PAGCOR Privatization Without Liberalization: Jumping Out of the Frying Pan to the Fire

Talks of privatization is ripe in the air. Privatize MWSS. Privatize NAPOCOR. And more recently, Privatize PAGCOR to the tune of $10B. Is this to the advantage of the Filipino taxpayer? Or will this benefit Filipino monopoly businesses only? P.Noy Aquino is sending signals he is inclined to sell.

* Aquino: Sale of Pagcor ‘a very interesting proposal

* 5 senators in favor of Pagcor sale

* Solons welcome proposed sale of Pagcor

* Aquino may order Pagcor to stop operating casinos-Drilon

* $10B offered for Pagcor

* PAGCOR suspends issuance of new casino franchises

By doing all these, the proponents and supporters of privatization claim that this will bring the Philippines closer to becoming a tiger economy.

On the flipside of the coin are those who prefer to “nationalize” (a euphemism for socialization as in “socialist”).

Privatization without liberalization means selling government assets to Aquino monopolist cronies.

Both models – privatization and socialization are not about to bring the Philppines closer to becoming a tiger economy. Nothing can be further from the truth. And I’ll show you why.

The Philippine Model – PAGCOR – GOCC – Public Monopoly

PAGCOR has a public monopoly on gambling. The PAGCOR site has this to say about the GOCC.

The Philippine Amusement and Gaming Corporation is a 100 percent government-owned and controlled corporation created in 1977 by virtue of Presidential Decree 1067-A and was amended to PD 1869 on July 11, 1983, later known as the PAGCOR Charter.

In 2007 the PAGCOR Charter was further amended through Republic Act No. 9487 extending the PAGCOR Franchise for another 25 years

PAGCOR was created with a three-pronged mandate: to regulate all games of chance, particularly casino gaming in the country, to raise funds for the governments’ socio-civic and national developmental efforts, and to help boost the country’s tourism industry.

In accordance with its Charter and other governing laws, PAGCOR earnings are distributed as follows:

• 5 percent of net winnings goes to the BIR as franchise tax

• 50 percent of the 95 percent balance goes to the National Treasury as the National Government’s mandated income share

• 5 percent of the balance after the franchise tax and the National Government’s mandated income share goes to the Philippine Sports Commission for financing of the country’s sports development programs

• 1 percent of the net cash income goes to the Board of Claims, an agency under the Department of Justice, which compensates victims of wrongful detention and prosecution

• Cities hosting PAGCOR casinos are given a fixed amount for their respective community development projects

The remaining balance is then remitted to the President’s Social Fund to help fund the priority projects of the government.

PAGCOR operates 13 casinos in 10 major cities across the Philippines, along with 28 satellite casinos 24 VIP Clubs and 4 PAGCOR Arcades. The popularity of Texas Hold’em poker is on the rise in the country with the licensed poker rooms up to 36.

The table games available for play in PAGCOR casinos are the Asian favourite Bacarrat, its variant Super 6, along with the equally popular Black Jack, Pontoon, Stud Poker, Pai Gow, Sic Bo and Craps.

Live entertainment is provided by premier artists, both local and foreign performing center stage on all casinos at given nights. This is peppered by home grown variety of talents that entertain gaming aficionados nightly.

PAGCOR also provide electronic and web-based games in partnership with Philweb.

PAGCOR’s consistent performance ensured its position as one of the top-earning corporations in the country and in the Asian region, as well as the third biggest income-generating arm of government, next to the Bureau of Internal Revenue and Bureau of Customs.

source: http://www.pagcor.ph/about-pagcor.php, Accessed Aug 9, 2010

Privatizing a Public Monopoly Creates a Private Monopoly

The offer of $10B is making the sale of PAGCOR very tempting. A public monopoly after being sold to a private party becomes a public monopoly. The government takes the $10B – the private monopoly corporation will make more than $10B because it is protected from competition. The lack of competition in the gaming industry will not bring the Philippines to tiger economy status. Selling a public monopoly to a private Filipino corporation will create cash flow in the short-term BUT it will be a strategic loss given that the STATE stands to earn MORE by retaining the regulatory powers within a PUBLIC agency and LIBERALIZING the gaming market.

Privatization is NOT Liberalization

The Philippine Public Monopolies are up for grabs via privatization. That seems to be a good thing. But when privatization is not accompanied by liberalization, you wind up with monopolies. And monopolies have this nasty habit of making the public pay for lousy services at high rates – because you don’t have a choice.

Thus far, the Philippine government has privatized telephone, electricity, airlines, water – and now gaming/gambling without foreign competition.

What’s the point in restricting the participation to a Filipino corporation only, when the government can provide a level playing field for competition.

When a public monopoly is privatized without the presence of competition then prices will definitely rise due to the lack of competition.

The Philippine government should study the Nevada model. It has proven quite robust and resilient. It is a model that has given rise to Las Vegas. While the Philippines does not aspire to be Las Vegas, we should certainly learn from the Vegas experience.

The Nevada Model – Nevada Gaming Board/Nevada Gaming Commission

The Nevada Gaming Control Board, also known as the State Gaming Control Board, is a Nevada state governmental agency involved in the regulation of gaming throughout the state, along with the Nevada Gaming Commission. It was founded in 1955 by the Nevada Legislature.

****

source: http://en.wikipedia.org/wiki/Nevada_Gaming_Control_Board

****
Statement of Policy

Nevada’s Public Policy on Gaming
Nevada Revised Statute 463.0129(1) provides a summary of the public policy of Nevada regarding gaming. All gaming regulatory decisions must reflect these public policy mandates. Specifically,

(a) The gaming industry is vitally important to the economy of the State and the general welfare of the inhabitants.

(b) The continued growth and success of gaming is dependent upon public confidence and trust that licensed gaming and the manufacture, sale and distribution of gaming devices and associated equipment are conducted honestly and competitively, that establishments which hold restricted and nonrestricted licenses where gaming is conducted and where gambling devices are operated do not unduly impact the quality of life enjoyed by residents of the surrounding neighborhoods, that the rights of the creditors of licensees are protected and that gaming is free from criminal and corruptive elements.

(c) Public confidence and trust can only be maintained by strict regulation of all persons, locations, practices, associations and activities related to the operation of licensed gaming establishments, the manufacture, sale or distribution of gaming devices and associated equipment and the operation of inter-casino linked systems.

(d) All establishments where gaming is conducted and where gaming devices are operated, and manufacturers, sellers and distributors of certain gaming devices and equipment, and operators of inter-casino linked systems must therefore be licensed, controlled and assisted to protect the public health, safety, morals, good order and general welfare of the inhabitants of the State, to foster the stability and success of gaming and to preserve the competitive economy and policies of free competition of the State of Nevada.

Much can be learned from the Las Vegas experience. Having a private monopoly operate gaming isn't part of it.

(e) To ensure that gaming is conducted honestly, competitively and free of criminal and corruptive elements, all gaming establishments in this state must remain open to the general public and the access of the general public to gaming activities must not be restricted in any manner except as provided by the Legislature.

The Nevada Gaming Commission

The Commission, created by the 1959 State Legislature, is a five-member lay body appointed by the governor to four year terms. The Commissioners serve in a part-time capacity.

The primary responsibility of the Commission is to act on the recommendations of the Board in licensing matters. The Commission is the final authority on licensing matters, holding the power to approve, restrict, limit, condition, deny, revoke or suspend any gaming license.

The Commission is also charged with the responsibility of adopting, amending and repealing the gaming regulations consistent with the State’s policies, objectives, and statutory purposes.

When the Board desires to impose discipline against a gaming licensee for violations of the Act or the Commission’s Regulations, the Board acts in a prosecutorial capacity and the Commission acts in a judicial capacity to decide whether the Commission will impose a sanction against a licensee for any such violations

Source: http://gaming.nv.gov/documents/pdf/gaming_regulation_nevada.pdf

The State of Nevada could have just opted to let a private corporation run the gaming as is being considered by Aquino and his stooges in Congress.

But, the State of Nevada had bigger plans. It didn’t want to behave like a haceiendero whose only idea of generating revenue is selling physical assets one-time instead of utilizing the assets to create a steady revenue.

Liberalization of the Gaming Industry – A Better Alternative to Privatization

Don’t just privatize – Level the playing field – provide equal access to both foreign and local investors so that local Filipino consumers can benefit from competition. Liberalize then privatize. A better option is to do the following:

1. Reconsitute PAGCOR based on the Nevada Gaming Control Board/Gaming Commission Model

2. Stimulate competition – Open up Ownership of Gaming Facilities to foreign investors (change constitution to allow foreign investors to own majority equity).

These two measures will bring more than $10B that’s being offered to buy out PAGCOR. The revenue generated through the measures of a level playing field – equal access to opportunities by both foreign and domestic corporations and liberalization of the gambling industry will make $10B look like loose change.

Ang Pinoy niluluto sa sariling mantika, tuwang tuwa pa talaga. (The Filipino is glad to be fried in his own lard!)

Hay buhay, it’s another day in these stupid islands.

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15 comments

  1. […] This post was mentioned on Twitter by Ka Balong, AntiPinoy.Com. AntiPinoy.Com said: New post: PAGCOR Privatization Without Liberalization: Jumping Out of the Frying Pan to the Fir (http://bit.ly/a0nWko) http://bit.ly/a0nWko […]

  2. Until today, many Filipinos dream of Filipino-only success, Filipino corporations using Filipino ideas, funded by Filipino-only money, supported by Filipino government, leading to Philippines becoming a tiger economy – while keeping foreign investment out. It’s a bad dream for me. Filipino only, Filipino only, Filipino only… nakakabangenge na. We should realize the we live in a world where nations help each other to survive, not race against each other to be the richest anymore… that is so medieval age.

