Casinos in Asia: The Philippines

Just three decades since casino-style gaming became legal, the Philippines has become the second largest gaming
market in Asia after Macau. For three decades, growth has been steady, if unspectacular. Moreover, prospects in the
near- and medium-term are bright.

In common with most other countries, the gaming industry in the country caters mainly to residents, especially
Chinese-Filipino businessmen. This is evident in the site selection, games in play and entertainment choices.

The development of the industry is subject to fits and starts owing to the ambivalent nature of Philippine society:
quick to adapt the latest trends from the West but sensitive to the moral influence of a predominantly-Catholic
population. The government-owned Philippine Amusement and Gaming Corp. (PAGCOR) had a monopoly of all
casino-style gaming since 1977 but it has frequently had to back down from attempts to open casinos in more cities
or to launch more slot machine arcades on account of resistance led by bishops. Stanley Ho himself was stopped from
docking a floating restaurant in Manila Bay amid accusations it would house a floating casino.

Nonetheless, Filipinos are fond of gambling. There are horse racing tracks, a cockpit (and an illegal numbers game) in
every town, and numerous popular card games. This explains why most of the Casino Filipino (CF, the PAGCOR brand
for all its venues) branches are right in the middle of Metro Manila and other principal cities. Four others are in up
market resorts one to two hours' drive from the capital, thus staving off criticism that casinos will bankrupt the very
poorest Filipinos.

Given a largely domestic market, slot machines and traditional table games like Baccarat, Blackjack, Roulette, Craps,
Big & Small dice, Stud Poker, Pontoon, War, and Super 6 have had to be supplemented by Bingo and "Pula at Puti"
("red and white", a country fair game using ping-pong balls). In addition, there are tables for Pai Gow Poker and "Qim
Pan Chong" dominoes both of which which cater to Chinese players; Filipinos adapt easily to the former, however,
because it resembles the local favorite "pusoy". Since most Filipino players are middle-aged businessmen and their
wives, PAGCOR is able to get by mounting low-cost events like ballroom dancing and charity bingo. Entertainment
does not have to spotlight international or national chartbusters either. After all, the country is rich with talented solo
performers and bands.

There is, moreover, a steady stream of "gaming tourists" principally from the Republic of China, Hong Kong and
mainland China. Whether they fly in as F.I.T's or in tour groups, such tourists are interested primarily in spending time
at the gaming tables of 19 casinos around the country (a twentieth is due to re-open).

This may be why Airport Casino, one the most enduring CF properties, is sited right on the periphery of the Manila
International Airport. Charters and scheduled flights also go direct to Laoag International Airport in the north, a quick
hop for gamers from Hong Kong and Chinese Taipei, where Casino Filipino Laoag sits in splendid isolation in a
beachfront garden resort hotel.

Cebu Island in the central Philippines attracts numerous European, American and Asian tourists. CF has two
properties there, one in a Cebu City business district and a second in resort-strewn Mactan island.

In the Subic Bay Freeport Zone are two more, Diamond and Legenda, also patronized by Taiwanese and Hong Kong
residents who fly in direct.

Already fairly liberalized, the Philippine gaming industry promises to become even more dynamic. PAGCOR has
already opened up licensing and there are now six foreign-owned casinos. And many Filipinos are already comfortable
with online betting.

'PH gaming industry to continue strong growth through 2015'

ABS-CBNnews.com
Posted at 02/14/2014 6:16 PM | Updated as of 02/14/2014 6:21 PM
MANILA, Philippines - With the opening of more casinos in the coming years, the Philippine gaming sector is expected
to continue generating strong revenues through 2015, Fitch Ratings said.

In a report "Eye in the Sky Series: Philippines", Fitch said the growth will be driven by the new gaming complex
Entertainment City of the Philippine Amusement and Gaming Corp.

"The initial results of the first two casinos operated under provisional licenses granted by Pagcor, namely Resorts
World Manila and Solaire, are encouraging relative to the investments made,” Fitch said.

