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.
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”).
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.
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.
(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
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.