ANC HEADSTART INTERVIEW OF SEN. WIN GATCHALIAN WITH KAREN DAVILA ON POGO HEARING AND DEPED BUDGET

Q: I first wanna ask you, you were in that meeting with the Chinese ambassador with Senate President Juan Miguel Zubiri and Senator Robin Padilla. What exactly did he say?

SEN. WIN: It's a simple case of misappreciation and context is very important. When we asked about POGO to the Chinese Ambassador, he explained that in China, there were cases of suicides because of addiction to online gambling. Therefore, the Chinese Law is very strict when it comes to number one, betting online, number two investing in online gambling businesses. And then number three, working in online gambling businesses. And then we went on to say that in order to prevent their citizens from engaging in online gambling businesses, whether working or investing, they implemented a blacklist. And he made an example of Cambodia. So I think the appreciation was not in line with one another. But it's very good that the Chinese Embassy has already clarified this issue. So the issue is now clarified through the official statements of the Embassy.

Q: So Senator, is it fair that the Chinese Ambassador? To what degree was giving a warning?

SEN. WIN: I didn't feel that it was a warning but the context, we have to look at the context, because what we are saying is that there are growing cases of suicides in China, and there are growing cases of people getting very indebted because of online gambling and the context there is they're implementing mechanisms to prevent their citizens from going abroad because a way for their citizens to skip the law is to go abroad, working in POGOs,investing in POGOs, playing online, so that is their concern. And whatever their policy, whatever mechanisms they want to employ, that's their own concern being a sovereign nation. So one of the mechanisms that they were thinking about or implemented in the case of Cambodia is blacklisting. Just to be fair, my appreciation, he never categorically said that the Philippines will be blacklisted anytime soon.

Q: Yes. Okay. So now it is clear. So I'm curious right now, where did it come from that the Philippines is blacklisted? So do you believe that's the part that's lost in translation here?

SEN. WIN: Definitely. Again, it's a simple case of misappreciation, I don't think we should blow this up. Definitely translation is part of the challenge. The challenge, definitely. And, again, there's so many things that were being talked about. It was very important, to be fair, also, the courtesy call was very cordial. It was a courtesy call and the aim of the courtesy call is to strengthen the relationship between the Senate, our country and also China.

Q: All right, now moving forward, given the hearings. I know that you still have to come out with a report but putting, considering the Chinese ambassador's, statements on the effect of POGO and what they've done to Cambodia. Should we heed their warning so to speak, or their concerns about POGO?

SEN. WIN: That's the question I posed to PAGCOR. The first is we have to understand the macro scenario of POGO. Where is POGO going? What is the future of POGO? What are the risks? What are the risks that the country will face when we cultivate POGO? These are the questions that I posed to PAGCOR because we need to understand if POGO is a business that can be sustained. Because right now, if you look at the external policies of China, what's happening in Cambodia, we found out here in ASEAN that it's only in the Philippines that allows POGOs so far, based on our research.

Q: Because Cambodia and Vietnam, tama ba ito Senator, they used to have and then now they banned it?

SEN. WIN: Correct, based on our research, Cambodia used to have a POGO industry, but they banned it. The same with Vietnam, but it's not as big as ours, but they banned it. Cambodia is actually a very good example because they also experience an increase in crime. So, what they did is they also banned POGOs and online gambling businesses. So in other words, we have to look at the industry as a whole. And we found out through the hearing that number one, there's no roadmap, meaning there's no direction for POGOs. And then number two, because of all of these risks, from China, from other countries, the biggest risk is crime. This business is quite unstable and if you have an unstable business, then it's very difficult to predict the growth of the business and where the business is going to. It's also very difficult to promote it because if we promote it and then one day POGO will stop, then we will have massive unemployment that will happen in our country.

Q: But then you've also said that we don't need POGO. This was a statement you had made.

