Farm Town

Some news on First Cagayan from Bloomberg. Look at the story — it says just one licensed casino in the Cagayan freeport is drawing $13 million of bets a day. Phew!

It’s 11 p.m. and inside an office building on the northeastern tip of the Philippines a dozen people place wagers on blackjack and baccarat. No matter how much they bet, none of the gamblers will win — or lose — a thing.

They are all proxy bettors, making wagers on behalf of patrons who track the action and issue instructions from outside the country by way of a live Internet link.

“There is no place like this in Asia yet,” said Kan Goh, general manager of Eastern Hawaii Leisure Co., which operates the casino in Santa Ana, a town of 20,000 fishermen and farmers.

Cagayan Freeport, a 12-year-old special investment zone that includes Santa Ana, is using the gaming provisions in its charter to chase a slice of the estimated $12 billion wagered over the Internet each year. The zone is the first Asian jurisdiction to legalize online casinos, giving it a head start in the race to lure the region’s bettors.

The zone targets Chinese gamblers who helped Macau overtake Las Vegas as the biggest casino market last year, said Jose Mari Ponce, chairman of Cagayan Freeport, who rented his office to Eastern Hawaii as a temporary home. Harrah’s Entertainment Inc. and MGM Mirage, the largest casino operators, so far have failed to persuade the U.S. Congress to let them take Internet wagers.

Second Largest Gaming Market in Asia

When you’re just a couple of hours flight time from a country of 1 billion people who love to gamble, your gaming industry will take notice, and begin positioning for the boom in Chinese tourism.

Check out these figures on how big the Philippine market is, in terms of machines installed, as estimated by PacificNet.

A couple months ago Tong said the Philippine gambling market is “even bigger than Macau” in terms of gambling machine installations and presents “huge opportunities” for PacificNet Games.

Tong said he believes the Philippine market will continue to grow rapidly as one of the top destinations for Chinese tourists from China, Taiwan, Hong Kong and Macau, since it is only a two-hour flight from Manila to Hong Kong.

After achieving early success in the Macau gambling market, Victor Tong, President of PacificNet said, he believes PacificNet is “ready to expand into other parts of Asia” as he sees strong demand and opportunities for growth in other Asian gambling markets.

According to recent report by Global Gaming Business, Jeffries Wall Street, the Philippine gambling market consists of about 5,000 gambling machines, over 620 gaming tables and over 8,500 positions, and represents the second largest gambling market in Asia, after Macau.

The More the Merrier

Asia has woken up to the potential of gambling. With affluent societies becoming more tolerant of what some still regard as an activity tainted by Mafia and Triad involvement, the race is on to outdo Las Vegas. What else will Asia’s middle class spend their money on when they already have their cramped apartments chock-full of appliances and gadgets?

Singapore’s media is asking whether the IRs (integrated resorts) being planned at Sentosa Island and Marina Bay can cope with the competition that will arise as Japan, Taiwan, and several other countries legalize casinos.   

With roulette wheels spinning and jackpot machines already whirring in casinos throughout a dozen Asian countries, the inevitable question that springs to mind is: Will there be enough well-heeled customers to feed the industry as more Las Vegas-style super casinos go up in new locations?

The question arises with the distinct possibility of luxury casino complexes coming up in Tokyo and the southern island region of Okinawa by 2012, as Japan moves closer to an overhaul of its strict gambling laws.

Taiwan is also considering lifting its ban on casinos, while Thailand is also seen as likely to relax its gaming laws in the coming years, an AFP report said on Sunday.

Casino Workers of the World, Unite

What happens when there’s a sunrise industry with more jobs than workers that’s situated only an hour’s flight away from a trained workforce only too willing to leave the Motherland? You get an exodus.

The company with a mega-sized HR headache is Pagcor, according to columnist Boo Chanco.  Don’t forget it’s not just Macau that will draw on Asia’s casino professionals. On the horizon is the city-state of Singapore, which has its own ambitions of becoming Asia’s Las Vegas (look at the want ads in Singapore and you’ll spot companies promising to train you for the lucrative jobs that will come when the hotel-casinos open next year).

A Deutsche Bank study of Cotai, one such new development, notes that Macau only has a population of 450,000. “When the Cotai Strip is fully developed, the area itself can potentially employ over 120,000 people, according to Las Vegas Sands.”

There goes the staff of Pagcor! There is supposed to be a gentleman’s agreement that prevents casinos in Macau from pirating staff from Pagcor, but given the higher wages and benefits here, I am sure those who want to work here will find a way around it. I heard Pagcor had lately been deluged with resignations and applications for early retirement from among the most experienced of its staff.