Fitch said it expects "double-digit gaming revenue growth" to continue at least through 2015.

"Fitch Ratings expects double-digit gaming revenue growth to continue at least well into 2015, when City of Dreams
Manila will be operational for a full year, and before the next wave of Macau projects come online," it said.

City of Dreams Manila, which is being developed and operated by Melco Crown in alliance with the SM group's Belle
Corp., is set to open later this year.

However, the ratings agency said it is difficult to forecast growth for the Philippine gaming industry beyond 2015. It
sees risks and constraints in the industry, as new projects start operating in Macau.

"We think it will be difficult for the Philippines to surpass Singapore in terms of gaming revenues (roughly $6 billion)
before the end of this decade... The Philippines is a relatively mature gaming market with several forms of gambling
available, including casino-based gaming, which is mostly operated by Pagcor to date," it added.

There are currently four licensed casino operators in Entertainment City -- Alliance Global and Genting's Travellers
International Hotel Group; Enrique Razon’s Bloomberry Resorts Corp.; Kazuo Okada's Tiger Resorts; and a joint
venture between Melco Crown and Belle.

Pagcor, the main regulator, operates 12 casinos throughout the country.

Philippine Casinos
The gaming industry and Philippine casinos have always offered one of the best forms of amusement. Three major
islands—Luzon, Visayas, and Mindanao—offer the best in casino culture, including the classic slot machine, exclusive
VIP clubs, and non-stop entertainment. Moreover, the casinos in these three locations are located in some of the
most convenient areas, meaning that a good time is just around the corner. Typically, if a location could be
considered a tourist destination, then chances are good that you will find a casino.

Generally, one company is in charge of overseeing the casinos and slot machines in the Phillipines. PAGCOR, or the
Philippine Amusement and Gaming Corporation is a world-class organization that is completely owned and operated
by the government and is supervised directly by the Office of the President of the Republic of the Philippines.

The games played at Philippine casinos are just like the games played at any other international casino, as well as any
games you would find on pokerblog.com, or any other online portals. Baccarat, blackjack, roulette, craps, bingo, big
and small, Pai-Gow, stud poker, Sic Bo, and of course, the ever-popular slot machines, offer some of the most intense
gambling action for tourists and Philippine locals alike.

Furthermore, PAGCOR also added some more innovative games such as: Red and White, Casino War, Super Six,
Pontoon, Jazzbeme Baccarat, Rapid Roulette, and Electronic Horse Racing. Other forms of recreation and
entertainments inside most Philippine casinos are karaoke singing; live band shows every night, ballroom dancing,
cultural show, concerts with special top national or international guests, and so much more.

Most casinos in the Philippines are so popular that they operate 24 hours a day, seven days a week. Most casinos
enforce a dress code, but one that is not hard to abide by—generally, just clothes that would be considered decent.
Shorts and slippers are generally frowned upon, and any head gear (such as hats or caps) that covers the face is
usually strictly forbidden.

Just like most casinos elsewhere, the casinos in the Philippines generally only allow people who are 21 and older to
enter the premises, and these people cannot be intoxicated or inebriated in any way, so no drugs or alcohol.
Weapons and pets are also prohibited for obvious reasons.

Casino officials here in the Philippines want to do everything they can to ensure that their customers have a world-
class gaming and entertainment experience. In order to ensure this, the infrastructure of most casinos here has been
improved, and now more competitive facilities with the best customer service are a mainstay.

What makes PH better casino investment in Asia?

MANILA, Philippines – A bigger domestic market is the Philippines' key edge against other more established gaming
destinations in Asia, states a report by Credit Suisse on the Philippine gaming industry.

In its ‘The Philippine Gaming Sector’ report, the Zurich-headquartered international financial services group said the
Philippines is viewed as having a potentially large domestic market to complement the VIP market coming in from
abroad. The VIP market is traditionally the main cash cow of casino hubs.

The Philippines' large domestic market is expected to sustain the gaming industry, more so than its casino hub
neighbors Macau and Singapore.

“The Philippine population of 97 million is almost 3 times that of Singapore, Malaysia and Macau combined,
presenting sizeable onshore potential for the higher-margin mass segment. Meanwhile, limited hotel capacity and the
absence of new casinos elsewhere in the region until 2015 could result in a spill-over of foreign VIPs into Philippines,”
the report stated.

The Philippines also has the fastest growing working age population in Asia, aside from Japan, and is forecast to grow
about 2% annually over the next 10 years.

An improving economy, accelerating wage growth, higher spending power and consumer confidence, which is at
near-record highs, all point to favorable demand prospects, the report states.

VIP market

Philippines new casino complex, the Pagcor Entertainment City, which is due to open up slowly over the next few
years, will also serve the interest of the regional VIP market as it is the only location in Asia that will introduce new
casinos in the next few years.

“To our knowledge, there are no plans to expand gaming capacity in Malaysia and Singapore, while new supply in
Macau does not begin until mid-2015 end,” the report stated.

The Solaire Manila casino of Bloomberry opened in March 2013. This will be followed by Belle Grande during the first
half of 2014. The other two resorts, Manila Bay Resorts of Universal Entertainment and Resorts World Bayshore of
Travellers are expected to open sometime in 2015 and 2016.

On the back of this new resort, Pagcor, the state gaming regulator and operator, expects annual gaming revenues to
grow to as much as $10 billion by 2017.

Credit Suisse estimates around 89% of this amount will come from casinos owned and operated by Pagcor, Resorts
World Manila and the 4 new integrated resorts set to open from 2013-16, with the balance made up of non-casino
gaming and a handful of smaller casinos.
“We believe that the Philippine gaming industry is well placed to exceed the current size of the Singapore market
within the next 6 years. In the near-to-medium term, we expect growth to be largely capacity driven, with sequential
supply coming on stream during 2013 to 16 end.

"In the years after, we expect improvements in supporting infrastructure and the draw of a fully developed
Entertainment City, complemented by adjacent real estate developments to continue driving growth,” the report
stated.

However, potential risks to consider include political tensions between the Philippines and China which could affect
visitation, gaming legislation abroad, and further delays in the roll-out of infrastructure projects. – Rappler.com

Casinos and Economic Development: A Look at the Issues

Thomas A. Garrett

Casinos have become a major industry in the United States over the past two decades. Prior to the 1980s, casino
gambling was legal only in Nevada and Atlantic City, N.J. Since then, nearly 30 states have legalized casino gambling.

Many states have approved commercial casino gambling primarily because they see it as a tool for economic growth.
The greatest perceived benefits are increased employment, greater tax revenue to state and local governments, and
growth in local retail sales. Increasing fiscal pressure on state budgets, the fear of lost revenue to casinos in
neighboring states and a more favorable public attitude regarding casino gambling all have led to its acceptance,
according to the National Gambling Impact Study Commission's Final Report. In addition, the passage of the Indian
Gaming Regulatory Act in 1988 allows Indian tribes to operate casinos on their reservations. Many states now have a
combination of tribal and corporate casinos.

The amount of money wagered in American corporate casinos is not trivial. More than $370 billion was wagered
during 2000 alone. This is roughly $1,300 per person in the United States. Of this annual total wagered, nearly 93
percent is returned to players in the form of winnings, leaving casinos with $26 billion in annual adjusted revenue.

Casino revenue varies greatly across states, however. Nevada has the largest market, with casinos capturing nearly
$9.5 billion annually in adjusted gross revenue. Atlantic City casinos generate more than $4 billion annually, whereas
the riverboat casinos in Missouri and Illinois collected more than $1 billion and $1.8 billion in adjusted gross revenue
during 2001, respectively.

Although economic development is used by the casino industry and local governments to sell the idea of casino
gambling to the citizenry, the degree to which the introduction and growth of commercial casinos in an area leads to
increased economic development remains unclear. What are some of the issues surrounding the perceived benefits?
Casinos increase employment.

