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.

RA 9487

Republic Act No. 9487, the law extending Pagcor’s franchise, was signed by Philippine President Gloria Macapagal-Arroyo June 20th. If you recall, this bill (House Bill 3409)  was approved on Feb. 19 during Congress’s special session.

The law extends Pagcor’s franchise, expiring on July 11, 2008, by another 25 years. The key provision is that instead of just having the right to run casinos, Pagcor now has “authority to operate and license gambling casinos, gaming clubs, and other similar recreation or amusement places, gaming pools, etc.”

Earlier Supreme Court jurisprudence had nullified a Pagcor contract with the now defunct Sage, with the high court finding that Pagcor had the authority to operate, but not sub-franchise its franchise.

Another key provision is that Pagcor must “obtain the consent of the local government unit that has territorial jurisdiction over the area chosen as the site for any of its operations.” Previously, Pagcor was not legally required to get the LGU consent, though in practice it did.  

Games & Amusements

Sooner or later, things would have come to a head.

We wrote in March that there could be a legal challenge mounted to see if the GARS language (games, amusements, recreational and sports) in the law that created a couple of the country’s special economic zones is wide enough to encompass gambling.  

Well, now Pagcor is formally complaining that PeJI, an entity operating within the Zambo ecozone handing out online gambling licenses, has no right to issue such licenses. Pagcor has sent a cease and desist order to PeJI, saying it has no right to issue gambling permits; PeJI says it has a legal opinion from the Philippine justice secretary that it has the authority to do so. PeJI is ignoring Pagcor.

I’m betting that this will reach the courts. And it won’t stop at a lower court, eventually winding its way to the Supreme Court. If it does, the Supremes should once and for all clarify what it is that “amusements” and “games” covers. Do those terms encompass gambling?

Christopher Arnuco, presidential assistant on trade and vice chair of the Zamboanga City Special Economic Zone (ZSEZ) and Freeport Authority, said gambling operations inside the ecozone were covered by a legal opinion from the Philippines Justice Secretary Raul Gonzalez.
 
ZSEZ authorities have already issued a license to Philippine E-gaming Jurisdiction Inc. (PeJI), which maintains an office at the zone’s Technical Enterprise Building B in Barangay San Ramon here, to control e-Gaming and other related activities “conducted within and from the Zamboanga Special Economic Zone (ZSEZ) pursuant to Republic Act No. 7903.”
 
Under the license, PeJI was empowered to receive and process all applications for and award e-Gaming licenses to business operators.
 
But the Philippine Amusement and Gaming Corp. (Pagcor) has ordered ZSEZ authorities to stop PeJI’s operation as it is illegal and contrary to their sole mandate to issue such licenses.  And the directive had been ignored.
 
Arnuco insists “…we are authorized under the law to operate, even casino for that matter. What we did was to ask Secretary Gonzalez … and he issued a legal opinion saying that yes we are allowed to do so on May 8, 2007 in reply to an earlier letter by ZSEZ chair Georgina Yu.”
 
Arnuco said Gonzalez told them that “contrary to Pagcor’s assertion, the Zamboanga Ecozone Authority possessed power to issue licenses to would-be locators/investors intending to operate tourism-related activities, including games, amusements and recreational sport facilities, including online/Internet gambling casinos among others, within the Zambo ecozone.
 
“After all, gambling is defined as the act or practice of betting, or the act of playing a game and consciously risking money or other stakes on its outcome, which to us, is squarely within the phrase of games and amusements and recreational and sports,” Arnuco quoted Gonzalez as saying.

What’s the Chinese Word for Tsunami?

Here are some statistics we picked up from an Internet site on how many more Chinese are traveling abroad, leaving the Communist paradise to experience life in other locales. And as everyone will tell you, this massive wave of Chinese tourism, already lapping at the shores of Southeast Asia, is just beginning. Assuming those hordes of tourists want to spice up their vacations with a little action at the gaming tables, does the region have enough casinos?

Mainland tourists are a new and growing phenomenon, in Bali and the rest of Asia. As their incomes soar and Beijing loosens restrictions on foreign travel, China’s middle classes are venturing eagerly beyond the Middle Kingdom. Last year, the number of Chinese trips overseas rose to a record 35 million, up from 620,000 in 1990, according to China’s national statistics bureau. About half were to destinations in Southeast Asia.

Hong Kong has been the biggest beneficiary of this trend. Last year, visitors from the mainland accounted for 13.6 million — more than half the 25 million total outside arrivals to the former British colony.

Pagcor: Get the Mayor’s Blessing

Here’s an update on the case in Bacolod.  What’s the old cliche? Never fight city hall.

The Philippine Amusement and Gaming Corp. has clarified that even if authority has been granted them by PAGCOR, Phuture Visions Co. Inc., the company owned by the sons of Rep. Monico Puentevella, will not be able to operate bingo games without a Mayor’s Permit.

