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Privatize PAGCOR!

August 9, 2010
Privatize gambling!

Privatize gambling!

The government should not get involved in gambling business. Is it not the constitutional duty of the government to promote ethics and condemn any form of immorality? So now that the current administration has the chance to fulfill this constitutional mandate, it should let go of the biggest promoter of gambling in the Philippines by means of privatization: the Philippine Amusement and Gaming Corp. (PAGCOR).

Rumors had it that one of the central elements of the corruption issues that hounded the shaky administration of former President Gloria Macapagal Arroyo was the multi-billion government-owned and controlled corporation. Some hard-hitting journalists also exposed the anomalies and corrupt practices of some PAGCOR official, particularly its former chairman and CEO Efraim Genuino. It was reported that Genuino was keeping an unexplained wealth- or great amount of loot- despite the fact that most of his businesses went bankrupt or were not productive.

A government-owned and controlled PAGCOR has been a big source of corruption in the government sector, and this is one of the main reasons why it must be privatized. Since PAGCOR is the priciest and the most productive agency of the government in terms of generating money, the Aquino administration should sell it to willing investors in order to focus more on its priorities. The government currently confronts huge budget deficit and high foreign debt. It could use the money to support its priorities or pay a portion of our national debt. The agency functions as a licensor and operator of casinos at the same time, which is highly anomalous because it involves conflict of interest.

Here’s a very interesting news story about the personal offer of San Miguel Corp. vice chair Ramon S. Ang to buy PAGCOR to the tune of US$10 billion.

MANILA, Philippines — With President Benigno Aquino III facing cash problems, San Miguel Corp. vice chair Ramon S. Ang is proposing the privatization of Philippine Amusement and Gaming Corp. (Pagcor) to raise as much as $10 billion and transform the country into a tiger economy.

Should Mr. Aquino listen to his suggestion, Ang said in a recent interview with the Philippine Daily Inquirer that he himself planned to make a bid to acquire Pagcor with Malaysia’s “big boys.”

Ang was referring to Robert Kuok, the richest man in Southeast Asia with a net worth of $10 billion; Ananda Krishnan, second wealthiest in the region with a net worth of $7.4 billion; and Francis Yeoh, who runs YTL, one of Malaysia’s biggest conglomerates.

“They’re all my friends and they are interested in Pagcor,” said Ang, whose first investment outside the Philippines was in Malaysia in partnership with former Prime Minister Mahathir Mohamad in 1998.

“San Miguel is not interested in going into gambling and I am going in this on my own. I do not intend to hold on this for long,” he said.

In his first State of the Nation Address, Mr. Aquino revealed his strategy of public-private partnerships and selling or leasing government assets to raise money for the government grappling with a deficit likely to hit P350 billion this year.

Last month, Mr. Aquino announced that he was open to privatizing Pagcor after assessing its assets and existing contracts.

Spectacular deal

“The sale of Pagcor fits in well with the President’s agenda. We are not asking him for anything but be true to his campaign promise of ensuring a level playing field for all businessmen,” Ang said.

“Why wait for six years to have $10 billion when he can have $10 billion in just six months? His government does not have to sell anything else and he will make the country a tiger economy immediately. Isn’t this a spectacular deal?”

Ang said that Pagcor would be worth at least P450 billion based on its 2009 gross income of P29.78 billion and the minimum 15 times premium value investors were willing to pay for a monopoly gambling business like Pagcor.

“It could go as high as 17 times premium compared to an average gambling firm which fetches an average premium of 10 times,” he said.

Move to strengthen peso

With $10 billion in cash, Ang said the impact of Pagcor’s privatization would be “stunning” not only on the government’s cash position but also on the country’s debt stock and economic standing in the region.

“Our peso-dollar market is so small that if we bring in $10 billion into the system, the peso exchange rate will drop to between 35 and 30 pesos to one dollar. And at that exchange rate, we will save between P440 billion and P640 billion in principal and interest payments on our debt (assuming that every peso gain in the exchange rate leads to P40 billion in savings in debt payments),” Ang said.

“We will be a tiger economy, we will jump ahead of Thailand,” he said.

“If a private company will take over Pagcor, that P29.78-billion income could easily go up to P35 billion. With profits like that, any group who wins Pagcor can turn around and sell 49 percent of the company through an initial public offering in the stock market and get back all its equity investments plus some profit,” Ang said.

Best to oversee deal

Mr. Aquino is the best leader to oversee the sale of Pagcor because majority of the people trust him, Ang said, adding that the government will continue to regulate the agency to address concerns of civil society and church leaders about the evils of a gambling culture.

The 33-year-old Pagcor currently runs 13 casinos in 10 major cities in the country with 28 satellite casinos, 24 VIP Clubs and four Pagcor Arcades.

Since joining businessman Eduardo “Danding” Cojuangco Jr. in his comeback to San Miguel 12 years ago, Ang has steered the country’s biggest food and beverage conglomerate into new big-ticket ventures such as power generation, energy, property development, mining and telecommunications.

Ang reckoned that he would be criticized for proposing the sale of Pagcor and his plan to bid for it with a Malaysian group.

“So what if they call me a Malaysian agent? The bottom line is: Will this deal be good for the country? I have been criticized as a maverick in the bidding that I have joined in in the past years. I wanted to ensure that the government got the best price for the assets that it sells. Win or lose, my goal is to give the government an honest bid for each project instead of just a select group controlling the bidding for themselves.”

SOURCE: Philippine Daily Inquirer

2 Comments leave one →
  1. Tertian permalink
    September 14, 2010 3:38

    Don’t be so hasty! $10B is quite low according to reliable estimates. Play fair.

    • September 14, 2010 3:38

      Of course it’s quite low. But the thing is, it must be privatized.

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