August 28, 2022

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PAGCOR needs to settle conflicting roles, says DoF

THE PHILIPPINE Amusement and Gaming Corp. (PAGCOR) should present its plans as the Marcos administration decides whether its gaming operations are up for privatization, the Department of Finance (DoF) said.

“PAGCOR’s new leadership will have to make known their plans moving forward. They should resolve the seemingly conflicting roles as an operator and regulator,” Finance Secretary Benjamin E. Diokno told reporters on Friday.

Mr. Diokno’s statement came after he told the House Committee on Appropriations on Friday that the administration is open to supporting a supplemental budget, possibly funded by the privatization of government-owned and controlled corporations (GOCCs) such as PAGCOR.

“We would like the economy to grow [and] to recover. So, if there [are] additional resources available to us — either through maybe new loans or maybe additional revenues coming from, say, privatization of some corporations — we would be willing to support a supplemental budget… Because if there are ready to implement projects, and we had the money, then better spend it now rather than, say, a year from now,” Mr. Diokno said.

“PAGCOR, as it is right now, is a GOCC, so when the government regulates it, it’s like regulating themselves,” said Antonio A. Ligon, a law and business professor at De La Salle University.

“If it is privatized, then the audit or internal control of the entity may be privatized also. So, you may see stricter and more efficient internal controls, with the hiring of employees having different criteria. But definitely, it will avoid, if not minimize, political factors,” he added in a Viber message.

Public investment analyst and convenor of think tank InfraWatch PH Terry L. Ridon rejected the idea that PAGCOR’s role as both regulator and operator makes up a conflict of interest, noting that it is an excuse for those who have an agenda in privatizing PAGCOR-operated casinos.

“Casino operators merely derive their power to operate from PAGCOR itself, as PAGCOR by law has the monopoly of casino operations in the Philippines,” Mr. Ridon said in an email.

“If government revenue will be less under a privatized regime, there is no point privatizing PAGCOR-operated casinos, particularly at this time of limited fiscal space, in which every peso going into public services counts,” he added.

Economist Bernardo M. Villegas of the University of Asia and the Pacific said that the state-run gaming firm should focus on the public good as opposed to maximizing profits.

“PAGCOR should limit its role to regulating and allow a private enterprise to operate it. Government revenues need not be reduced if the regulation is enlightened,” he said in an email.

The previous administration sought to privatize the gaming operations of PAGCOR to raise an estimated P300 billion in revenues, in lieu of imposing additional taxes amid the coronavirus disease 2019 (COVID-19) pandemic.

The plan did not push through as it was thought that the move might eventually result in foregone revenues for the government after PAGCOR foregoes its gaming operations.

But, “in the short and medium term there will be no revenue loss because of privatization proceeds,” Mr. Diokno said.

When asked if taxes and license fees collected from its potential new owners in the future would be enough in the long term, Mr. Diokno reiterated that “the new leadership should consider the worthiness of their move appropriate to their role.”

“I’m not sure if the government can put conditions on privatization. But let’s say if PAGCOR does not make a higher yield within three or five years as compared to the present, then it should go back to being government-run,” Mr. Ligon said.

“As to profitability, I think the private entity, which is profit-driven, can make it more profitable than the government operation.”

In the first half of the year, PAGCOR posted a 68.11% expansion in its revenue collection, obtaining P26.7 billion against P15.88 billion in the same period last year.

Its net income after tax also surged to P2.15 billion compared with the P79.07-million income in the first semester of last year.

PAGCOR also said that its contributions to nation-building from January to June increased by 62.69% to P21.23 billion. This includes P11.71 billion that went to the Bureau of the Treasury, P6 billion to the national coffers as cash dividends for the dividend year 2021, and P1.23 billion to the Bureau of Internal Revenue as franchise tax.

Last week, new PAGCOR officials were sworn into office. Alejandro H. Tengco was appointed chairman and chief executive officer, while Juanito L. Sañosa, Jr. was appointed president and chief operating officer. — Diego Gabriel C. Robles