  3. Ryan Bosco · ·

    Exactly. Hypocrisy will further relegate the Philippines as THE laughingstock of all of Asia. The Millenium Fund recently awarded the Philippines over $400 million dollars. When it comes to donations and begging for money, the Philippine government and ruling class are experts at it. But when it comes to uplifting its people’s economic conditions, the oligarchs lock their gates and party.

    It’s time for a revolution people.

  4. Hyden Toro · ·

    I don’t believe in Gambling. Public Corporations have been the Employment Agencies of people hitching rides in any administration. They are always: inefficient; graft ridden; used to pay political debts, refuge of people who lost in elections; etc…you can never run any government corporation with efficiencies: they are the politicians’ Milking Cows. Look at Noynoy Aquino’s KamagAnak, Inc…

  5. absolutemente. consider this –

    1. Aquino says – NO new taxes

    2. Aquino resorts to Foreign Borrowings

    3. Aquino’s term ends

    4. Philippine taxpayers still paying for interest of Foreign Borrowings.

    The Good News: NO NEW TAXES

    The Bad News: HIGHER GOVERNMENT FEES (increased higher to compensate for loss of tax revenue); HIGHER INTEREST FEES (due to foreign borrowing).

    The Worst News: – Congressman, Oligrach-owned companies benefit from Borrowings – while Taxpayers are left to foot the bill.

    Privatization without Liberalization is a BUM deal.

  6. Hyden Toro · ·

    The good way out is to: get ourselves out from the Hole. Not to dig ourselves deeper: into the Hole. Availing of foreign debts will be like digging ourselves more deeper into the Hole. Noynoy Aquino is an imbecile. We deserve what we voted for…an imbecile President, who will make us dig ourselves deeper into the Hole.

    We are financially bleeding. Noynoy Aquino does not want to stop our bleeding. Instead, he intends to cut more holes into our financial body , to bleed us more. This is his solution…

  7. boombox · ·

    Up for grabs ang PAGCOR…

  8. Thank you, BongV for the clarification. The Filipinos deserve to know the disadvantages and consequences but the Media is controlled. It is really a treacherous game out there. It shows how irresponsible our politicians are in dealing with the state matters. It seems that the campaign donations for PNoy will be paid back by the taxpayers.

  9. @mel: Picture this – One private company that owns ALL casinos – and is answerable to the legislature – its easy to get special privileges for “consultants”.

    If PAGCOR hires “consultants” right now as GOCC – these names can be revealed.

    If PAGCOR becomes “privatized” – it can hire the “consultants” – without having to reveal the names if it has congressmen and senators and cabinet undersecretaries or secretaries or their relatives/bag men.

    If Gambling is liberalized – instead of one owner – you have many owners – it is harder to get kotong. It is harder to defend if more than 4 casino owners (under a liberalized market) corroborate their statement about mulcting congressmen and senators – versus one monopoly owner who can take “amicable settlement”/areglo.

    Remember the congressmen and senators who support privatization of PAGCOR – wanna bet their pork barrel? 😆

  10. Jett Rink · ·

    All this talk of PAGCOR privatization came from a proposal from Ramon Ang, with him partnering with Malaysian “heavyweights” like Robert Kuok, Ananda Krishnan, Francis Yeoh. Maybe they have a better track record in running gaming companies, Kuok and Krishnan certainly. But I think all of these talks are overemphasized, and it is just a fallout of the purported “cleansing of the sins” done by Efraim Genuino, who the media has almost unanimously demonized. The Aquino administration knows that Pagcor is a gravy train, and once they fully realize its “capabilities of funding anything”, all this privatization talk will fade.

  11. picture this – which one will generate more benefits to the public:

    A) A Joint Venture between Ramon Ang ($6B) and the Malaysian Group ($4B)

    – they will own all the PAGCOR Casinos and Lotto Operations

    B) Liberalized Gaming Industry – more diverse ownership structures (not just 60/40) – break up PAGCOR Casino monopoly

    – Gambling Board/Commission to Regulate Gambling
    – Casino ownership not limited to PAGCOR – but to any investor who complies with liberalized regulations
    – Competition between casino owners – not monopoly – better services, competitive rates.

    Which do you think will actually deliver a tiger economy faster?

    We have tried the same approach in telephones and electric power (privatize a public monopoly without liberalization) – and what do we have to show for it – PLDT and MERALCO – lousy services, high rates, no competition.

  12. I like hearing the word “private monopoly”. Local execs to where the Pagcor raised their objections since a lot of services in their city will be deprived of much needed funds after the sale.

    The way I look at it is Ang was salivating his possible commissions from the sale or whatever comes of it.

  13. tuloy pa ba ito….or hangang salita or porma lang ito? i don’t see any kind of update reports.

    http://www.bagongnayongpilipino.com/

  14. […] PAGCOR Privatization Without Liberalization: Jumping Out of the … […]

  15. Why not sell franchises instead?

    Gov’t could still own PAGCOR and earn from those Gambling Operators

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