Privatizing Pagcor

There is something very anomalous about PAGCOR that no administration has cared to fix. It is both a regulator and a participant in the business it regulates. Not even PNoy, with his emphasis on good governance, managed to correct this glaring irregularity. Politicians and influential cronies of post-EDSA presidents have benefited greatly – and still do – from the arrangement, weakening any political will to make things right.

Then again, we seem comfortable with a situation like this. Apparently, our bureaucracy and our dynastic politicians are oblivious to conflicts of interest.

Surprisingly, the BBM administration is determined to privatize PAGCOR, according to its chairman, businessman Al Tengco. He said BBM recognized the transparency and governance issues with PAGCOR as both the regulator and operator of casinos. The sale of PAGCOR’s casinos is expected to generate no less than P80 billion. Thereafter, PAGCOR will collect licensing and other fees.

Privatizing PAGCOR involves selling all 43 casinos it manages to the private sector. After that happens, PAGCOR will become a purely regulatory body with no conflict of interest. This will also enable PAGCOR to focus more on the proper regulation of the gaming industry, helping to ensure criminal elements are weeded out.

Casino Filipino was and still is not a significant contributor to PAGCOR’s revenues that would prevent privatization. From January to September, PAGCOR recorded a total of P299.83 billion in GGR (gross gaming revenues) for the Philippine gaming industry (including offshore gaming). PAGCOR-operated casinos generated P12.53 billion or just 4.18 percent of industry GGR.

For comparison, licensed casinos and integrated resorts are still the biggest GGR contributors with P149.89 billion, or a 49.99-percent share. Other licensees, including e-bingo, e-games and bingo grantees, contributed P103.11 billion, or 34.39 percent of the revenue. Offshore gaming or POGOs, the biggest headache for PAGCOR, contributed P34.28 billion or 11.43 percent.

PAGCOR’s chairman, Tengco, explained to me in a recent conversation that he has started the ball rolling to ensure the privatization of Casino Filipino by 2026. He has formed a committee to work on a proposed bill for Congress to study and enact, as the PAGCOR charter needs to be amended for privatization to proceed. The amendments will include extending PAGCOR’s franchise.

The last effort in Congress to privatize PAGCOR was SB 1471, sponsored by Sen. Panfilo Lacson. In his explanation, Lacson said his bill seeks to promote a level playing field in the gambling industry, avoid conflicts of interest and focus PAGCOR on its regulatory authority, which is its governmental role.

Lacson’s bill sought to consolidate PAGCOR’s authority to regulate newly developed gaming and gambling activities, premises and technologies, including online gaming sites, while protecting minors and problem gamblers and ensuring gambling and gaming are not used for illegal activities like money laundering and terrorist financing.

Tengco said they are now holding town hall meetings in various Casino Filipino branches and satellites to explain to employees the need to privatize PAGCOR casinos and reassure them that their rights will be protected in the process. As was done at NAIA, it is likely that whoever buys the various branches of Casino Filipino will retain some employees (up to 70 percent), while others will be given generous retirement packages. Tengco also explained that many workers will still remain in PAGCOR’s regulatory, enforcement, monitoring, electronic gaming licensing and other units.

To ensure PAGCOR gets the best possible returns on the sale of Casino Filipino branches, Tengco said he has started upgrading its casinos to boost foot traffic and profitability. They are also working on modernizing the Information and Communication Technology and Cybersecurity infrastructure.

Tengco has asked the owners of the buildings being leased by the casinos to make significant improvements to modernize the look and feel of the branches. That will make them more attractive to potential investors. He also said they are expecting the delivery of nearly 4,000 new units of state-of-the-art slot machines in partnership with three major suppliers for Casino Filipino branches.

After privatization is completed, Tengco said they will focus on developing industry professionals by establishing a Gaming Academy. This, he said, will address the growing demand for skilled gaming and hospitality professionals. To do this, PAGCOR will forge partnerships with Asian gaming education providers and those in the hospitality industry to create a consortium that caters not only to the Philippine workforce but also to all who wish to build a career in gaming and hospitality in other jurisdictions.

In the meantime, Tengco said he is maximizing PAGCOR’s earnings potential by adopting accepted private-sector business practices. This has resulted in a record third-quarter 2024 total revenue of P79.43 billion, which is 41.97 percent higher than the P55.95 billion year-on-year figures.

Of the P79.43 billion in revenues from the first nine months, P68.88 billion came from gaming operations and license fees, P6.43 billion from other related services, and P3.11 billion from other income. The biggest contributors to PAGCOR’s third-quarter revenues were electronic games (P28.22 billion) followed by licensed casinos (P24.50 billion).

Tengco reiterated that there are no ifs or buts on the banning of POGOs after Dec. 31. He said it is not a big loss at all. When he started as chairman of PAGCOR, there were 298 POGO licensees and service providers. He whittled that down to only 41 licensees. Yet, he pointed out, PAGCOR was able to almost double the revenues to P5 billion from P2.9 billion with just the 41.

To see is to believe. Politicians in Congress may yet stop PAGCOR’s privatization for ulterior motives. But the BBM administration’s intention and determination to see PAGCOR step out of running casinos and just regulate them appear to be there.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco.