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.  

Beginning the Bay of Dreams

The Manila Standard Today is reporting that a proposed tourism and gambling complex has gotten an endorsement from the Department of Tourism. Not that the endorsement has a big sway in the grand scheme of things . . . It only means that the project proponents are moving forward with plans to turn about 200 hectares of reclaimed land in Manila Bay into a gambling mecca, actively pushing on all fronts to make the dream a reality.

The anchor to all this is a Pagcor board approval to put up a casino in the complex. Without a Pagcor casino, there’s no attraction to bring in the tourists and no gaming margins to pay for the luxury hotels.  And those nice architectural plans and scale models being showcased in Pagcor offices will remain just that.

Manila Bay Tourism and Leisure Corp., a local company identified with Manila Bay Development Corp. and publicly listed online gaming firm PhilWeb Corp., has proposed to build a world-class shopping center, restaurant, hotel, entertainment facilities and casino within the Aseana Business Park in Parañaque City.

Manila Bay Development is the original proponent of a project to transform a 43-hectare property in Parañaque into a tourist-oriented complex. It is owned by businessman Jacinto Ng Sr., chairman of Asia United Bank and Republic Biscuits Corp. and a close friend of deposed President Joseph Estrada.

PhilWeb, which started as an oil exploration company in 1969, is now mainly involved in Internet gaming. It is identified with investment banker and former trade minister Roberto Ongpin. . . . The Philippine Reclamation Authority, formerly Public Estates Authority, said the project would be located within the planned Pagcor Entertainment City at Aseana Business Park.

The 204-hectare Aseana Business Park, located along the shoreline of Manila Bay, extending northeast to Roxas Boulevard, is envisioned to be the new central business district of Parañaque.

Pagcor plans to develop at least 40 hectares within Aseana Park into an entertainment and gaming center, near the proposed Bagong Nayong Pilipino, which will cover at least 15 hectares. The corporate communications division of Pagcor said it had not yet signed any partnership with a local private investor, like Manila Bay Tourism.

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.

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 Neighborhood Example

There’s nothing like your neighbor buying a new Mercedez Benz to egg you on into the arms of the nearest car salesman. In Asia, the nation-level equivalent of the “Keeping Up With the Joneses” game is in casino gambling. The huge pools of money piling up in Macau’s coffers is just too enticing for Asia’s leaders to ignore. So with the lure of tourism riches, countries throughout the region are removing the legal obstacles for casino industries to flourish.  

South Korea last year opened three casinos, bringing its total to 17. “South Korea plans to continue expanding into the casino market in order to compete with Macau and lure upper-tier Japanese customers,” says Tina Stehle, vice president of Agilysys, a Boca Raton, Fla.-based technology firm that works with casinos. South Korean newspaper Chosun Ilbo gushed earlier this year, “If 11 foreigners visit a casino, they will spend the equivalent of one exported car.” Globalysis says South Korea’s Jeju Island, which has eight casinos, could become “Asia’s next casino gaming giant.”

Taiwan confirmed last month that it’s considering allowing casinos — though PricewaterhouseCoopers last year predicted that gambling would be limited to a $600 million casino on Taiwan’s Penghu Island and forbidden elsewhere.

Japan’s ruling party is considering legislation to legalize casino gambling. “The Japanese public is becoming more tolerant of gaming and realizes the benefits of (casino) legalization, such as (an) increasing tourism market,” Agilysys’ Stehle says. The move would imperil Japan’s $250 billion-a-year pachinko business. Pachinko is a pinball game. It skirts Japan’s gambling ban because players exchange prizes for cash outside pachinko parlors.

PricewaterhouseCoopers expects gambling revenue in the Philippines to pass $1 billion in 2010 (up from $387 million in 2005) because the government is planning a big casino complex in Manila Bay.

Driving the regional interest in gaming: Asia’s rise from poverty to affluence. An Asian Development Bank advisory group predicts 90% of Asians will live in “middle-income” countries by 2020. That shift has created millions of consumers with cash to spend on entertainment.

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.

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.