Inside Asian Gaming

INSIDE ASIAN GAMING | July 2011 18 Feature A n attempt by PAGCOR— the Philippines’casino operator-cum- regulator—to unilaterally tear up a revenue share agreement with a major private casino hotel resort operator and replace it with terms more favourable to PAGCOR, has been met with firm resistance and court action. The battle threatens to poison the already delicate relationship between the foreign investment community and PAGCOR. In the past, small investors in gaming—short of options in a supply-limited Asian casino market largely sown up by the ‘big boys’—have been willing to risk the Philippines’ somewhat idiosyncratic approach to contractual relationships. Larger investors have repeatedly looked at the Philippines and mostly walked away because they were concerned about a lack of transparency. And in the next five to ten years, those larger investors are likely to have other opportunities— including Taiwan, South Korea, possibly Japan and even potentially a chance to build a third resort in Singapore. Several sources with good knowledge of the Philippines market separately told Inside Asian Gaming that PAGCOR’s aim in the current dispute was to scrap an agreement negotiated between PAGCOR during the chairmanship of Dr Efraim Genuino and the Frankfurt-listed international casino operator Thunderbird Resorts and its local Philippines units. Under the original (and still current) agreement, there is a 75:25 revenue split in Thunderbird’s favour at the company’s Poro Point casino resort in San Fernando City, La Union, in the northwest of the country’s main island Luzon and at its Rizal resort just east of Manila. In both cases PAGCOR had sought to impose a revised 60:40 revenue share. Other updated terms sought by PAGCOR were changed weightings for the amount of casino space to hotel space. The new requirements are two slot machines for every three rooms and one live gaming table per four hotel rooms. Also included in the new ‘Authority to Operate’ conditions demanded by PAGCOR were that Poro Point and Rizal must each invest a minimum PHP2.6 billion (US$60.4 million) in facilities over three years. IAG ’s sources add that in early June, PAGCOR officials turned up in the middle of the night at Poro Point. The PAGCOR staff claimed unspecified breaches of the resort’s operating terms. This was followed up with a demand for the company to supply “written unconditional acceptance”of newAuthority to Operate terms. Failure Ball of Confusion PAGCOR’s instinct is to blunt the competitive edge of private casinos in the Philippines—it should resist the temptation Stormy waters ahead?—Thunderbird’s Poro Point casino resort in court battle with PAGCOR