Matthew Benjamin P.

Lopez 23 August 2014

11-2571 PET

Changing the Play of the Game: The Necessity to Reform the Philippine Amusement
and Gaming Corporation (PAGCOR)

I. Introduction

Since its establishment in 1976, the Philippine Amusement and Gaming

Corporation (PAGCOR), held a single monopoly for several decades over the gaming
industry by operating state-owned casinos and VIP slot clubs, while being the state
regulator and arbiter over the all gaming and amusement in the Philippines as
envisioned in the former program to promote the nation into an entertainment
hotspot in Southeast Asia (Oplas, 2012). Then in 2002, PAGCOR decided to build on
a special gaming economic zone on the reclaimed areas of Manila Bay called as
“Entertainment City”, in which several foreign and local-operated integrated resorts
would be permitted to operate within the exclusive economic area. With several of
these integrated resorts being presently built in several phases with a due
completion in 2015 of majority of all the licensed resorts, high-limit gamblers have
been enticed to spend their fortunes through these privately-managed casinos as
compared to the PAGCOR-controlled gaming hubs including the noted Casino
Filipino chain, who has since announced a closure of several of their state-owned
clubs including the Airport Casino Filipino that since been hemorrhaging a
substantial PHP 23 million in its rental space per month (O'Keeffe, 2012; Castro,
2014).

Given that the gaming industry is becoming a lucrative enterprise in the

Philippines and the considerable losses being incurred by casinos owned by
PAGCOR, notably with the rise of luxurious gambling zones, it would be
characterized that the state-owned corporation is characterized as a government
failure given its irrelevance to its own government policy of operating and
promoting a fully privately-owned gaming enterprise, while being a player in the
 gaming industry in addition to its regulatory powers that impedes the public good of
regulating the thriving gaming industry. Included in this, the political dynamics of
PAGCOR has increasingly been seen as a consistent private interest group on the
national government, rather on fulfilling its legal obligations. This was noted in the
latest amendments to the Anti-Money Laundering Act, in which casinos were
excluded from the covered financial institutions required to disclose and report
suspicious transactions, after a last minute compromise between PAGCOR and the
legislators in the final reading of the proposed legislation in 2013 (Ager, 2013).

The purpose of this paper is to examine the necessity of the matter given the
present standing of the state-owned enterprise to which the national government is
presently operating at a considerable loss. It shall denote that present challenges
being faced upon PAGCOR, given that its own financial interests are seemingly
prioritized, rather than on regulating the industry as seen by their counterparts in
Las Vegas and Macau. And it shall seek to explain the political framework
surrounding the enterprise; thereby reforms must be undertaken in correcting its
overlapping powers and functions.

It is denoted that the gaming industry in the Philippines has relative minimal
data on the premise that the industry has long been dominated by a single
enterprise, namely PAGCOR, since its inception in 1976. The paper shall not deviate
in discussing other forms of gambling including the lottery sweepstakes and other
legal gaming enterprises, as it is not part of the regulatory aspect of the said agency.
It shall primarily be focused on the institution, its legal functions and given powers
and its financial capacity to sustain itself within the gaming industry, while
competing with foreign and local casino operators.

II. The History of the Philippine Gaming Industry

Casino gaming in the Philippines can traced its foundations to the first legal
casino that operated in 1938, established by the partnership of American
businessmen Ted Lewin and Paul McDonald in running casino-type games in high-
end hotels and nightclubs. Upon the conclusion of the Second World War, Lewin and
McDonald partnered once again by combining the earlier business partnerships
with several Philippine entrepeneurs, in establishing casinos along the Dewey
Boulevard (present-day Roxas Boulevard) that developed in a luxurious operation
built in former Spanish mansion near the end of the Ayala Bridge, that had six
blackjack tables and one table specifically for the dice game of craps and roulette
(Gica, 2000, pp. 1-4). In the early 1950’s, underground casino gambling became a
fixture within the upper class of Manila society through sheer ingenuity and political
influence regardless of the pronouncements from the mayoral administration of
Manuel dela Fuente that started a crackdown on illegal gambling. Amongst the
famous clandestine operations were held at the Casino Español, were members of
the diplomatic corps, politicians and notorious gangsters including Ben Ulo and
“Scarface” Suarez, wine and dined with one another and thrived for the luxurious
accommodations served with imported processed meats, Cuban cigars and other
luxurious items that were smuggled through the Bureau of Customs, due to rampant
corruption in the local police force and the government officials. In the midst of a
thriving underground gaming industry, a former cashier that previously worked in
the underground casinos started building and operating several high-end and
luxurious casino chains that spanned from South Korea to as far-west as Nepal and
Bangladesh and became the predominant fixture in the Philippine gaming industry,
Carlos V. Magdaluyo (Gica, 2000, pp. 6-10).