SEN. WIN: Just to give context again. We also found out from the hearing that 50 percent of our total revenues, the revenues that we get here in the Philippines, through the POGO business is from China. So a big chunk, half of the revenues derived by POGO businesses is coming from China. So China plays a very important role. And we also found out that recently, China really cracked down on investing and participating in both POGO businesses, because in their Chinese law, we also did some research that you can be put in jail for three years if you are caught working, investing and participating in POGO. So because of that, this becomes an uncertainty in the POGO industry because a large chunk of your business comes from China.

Q: Okay, but then, based on the hearing, let's talk about the economic impact of POGO. I know that you have David Leechiu in the Senate hearings and he raised concerns on how this would affect the real estate market in the Philippines. And they claim that P19 billion worth of revenues are coming from POGOs, in real estate investments. Is that correct, Senator?

SEN. WIN: From the data that Mr. Leechu submitted to us, we tried to call out the data. Basically, he was saying that P24 billion of direct and indirect revenues will be lost or we have gained P24 billion from POGOs since 2017. It's about 0.13% of our GDP. But we have to also understand that the POGO during its heyday and the POGO now are wildly different. After the pandemic, after the crackdown, and after the soaring of crimes, we saw a big dip in terms of POGO revenues. I'll give you an example. If you compute all taxes, direct taxes from POGOs, also from rent, also from utility. That's about P34 billion that our government gets. This is in 2021. So that's about 0.2% of our GDP. So it's not a sizable amount and that's why my conclusion here, personal conclusion here, if POGO disappears in the Philippines, we won't feel it in the long run, because it's only 0.2% of our GDP. But I will admit that in the short run, in the short term, there will be implications to our real estate industry and most especially to employment because right now POGO employs about 20,000 Filipinos. In the short run we need to find a replacement job for them. The good thing is that 20,000 Filipinos, I found out during the hearing, are also technically inclined, they work in IT, they work in customer service, they have technical jobs, so meron silang skills, they have skills, and those skills can be easily absorbed by the BPO industry. We also found out through research that the BPO industry is growing at 8%. So that's quite fast, and they're employing about 1.5 million Filipinos, Filipinos and foreigners. So in other words, that 20,000 because of their skills that they got from working in service providers in POGOs can be easily absorbed and we will put a lot of emphasis in the transition employment of those 20,000 who will lose their job.

Q: And another issue to consider is diplomacy. Foreign Relations. This is another issue considering those victimized by POGO while they are not Filipinos, they are Chinese nationals who are gambling right outside the country, but then some I think it was Senate President Migz Zubiri said how would we feel if they did E-sabong in China and then our citizens are still gambling when E-sabong is banned?

SEN. WIN: That's why context is very important. That's why I had to lay down the concepts on why the Chinese ambassador mentioned that blacklisting issue. And because in China, there's now a growing concern of Chinese citizens being indebted, Chinese citizens committing suicide because they cannot pay their debts.

Q: Same with E-sabong, right?

SEN. WIN: The same case with e-sabong, and we also found, actually I have some Filipino Chinese friends who texted me, there are also cases of teenagers in China betting on online gambling. So this is a growing social concern for them. So they will also do whatever they can to arrest that growing social concern. That's their prerogative being a sovereign state. They're also doing the same. And during the heyday we're getting a lot of revenue from POGO. Close to about 14 billion in terms of taxes and fees. So that's quite a lot for us considering also that there was a pandemic, we were scrambling for revenues. That's why at that time, we gave our own national necessity priority, meaning to collect revenues. And that's why we enacted that POGO taxation Law. But the thing is, this also came out in the hearing that despite the pandemic, in 2020, 2021, the crime related to POGO increased from 30% to 50% of all kidnap for ransom cases. So imagine that the number of POGO licensees are going down from 60 to 30. But the crimes related to POGO are going up. So in other words, my analysis on this is that the crimes associated with POGO are very difficult to disentangle. And that's probably the nature of POGO because it's banned in China. A lot of these operators who are connected to crime syndicates, also came here to the Philippines because they're the only ones who can operate this type of businesses because they're totally banned in China.