Issue 1: Casino proponents commonly point to a lower local unemployment rate after a casino is introduced as
evidence that casinos improve local employment. Because the local unemployment rate dropped after the casino was
introduced, it must be that the casino helped lower the local unemployment rate. Maybe. The change in the
unemployment rate in the local area should be compared with the change in the statewide unemployment rate
during the same period. If the changes are about the same, then it is possible that all of the employment growth in
the casino area is the result of the natural movement of the business cycle (economic changes in other sectors of the
economy) and not the introduction of the casino. If the drop in unemployment is larger in the local area than
statewide after the casino is introduced, then one could argue that the casino has indeed reduced local
unemployment.

The point here is that local changes in unemployment should be compared with statewide unemployment changes.
Other factors, such as population changes and local business conditions, should also be considered when comparing
local unemployment rates before and after a casino opens. Just looking at differences in local unemployment rates
over time without an understanding of population dynamics and the statewide business cycle can paint a false picture
as to the employment benefits of casinos.

Issue 2: The basic idea regarding increased employment is that a casino's operation requires labor, and this labor will
come from the local area. This, in turn, will reduce unemployment in the area. The question to ask is not just whether
casinos decrease unemployment, but for whom they decrease unemployment. Most casino jobs require some kind of
skill, be it accounting, dealing cards, security or other expertise. If a casino is planning to move to a rural area having a
relatively less skilled work force, the casino probably will draw skilled labor from outside of the area. If this labor
remains outside of the local area and workers commute to the casinos, then unemployment in the local area will
remain unchanged. If some of this skilled labor decides to move near the casino, then the unemployment rate (which
is the number unemployed divided by the labor force) in the local area will fall because the labor force has increased.
It is this decreased unemployment rate that is often used as evidence that casinos have indeed improved local
employment. However, it is important to realize that unemployment for the original, relatively less skilled population
has remained essentially unchanged—only the higher skilled, new arrivals have found employment with the casino. It
is the employment of these new arrivals that has decreased the unemployment rate.

The main lesson regarding casinos and their impact on the local unemployment rate for the original population is that
local officials and the citizenry need to know whether the work force for the new casino will come from their area.
The promise of increased employment for the original population that is often used as an argument for the
construction of casinos may not be realized. In a relatively urban area, there is probably enough variety in the work
force to ensure that skilled labor will be provided locally. In rural areas, however, most of the labor will be from
outside of the local area, thus leaving the unemployment rate for the original population unchanged.
Casino tax revenue is a benefit.

Issue 1: Most states tax adjusted casino revenue and use the taxes to fund state and local programs. In Missouri, the
tax rate is 18 percent, and there is an additional 2 percent tax to aid local city governments. Indiana has a 20 percent
tax rate. Illinois and Mississippi have a graduated tax schedule.

Casino proponents and state and local governments promote casino tax revenue as a benefit. This revenue is a
benefit for the recipients of taxed casino revenue. However, it is important to realize that this revenue is not "new
money" to society. Taxes result in a transfer of income from one group to another group—in this case, casino owners
to state and local governments (and eventually to program recipients). So, for example, while the state of Missouri
collected nearly $190 million in casino taxes during 2001, this $190 million is a cost to casino operators. Zero new
money was created as a result of the casino tax.

Issue 2: State governments use casino tax revenue for various programs, but public education seems to be the
favored destination for casino tax revenue in many states. In fact, states often promote how much money from casino
revenue is earmarked to public education. This suggests to the public that spending on education has increased since
the taxing of casino revenue began. Not necessarily.

The problem is that all earmarked revenue is interchangeable. Consider the following example: Your son is in college
and spends $40 a week on pizza. You send him a check for $20 and insist that he spends the money on pizza. This
suggests that his total spending on pizza will now be $60 a week. But there is nothing from preventing your son from
taking $20 out of his original $40 and using it for something else, and then simply adding your $20 back to get the
final $40.