Magdaluyo and several Philippine and American partners operated the first
casino within the Olympus Hotel located at Incheon in South Korea with the
financial support of Korean entrepreneurs in 1950, with two additional casino
operations in Walker Hill, the largest casino resort complex built on the hillside of
the Yalu River spanning 150 acres of land, including four hotels, eighteen cottages,
several skiing grounds, swimming pools and other-high facilities. After constant
training and development by the Magdaluyo consortium, the Koreans evicted the
Philippine-American gaming entrepreneurs. By 1968, under the guidance and tacit
support of President Park Chung Hee, the Korean gaming industry with the building
of multi-million dollar development projects notably the Casino Pusan in Busan, the
second-largest metropolis in 1978, through the inception of the Paradise Company
Limited that was granted a monopoly over Korean casino operations targeted to
foreign high-rollers, as the local Korean population were restricted from entering
into casinos until its subsequent lifting in 2000. After his forceful exit from Korea,
the Magdaluyo group ventured into entering other Asian markets including
Bangladesh and Nepal that necessitated foreign capital after decades of political
instability in their respective regions and provided luxurious cruise liners with
gaming operations that were opened once reaching international waters along
Pattaya, the famous resort island in Thailand (Gica, 2000, pp. 12-16).

Their successes in these markets noticed the attention of Macanese

entrepreneurs that were developing their own casino operations in the Portuguese
enclave that legalized gambling activities since the late 19th century. Teddy Yip and
his business partner, Stanley Ho, the subsequent “casino king” of Macau were
advised and consulted upon by the Magdaluyos and incorporated Western casino
gaming with an Asian flare including the opening other forms of gambling namely,
horse racing, football betting and dog races. In 1962, the Portuguese colonial
government granted a full monopoly of the gaming industry to the Ho-Yip
partnership, the Sociedade de Turismo e Diversóes de Macau SA, collectively known
as the STDM Group that rejuvenated the Macanese gaming industry and further
expanded into several international operations in Southeast Asia, particularly in the
Philippines. With their technical knowledge and dominance over the Philippine
gaming industry irrespective of their clandestine operations, the Magdaluyos
consistently pressured the Congress of the Philippines into the legalization of
casinos that ultimately failed in the process. The heydays of the Magdalyos’
dominance came to an abrupt end on the 23rd of the September 1972, when
President Ferdinand Marcos declared martial law and usurped the all casino
operations held by the Magdaluyos with several family members placed under
direction, while their businesses were being passed unto known associates of the
President, including their former Macanese partners, the STDM Group (Gica, 2000,
pp. 19-20).
III. The Establishment of the Philippine Amusement and Gaming Corporation
(PAGCOR)

With the eviction of the Magdaluyos and other gaming entrepreneurs from
the gaming industry, President Marcos consolidated the existing casinos and
legalized their operations through its nationalization. Presidential Decree Nos.
1067-A, B and C issued on the 1st of September 1977 that created the Philippine
Amusement and Gaming Corporation (PAGCOR) as the national gaming regulator in
the Philippines. The Marcos government further expanded the powers and
privileges of PAGCOR through the passage of several presidential decrees, four
executive orders and one letter of instruction namely:

a. The exemption of PAGCOR from all import duties and taxes;

b. The exemption of all revenues generated by PAGCOR from all forms of income
taxation;
c. Unrestricted foreign exchange controls;
d. Granted control of PAGCOR to the Office of the President with a market share of
60-percent of the voting power held in the corporation;
e. Specified the allotment of revenues generated by PAGCOR:
i. Five-percent share by the national government through the Franchise Tax
of the gross earnings;
ii. 50-percent share of the remaining balance to the National Treasury;
iii. 10-percent share shouldering the management fees to a selected private
firm and finally;
iv. 35-percent share to cover all the operating expenses and net income of
PAGCOR.