Q: So what do you think Senator happened? I know the PNP reported in the hearing that there have been no crimes related to POGO since September 15. Right. So what do you make of that report?

SEN. WIN: You know naman in our country, kapag mainit people lie low. And they either don't do anything or don't report it because we're conducting hearings regularly. I think that's an aberration to crime reporting, but this is the thing that we found out. We're losing the war against POGO related crimes. Because the PNP reported to us that in the last four years, they investigated 99 POGO related crimes, and we found out that only one was convicted. So out of the 99, close to 100, only one was convicted. That's a measly 1% conviction rate. So kaya lumalakas ang loob ng mga crime syndicate because they know that they will not be convicted, only one out of the 99 was convicted.

Q: Okay, now recently, I know that there are over 3,000 POGO workers who also signed up for police clearance, have you heard about this?

SEN. WIN: That's what we found out from the PNP. I was going to say that that's their initiative because this is the sad part, we found out also that major government agencies are not communicating on a regular basis. I'll give you an example. The licensees of PAGCOR are not given on a regular basis to the PNP so they don't know who the underground POGO and the legitimate POGOs are.

Q: Yeah, General Azubrin admitted that.

SEN. WIN: Correct, on record. And so the PNP took it upon themselves, that, for example, in your area of jurisdiction, you have a lot of POGOs there, they implemented a police clearance mechanism wherein they will issue police clearances to the POGO workers. So that's their own initiative and we have to give credit to the policemen because they're trying to do whatever they can so that peace and order will be maintained in their communities.

Q: But the problem is pwedeng may police clearance sa mga illegal, the POGO operator?

SEN. WIN: They can also issue police clearance to illegal POGOs. They can also issue police clearance to illegal POGO workers, because they don't have the records. This is also a classic case of structural issues. Another thing that we found out is that PAGCOR and BIR are also not talking regularly. In fact, the last time that they formally met was last June and we found out that the declaration of POGO companies to BIR is grossly undervalued. This year, we actually lost 1.9 billion in terms of taxes from POGO because PAGCOR holds the audit for gross gaming revenue. BIR is self declaration, whatever you want to indicate. So we found that underdeclaration is close to about P40 billion. So the revenue that we are collecting by the BIR is grossly undervalued by about P1.9 billion. So there's also tax evasion, because they're supposed to declare truthfully to the BIR.

Q: Shouldn't PAGCOR and BIR be working together?

SEN. WIN: There's actually a mechanism in the law for them to work together. And that's actually a perennial sickness of government agencies that they don't coordinate or they coordinate, kapag may problema na. But in the law, they should sit down together, everyone; the Bureau of Immigration, the PNP, the BIR, PAGCOR so that they can regularly exchange data and update their data, but it's a structural problem. It's definitely a sickness in our country, and that's now affecting government revenues.

Q: Now, let's be fair to those who are operating legally, they may be asking right now. I mean, two days ago, they had a press conference, the Association of POGO workers, I'm sure you've seen that. And then tax paying POGO companies are asking, why go after us? We're paying taxes. There are those that are illegally doing POGO operations, why not run after them? Or they claim now even E-Binggo is not being noticed. Gross bets are reaching billions of pesos, as much as E-sabong at its peak.

SEN. WIN: It can be argued that the whole business model of POGO is unstable. And the reason for that is the revenues that we derive from, the biggest revenue generator for POGO which is China has some policy issues on POGO. So my point there is, if you have an unstable business, you now run the risk of having people who can lose their jobs in the future if that policy will change. I'll give you an example. The BPO industry has been here for the last 20 years. They're growing at around 8% per annum and they are employing 1.5 million employees now and they're projected to grow by to about 10% in the next five to 10 years. I made the comparison because you can see that there's a direction for business process outsourcing. In fact, they want to go much higher in terms of value. So in that case, we can plan, we can encourage people to work in business process outsourcing, we can help them grow employment without running the risk of unemployment in the future. So that's what I meant by unstable business model because we can encourage people to go and work for POGOs and one day we say sorry, nagbago ang policy ng China and then we run the risk of unemployment.

