By Business Mirror, July 29, 2019

Image Credit to Business Mirror

THE President’s decision to shut down Philippine Charity Sweepstakes Office (PCSO) lottery operations may only deepen and widen the underground economy, according to local economists.

This, as leading members of the House of Representatives sought a full investigation of the alleged corruption that led President Duterte to suspend all PCSO operations late Friday, stunning licensed small lotto operators and workers, and putting in limbo the fate of the government’s multibillion-peso charity operations that ordinary Filipinos rely on for medical subsidy.

The resulting revenue shortfall is also seen to impact the Department of Finance’s projections.

The President’s spokesman said at the weekend Duterte lost his cool over the massive alleged shortchanging—at the rate of 60 to 70 percent—by PCSO of the national government when it declares its income, but offered no details of this. The Department of Justice said it was ready for lawsuits from disrupted businesses as a result of the President’s order.

‘Wrong policy’

In separate interviews at the weekend, Action for Economic Reform (AER) Coordinator Filomeno S. Sta. Ana III and political economist Maria Ella C. Oplas of the De La Salle University agreed that shutting down the lotto is not good policy.

Sta. Ana said this will only drive the operations underground while Oplas said removing corrupt officials may be a better solution to the problem.

“[It’s the] wrong policy. It will just drive the activity underground,” Sta. Ana told the BusinessMirror via SMS over the weekend.

Oplas said for many of the poor, it is a means to achieve an end, especially when they become desperate. As such, they will resort to alternatives that could lead to the underground economy.

She said the underground economy is unregulated and does not provide resources for essentials such as health. The biggest loser when it comes to these kinds of policies are Filipinos.

Instead of shutting down lotto operations, Oplas said it would have been better to just remove the officials who committed misdeeds.

“I believe that it will aggravate the underground economy in our country. Gambling is not limited to economics. For some, it is engraved in their systems and its hard to let go. Hence, they will look for alternatives. Which is the problem,” Oplas told BusinessMirror. Ultimately, the decision to shut down PCSO’s lotto operations will have dire consequences for the public health programs and investor confidence, she said.

National Economic and Development Authority (Neda) Undersecretary for Planning and Policy Rosemarie G. Edillon told BusinessMirror that while the President’s decision will not have an impact on poverty, it will have an impact on PCSO funding for social programs.

Private sector economist Calixto V. Chikiamco however, told the BusinessMirror that the suspension of PCSO’s lotto operations which are often used to finance medical projects, which could now be discontinued due to the shutdown.

Chikiamco added that this also does not bode well for investor confidence given the uncertainty it creates.

“Part of the lotto revenues fund the medical projects of PCSO for the poor. We can expect these projects to be cut,” Chikiamco said. “But the greater risk is increased investment uncertainty and policy instability which will turn off investors.”

Congressional probe

Lawmakers on Sunday called for an inves-tigation to assess the impact of Duterte’s order.

Marinduque Rep. Lord Allan Velasco said an in-depth investigation will not only  address alleged corruption in the agency but also look into the impact on the economy.

Ako Bicol Rep. Alfredo Garbin said Congress needs to know from the DOF how it will make up for the resulting revenue shortfall and how this new development will affect the social services, education and sports budgets.

“I believe his action should prompt a more in-depth investigation into the gaming schemes not only to ensure that it is free from corruption, but to also assess its impact on the economy and the programs being funded by the PCSO,” Velasco said.

“This way, we will have a better assessment of the situation. President Duterte is consistent in his strong stance against corruption and we are fully supportive of this policy,” he added.

P63.1-B income

Garbin said Congress will wait for the briefing by the Executive Branch on Duterte’s decision to stop PCSO gaming operations.

“We need to know the details because the PCSO is a significant government corporation,” he said.

Citing the Commission on Audit (COA), Garbin said PCSO income in 2018 was P63.097 billion, while operating expenses were P49.285 billion, profit before taxes was P13.811 billion, and Net Income was P1.55 billion.

He added the PCSO’s financial assistance, subsidy, and contributions to various funds and causes was at P11.678 billion, per the 2018 COA audit.

Boon to jueteng?

With the stoppage of all PCSO betting games, Garbin said the illegal jueteng operations will be swamped with bets from millions of people.

“I therefore appeal to the Philippine National Police to boost their anti-jueteng operations now because more jueteng money means more funds for crime lords, warlords, smugglers, drug lords and their protectors,” he added.

Meanwhile, Minority Leader Bienvenido Abante Jr. said the minority agrees that government should be relentless and uncompromising in its campaign against corruption.

“Personally, I believe that gambling is an issue of corruption, not only in terms of money, but also in terms of morals. This is the reason I have always been against it,” he said.

“Personally, I believe that gambling is an issue of corruption, not only in terms of money, but also in terms of morals. This is the reason I have always been against it.” — Minority Leader Bienvenido Abante Jr.

‘NG cheated of 60-70 percent’

The PCSO has been “cheating off the government of its rightful share” by up to 60 percent to 70 percent, Malacanang said on Sunday.

Presidential Spokesman and Chief Presidential Legal Counsel Salvador S. Panelo revealed that the President discovered the massive corruption involves a “grand conspiracy of all players and participants of all gaming operations.”

Panelo said in a radio interview on Sunday the corruption was “massive enough to make him decide to stop all of it. Because the government is being cheated of its rightful share. The government is losing around 60 percent to 70 percent. If the scoundrels are the ones who are benefiting from this, as far as the President is concerned, why are we still continuing this project [PCSO]?”

In a video message late Friday night, the President ordered the stoppage of all gaming activities under PCSO, including lotto, Small Town Lottery and Peryahan ng Bayan due to massive corruption.