As stated earlier presidential decree, President Marcos appointed the first board of
directors in 1977, composed of known political and business allies including: Ruben
Ancheta, Constante Fariñas, Roberto Sabido, Manuel Lazaro and Edward T. Marcelo.
Amongst the primary resolutions passed by the newly instituted board is the
outsourcing of the casino management operations to the Philippine Casino
Operators Corporation (PCOC), a letter-box holding company created to facilitate
the hiring of Macanese-based casino managers from the STDM Group under the
supervision of Paulo Ho, that were given lofty shares of the tips, added to their basic
salaries and with the bonus of receiving Philippine citizenship for the employment.
With the approval of the PAGCOR Board, PCOC acquired the Manila Bay Enterprises,
Inc. (MBEI; later renamed as the Presidential Special Services Corporation (PSSC))
and the Provident International Resources Corporation (PIRC) to provide the
manpower, equipment and gaming premises in the operation of the PAGCOR casinos
located at their present locations in Parañaque City, Cebu and Pampanga (Angeles
and Clark). Edward Marcelo, a board member of PAGCOR and known subordinate of
President Marcos, held financial interests in PCOC and the PIRC being one of the
main incorporators in the said firms. Security for the PAGCOR-licensed casinos was
provided for by the National Intelligence Service Agency (NISA) and the Presidential
Security Group (PSG) through the hiring of 200 personnel being assigned to bestow
a blanket security to the government-owned casinos. Employees were placed under
strict surveillance and worked with reactively low wages and no day-offs including
regular holidays that further deteriorated their own long-term productivity (Gica,
2000, pp. 19-23).

In October 1983, relatively two months after the assassination of Senator

Benigno “Ninoy” Aquino, the noted leader of the Philippine opposition, the former
casino operations in the gambling ships were further transferred into the
contemporary built, Airport Casino, a spacious building with several luxurious
restaurants, recreational facilities and a sprawling gaming area, including the
accommodations provided for by the nearby Philippine Village Hotel. In order to
further solidify control over the present casino enterprises, President Marcos
amended the PAGCOR charter on the 11st of July 1983 through the issuance of
Presidential Decree No. 1869 that broaden its authority by placing all rights to
operate and maintain all existing casinos, gaming pools and other recreational and
amusement clubs within the national boundaries of the Philippines in its exclusive
economic zone (EEZ) on the high seas, in effect guaranteeing a full monopoly over
 the gaming industry. As in the previous management, PAGCOR underwrote its
remittances to the national coffers and continued its hiring of Macanese gaming
managers through the PCOC, at the expense of the massive layoffs from the domestic
labor gaming market (Gica, 2000, pp. 22-23).

IV. The Decline of PAGCOR and the Closing of the Casino Operations

Upon the conclusion of the People Power Revolution on the 25th of February
1986 that toppled the Marcos regime, the interim government of President Corazon
Aquino, the widow of the slain opposition leader, reshuffled the management of
PAGCOR with the purpose of instituting reforms that shall oversee to the eventual
closure of its own casino operations in the long run. The internal reshuffle of
functions were placed through: the changing of the depository agent assigned to
manage the management revenues formerly held in a private bank owned by the
business associates of the deposed President, sequestration of assets and liabilities
incurred by the previous PAGCOR Board and their subsidiaries, PCOC and PSCC,
internal auditing of all withheld properties and licensed franchises held in various
hotels, resorts and gaming pools and clubs and the subsequent sacking and
prosecution of the erring officials including the Macanese managers and consultants
hired by the PCOC. Placed to manage the restructuring of the gaming regulator were
Norberto Quisumbing, Jr. as its chairman and the following as respective board
members: Magno Abrigo as vice-chairman and general manager of all provincial
operations and security; Carmelo Lazatin as manager of the Manila operations and
Alberto Antonio as manager of the treasury and accounting offices of PAGCOR (Gica,
2000, pp. 25-29).

Amongst the reforms spearheaded by the New PAGCOR was the sacking of
the entire Macanese management under Paulo Ho, on the basis of restoring the
retrenched Philippine staff that were placed under dire constrains in their previous
management. The internal reforms within the PAGCOR were encouraged by the
Casino Labor Association (CALAS), the casino employees’ labor union noting the
increased discontent with the working conditions under the previous Macanese
management, but several employees seeing that internal reforms were relatively
sluggish, considered planning industrial action in an effort to hasten the progress of
these reforms. As noted from the earlier statement, casino employees were not
informed of their working rights and privileges in their workplace, noticeably on
their benefits accorded upon by their memberships in the Social Security System
and the Home Development Mutual Fund (Pag-IBIG Fund). Other indirect
stakeholders affected by the internal reforms, were the entries to the casinos
ranging from the compulsive gamblers to the high-stake rollers, protesting the
stricter implementation of the rules and regulations on the gaming floors and
grumbled on the slow card dealing that resulted to several incidents of abuse
committed towards the casino staff (Gica, 2000, pp. 25-28).