Q: Now you have two sides here, you have some lawmakers that are of course justifying, finding ways to compromise the existence of POGOs in the country. Senate President Juan Miguel Zubiri said yesterday, he said let's face it, the lobby is also strong. That's what he said yesterday, and of course there are lawmakers like yourself and others who feel it's not worth it. Will this be resolved if the President Just makes the decision as you had hoped for, should he just make that decision?

SEN. WIN: The Senate is conducting hearings using data and statistics. So our recommendation will be based on statistics, data, evidence and validated information. And I'm sure the President will do the same. Of course, the crime element is very heavy. That's the social cost. And, unfortunately, looking at the trend, it seems to me that it's very difficult to disentangle the POGO industry and crime. I told you earlier that despite the number of licensees going down in the last two years, the crime rate went up. So it's very difficult to disentangle it and then if you look at the nature of the POGO industries, a lot of them are people who cannot skirt Chinese laws by coming here to the Philippines. So those are the qualities of investors that are coming to the Philippines. Hindi kasi sila maka-operate sa China, so to skirt that, they come here to the Philippines. We want investors who are legitimate, we want investors who are long term, we want investors who are crime free. Those are the investors that we want to attract here to the Philippines.

Q: So I wanted to ask you, would you want the President or are you calling on the President to make a decision? I mean, if you remember former president Duterte, at one point finally decided to end e-sabong. I mean, it was way close to the end of his term, but he did it. So do you believe that it should be the President who will make a decision and you hope for him to do it soon?

SEN. WIN: From the hearing yesterday by Senator Angara, he asks Executive Secretary Bersamin about POGOs. And the way I understand it, the Palace, the Malacanang is looking at this very carefully, studying it also. And they're also looking and listening to the Senate hearings, and they will probably use the Senate hearings as a basis for their decision. So it can go parallel, that while the Senate is conducting its hearings, we will give our recommendations of course to the executive because at the end of the day, they will be the ones implementing it. And the palace is also studying on their own, so it's good that both sides are studying because at the end, we'll arrive at some conclusion but in our case, the way we're conducting our hearings is we're using a lot of data, a lot of statistics and we're getting a lot of evidence because we want to recommend a position that is well grounded on facts and validated information.

Q: Okay, let's move on to another topic quickly. Let's talk about the 2023 budget. The idea of this budget is it's a no additional tax budget, right? In terms of funding services for this budget. What to you is the biggest challenge with the 2023 budget?

SEN. WIN: Well fiscal space will be the biggest challenge Karen, because the challenge there is how to reduce deficit, how to reduce our debt, while not sacrificing social services. Investing in education, continuing to fight pandemic, investing in health. These are the priorities, but at the same time, we're trying to manage our fiscal position by reducing our deficit back to the pre-pandemic levels of about 2 to 3% and also our debt to about 30 to 40%. Of course, it will not happen overnight. But the most important thing here is, there's a plan already. And second, the most important thing is to spend judiciously. There's still a lot of room to reduce expenses. For example, there are some attached agencies there that cannot justify their..

Q: Yeah yeah, Spend judiciously you are the chairman also of the Senate Committee on basic education. The DepEd is asking for 150 million pesos in confidential funds, and some of your colleagues say this is the first. Is that necessary? Does the DepEd Secretary need confidential funds?

SEN. WIN: These are the facts. There are crimes happening in our schools. For example, drugs, abuses, harassment, especially drugs and even human trafficking, we found out that there also cases..

Q: Why does it have to be in confidential funds?