Pagcor’s loss will be the nation’s gain… more OFWs sending precious dollars home. I am told that right now, there are at least 15,000 immediate openings for gaming professionals in Macau. Since we are the most proximate nation with trained gaming professionals, we are a natural source of manpower to fill in the need.

Maybe Efraim Genuino should have been allowed to put up his Pagcor Academy after all. The Pagcor chief once upon a time proposed that such a training center be established to fill in the manpower needs of Pagcor itself. But it was opposed by the usual suspects who have problems with gambling being here at all. Now, it may be too late to satisfy Pagcor’s needs as it hemorrhages its staff to Macau casinos.

Wynn Win for Pagcor E-City

You’ll know that the Pagcor dream of creating a Las Vegas on Manila Bay will come closer to reality when one of the Big Boys actually signs a contract or joint-venture agreement with the state gambling monopoly. For the optimists, there’s recent news that Wynn Resorts, Ltd. (annual sales: US$1.4 billion and market cap of US10.3 billion) is interested. Given the Pagcor E-City’s ambitions, only those in the billion bracket (dollars, not pesos) can undertake this. But right now, it’s all just talk-talk, in contrast to Macau where it’s build-build-build.

Tim Shiah, a representative of Jack Binion of Wynn Resorts, said the company is “committed to look at all opportunities in the Philippines.” Jack Binion runs the international operations of the hotel casino chain, the first of which was Wynn Macau.“Wynn Macau is actually looking into the Philippines. Jack Binion is director of Wynn International that’s why he’s been down here for the last couple of years and they’re looking [around],” Shiah said at the Asia Gaming and Entertainment Expo briefing.“You know the biggest asset in the Philippines—and I can’t preach this loud enough—is the people here, the workforce,” he added.Hotel chain owner Steve Wynn and Binion had talked about duplicating Wynn Macau in the country, Shiah said, adding that the renewal of the license and eventual amendment to the charter of Pagcor would make it easier for the group to enter the local gaming scene.

UK Super Casinos

How many “super casinos” will the entire United Kingdom have? Only one — in Manchester.

As defined by regulators there, a super casino is one with at least 5,000 square meters of area for customers to gamble and up to 1,250 slot machines.  How many does Las Vegas have? 30.  How many are in Asia? Good question…..

Manchester was a 16-1 outsider at the bookmakers to be selected as a test-bed for the UK’s first regional “resort” casino.

There has been speculation that more super-casino licences might be awarded but Ms Jowell told MPs that there would definitely be no more granted during this Parliament.

Any further casinos would have to be approved by parliament and would not be considered until there had been a “proper evaluation over time” of the social and economic effects of the 17 new casinos.

Pursuing the Bay of Dreams

Any bets that there will be a major announcement from Pagcor Chairman Efraim Genuino this week? 

Big wigs in the gaming industry are arriving in Manila for a conference and exhibition. Genuino’s dream is to establish E-City, a gambling-cum-enterntainment complex  on reclaimed property in Manila Bay that would rival Las Vegas and Macau. He had earlier been stymied from pursuing it because Pagcor’s charter was expiring in 2008. Last month’s Congress renewed the charter, removing an obstacle in developing E-City.  

Recognizing the synergies created by a strong combination of tourism, entertainment and gaming, Pagcor is actively involved in soliciting offers from potential foreign investors and locators in the planned P15-billion development complex on the 300-hectare Manila Bay property.

Initially, the proposed tourism investment zone will dwell on a tropical resort setting. It will be marketed as E-City Manila (E for Entertainment), and will be positioned as the hub of gaming, entertainment and tourism in Asia.

Chairman Genuino, I understand, had been in exploratory talks with several possible business interests as early as 2005. Genuino is confident that the impasse created by the issue of Pagcor’s expiring franchise is finally out of the way and that discussions are moving forward on firmer ground.

There should also be some substantial agreements during the 2nd meeting of the Euro-Asian Cooperation on Gaming on March 21 at the New Hyatt in Manila which would be attended by prominent gaming complex owners, operators and gaming suppliers based and/or operating in Asia and Europe.

Casino Closures: LGU Code vs PD 1869

It’s election time. Does that color decisions that are usually left to the judiciary to sort out?

Here’s some news from Manila Bulletin on PGMA nixing a planned casino in the Sta. Lucia East Grand Mall after opposition from the Marikina local government and church leaders in Rizal province.  

The President issued her order to Ephraim Genuino, Pagcor chairman, upon the appeal of the residents and members of multi-sectoral groups led by Bishop Gabriel Reyes of the diocese of Antipolo, Rizal Gov. Casimiro Ynares, provincial board members and other leaders of the province.

Meanwhile, another casino in Rizal province, the Fiesta Casino in EastBay Resorts in Binangonan, is under the gun. A local court had ordered the casino’s closure; Pagcor has asked the Court of Appeals to overturn the lower court. The article quotes Bishop Reyes as saying President Arroyo will “find a way to close” the casino in EastBay. 