The growth of frustrations leading to the eventual backlash from the casino
employees and their customers compelled the New PAGCOR Board to consider
implementing their end goal as their main directive, shutting down all legal casino
operations in the Philippines on the 12th of July 1986. The closure of the casinos
increased tensions between the New PAGCOR Board and CALAS with massive
demonstrations by employees in their interim offices in Manila, and subsequently in
Mandaluyong, picketing in front of their offices. In the process, the shutdown of the
PAGCOR casinos effectively split the board into two distinct factions: the legalists
and the pragmatists. The legalists headed by the PAGCOR Chairman Quisumbing, a
trained lawyer argued for the casinos to be legally repossessed by the state
involving a long and tedious legal tussle that entailed incremental costs to detriment
of the national government, while the pragmatists under Board Member Abrigo,
noted the fiscal incapacities of the cash-strapped government urged the immediate
opening of the casinos and employing the recently retrenched staff members. The
factions later reconciled and reached a consensus that the casinos would be
reopened, on the condition that a labor dispute between PAGCOR and CALAS
resolved amicably to hasten the reviving of the gaming operations, in earnest. The
Board represented by Abrigo, finalized a legal settlement with CALAS, ending with
the eventual rehiring of former casino employees that shall handle the operations of
 the casinos. Unperturbed, the Board later decided to open tenders for the casino
managerial operations to other interested parties in the hotel management industry
that was eventually awarded to the Manila Hilton (present-day Manila Pavilion
Hotel) and the Silahis International Hotel at knockdown prices, that ended the
government subcontract with the PIRC (Gica, 2000, pp. 33-39).

V. The Prominence and the Intrigues of PAGCOR in the Post-Aquino

Administrations

With the reopening of the casinos on the 15th of July 1986, the national
government started continued the strengthening of the regulatory capacities of
PAGCOR through its internal reforms and the infusion of capital to entice the hiring
of professionals and employees to promote transparency and proper working ethics
in the management of the casinos. Noticing the initial fallout from the interim
PAGCOR Board, President Aquino obliged the directors of the interim PAGCOR
Board to tender their courtesy resignations and installed a technocratic managerial
board to facilitate and fast-track the internal reforms started by the previous
directors (Gica, 2000, pp. 43-55). In January 1987, Alicia Reyes, a former banker was
appointed as the chairman of the PAGCOR. Under her leadership, the PAGCOR Board
curtailed the tax-exemption privileges accorded under the previous PAGCOR charter
and imposed import duties on imported equipments, curtailed the purchase of
luxury vehicles that were normally rented out for high-risk gamblers, paid income
and corporate taxes on their gaming revenues and remitted of its percentage share
of the gaming revenues to the National Treasury as stipulated in the charter. The
Board also imposed an entrance fee of PHP100 on its own enterprises prior to use of
the gaming area that initially was riled in opposition to the measure, later resigned
to its imposition. In addition to the entrance fee, the PAGCOR Board wholly
transmitted its gross net revenues to the Presidential Social Fund (PSF), whereas
the state regulator subtracted from the operational costs from the stated revenues
(Gica, 2000, pp. 57-59).
 Internal controls amongst the PAGCOR personnel were placed to prevent sexual
harassment of employees and terminated illicit affairs amongst the staff members
within the corporation. Modernization started in earnest with the procurement of
electronic devices particularly closed-circuit television cameras (CCTVS) on the
gaming floor to properly conduct surveillance operations on possible cases of
misconduct of the staff members and players suspected of cheating the casino. To
restrain possible influencing from criminal syndicates and political corruption,
equitable wages and benefits were granted to PAGCOR employees that matched the
normal wages by their competitors in other casinos in Southeast Asia. A strict
implementation of the PAGCOR Charter barred the entrance of all national
government officials particularly military and police officials from entering any
casino premises, under Presidential Decree No. 1869-B. The legal gambling age is
pegged at 21, with a further exclusion of all students presently enrolled towards the
tertiary level in the Philippines from the premises. Media dissemination in their
flagship “Casino Filipino” commercials in the national press and the quarterly
publishing of its financial reports by the Commission on Audit (COA) rehabilitated
the image of PAGCOR and became an alternative destination for gaming tourism in
Southeast Asia in the 1990’s (Gica, 2000, pp. 59-60).