In her letter dated March 21, 2007, Margarita Bangi, Pagcor Bingo Department managing head, said they will wait for the decision of the court on the case involving the closure of the bingo outlet of PVI at SM City mall in Bacolod City, before acting on the request of the city government. Bacolod Mayor Evelio Leonardia had written PAGCOR chairman and chief executive officer Efraim Genuino on Feb. 23 informing him that his office did not issue to PVI, that is being operated by the family of Puentevella, the Mayor’s Certificate of No Objection, which is a requirement for the conferment of provisional Grant of Authority to operate bingo games at SM-Bacolod.

He informed PAGCOR that PVI has not been issued the Mayor’s Permit as it had not even applied for its issuance. He also requested PAGCOR to recall or revoke the provisional GOA to operate traditional bingo games obtained by PVI “for want of a Mayor’s Certification of No Objection” and for failure to secure a Mayor’s Permit within 30 days from notice of such provisional grant.

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.

The Law Taketh, the Law Giveth

Across the pond that we call the Pacific, in the heartland of America, the state of Kansas passed a bill that would allow the construction of casinos, one in each of four “gaming zones.”

The bill also would allow resort-style “destination” casinos to be constructed in southeast Kansas near Pittsburg, near Wichita and in Dodge City. Slots would be allowed at existing horse and dog racetracks.

The bill began as a reauthorization of the Kansas Lottery. During debate in the House, provisions allowing state-owned casinos and slots at dog and horse tracks were added.

The casinos would be owned by the Kansas Lottery, which would contract with private companies to manage each casino. The manager could be an Indian tribe, the bill says. The state lottery and the Kansas Racing and Gaming Commission would be responsible for all oversight and regulation.

Like other gaming measures, the hope is the new measure will attract tourists, and  revenues from gambling will help Kansas cover its expenses.

“This is an opportunity for our state to generate out-of-state dollars from visitors, to reinvigorate Kansas agribusinesses raising horses and greyhounds and to maximize state revenue while maintaining strict regulatory oversight,” Sebelius said in the news release.

In casinos, at least 22 percent of the gambling revenue will go to the state. The bill dictates 40 percent of slot machine revenue will end up in state coffers.

Meanwhile, one of the U.S. laws passed last year making it illegal to make payments for online gambling was declared illegal by the WTO. Don’t hold your breath waiting for the law to be overturned, though. Better to save up money and drive to Kansas. 

The U.S. ban on offshore Internet gambling payments is illegal, the World Trade Organization said yesterday, upholding a decision that allowed for sanctions.

The WTO said the United States ignored the previous ruling, which challenged the U.S. ban on payments to gambling Web sites while allowing bets on its own soil.

Antigua and Barbuda, a Caribbean nation with about 70,000 people, challenged U.S. government efforts to close the estimated $12 billion worldwide business to U.S. residents, who accounted for half the market. Last October, the U.S. government banned credit card companies from processing payments to betting sites such as SportingBet and Empire Online, which then ceased U.S. operations or sold them for nominal amounts.

Here’s the impact on the tiny Caribbean nation’s economy of UIGE:

Income for the 32 registered online casinos in Antigua and Barbuda has fallen to $130 million a year, from $1 billion in 2000, the Antiguan government said. The country developed online gambling to boost a tourism-dependent economy after several hurricanes in the 1990s.

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.

Pursuing the Bay of Dreams, Part 2

Today Pagcor again talked in public about its dream to build something bigger than Macau on the shores of Manila Bay.

Chairman Ephraim Genuino of the Philippine Amusement and Gaming Corporation (Pagcor) today revealed that some 800 hectares of property by the Manila Bay will be developed into a resort-style “Pagcor City” that could be completed in two years at a cost of about 10 billion U.S. dollars.

Genuino spoke at the opening today of “Asia’s Gem –Gaming and Entertaining Lesure Expo” in Manila. He was joined by industry giants in gaming and leisure such as Andrew Love of the Ritz Hotel in London, Michael Boettcher of Storm International, which operates casinos in Russia, and Henki Kivits of the Netherlands.

Genuino said that the recent extension by Congress of Pagcor’s franchise, due to expire in 2008, amended to allow for Pagcor to enter into investment and management agreements with private sectors, spurs development plans. The development of “Pagcor City” will employ about 250,000 persons.

Here’s the ABS-CBN article on it:

State-owned gaming operator Pagcor said on Wednesday it was in talks with Greece’s Loutraki Casino which wants to bid for the right to develop the first phase of the government’s 800-hectare gaming project in the capital.

The Philippine Amusement and Gaming Corp. (Pagcor) hopes to bid out the contract this year for the $10-billion development of the first phase covering 42 hectares, company chairman Efraim Genuino said on the sidelines of an international gaming conference in Manila.

“Loutraki is the biggest gaming operator in Europe. It’s from Greece,” said Genuino, who expects development of the first phase to be completed in two to three years.

We’re all for such grand plans and sweeping visions. With Pagcor’s three decades of operational experience in running casinos, the Philippines has always been a strong contender to become a major Asian gambling destination. But the painful truth is that only a fraction of the 800 hectares is actually reclaimed; the rest is still under water. Even if started tomorrow, a reclamation project of the scale that Pagcor envisions, as any engineer will tell you, takes years to settle down. Ah, if we were only an oil-rich kingdom like Dubai that can afford to throw money to realize a “build it and they will come” strategy.

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.