Pagcor’s main argument in saying that it has the right to operate the casino in the municipality is its enabling law, Presidential Decree 1869: 

Citing PD 1869, Pagcor likewise stated that the casinos and other franchisees nationwide are exempted from such obligations such as securing mayor’s and business permits.

The counter argument is that the Local Government Code enshrines the principle that local governments, rather than the national government, have the final say when it comes to businesses operating in their jurisdiction.   

Binangonan Mayor [Cesar] Ynares assailed Pagcor for “belittling” the local government code through its continued defiance of its provisions, which give powers to the host local government unit on matters pertaining to any private operation, which may directly or indirectly affect the locality. 

 

Legal Competition II

Let’s take a walk through the legislative landscape, and examine the specific laws which created our special (gaming) economic zones.  

RA 7903, officially known as the Zamboanga City Special Economic Zone Act of 1995,  created the ZamboEcozone Authority. This is one of many zones that have mushroomed throughout the archipelago, of which the more famous ones are in the former U.S. bases, Subic and Clark. The zones are legal jurisdictions carved out from the rest of the Philippines, on the premise that a special zone able to provide abundant tax breaks can attract more businesses to locate in the country, thereby creating more jobs than would otherwise have been created.   

Section 7 of the governing law for the  ZamboEcozone Authority states its powers and functions, of which the relevant clause is this:  

(f) To operate on its own, either directly or through a subsidiary entity, or license to other tourism-related activities, including games, amusements and recreational and sports facilities;

Take note of that language. We’ll revisit it soon.  

On the other hand, there is Republic Act 7992, otherwise known as the Cagayan Special Economic Zone Act of 1995. Section 6, the relevant “Powers and Functions” section, says:

(f) To operate on its own, either directly or through a subsidiary entity, or license to others, tourism-related activities, including games, amusements, recreational and sports facilities such as horse racing, dog racing, gambling casinos, golf courses, and others, under priorities and standards set by the CEZA;

Note that the CEZA law does not directly state that it can do Internet gambling; there is no language prohibiting it either. What it does state is that CEZA can license “sports facilities such as horse racing, etc.” under the umbrella of “tourism-related activities.”  Is that umbrella wide enough to encompass Internet gambling?

But it is worth noting that CEZA’s language is much more explicit than ZSEZA’s.  Again, ZSEZA’s enabling law merely states that it can do “games, amusements, and recreational and sports facilities.”

How wide is the GARS language? Is it wide enough to include Internet gaming and gambling? The chief regulator of all gambling in the country is known as the Philippine Amusement and Gaming Corp., abbreviated to Pagcor, so ZamboZone proponents can argue that the terms “amusement” and “gaming” encompass gambling.  

This isn’t all semantics. Given the nature of the Philippines, there’s always the risk that someone will challenge both CEZA and ZSEZA. And whatever court challenge may appear will eventually go all the way to the Supreme Court. That process will take several years; in the meantime, those that do establish online casinos can make hay while the regulatory sun is shining.

Clash of Authority

Who has the authority to open gambling parlors?

By virtue of the super charter that created it, Pagcor’s authority  overrides those of local governments. In theory, Pagcor could open casinos and bingo outlets in any locality without going through the usual torturous process of obtaining permits that every other business must go through.

In practice, Pagcor usually asks gaming operators running Pagcor-sanctioned outlets to obtain a mayor’s permit, or at least a letter of no objection. The requirement that’s not a legal requirement is mandated, on the premise that it’s better to be in a place where the local political powers don’t object to you rather than establish in a hostile environment. Never fight city hall.

But every so often that clash of authority erupts.

In Bacolod City, Mayor Evelio Leonardia padlocked a newly opened Bingo Bonanza outlet in the SM mall last week. Now Jesus Hinlo, the lawyer of the Bingo operator, Phuture Visions Corporation, Inc., is going to be busy trying to get a court to overrule the mayor. 

It would be in the interest of Pagcor that the court issues a ruling in this fracas affirming that a mayor’s permit is indeed not needed.

Hinlo, in his letter to Reynaldo on Feb.26, said Pagcor has already approved their application without requiring a Mayor’s Certification of No Objection. He also reminded Reynaldo in his letter that it is only Pagcor and not the City of Bacolod that has regulatory control in the grant of the authority to operate bingo outlet.

“Whatever requirements that the Pagcor obliges from its applicants is solely and exclusively within the said Agency’s jurisdiction. The Pagcor’s Board Resolution conferring upon my client the authority to operate Bingo games at SM City Mall, effectively superseded the procedures and requirements,” Hinlo also stressed in his letter.