Notwithstanding the various accolades awarded in its internal reforms, the

PAGCOR Board became synonymous with politicking and an avenue for corruptions
with the profitable revenues incurred by the state regulator in its casino operations.
Subsequent political appointments to the PAGCOR Board in the Estrada and Arroyo
administrations, an assortment of irregularities occurred that damage the integrity
and reputation of the esteemed state-owned entity. Notwithstanding the
government ban, several government officials have been reported in engaging in
casinos. The most prominent incident occurred on the 16th of September 1996,
when President Joseph Estrada then sitting as the Vice-President was caught on
camera, playing a high-stake game of baccarat with his close business associate
Charles “Atong” Ang in the exclusive VIP room of the Heritage Hotel and Casino in
Manila with the close monitoring of Butch Tenorio, the general manager of the said
casino. The PAGCOR video technician Edgar Bentain, the person who reportedly
disclosed the footage to the national press disappeared on the 16th of January 1999,
in front of the Grand Boulevard Hotel, a PAGCOR-licensed hotel after receiving
consecutive death threats. Until this day, no prosecution towards the figures
involved in the affair proceeded, with Bentain still considered as missing.

President Estrada as noted in the Bentain affair, had considerable business

interests in the gaming industry, holding several various stakes held in Power
Management and Consultancy, Inc. (PMC), Best World Gaming and Entertainment
Corporation (BW Gaming) and Belle Corporation through pseudonyms and letter-
box incorporators provided by his nearest associates including Charles Ang, Jaime
Dichaves and Dante Tan. Upon assumption of office on the 30th of June 1998,
President Estrada started the process of privatizing the gaming industry from the
PAGCOR-licensed casinos to other forms of gambling including bingo and jai-alai, a
popular Hispanic ball sport, but in effect monopolizing the entire industry. PAGCOR
started bidding out the gaming operations of jai-alai and the Bingo-2-Ball that was
later awarded unto the Belle Corporation through the advisory representation
provided by PMC owned by Ang, the contract was later deemed unconstitutional by
the Supreme Court by declaring the jai-alai practice as an illegal form of gambling
on the 29th of November 2000 (Gloria, 2000). On this basis, President Estrada was
later impeached by the House of Representatives along with other charges of
bribery, extortion and graft and corruption, particularly in receiving payoffs related
to the illegal numbers game of jueteng and the misappropriation of public funds
collected from the tobacco excise tax. After an inconclusive trial in the Senate
leading a walkout of public prosecutors, Estrada was subsequently ousted from
office in the Second People Power Revolution, commonly known as EDSA Dos on the
20th of January 2001 and replaced by his deputy, Vice-President Gloria Macapagal-
Arroyo as President (Dalangin-Fernadez, 2007).

Mismanagement of the PAGCOR Board further continued, when President

Arroyo appointed Efraim Genuino, a prominent businessman as the chairman of the
plagued gaming regulator in 2004, after her controversial re-election bid. Genuino
 in his capacity, utilized his authority as the chairman of the PAGCOR Board to
facilitate social projects that were directed in ensuring the electoral success of his
own sons, Edwin and Anthony Genuino in the 2010 general elections, amounting to
US$6.22 million through the charity incorporated by his family, the Batas Iwas
Droga Foundation (BIDA) noting conflict of interest. In order to promote the
production of the locally-produced film “Baler”, PAGCOR shelled out PHP 21.65
million in the purchasing 72,150 unsold movie tickets abrogating an earlier
agreement with the film distributor, Viva Communications, Inc., PAGCOR and BIDA.
The executive producer of the said film was Genuino’s son, Edwin who served as the
Executive Assistant of PAGCOR. As denoted earlier allegations, Genuino transferred
300 metric tons of rice donated by a Japanese firm, initially cited for the victims of
Typhoon Frank in 2008 through the Department of Social Welfare and Development
(DSWD), a noted receiver of PAGCOR funds that were repacked and given during the
electoral campaigns of the Genuino sons, in their respective bids to become Mayor
of Makati City and Los Baños City. Charges of graft and malversation of public funds
were filed against the former PAGCOR Chairman and his former executives by the
Ombudsman on the 6th of March 2013 and is presently pending action in the
Sandiganbayan (Rappler, 2013).