The same works for state, local and federal governments regardless of the tax and destination of revenue. If $100
million a year from casino taxes is earmarked to education, one would expect total education spending to increase by
$100 million. However, state legislators can simply reduce the total amount of funds budgeted for education by $100
million and use these funds elsewhere, and then use the $100 million from casino revenue to bring total education
expenditures back to their pre-casino levels. No increase in education spending has occurred.

The swapping of casino revenue has yet to be tested empirically, but the issue has been explored using state lotteries.
Numerous studies have found that in those states that earmark lottery funds for education, spending on education
has not increased beyond historical trend levels after the introduction of the lottery. Essentially, contrary to the claim
made by lottery officials, state lotteries do not appear to help public education. There is no reason to doubt the same
result could occur with casino revenue.
Casinos help boost local retail sales.

The issue of whether casinos help or hurt local retail sales, and thus retail sales tax collections, has received the most
attention in the academic literature. Essentially, the degree to which casinos attract visitors from outside the local
area relative to local customers determines the casino's impact on local retail sales. If the bulk of a casino's clientele is
local, then one would expect retail sales (and thus retail sales tax revenue) in the local area to be negatively impacted.
This is the substitution effect, i.e., consumers substitute casino gambling for other consumption activities such as
dining out or going to the movies. However, if casinos act as part of a "tourist vacation," where non-local visitors
spend several days gambling, touring museums and dining out, then local retail sales would probably increase.

Another factor to consider is that many casinos have restaurants, shops and hotel rooms for casino customers. All
items purchased in these outlets are taxable under state and local sales tax laws. A possible loss in retail sales in the
local community may be partly offset by an increase in retail sales activity in the casinos.

Rural areas that have one or two casinos are more likely to experience a decrease in local retail sales than urban areas
that attract a greater number of tourists. Areas such as St. Louis and Kansas City would probably experience less, if
any, of a decrease in retail sales compared to rural casino areas such as Booneville or Caruthersville, Mo. Of course,
only empirical testing can provide a definite answer regarding retail sales losses and gains due to casinos. An
interesting point is that many rural communities do promote their casinos along with other area attractions to draw
out-of-area visitors.

Regardless of the specific issues, casino gambling in the United States is likely here to stay. The only question is to
what degree its popularity will increase in the future. The topics presented here should be understood by both
citizens and government officials when they debate the issues surrounding casinos and economic development.

Betting on a gambling boom

City of Dreams, a new casino resort in the capital, Manila, is set to launch formally on February 2nd—well in time for
the Chinese New Year holiday—after a soft opening in December 2014. It is the third integrated gaming resort in the
Philippines, and demonstrates the government's faith in the potential of casinos to boost economic growth and job
creation. However, the sector faces a significant hurdle in the form of diplomatic spats with China, and will need to
overcome such obstacles if it is to lure high rollers away from Macau and Singapore.

The first phase of the City of Dreams gambling complex will open with 380 tables, 1,700 slot machines and 1,700
electronic table games. It will also host three international hotels: Crown Towers, Hyatt and Nobu. The complex will
be operated in partnership with Philippine investors by Melco Crown Entertainment, a Hong Kong-headquartered
firm which also runs the City of Dreams urban resort and Altira boutique casino in Macau.

Betting on casinos

The opening of a new integrated resort marks yet another milestone in the government's ambition to make the
Philippines a major gambling and tourism hub in Asia, after Macau and Singapore. The government first unveiled
plans to build a Las Vegas-style strip of integrated casino resorts, collectively titled Entertainment City, along Manila
Bay in 2007. But the project had been set back for several years by the 2008–09 global financial crisis and prolonged
contract reviews after Benigno Aquino assumed the presidency in 2010.

