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Philippines: POGO crackdown to affect businesses
MANILA, Philippines — Clothing retail, food and other commercial businesses that have benefitted from the growing offshore gaming industry in the country are likely to take a hit from the ongoing crackdown on the controversial sector, analysts told The STAR.
This developed as property giants assured their investors that their exposure to the Philippine Offshore Gaming Operations (POGO) industry is limited and would unlikely have a significant impact on them if regulators suddenly decide to shut down offshore gaming operations in the country.
Michael Ricafort, chief economist at Yuchengco-owned Rizal Commercial Banking Corp. said allied industries would be affected. “Other allied industries/businesses/individuals that benefit from POGOs and POGO workers would also be adversely affected in terms of reduced sales, revenues, and net income,” he said.
Thus, Ricafort said this could also result in a slowdown in the economy. “This could also somewhat cause some reduction in the overall economic growth especially if there is an outright or tougher ban on illegal Chinese online gaming activities,” Ricafort said.
He said that the recent crackdown on POGO and other recent developments could slow down the growth of the industry.
“Recent developments on POGOs such as government’s suspension of new applications for POGOs, any further crackdown on illegal Chinese online gaming activities as discussed by the Chinese and Philippine governments, intensified collecting of taxes from POGOs/POGO workers, and the proposed transfer of POGO operations to self-contained hubs, could all somewhat curb the fast growth of POGOs especially over the past two to three years,” he said.
According to Ricafort, it may also temper the relatively faster increase in rental or lease rates and prices of capital values especially if there is a gradual ban on illegal Chinese online gaming activities.
In all, Ricafort said it would reduce the attractiveness of the country as destination for POGO operations and could reduce the influx of more POGO workers that partly pushed higher the prices and lease rates in the local real estate market.
Property consultant David Leechiu also said that related industries could be negatively affected by the possible ban on POGOs.
“Those that will be affected are the convenient stores, restaurants and other stores that have benefitted from the Chinese customers,” Leechiu said.
The landlords or the property giants, he said, have a buffer because they have long-term lease contracts and relatively higher rates for their POGO tenants. This means that property companies have at least a year of assured monthly rental payments even if POGOs suddenly have to pack their bags.
Megaworld, the biggest office landlord, said it won’t be affected by the POGO issue.
“While we are the biggest lessor of office spaces in the Philippines, the POGO issue won’t affect both our office and residential businesses because our exposure remains small and manageable,” Megaworld chief strategy officer Kevin Tan told The STAR.
He also said that Megaworld sales take-up in 2018 up to end-June 2019 amounted to P215 billion, of which sales to Chinese nationals would be about 13 percent.
“The impact of POGO on residential revenues will only happen when we already complete the residential projects taken by POGOs. For those sold to POGOs in 2018, we will see the impact next year. We estimate Chinese contribution to residential sales next year to reach four percent only, or P1.5B billion of the total residential revenue forecast of P40 billion,” he said.
The office space leases today will contribute to leasing revenue by the following year. In 2018, about five percent of total rental income came from POGOs which accounted for seven percent of total rental gross leasable area, Megaworld said.
Megaworld shares dropped to P4.80 per share on Friday, down 0.80 percent on POGO-related jitters.
This after China urged the Philippines to ban online gaming.
Source: https://www.philstar.com/business/2019/08/26/1946430/pogo-crackdown-affect-businesses#ic865Zg8JGsywwB3.99