VI. Concrete Solutions in the Reforming of PAGCOR

Citing the government failure in the internal reforms instituted by the previous
Reyes-led Board of 1987 in the Philippine Amusement and Gaming Corporation
(PAGCOR) noted in the notable cases of financial impropriety, politicking by
government officials leading to instances of political graft and corruption and the
controversial disbursement in the allocation of public funds has increased the
necessity to reform the roles, functions and regulations of PAGCOR. In an earlier
discussion paper written by noted economist Solita Monsod denoted that PAGCOR,
being a hybrid of both the regulatory and corporate framework provides avenues of
conflicting interests in the constant political shifting of its charter (Monsod, 1985).
Therefore, a proper revising of the present charter of PAGCOR is required to
standardize its functions as a solely regulatory body that is apolitical in nature. In
the amending of Presidential Decree No. 1067, as amended by Presidential Decree
No. 1869, including the stringent penalties for barring government officials and its
enforcement. In addition, nepotism as seen in the case of the Genuinos, must be
curtailed through an internal memorandum order, barring the appointment of
PAGCOR officials towards the fourth degree of affinity. Because of the economic
viability of the Philippine gaming industry as noted in its national revenues, the
regulatory body that replace the functions of PAGCOR should be placed under the
helm of the Department of Finance (DOF) from the present supervision of the Office
of the President, as in case of the Bureau of Customs and the Bureau of Internal
Revenue meeting an annual quota for its target collection of revenues that can
provide a broaden outlook of setting substantial solutions in curbing corrupt
practices within the gaming regulator. Political reforms in PAGCOR, requires
reaching a consensus agreed upon by public policymakers including furthering their
implementing powers, in order to oversee the industry and fine tuning its legal
parameters by updating its present legislation (Monsod, 1985).

Being a solely as regulatory arm of the national government, what are the
possible avenues for the privatization of its own casino operations? Two concrete
alternative solutions can be adopted by the national government of the Philippines
for the thriving gaming industry, notably of Macau, that fully liberalized their
market by eliminating its long-standing monopoly and Singapore that legalized the
casino operations but restricted its gaming licenses to several concessionaires. Both
states have since displaced their Western counterparts in the global market share.
This can be provide suitable development approach for the niche Philippine gaming
industry that is projected to become a significant gaming area by 2015.

As previously discussed, the Macanese STDM Group held a long-standing

monopoly over all its gaming franchises, in exchange for collection of revenues
towards the national government. In 2002, the Macau SAR Government ended the
state monopoly in order to permit foreign gaming operators to enter the domestic
gaming market to boost its international tourism reach. Prior to its liberalization of
the gaming market, Macau was ranked as the third globally, amounting to US$3.5
billion in its annual revenues (McCartney, N.D.). By 2015, the annual revenues will
be projected to stand at US$23.4 billion of the global market share, after the entry of
foreign gaming operators including the American-led Wynn Resorts and the
Venetian handled by Galaxy SA, competing with its main domestic competitor, SJM
Holdings, the main gaming subsidiary of the STDM Group. Thereupon, Macau has
now since displaced Las Vegas of the United States with constant annual revenue of
56% of table winnings by 2015, considering that its own market liberalization has
progressed in economic growth and development in the Asia-Pacific region
(Pricewaterhouse Coopers, 2011).

The restrictive entrance of foreign competitors, as noted in the case of Singapore

that has become a major gaming market in the Asia-Pacific region with projected
annual revenue of US$7.2 billion in 2015, due in part to the lifting of gambling
restrictions in the city-state in 2010, with the opening of Resorts World Sentosa and
the Marina Bays Sands in 2011. The economic outlook is on the upside given is
through the relatively strict adherence to entrance of domestic residents that are
placed under a national quota per month, in order to curtail plausible gambling
addictions through the payment of an entrance fee of SGD100 for all Singaporean
citizens and permanent residents per day, amounting to a total of SGD2000, per
year. Exclusion by means of self-exclusion by residents or through their respective
families hinders the influx of local gamblers to thrive. The high-end rollers from
China and Southeast Asia have seen the tourism aspect of the Singaporean gaming
industry due to its geographical location, as a viable alternative to Macau through its
integrated resorts (IRs) program that has provoked controversy since its passage of
the domestic legislation in the national parliament in 2005 (Pricewaterhouse
Coopers, 2011; Wee, 2011).

