Inside Asian Gaming

INSIDE ASIAN GAMING | July 2011 20 to accept such an agreement would result in“cessation proceedings”, said PAGCOR. The sources say that PAGCOR’s pretext in the case of Thunderbird Resorts was that the revenue deal had been made with Dr Genuino’s management team. The advent of a new PAGCORmanagement team following the election of a new national government in May 2010 required a new deal. Thunderbird not unreasonably pointed out its existing agreement was in the name of the Republic of the Philippines, not Efraim Genuino, 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. IAG understands from sources that PAGCOR’s motivation for acting against Thunderbird was twofold. First, it wants to achieve a claw back of gaming revenue from the private sector casinos in general, because they have reportedly been cannibalising the performance of PAGCOR’s own casinos by offering better facilities and products. Second, PAGCOR also wants to set a precedent so that it could tear up its existing revenue share agreement with Resorts World Manila (RWM), the integrated gaming resort operated and part owned by Malaysia’s Genting Group. RWM is the biggest private casino operation in the country and operates under a 75:25 revenue split in favour of RWM. Resorts World Manila is owned by Travellers International Hotel Group, Inc, a joint venture split 50:50 between Genting’s cruise ship unitGentingHongKongandthePhilippinesdeveloperAllianceGlobal Group. If PAGCOR were able to get a bigger share of the revenues generated by RWM, it would make a significant improvement to PAGCOR’s own finances. Industry sources suggest to IAG that Resorts World Manila may currently have around a 66% share of the Metro Manila casino gaming market by gross revenue. In Genting Hong Kong’s 2010 annual report, the company said in RWM’s first full calendar year of operation following its soft opening in August 2009, it achieved US$355.8 million in total revenue and US$102 million EBITDA (earnings before interest, taxation, depreciation and amortisation). PAGCOR’s total remittances to the country’s Bureau of the Treasury in 2010 were PHP10.343 billion (US$238.8 million). Promises of an era of PAGCOR reform under President Benigno Aquino seem to have hit the buffers Under Pressure PAGCOR faces domestic voice calling for the private casino ‘lemon’ to be squeezed P AGCOR—also known as the Philippine Amusement and Gaming Corporation—has a track record of reneging on or unilaterally renegotiating deals with private casino investors, say industry sources. It is under some domestic financial and political pressure to do so, given that it is one of the national government’s biggest sources of revenue. Thus, the rule of law and the ability of foreign casino investors to execute on their agreements with PAGCOR often seem to come a poor second to political expediency. PAGCOR’s remittances to the national treasury fell by 6% in 2010 as compared to 2009. In other words, in a region where most casino jurisdictions are quarterly setting new gross revenue records, PAGCOR appears to be going backwards. There are, however, question marks about the transparency of PAGCOR’s accounting and that of the government agencies receiving money from it. In any case, placing obstacles in the path of the private gaming sector appears to be more acceptable in domestic political terms than asking PAGCOR to compete in the market by raising its own game. Investment versus ‘donation’ As one industry executive told IAG : “It’s got to the stage now that people in the industry talk not of investing in the Philippines but of ‘donating’. It’s become in many cases impossible for prospective or existing private investors to get any clarity on the rate of return on their investment. That’s because they find the goalposts being constantly moved in terms of extra fees, costs and middlemen. I understand that what PAGCOR attempted to do with Poro Point in tearing up their revenue share agreement has also happened to some of the VIP slot clubs. Many people don’t like to speak out because they fear even harsher treatment by PAGCOR.” The Thunderbird court case is still pending. 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). A press statement from Thunderbird following that court hearing indicated that it felt it had kept its side of the bargain with the Philippines government, PAGCOR and the people of the country when it invested there. “The Group reiterates that we take seriously our responsibilities Feature