Inside Asian Gaming e-Newsletter has learned disturbing news that the Philippines’ casino operator-cum-regulator is back to its old tricks.
Those tricks include taking other people’s money to licence private casinos in that country, then putting every kind of commercial obstacle in the way of the private business if it turns out (as is often the case) to be a better or more popular product than the PAGCOR casinos.
PAGCOR’s accounts can hardly be said to be a model of transparency. But what can be said is that the organisation’s remittances to the country’s Bureau of the Treasury (based on a percentage of PAGCOR net win) fell by 6% in 2010 as compared to 2009. For the record, the figure was P10.343 billion (US$238.8 million). In other words, in a neighbourhood where most casino jurisdictions are quarterly setting new gross revenue records, PAGCOR appears to be going backwards. As a state-owned behemoth however, PAGCOR’s instinct and management culture is not to improve its own product and compete with the private casinos it has licensed, but to hamstring the private sector and drag it down to PAGCOR’s level.
The recent legal tussle between PAGCOR and the Frankfurt-listed boutique casino operator Thunderbird Inc—which operates two casino resorts in the country—is a case in point. IAG has been told by usually reliable sources however that the real target of PAGCOR is actually Resorts World Manila—part owned and operated by the Malaysian conglomerate Genting. That property near to Manila International Airport (named incidentally in memory of the current national president’s father who was murdered on the airport tarmac on his return from exile) has been hurting the business of PAGCOR’s own casinos in Manila—in particular the Parañaque property. There’s a good reason for that. Casino Filipino Parañaque is a tired, state-run casino with a sticky carpet that looks like it hasn’t been properly refurbished since the late 1980s. Resorts World Manila is a smart, well-run modern property with world-class hotels a short taxi-ride from the airport.
PAGCOR has already been making life difficult for Resorts World Manila. Six months ago PAGCOR slapped an embargo on the importation of spare parts for slot machines at Resorts World Manila. That might account for why PAGCOR showed a marked improvement in trading in the first four months of this year, posting P11.13 billion in revenues—up by more than P1 billion from the P10.07 billion it earned in the same period last year.
But even PAGCOR dare not take on the mighty Genting by unilaterally ripping up its Authority to Operate—unless PAGCOR can set a precedent by doing the same to another multinational private operator first. That’s where Thunderbird comes into the picture.
IAG’s sources indicate that PAGCOR officials recently turned up in the middle of the night at Thunderbird’s Poro Point casino resort in San Fernando City, La Union, in the northwest of the main island Luzon. The PAGCOR staff claimed unspecified breaches of the resort’s operating terms. This was followed up with a demand for the company to supply “written unconditional acceptance” of new Authority to Operate terms. Failure to accept such an agreement would result in “cessation proceedings” said PAGCOR. This in effect meant ripping up the previous agreement made between Thunderbird and its local operating units and PAGCOR. The current PAGCOR management apparently attempted to justify this ultimatum by saying the previous agreement had been made by the earlier PAGCOR regime of Dr Efraim Genuino and was no longer valid.
In the past, smaller foreign investors with shallower pockets have tended to roll over and wave their legs in the air when the horse whisperers of the PAGCOR legal department have come calling. This time PAGCOR appears to have taken on an opponent made of sterner stuff.
Thunderbird not unreasonably pointed out its existing agreement was in the name of the Republic of the Philippines, (not the ‘Republic of PAGCOR’ as sources unrelated to Thunderbird sometimes jokingly refer to the regulator), and that it would see PAGCOR in court. Thunderbird kept its promise and in early June got a court to grant a temporary restraining order preventing PAGCOR from issuing a cessation notice.
On 23rd June the Philippine Regional Trial Court issued a preliminary injunction directing PAGCOR to “cease and desist from initiating and completing cessation or other similar proceedings” against the business operations of Thunderbird’s local units Eastbay Resorts, Inc (ERI) and Thunderbird Pilipinas Hotels and Resorts, Inc (TPHR).
Thunderbird said in a statement after the injunction: “The Group reiterates that we take seriously our responsibilities to our employees, to the communities where we operate, and to the provincial economies of those communities. Currently, we employ over 1,300 people, providing good wages and benefits. We continuously support the Provinces of Rizal and La Union through various community activities. Our facilities also support over 1,700 local vendors, spending with them over PHP 5.2 billion in the past 6 years. We have spent over PHP 27 million on various social responsibility initiatives.
“These include monthly medical missions where we distribute medical care to the local areas in Rizal and Poro Point to over 10,000 constituents, an adopted school program affecting over 3,500 students in 2010, typhoon relief programs and donations to various other charities. In order to protect our employees and our businesses, ERI and TPHR had no choice but to seek the protection of the courts.”
The industry must hope that for once the PAGCOR bullies will not win. But the only real remedy for this situation lies not with the courts but with the politicians. They need to end PAGCOR’s joint regulator-operator role. It doesn’t work and never will. And until it’s ended, most foreign investors will steer well clear of the country.
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