Privatize Pagcor right away

A few weeks ago, PAGCOR Chairman Al Tengco told me that BBM is determined to privatize PAGCOR and has already started the ball rolling to get this done. But Al said that the PAGCOR Charter has to be amended by Congress to provide the legal basis for privatization.

I received an email from former senator Frank Drilon to let me know that PAGCOR can be privatized right away without waiting for Congress to amend its Charter.

“There is an existing law,” Senator Drilon wrote, “which authorizes the President, through the Governance Commission for GOCCs, to privatize PAGCOR without going to Congress.”

Senator Drilon explains: RA 10149, or the “GOCC Governance Act of 2011,” empowers the Governance Commission for GOCCs to “review the function of each GOCC and, upon a determination that there is a conflict between the regulatory and commercial functions of a GOCC, recommend to the President the privatization of the GOCC’s commercial operations…

“I personally authored and sponsored RA 10149, and the above quoted Section 5(L) of the law, delegated to the President the power to amend the PAGCOR Charter without going through Congress (N.B. Sen Ping Lacson probably didn’t know when he filed SB 1471 on May 24, 2017, that RA 10149 was already effective since it was signed into law June 6, 2011).”

This is good news because waiting for Congress will cause undue delay and offer opportunities for vested interest groups to short circuit the privatization plan and make it less effective than contemplated. This will test the sincerity of Chairman Tengco beyond mere press releases.

In my previous conversation with Tengco, he said that selling all the 43 Casino Filipino or the PAGCOR-managed casinos will bring as much as P80 billion upfront. Based on a separate estimate of Albay Rep. Joey Salceda, privatization will generate proceeds of P120 billion to P128 billion.

Tengco said it is possible for PAGCOR, acting as a purely regulatory agency, to earn more than what Casino Filipino earns as the privatized casinos will pay regulatory fees and frees PAGCOR from business risks.

Privatization will also remove a conflict-of-interest situation where the regulator is actively involved in and competing with the activities of the regulated.

Bringing cash into the national treasury was the justification for letting PAGCOR operate casinos. The ever-growing fiscal deficit because of a spendthrift Congress greedy for pork barrel funds has increased the level of government borrowings as of Sept. 30, 2024, to P2.3 trillion, 31.4 percent higher than the same period last year. The Philippine economy is overtaxed and there are few other easy sources of new funds to pay for among others, a P30 billion new Senate building.

Raising revenues through gambling has been the easy path for past administrations to augment tax collections. According to PAGCOR, the nation’s gross gaming revenue reached a record high of roughly P280 billion or about $5 billion in 2023. But given problems with online gambling, there may be a regulatory preference for brick-and-mortar casinos because they can be easier to police for criminal activity.

BBM has just issued Executive Order 74, which, according to the Presidential Communications Office, imposes “an immediate ban on offshore and internet gaming in the country.” It is not clear from the wording of the Palace press release if this new EO covers more than POGOs and will result in a ban on all internet gaming or Internet Gaming Licensees or IGL. The POGOs are now winding down their operations towards a complete end by December 31.

The EO seems to show BBM’s impatience by ordering closure “immediately.” And from Palace issuances, it seems the ban covers not just PAGCOR – regulated POGOs but all similar operations in special economic zones including the one in Cagayan managed by the daughter of JPE, the presidential legal adviser.

In issuing EO 74, BBM said “the State has the paramount duty to safeguard national security, maintain public order, uphold the rule of law, protect the safety of its citizens, and ensure the integrity of the social fabric of the nation.”

The EO cited a Department of Finance (DOF) study saying that any economic and social benefits that POGOs bring in are far outweighed by severe social consequences, including increased crime rates, exploitation of vulnerable people and increased cases of money laundering, fraud and other illicit financial activities that threaten the integrity of the country’s financial system.

We can’t get out of the “gray list” of the Financial Action Task Force because of, among other issues, risk of money laundering from POGOs and casino junkets and inefficiency in countering money laundering. The Bangladesh Central Bank heist comes to mind.

“The high reputational risks associated with POGO/IGL operations deter foreign investment and tourism, undermining the efforts of the National Government in promoting the country as a safe and sustainable investment and tourism destination,” the EO stated.

The Department of Human Settlements and Urban Development was instructed to assist the technical working group on Anti-Illegal Offshore Gaming Operations in securing the cooperation of homeowners’ associations to ensure the non-proliferation of POGO/IGL and other offshore gaming operations and services in subdivisions, condominiums and other real estate developments.

The Department of Tourism, on the other hand, was tasked to monitor tourism establishments and facilities to ensure they are not utilized for POGO/IGL and other offshore gaming operations or services.

There have been reports of exclusive subdivisions like Ayala Alabang harboring POGO operations. There were also reports that tourist resorts are being rented and paid for a year in advance to serve POGO-type operations.

Gambling has always been seen as a social plague in the country. But it is so widespread down to the grassroots that the government has been trying to both regulate and earn revenues from it.

Closing down POGOs is the right thing to do. Let’s see how effective the implementation will be.

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