The announced POGO ban, set to be fully implemented by the end of the year, is expected to have the most immediate impact on the Philippines’ property sector, finance professionals told AGB.
In a significant move, Philippine President Ferdinand Marcos Jr. announced an immediate ban on Philippine Offshore Gaming Operators (POGOs) during his third state of the nation address, with operations to cease by December 31st.
This decision comes amidst the country’s growing gaming industry, which currently includes over 40 licensed offshore gaming operators and dozens of illicit gambling hubs, according to the country’s gaming regulator, the Philippine Amusement and Gaming Corporation (PAGCOR).
Juan Paolo Colet, the managing director at investment bank China Bank Capital, noted that while the POGO ban is unlikely to have a significant adverse effect on the overall stock market, its near-term impact will be felt most acutely in the property sector, leading to a selloff in some listed property companies.
“It’s important to remember that all the major real estate players have already limited their exposure to POGOs, so any loss in lease income should not materially affect their earnings outlook or long-term prospects,” Colet noted to AGB.
However, he cautioned that the market will need to absorb the additional supply of office spaces and residential units from POGO tenants and landlords, which could potentially lead to a glut and put downward pressure on real estate rents and prices in certain locations with high POGO exposure.
Meanwhile, Simoun Ung, a finance professional and the President and CEO of OmniPay, offered a more mixed perspective on the economic impact of the POGO ban, with real estate being one of many areas impacted.
For Ung, the economic impact of the POGO ban should “clearly be negative”, leading to “job losses for those employed by POGOs; reduced demand for businesses that cater to POGOs from landlords to restaurants” and an increase in vacancies, especially for offices which have yet to recover from the pandemic lockdown and a decrease in tax revenue from POGO operations.
“In the longer term, the costs associated with POGO operations, including increased crime, corruption and other societal ills may outweigh the short-term economic benefits. This is the justification of the government in the announcement. Nonetheless, I have reservations as this issue is more complex,” the finance expert stated.
Ung noted that land-based casinos will be unaffected by the ban but considered that the “societal costs of increased crime, corruption, and other societal ills associated with gambling” are still present.
“Moreover, if PAGCOR has granted licenses and awarded contracts to the POGOs that extend beyond December 31st 2024, then the ban will negatively impact the Philippines’ ability to attract more foreign investment,” he concluded.
