platform to Pagcor for approval. It’s GLI compliant and our sportsbook is too. It’s just a matter of approvals.”

Pisano said he’s a strong believer in the convergence between land-based and online gaming. “I still strongly believe we are one industry,” he said.

Another product Jade is venturing into is cock fighting. Known as Sabong in the Philippines, the practice is hugely popular and viewed almost as a national sport. Jade has signed exclusive rights with some of the largest event organizers in the country and will provide the screens, call the games and publish results on its site.

At present, the PIGO sector is waiting for PAGCOR to dot the i’s and cross the t’s on the relevant regulation. It’s a slow process, but once the approvals are in place, Pisano sees “incredible opportunities.”