SEN. WIN: The way I understand the process, to apprehend and also to stop all of those crimes is to investigate by gathering information. And the funds that will be used, the funds that will be allocated will be used to gather information. And again we have to put this in context. We're talking about 50,000 schools nationwide, and 23 million students nationwide. So some might be big on face value, but if you look at the entire magnitude of our public school system it's quite big. And it's quite important also to arrest those crimes being perpetrated in our schools.

Q: Now, let's talk about this. I mean, I know it may seem political, but it shouldn't be if the President right now is with 5 billion pesos in confidential funds essentially, then you have the Office of the Vice President, I think at half a billion. Am I correct? 500 million, then the Vice President being DepEd secretary is asking for 150 million. And then the irony of this policy of the National Intelligence Agency of the country, the NICA with 141 million, like 9 million pesos less than the confidential funds that's in DepEd. So do you find this ironic or what do you make of this?

SEN. WIN: Karen we have to understand, the law allows it. When I was a mayor, we also had intel at that time, intelligence fund pa ang tawag. We also have intelligence funds that we use to fight drugs and those intelligence funds were used to give money to informants to do buy busts operations, majority with buy bust operations, and they also need to understand that aside from the law authorizing it, there are mechanisms to assure the public that the funds are not being misused. I'll give you an example. Those funds should be approved by the Office of the President. Number two, those funds will be audited by COA. And then number three, those funds should be regularly reported back to Congress. There are mechanisms for check and balances. They are not slush funds that we give and then they can just spend it whenever, on whatever they want. Those funds have limitations in terms of what can be spent on and there's reporting mechanisms, both to COA and also to Congress.

Q: Okay, so what you're saying is the confidential funds for these offices, the Office of the President, Vice President, and even the one that the DepEd is asking is not spared from the auditing of the Commission on Audit?

SEN. WIN: No, no, definitely not. In fact, I know for a fact that there are a lot of LGUs that the COA turned down, they are spending on intelligence funds but were asked to return the funds. I know a lot no, this is a regular case in the local government unit. So if the COA finds out that they spent the funds, but these are done in confidence because of the nature of the activity, but the COA saw that it's not within bounds of the law. The local government will be asked to return the same to the national government. If they are not within the bounds of the law, they will be asked to return it.

Q: Okay. All right. Now, I know with education, it's a whole different show. We can actually talk about the budget for education. My last question is let's talk about SPED. At one point it was discovered it had no budget. And then I think the lower house was aligned. I can't remember if it's 80 million going to SPED or 90 million right now. But what worries me as a mother, with a child with special needs, is the fact that the Department of Budget and Management said that it's the DepEd, they didn't know how to spend the SPED budget. That's why they declined it.

SEN. WIN: Karen, we now have a law. The inclusive education law. This is a brand new law. And this law puts us in line with global standards when it comes to inclusive education. And we're one of the few countries that have this type of law, this type of inclusive education law and we need to to promote it and spend on it. So we also flagged the Department of Education on that, and it's good that the Department of Education acknowledged that they should put funds. They're putting close to about 500 million in terms of funding but personally, I think that's small, I think we should increase it to not less than a billion because we need to put Inclusive Learning Resource Centers...

Q: And we have to train teachers.

SEN. WIN: But the most important Karen is intervention. A lot of our children with special needs cannot go to a Makati Med or to St. Luke's to go to a developmental pediatrician. We need to get those experts in the facilities to the countryside and that's the aim of the inclusive education that we need to fund seriously.

Q: All right. On that note Senator Sherwin Gatchalian, thank you so much for joining me on Headstart today. When is the next hearing for POGO?

SEN. WIN: We're scheduling in about two weeks from now we're just waiting for information to come in.

Q: And that would be the last one.

SEN. WIN: That will be the last.

Q: All right. So after that you'll have a committee report by then?

SEN. WIN: I'll be working with Senator Bato Dela Rosa, there are two components to this, the revenue side and also the peace and order side. So we'll work together to come up with a single direction.