Inside Asian Gaming

April 2012 | INSIDE ASIAN GAMING 21 “Similar to other Asian countries, a segregated gaming tax regime is applied to Philippines casinos with 17% gaming tax applied to VIP gaming activities and 27% gaming tax applied to mass-gaming activities. Blended gaming tax in Philippines would come in at about 21%, which is higher than Singapore’s [blended] 16% [22% for the mass and 12% for VIP], but significantly lower than 25% in Malaysia and 39% in Macau.” Underpinning the favourable business fundamentals is the government’s political support for casino gaming as a motor for general economic development in the country, states the report. “The success of integrated resorts in Asia has captured the imagination of the Philippines government. Eager to boost GDP and employment, the Pagcor Entertainment City development in Manila Bay is at the forefront of its ‘more fun in the Philippines’ campaign aimed at attracting repeat local and overseas tourists. “Economic development in the Philippines has lagged other developing Asian countries, with a relatively slower 5% GDP Cagr over 2005-11 and higher unemployment rate (8% in 2011),” adds CLSA. “Marina Bay Sands in Singapore is a prime example of the potential benefits of an integrated resort injecting vitality into a country’s economy. Success stories in Macau and Singapore have boosted the Aquino government’s confidence to undertake its Pagcor Entertainment City development in Manila Bay,” concludes CLSA’s executive summary. Win per VIP table per day (2011) Macau Singapore Malaysia Australia Korea Philippines (‘15) Philippines (‘11) Cambodia 0 10,000 20,000 30,000 40,000 (US$) Source: CLSA Asia-Pacific Markets Macau Singapore Malaysia Australia Korea Philippines (‘15) Philippines (‘11) Cambodia 0 2,000 4,000 6,000 8,000 (US$) Source: CLSA Asia-Pacific Markets Win per mass table per day (2011) forecast variables with those of other countries. “We estimate win-per-VIP table to be US$4,625 in 2011 and expect it to grow to US$5,425 in 2015. Despite the significant growth, the win-per-VIP table in the Philippines is still far lower than the current win-per-VIP table in most of other Asian countries, which yielded an average of US$10,000-US$33,000 per table per day. “In the mass-gaming segment, we forecast win-per-table per day to increase from US$1,188 in 2011 to US$1,577 in 2015, which compares to US$2,291-US$6,717 in other Asian countries. “We expect the size of domestic gaming revenue to also grow rapidly from US$1.1 billion to US$1.7 billion, but it will still be smaller than Singapore’s US$2.0 billion and Australia’s US$2.5 billion. Despite the rapid growth, domestic gaming revenue per adult population in 2015 will still be low at US$31 (versus US$20 in 2011), compared to China at US$33, Malaysia at US$102, Australia at US$149 and the USA at US$268. CLSA also presents a best-case position it refers to as the “blue- sky scenario”. “In a blue-sky scenario, the size of the Philippines gaming market could grow to US$6 billion [annually], which is in line with the government target. In the ‘terms of reference’ document regarding the Entertainment City published by Pagcor, it indicates that Pagcor targets to increase annual income generation by US$1 billion when the Entertainment City is completed. With a blended tax rate of 21%, it implies the government expects the Entertainment City to generate incremental gaming revenue of US$4.9 billion, bringing the size of the Philippines gaming market to US$6.0 billion, on par with that of Singapore. Asia Pacific: Gaming tax rate Source: CLSA Asia-Pacific Markets 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Cambodia Las Vegas Melbourne - VIP Singapore - VIP Korea - VIP Philippines - VIP Singapore - Mass Malaysia Melbourne - Mass Philippines - Mass Macau Korea - Mass Philippines Casino: Win per table / slot (US$m) 4,171 Win per VIP table Win per mass table 5,394 831 2,466 5,000 4,000 3,000 2,000 1,000 0 Source: CLSA Asia-Pacific Markets Pagcor Resorts World Manila Market Outlook