The government is banking on its new casinos to develop tourism as an engine of economic growth and job creation.
The authorities hope to boost annual international tourist arrivals to 10m by 2016, compared with just 4m in January-
October 2014 (latest available data). Tourism receipts, which totalled US$3.9bn in the same eight-month period, are
an important source of foreign exchange for the country after workers' remittances and call-centre revenue.
Business moguls and their gaming resorts

City of Dreams is the Philippines' third integrated casino resort after Resorts World Manila (operated by Travellers
International Hotel Group, a joint venture between Genting Hong Kong and locally based Alliance Global) opened a
location adjacent to Ninoy Aquino International Airport in 2009, and after Solaire Manila (owned by another local
firm, Bloomberry Resort) began operations in 2013. Work on two other large casino resorts in Manila is under way:
Manila Bay Resorts, developed by Universal Entertainment of Japan, is set to be completed later this year, while
construction on Travellers' Resorts World Bayshore is set to finish in late 2018.

Some of the country's richest businessmen are behind many of the new casino projects. Henry Sy, the Philippines'
richest individual, is Melco Crown's local partner in the City of Dreams resort. The country's third-wealthiest man,
Enrique Razon, is behind Bloomberry's Solaire Manila. In fourth place is Andrew Tan, whose company, Alliance Global,
is the local partner of Genting Hong Kong in Resorts World Manila and Resorts World Bayshore.

Casinos have long been legal in the Philippines, one of a few Asian countries where gambling is allowed, although
state involvement is heavy. A state-run company, the Philippine Amusement and Gaming Corporation (PAGCOR),
owns and operates most of the over a dozen casinos throughout the country. Only a handful of casinos are privately
owned and these operate under a revenue-sharing scheme with PAGCOR. With the government running most of the
casinos, growth in gambling revenue has been slow, averaging less than 10% per year between 2000 and 2012.
However, the chairman of PAGCOR, Cristino Naguiat, has said that the figure could rise fivefold, from US$2.2bn in
2013 to US$10bn by 2016.

Politics presents a stumbling block

However, the extended and often bitter diplomatic spat between the Philippines and China over territorial disputes in
the South China Sea pose a significant downside risk to these optimistic projections. For example, in September 2014
China's Ministry of Foreign Affairs issued a warning on travelling to the Philippines, citing security concerns for
Chinese nationals there; this quickly resulted in a number of holiday cancellations. The claim was swiftly dismissed by
Philippine security officials, and was widely seen as a political manoeuvre amid escalating diplomatic tensions over
the South China Sea. The Chinese authorities issued a similar warning in 2012, amid a stand-off over the contested
Scarborough Shoal.

China is the Philippines' fourth-largest source of international tourists, and the new casinos are targeted to cater to
Chinese high rollers with luxury developments such as the Nobu Hotel. In 2013 the Philippines missed its US$2.5bn
gambling revenue target and instead hit just US$2.2bn, or just one-tenth of the previous year's figures, owing to
lower than expected tourist arrivals from China and Hong Kong. Mr Razon, who opened his Solaire Manila casino in
late 2013, has said that revenue growth would have reached 20% if not for this slowdown in arrivals.

Full-year figures for 2014 are not yet available but, according to a US-based magazine, Forbes, gambling revenue grew
by 9.3% year on year in the first six months. PAGCOR's revenue fell by 5.2% to P20bn (US$450m) in the same period,
from P21.1bn a year earlier, owing mainly to a sharp cut in its licence fees from private casino operators following a
change in tax regulations. Travellers' revenue also fell, by 14.1% year on year in the first nine months of 2014, to
P20.8bn. More positively, Bloomberry Resorts reported a 127% rise in gross revenue, to P22.4bn, for January-
September.

The absence of good airports and roads to some of the country's top tourist spots also limits the growth potential of
these new casinos. In 2014 the authorities will have missed their target of attracting 6.5m tourists to the country, in
turn casting doubt on their annual goal of 10m arrivals by 2016. Still, a possible surge in Chinese casino players
travelling further afield to avoid Macau amid the Chinese government's crackdown on official corruption is likely to
benefit mid-sized gambling destinations, such as South Korea and the Philippines. A gambling report published by a
Frankfurt-based financial services firm, Deutsche Bank, projects that Macau's gross casino revenue will contract by 8%
in 2015, while Philippine revenue will grow by more than 30% in the same year.