Why he did not detail the corruption allegations, the President said he will talk more about it in due time. In the same interview, Panelo said that the corruption also involved local officials and the courts.

For instance, the Palace spokesman said, a gaming operator was allegedly found not paying his dues which may have already reached a hundred million pesos, but was still allowed to operate. Moreover, courts allegedly issue injunctions to stop the government from going after those behind these activities.

“There is a gaming operator who was found not paying his dues, which already amounted to a hundred million then it still continues to operate, then a court issued an injunction. Where in the world can you see something like that? That means it [court] is involved. That is why the President ordered the stoppage. He strikes the sword of his office [in] this kind of massive corruption,” he said.

But Panelo said he still does not know whether the PCSO ban would be temporary or permanent.

Spare lotto—Lacson

Meanwhile, Senator Panfilo Lacson said Sunday that the State-run lottery, the proceeds of which are used to subsidize medical bills of ordinary Filipinos, should have been excluded from a presidential directive suspending gaming franchises.

“If the intention is to stop gambling altogether,” Lacson said, “then all forms of gambling, including the Pagcor-regulated games like casinos and online should have been included.” The senator pointed out that “since it doesn’t appear that way, then lotto outlets should have been spared since there are no reports of revenue cheating as far as lotto operations are concerned.”

Lacson explained, “this was because they are computerized and automated and, therefore, closely monitored—unlike STL where PCSO, for millions of reasons, has consistently resisted to make it more transparent and foolproof.”

The Palace closure order is expected to be appealed by affected parties that indicated plans to plead with the President to reconsider his directive.

Ready for lawsuits

Justice Secretary Menardo Guevarra on Sunday said the government is anticipating legal actions, including damage suits from those affected by Duterte’s order to shut down all games operated by the PCSO, due to “massive corruption.”

“Such damage suits are always possible but the government will be ready to handle them,” Guevarra said in a text message to Businessmirror.

Guevarra said Duterte has the authority to order the suspension, even the termination of these games upon prima facie proof that licensees have failed to comply with their legal obligation to remit the correct amount of the government’s share in revenues or that their operations are tainted with corruption.

“It should be emphasized that a gaming license is not a contractual right but a mere privilege that may be revoked at any time by the State,” Guevarra added.

The DOJ chief also denied that the government deprived PCSO-licensed gaming operators of due process for shutting down their operations without showing concrete evidence of corruption and without giving them an opportunity to refuse such allegation.

Guevarra said his order for the National Bureau of Investigation (NBI) to conduct an investigation was precisely to give PCSO officials and licensees  an opportunity to show that there is no corruption or fraud in their operations.

“The President may order the suspension of operations based on preliminary information available to him, much like a judicial restraining order, but even more powerful because it emanates from a constitutional duty to faithfully execute our laws, if not from the inherent police power of the State,” the justice secretary explained.

Except for its gaming operations, Guevarra said the PCSO will continue to perform its mandate although with limited resources now.

Since the President issued the order, police have closed more than 2,000 lotto stores and other gaming outlets. Aside from Lotto, also covered by the order are Small Town Lottery (STL) and Peryahan ng Bayan.

The NBI, upon Guevarra’s order, has started investigating alleged anomalies in the gaming activities of PCSO, particularly the nonremittance of the government’s proper share, among other corrupt practices.

“I believe that until this investigation is completed and people responsible for cheating the government have been unmasked, PCSO gaming operations such as Lotto and STL, which are otherwise legal, may not resume,” Guevarra said.

Impact on UHC

The DOF said over the weekend it is studying the financial impact of the PCSO ban on the funding for Universal Health Care Act next year.

Despite this, Malacañang stood by the President’s decision, saying it would rather get its revenues or funds for medical assistance for PCSO beneficiaries from other sources, like the Philippine Amusement and Gaming Corp. (Pagcor) or the Office of the President, which has discretionary funds.

“If what we are getting [from PCSO] is little, like can you imagine they are getting 70 percent from the government…let us just get it from other sources, we still have other sources. There is still Pagcor,” he said.

As for those who still need medical assistance amid the PCSO ban, Panelo urged the public to write a letter to the Office of the President.  “Those who need help, please write a letter. We will direct your request to Pagcor…And you can expect that the government will help you,” he said.

Aid to workers

Labor groups are calling for government aid for workers affected by the order.

Federation of Free Workers (FFW) and Sentro ng mga Nagkakaisa at Progresibong Manggagawa (Sentro) asked government to provide aid to affected workers like emergency employment.

Sentro Secretary-General Joshua Mata said, “If a policy has implications for workers, it is the responsibility of the government to ensure for their just transition.”

For his part, Vice President of FFW Julius Cainglet said the government should also consider providing unemployment insurance.

Cainglet said while they respect the right of Duterte to hold accountable government agencies under him, it should not be at the expense of labor rights.

“Private-sector workers of the lotto outlets and other PCSO-sanctioned games will be in a more complicated situation,” Cainglet said.

“Most would most likely be laid off. While others who are retained, but earning on commission basis, will take home less income from the retail operation of the lotto outlet,” he added.

Mata hoped the workers will be given better treatment than those who were affected with the six-month closure of Boracay Island in 2018.

The Department of Labor and Employment (DOLE) said it was able to provide emergency employment and financial aid to almost 18,000 displaced workers from Boracay Island during that period.

Reports by Cai U. Ordinario, Jovee Marie N. Dela Cruz, Butch Fernandez, Joel R. San Juan, Samuel Medenilla and Bernadette D. Nicolas