Online gambling’s huge social costs outweigh ‘minimal’ economic contribution, DEPDev says

By Kenneth Christiane L. Basilio, Reporter

THE PHILIPPINES’ economic planning department on Wednesday expressed its support for either an outright ban of online gambling operations or tighter regulations for the sector, a position that might give lawmakers impetus to crack down on the industry that has come under scrutiny due to its social impact.

The Department of Economy, Planning, and Development (DEPDev) said the electronic gaming industry contributed only about P81.6 billion or 0.37% to real gross domestic product last year, according to a technical brief submitted to a House of Representatives committee and obtained by BusinessWorld.

“Given its minimal contribution to the economy and vis-à-vis the significant social cost, we do support either its complete prohibition or stricter regulation,” DEPDev Director Desiree Joy O. Narvaez told lawmakers at a congressional hearing.

Online gambling has emerged as a growing concern in the Philippines amid rising cases of addiction, prompting lawmakers to file multiple bills in Congress seeking to either ban or tighten its regulation.

“Studies have found that people are more inclined to engage in online gambling due to its high accessibility, affordability, convenience, anonymity and the ability to participate in multiple gaming activities,” according to a DEPDev position paper signed by Economy Secretary Arsenio M. Balisacan.

About 32 million Filipinos —half of the country’s working-age population — gamble online, from 469,000 in 2018, according to government data.

The House Committee on Games and Amusement has yet to decide whether to endorse a full ban on online gambling or pursue stricter regulations, its chairman Cavite Rep. Antonio A. Ferrer said. However, most congressmen favor a total ban, he added.

“At the end of the day, this will be voted on. This is a numbers game,” Mr. Ferrer told reporters after the congressional hearing.

The House Games Committee would likely come up with a technical report that would be the basis of the consolidated bill on proposals that mandate either a total ban or tighter industry regulations before yearend, he said.

The Finance department shared the DEPDev’s support for stricter online gambling regulation while noting potential gains from the sector.

“The DoF (Department of Finance) recognizes the potential economic benefits arising from online gaming or electronic games… provided that the associated economic and social costs are mitigated through very stringent regulations,” Finance department Director Maria Karla L. Espinosa told the same hearing.

The Philippine Amusement and Gaming Corp.’s (PAGCOR) gaming income was at P40.5 billion in the first nine months of the year, Jessa Mariz R. Fernandez, an assistant vice-president at the gaming regulator’s licensing department, said at the hearing.

However, she said PAGCOR’s full-year earnings could fall short of the P60-billion target for this year as it has seen a “sharp” drop in income after the Bangko Sentral ng Pilipinas (BSP) in August ordered its supervised financial institutions, including electronic wallets, to remove all links to gaming or gambling platforms from their online apps.

“We felt a sharp decline in income — up to a 49% drop,” Ms. Fernandez said in Filipino. “One of the main factors we’re looking at is the delinking of the platforms from our payment e-wallets. We also observed a slight decline in the number of new players.”

Meanwhile, PAGCOR reiterated that a total online gambling ban could cause both operators and players to go underground, making it harder for authorities to police the industry.

“Such measures would not eliminate online gambling,” the state gaming regulator said in a position paper obtained by BusinessWorld.

“[It would] instead push players and operators towards unregulated platforms where player protection mechanisms, responsible gaming programs, anti-money laundering safeguards and government revenue contributions are altogether absent,” it added.

PAGCOR recommended that lawmakers remove its power to regulate the online gambling industry if the government moves to ban the industry to ensure the measure won’t have “constitutional infirmities.”

Ronald B. Gustilo, national campaigner for digital advocacy network Digital Pinoys, likewise said that a sweeping online gambling ban could end up encouraging more unregulated activities, noting what has happened following prohibitions on online cockfighting and offshore gaming.

“Up to this day, they are still operating, as if taunting the government if the state can completely eradicate their operations,” he said in a Viber message.

But with the government recognizing the industry’s harmful effects on society, it should clamp down on its operations, Hansley A. Juliano, a political science lecturer at the Ateneo de Manila University, said in a Facebook Messenger chat.

“There’s enough basis to already cast online gambling as a dangerous industry with its socioeconomic costs to the public,” he said.

It would be a “delicate balancing act” for the government to crack down on the industry, which is a massive revenue source that helps fund public social services, said Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp.

“There is a need to better manage the risk of social ills of gambling, especially easier access online, to align with global best practices in managing gambling operations onsite and online, while also taking into account the large government revenues for many years to partly fund for social services,” he said in a Viber message.