Inside Asian Gaming

Letters AWhine About the Grapevine The undersigned Chief Legal Counsel of the Philippine Amusement and Gaming Corporation (PAGCOR) writes in response to the article published in the October 2005 issue of your magazine entitled,“From the Manila Grapevine.” We wish to correct certain pieces of inaccurate and misleading information that you allegedly gathered from the“grapevine.”PAGCOR’s profitability has neither declined, nor has it been tarnished by cheap rumours of corruption and investor mistrust. Under its present leadership, PAGCOR has flourished into one of the most profitable corporations in the Philippines today. PAGCOR Chairman and CEO Efraim C. Genuino’s visionary approach, coupled with his business savvy and no-nonsense management has propelled the gaming firm to the second highest position in terms of revenues in Asia, next only to Macau. In 2001, PAGCOR posted over Php17.46 billion total income, exceeding by almost 20% its Php14.6 billion income of 2000. In 2002, the corporation posted Php20.21 billion, which earned it the distinction as the most profitable corporation in the Philippines for 2002, according to the Philippine Securities and Exchange Commission (S.E.C.). In 2003, while most countries with casino gaming industries suffered immensely from the effects of the SARS scare, PAGCOR kept its shortfall to a minimum, earning Php19.43 billion for that year. In 2004, PAGCOR beat all previous income records by posting a record-breaking Php 21.90 billion, the highest ever in its history. If the issues of corruption and inefficiency bear any trace of trust in them, how does one account for its optimal and unprecedented performance? To mismanage and to register top-notch feats are two ironic and incongruent propositions. One can only make sense of these deviant claims in the context of fierce competition in the region. PAGCOR has undoubtedly earned the envy of its neighbours.What you have featured in your magazine reeks of contrived press releases from PAGCOR’s competitors. If these“PR lies”prove anything at all, it is the fact that the Philippine competitors are desperate, and they are now resulting to black propaganda.What they claim to be “from the Manila grapevine”is no more than mere“sour-graping”. PAGCOR has, indeed, developed a plan that once realised, will transform the Philippines as the next tourism and gaming hotbed in Asia. And this is what is sending panic ripples all throughout the region. It is a fact that the Philippine gaming experience boasts of an incomparable showcase of extraordinary pleasures, from the scenic landscapes, to gastronomic feats, to the grand hospitality that is distinctly Filipino.These are the real “sweet grapes”that await the hands of gaming enthusiasts.Those who cannot even come close to the real thing, just content themselves to sucking on the grapevine.Who can blame them? We wish, however, to remind you to be more circumspect in devoting precious space in your publication to manipulative excretions from those whose motives are suspect. Their lies tread the thin line between the libellous and the absurd. Carlos R. Bautista Jr. Chief Legal Counsel PAGCOR Ed: We thank you for your feedback.We rely on readers better positioned than ourselves in the industry to point out inaccuracies in our articles and flaws in our analyses. However, the article in question made no mention of profitability declining due to“rumours of corruption and investor mistrust.”The article’s focus was on the investor mistrust itself, which is likely supported by such reports as appeared in the March 12, 2005 edition of the Manila Times (a“contrived press release”from one of PAGCOR’s competitors?), stating that PAGCOR Chairman Efrain C. Genuino is facing allegations of plunder and graft from anti-corruption groups. Mr. Genuino’s relationship with President Arroyo’s husband, Mike, is well documented, as are allegations that he may have influenced the Electoral Commissioner on behalf of the President. The Philippines also lacks two things that are fundamental underpinnings of foreign investment: a stable Government and relative freedom from corruption. On the latter point, the 2004 Transparency International Corruption Perceptions Index ranks the Philippines a dismal 102, down from 93 in 2003. In short, the country does not present much of an attraction for gaming industry investors with a plethora of options, most recently in Macau, Singapore and the UK. If you check your figures, rather than suffering“immensely from the effects of the SARS scare,”Macau’s gambling revenues actually rose over 30% year-on-year in 2003, while those in the Philippines declined.You are at pains to stress the profitability of a company that enjoys a monopoly position. Monopolies are perhaps better off not trumpeting the profits they derive in the absence of competition. Basic economic textbooks point out that monopolies do indeed simultaneously mismanage and“register top-notch feats.”That is the nature of monopolies. As a final point, none of the Macau casino operators we spoke to have mentioned feeling the“panic ripples”you allege PAGCOR’s grand plans have sent through the region. The Future of Machines in Macau You cannot compare win per table with win per machine as a basis for arguing there is no future for machines in Macau. A typical casino table, say Baccarat, has a footprint roughly equal to that of 10 machines, when you take account of gaming seats. A premium of MOP1,000 per machine p.a. is payable, compared with MOP300,000 p.a. for a VIP table .Tables require dealers; machines don’t. If table win, especially on mass market tables, declines, there will come a point at which the economics favour a switch to machines.There are no“dead”machines, as there may be dead (i.e. non-operational) tables in some properties in Macau as the industry matures. David Green Head of Gaming Practice PricewaterhouseCoopers (Macau) Ed: A further point is the different staffing requirements of tables and machines, especially given Macau’s worsening labour crunch. A mere 50 staff are needed to operate 300 machines 24 hours a day. Over 2,000 staff would be needed to operate 300 tables. Please email all letters and comments to the editor to kareem@asgam.com.Letters may be edited for length and clarity. 7