Thomas White Global Investing
The Philippines
The Philippines Stamp
July 20, 2012
A Postcard from the Asia Pacific
The Philippines: Playing its ace

Manila Bay

Manila Bay, a popular tourist attraction in the capital of The Philippines, will soon be dominated by massive casino complexes.

Macau is the Mecca of gaming in Asia. But when it comes to cashing in on the gambling boom on the continent, Singapore, Vietnam, Taiwan, and South Korea are all playing their cards right. The Philippines though may be the ace in the pack.

After years of quietly constructing gaming venues and casinos, this “tropical paradise” is now ready to up the ante. The Philippine government has awarded exclusive licenses to four huge casino complexes along the picturesque Manila Bay as part of the country’s ambitious plan to own the biggest stake in Asia’s rapidly growing and extremely competitive gaming and casino market. Once the megaproject begins operations, Manila is expected to draw professional gamblers and die-hard gaming enthusiasts from across Asia and the world. The government is also planning to build casino resorts in other parts of the country, including Cebu, the largest city after Manila.

The four Manila Bay casino complexes are anticipated to be the mainstay of the grand Bagong Nayong Pilipino Entertainment City, where the world’s richest are expected to up the stakes. The licenses for the casino-resorts have been granted to some of the biggest names in the region. They are Enrique Razon Jr., a billionaire port operator in the country, Henry Sy, retail tycoon and the richest Filipino, Kazuo Okada, Japanese slot machine magnate, and Andrew Tan, the head of Philippine conglomerate Alliance Global Group. Together, the complexes are estimated to accommodate 5,400 slot machines and 800 gaming tables.

Nonetheless, according to Philippine Amusing and Gaming Corp. (Pagcor), the state gaming monopoly that also issues casino licenses, existing casinos in the country are already generating record revenues. In May 2011, Pagcor raked in 3.03 billion pesos ($69.58 million) in revenues — a 10.87% increase from May 2010. Forbes Magazine estimates that once the new casinos are in full swing, they will generate close to $10 billion a year in gaming revenues alone, a figure that will easily top Las Vegas’ $6.5 billion sales turnover in 2011 but still lag Macau’s 2011 revenues of $33.5 billion. In fact, casino industry analyst Jonathan Galaviz has predicted that by the end of 2012, Asia might overtake the U.S. to become the world’s biggest legal gaming market.

Clearly, gaming is reaching mammoth proportions on the continent and related industries such as tourism and hospitality are basking in its reflected glory. Consider, for instance, the relatively conservative Singapore. Analysts believe its casinos are partly responsible for the record 11.6 million tourists who visited Singapore in 2010. Vietnam too is due to open a resort next year and markets such as Taiwan and South Korea are on the verge of legalizing gambling. The Filipino authorities seem to have observed and understood this game well. Macau might be the undisputed leader but The Philippines’ potential to give it a run for its money is huge. Filipino investors are already rubbing their hands in glee and there are enough reasons for them to do so.

Filipinos are legally allowed to gamble, which automatically creates a larger pool of players compared to markets such as Vietnam, where only foreigners can try their luck. Already, The Philippines gets 30% of its casino revenues from foreign tourists, mainly from China and Korea, and the new complex along the bay is expected to turn this trickle into a deluge.

But the biggest ace up the island nation’s sleeve is its clear intention to tempt potential gamers with its very own version of the age-old supermarket trick — buy one, get another free. Tourists can not only gamble in some of the swankiest resorts the region has to offer, but also combine this advantage with budget travelling on many of the cheap flights to and from the stunning tropical islands of the archipelago. Indeed, the chairman of Pagcor, Christino Naguiat Jr., is confident that soon gaming enthusiasts will prefer The Philippines to other gambling centers because of this ‘double bonanza.’ “It’s more fun in The Philippines,” he has said in a Forbes article, taking a cue from the country’s worldwide tourism campaign.

Indeed, revenues from gaming and its ripple effect on the tourism and hospitality industries might prove to be a shot in the arm for The Philippines’ economic growth. Though the country’s economic ascent has been lauded and it is today the third largest BPO hub in the world after India and Canada, its level of industrialization is low, even by emerging market standards. This has meant high unemployment rates, with nearly a tenth of its population working abroad. Political instability and mismanagement continue to dog the nation’s fortunes and the economy’s heavy dependence on the services sector, which is largely fueled by the BPO industry and foreign remittances, is not very healthy.

And in this scenario, the casino boom may well prove to be the country’s trump card.

 

Image Credit: Benson Kua on Flickr under a Creative Commons License

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