President studying $10-B offer for Pagcor

President Benigno Aquino 3rd on Monday said that the proposed sale of the Philippine Amusement and Gaming Corp. (Pagcor) was “very interesting” but he wanted to study the proposal first since there are allegations of corruption against the government agency. President Aquino described as interesting the $10-billion offer from Ramon Ang, San Miguel Corp. vice chairman, to buy Pagcor.

“I think I stated to you before, we have a problem, there are so many allegations with regard to Pagcor.

We have to ensure that if we intend to sell something, it is the best price that we can get,” the President said in a chance interview during the celebration of the 43rd foundation day of the Association of Southeast Asian Nations (Asean) at the Department of Foreign Affairs in Metro Manila.

Mr. Aquino earlier said that he was thinking of selling Pagcor, which has jurisdiction on all casinos in the country, after assessing its assets and existing contracts.

The President had said that the privatization of Pagcor is the most practical solution to professionalizing the firm and ending alleged corruption in one of the government’s biggest revenue earners.

Pagcor operates 13 casinos in major cities across the country, 28 satellite casinos, 24 VIP Clubs and four arcades.

Malacañang spokesman Edwin Lacierda said that they have not received any formal proposal from Ang.

He added that they would look at the proposal first since there are “many concerns that have to be studied.”

Among these, Lacierda said, is whether the $10-billion offer of Ang to buy Pagcor is a “fair evaluation” of the gaming agency.

But he added that they are “thankful” for Ang’s “bullishness” on the Philippine economy under the Aquino administration.

Lacierda said that the newly appointed Pagcor chairman, Cristino Naguiat, would study all the existing contracts of Pagcor to establish the best price for the gaming corporation.

Ang said that he intended to make a formal bid to acquire Pagcor once it was formally put on the auction block for privatization, a newspaper reported on Monday.

He added that he intended to go into partnership with Malaysian magnates Robert Kuok, Ananda Krishnan and Francis Yeoh, according to the report.

“They are all my friends and they are interested in Pagcor,” Ang was quoted as saying.

He said that he intended to go after Pagcor independently of San Miguel Corp., one of Southeast Asia’s leading conglomerates.

But a spokesman for Pagcor, Jay Santiago, said that privatization would not happen anytime soon.

“It is not as simple as it sounds. Eventually, there will be privatization, but that is too far off,” Santiago told Agence France-Presse.

“[But] we agree that $10 billion is a good benchmark. If and when we do go through that process, at least we know we will not be getting anything below $10 billion,” he said.

Pagcor reported a net income of P29.62 billion, or about $640 million in 2008.

Finance department position

The Department of Finance on Monday also said it needs to work out the issues regarding Pagcor’s regulatory and commercial functions before it can privatize the agency.

“The Department of Finance [DOF] welcomes investor interest in the privatization of Pagcor. The DOF will ensure that when Pagcor is privatized, it is done in a transparent, competitive manner which will maximize its value to the government and ensure a level playing field in the gaming industry in the future,” Finance Secretary Cesar Purisima said in a statement.

But before the state-run corporation can be sold, the national government has to make a “careful analysis of several important issues,” such as separating Pagcor’s regulatory function—which would remain with the government—and the commercial operations, which can be privatized.

“Government must also ensure that Pagcor’s potential to generate tourism, investment, and employment are maximized, while the social costs of gambling are minimized. Sweeping changes have taken place in gaming in our neighboring countries such as Macau and Singapore, and the government must ensure that the Philippines can compete internationally,” Purisima said.

Pagcor is also reviewing its finances and licenses issued in the past to give a clearer picture of its financial and operating position.

The government is hard-pressed to keep its budget deficit from widening further without raising or implementing new tax measures. In addition to higher borrowing—which Budget Secretary Butch Abad said would lean towards higher peso loans than foreign currency-denominated ones—the Finance department is bent on raising funds through the privatization of assets.

But so far the government was only able to generate P2 billion out of the original target of P30 billion from the state asset sales this year.

For, against privatization

Senate President Juan Ponce Enrile and Sen. Franklin Drilon also on Monday expressed full support for the proposed privatization of the casinos operated by Pagcor.

They said that privatization should be carried out through bidding but that it should not prevent Pagcor from exercising its licensing and regulatory functions.

“It will be more manageable if the government is not involved in the winning or losing in the business. It regulates, gets its taxes and gets its share from the outcome of the operation,” Enrile said.

He added that he has a draft bill amending the Pagcor Charter, patterned after the Reno (Nevada) model.

“Create a regulatory body, and leave or spin over the assets of Pagcor in exchange for shares of stock. Let the shares of stock be sold and make Pagcor the regulatory body,” Enrile said.

He added that the privatization of Pagcor casinos could not be done through an executive order.

“It has to be done by law,” Enrile said.

Without mentioning Ang’s proposal, Drilon said that the government can now start bidding out casino operations provided this is done in an open and transparent manner.

He added that under its charter, Pagcor is allowed to sell its casinos.

Drilon, however, said that the Pagcor charter must be amended so that future administrations would no longer be able to revert to the old practice of the government operating casinos.

“The present set-up wherein Pagcor serves as both the licensor and operator of casinos is anomalous. There is a clear conflict of interests here,” he added.

Drilon, the chairman of the Senate Committee on Finance, also proposed that the income generated from the licensing of the casinos should go directly to the government’s general fund “just like ordinary taxes collected.”

“This system will eliminate leakages in government income from the casino operations,” he said.

House views

But some members of the House of Representatives had mixed views on the offer of Ang to privatize Pagcor.

Rep. Albert Benitez of Negros Occidental warned that Ang’s proposal might not be fair to the government.

“What he [Ang] is basically saying is that they’ll pay government the 15-year estimated earning of Pagcor for $10 billion. This begs the questions: Is the $10 billion for 15 years only?” said Benitez, a former chief executive officer of the Pagcor-accredited Bingo Bonanza.

He added that the public should be made to understand the specifics of Ang’s privatization proposal, and that Congress will have to give its nod to the deal.

“While the power of regulation is an executive function, the grant of regulatory powers, however, is legislative in nature,” Benitez said.

He clarified that he was not against the privatization of Pagcor.

Rep. Roilo Golez of Parañaque City (Metro Manila) said that Ang’s proposal “merits consideration.”

“This [Ang’s offer] could be the mother of all mega deals and would really prop up the government’s economic development program,” he added.

Golez said that the $10-billion offer would wipe out the country’s budgetary deficit with more to spare.

“That kind of liquidity and fund that would liberate us from the World Bank-IMF [International Monetary Fund] clutches,” he added. –CRIS G. ODRONIA, LIKHA CUEVAS-MIEL, EFREN L. DANAO, RUBEN D. MANAHAN 4th AND MARY ANN JOCSON WITH REPORT FROM AFP, CRIS G. ODRONIA REPORTER, manila Times