Inside Asian Gaming

inside asian gaming April 2015 14 Insights More Bricks For “Nation Building” Gaming revenue in the Philippines grew 16% in 2014 to 110 billion Philippine pesos or US$2.5 billion, according to Pagcor Chairman Cristino Naguiat. The share of that revenue generated by Pagcor, the government-owned casino operator and industry regulator, fell to 27%. Pagcor operates 11 casinos, two in Metro Manila after the closure of its Airport Casino Filipino last year, plus other gaming facilities. but made no mention of its licensees. Bloomberry Resorts, Solaire’s Manila-listed corporate parent, has filed suit against the BIR ruling, and that case is pending. Pagcor has also been ready to stand up to licensees. Tiger Resort, Leisure and Entertainment, a subsidiary of Japanese pachinko magnate Kazuo Okada’s Universal Entertainment, has been embroiled in legal and regulatory issues, including bribery allegations that arose amid Mr Okada’s ouster as a director at Wynn Resorts in 2013. Philippine investigators have reportedly dismissed the bribery case but investigation continues into allegations that Tiger attempted to circumvent the legal requirement of 60% land ownership by Philippine nationals through dummy corporations. While the judiciary process plays out, Pagcor has said repeatedly that the $2 billion project known as Manila Bay Resorts needs to satisfy the Philippine land-ownership requirement before it can open. Potential partnerships between Tiger and Philippine companies have fallen through twice, and Tiger says it is in partnership talks again. Tiger’s Marina Bay Resorts completion date is a more immediate issue. Its contract with Pagcor mandated completion by the end of March, extended from an original 2013 completion date. Tiger told a congressional hearing last month that it has asked Pagcor for an extension to the first quarter of 2017, promising to invest an additional $700 million to increase the size of the resort by 97,000 square meters—more than 1 million square feet—including more guest rooms, parking and design enhancements. Pagcor President and Chief Operating Officer Jorge Sarmiento stated at the hearing that Tiger would forfeit its 100 million Philippine pesos ($2.3 million) performance bond for missing the deadline. He added that Pagcor was evaluating the construction status and could revoke or suspend Tiger’s license if the project is not more than 50% complete. Mr Naguiat has also had to help Pagcor’s operating arm cope with the impact of private licensees in Manila on Pagcor’s Casino Filipino properties. In 2013, Pagcor closed its casino at the Heritage Hotel, the closest of its gaming properties to Entertainment City, and last year it shuttered its Airport casino, near Resorts World Manila. That leaves Pagcor with just two of its 11 casinos in the capital region. Pagcor also operates electronic gaming arcades, mini-casinos with machines and table games, and bingo halls across the archipelago. In his office at Pagcor’s headquarters, above its casino at the New World (former Hyatt) Hotel in Manila’s Ermita district, Mr Naguiat talked to Inside Asian Gaming Editor at Large Muhammad Cohen about the state of gaming in the Philippines. The combined gaming revenue of those venues was up 8.5% last year to P29.9 billion ($675 million). Pagcor’s overall revenue fell 1.3% last year to a shade below P40 billion. The main reason for the reduction was a decreased take from its casino licensees, four in Manila and four smaller ones in the provinces, after Pagcor cut license fees—effectively the gaming tax—to balance the impact of a 2013 court ruling requiring licensees to incur the nation’s 30% corporate income tax—licensees had previously believed they were exempt from taxes other than their license fees. Pagcor’s revenue in the “other services” category including license fees dove 28.2% to P8.6 billion. Pagcor’s net income rose 5.1% to P3.3 billion. Pagcor’s payments to the government—described as “contributions to nation building” by Mr Naguiat—rose 2.3% to P21.7 billion. Pagcor is mandated to turn over half of its revenue to the treasury and is the third largest contributor to government revenue after the Bureau of Internal Revenue and Customs. Pagcor Cristino Naguiat