At the moment, the Philippines is challenging the gaming hubs of Macau and
Singapore through its own gaming initiatives with the support of the public and
private sectors. Under the direct supervision of PAGCOR, the “Entertainment City”
project presently being built on reclaimed land areas of the Manila Bay has become
the main attraction for the gaming industry that seeks to displace their Asian
counterparts in the region. Since 2002, the project has been designated as a free
economic zone (FEZ) by the Philippine Economic Zone Authority (PEZA), providing
the needed structural framework to tolerate foreign direct investments to flourish
in the Bay area, noting the present constitutional restrictions on foreign ownership
of land. The licensed consortiums permitted to operate in the zone are: Solaire
Resort & Casino (Bloombery Resorts), City of Dreams Manila (Melco Corporation
and SM Prime Holdings), Resorts World Bayshore (Genting Group and AGI) and
Manila Bay Resorts (Azure Holdings). These consortiums underwent a public
tendering for their gaming licenses through bidding war amongst foreign and
domestic gaming entrepreneurs given the limited quantity of the licenses. The
Philippine gaming hub has increased the global outlook on the gaming industry that
stands at US$1.2 billion by 2015, as the stated entities shall finish completion of
their construction projects by 2017, irrespective of the constant legal delays
(Pricewaterhouse Coopers, 2011).

The Entertainment City project, notes the shift of roles of PAGCOR from
providing the service of entertainment towards a more regulatory approach. Adding
to this conclusion is the closure of several Casino Filipino chains that have been
plummeting in their annual revenues. In February 2014, PAGCOR announced the
closure of its premier Airport Casino Filipino, generating total net revenue of PHP
180 million annually. Regardless of its high-yielding income, present PAGCOR
Chairman Cristino Naguiat, Jr. appointed by President Benigno Aquino III in 2010 to
replace the tumultuous Efraim Genuino, stated in an interview that the operating
expenses in maintaining the state-owned casinos, one of the largest in the
Philippines have peaked at PHP 90 million, discounting the required PHP 23 million
of rental payments to the Manila International Airport Authority (MIAA), the owner
of the casino lot. Deficits incurred by the state-owned casinos have increased with
the population moving to the privately-held casinos in Entertainment City,
compared to the lack luster facilities provided by PAGCOR, though posting a net
profit of PHP 3 billion in 2013, with an increase of PHP 200 million from the
 previous year, partly incurred from the collection of direct taxes from the private-
run casinos and their remaining state-owned casinos in the provinces (Remo, 2014).

VII. Conclusion

Reforming the present structure of the Philippine Amusement and Gaming

Corporation (PAGCOR) requires a dual approach: political and economic. It is noted
that politicking in a government-owned and controlled corporation can be
minimized provided the helms of its management be placed under the guard of
apolitical agents as in the case of PAGCOR Chair Alice Reyes in 1987, who instituted
effective reforms in the beleaguered gaming regulator. Legal structuring provides
the political legitimacy in regulating the Philippine gaming industry that as earlier
pointed is thriving with a providential economic outlook by 2015 and further on.
Another key principle denoted is that privatization can only be possible and
effective, through a transparent and open bidding process as denoted in the case of
the Entertainment City project. The national government cannot be a barrier in the
sole monopoly of the industry for as discussed earlier, has failed in providing that
service to the public as seen in the case of the Casino Filipino chain, the flagship
casinos operated by PAGCOR.

The present PAGCOR management under Cristino Naguiat, have seen an

dramatic improvement on their financial statements as a regulator in collecting
taxes from private casinos, rather than placing their own casinos to compete with
their foreign and domestic rivals. In spite of proper management, PAGCOR must be
accorded its own autonomy to be neutral in its affairs and not be utilized for self-
preservation of bureaucrats and politicians as encountered by previous
administrations that have stained the image of PAGCOR. The time for reforming
PAGCOR is presently occurring shown in the technocratic managerial style of the
present board, nevertheless, political willpower through the private sector must
hasten the structural reforms that hamper our niche gaming industry in order to
fully compete with our Southeast Asian and East Asian neighbours that have a
comparative advantage in their respective industries.
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