INTERVIEW | GAMING
The Philippine gaming regulator wants to fast-track the privatisation of the casinos it operates and improve the country’s reputation in anti-money laundering efforts. With a sound recovery underway, Alejandro H. Tengco does not see Macau as a threat and looks to strengthen cooperation with the SAR’s regulatory authority
The Philippine Amusement and Gaming Corporation (PAGCOR) wears two hats: It serves as the regulator for the entire industry across the country and also operates a number of casino establishments. However, the days of this dual role are numbered, as the government entity is paving the way for privatising its gaming operations.
In an interview with Macau Business, PAGCOR’s Chairman and CEO, Alejandro H. Tengco said he expects big foreign players, including companies operating in Macau, will be joining the privatisation process, which he hopes can be launched in 2025.
Fighting money laundering is another priority, he stresses, as the country aims to be removed from the grey list of the global anti-money laundering watchdog, Financial Action Task Force (FATF), by next year. Mr Tengco is upbeat about the gaming market trend, both land-based and online, a segment that is booming in the country.
You took office about a year ago against the backdrop of challenging and very interesting times, as the Philippines was starting to recover from the COVID-19 pandemic. What have been the major highlights of tasks PAGCOR has been carrying out?
Alejandro H. Tengco – One of the industries that was really hardly hit by the COVID-19 pandemic was the gaming industry. There were a couple of months that the Philippines, just like elsewhere around the world, was in hard lockdown. We had to close the inland casinos, and then after a year or so came the omicron variant, in the first quarter of 2022, when all casinos were instructed to close once again. So I came to this position when we were trying our best to recover from the difficult times of 2020, 2021, and 2022. And up to today, we are still awaiting the arrival of foreign tourists, namely Chinese. In 2019, there were 2.2 million Chinese tourists that came to Manila. And we have not seen even 10 per cent of that number. That’s why our projections are conservative in the sense that we have not included in our projections the possibility of a great number of Chinese tourists coming into the Philippines in the second half of 2023.
And when, when do you think we may see that happening, , the return on mass of mainland Chinese tourists?
A. H. T. – The Chinese government is basically asking their citizens to focus on the domestic market first, meaning that later on, hopefully, they will ease the restrictions and really make them travel anywhere. And I believe that because of the numerous attractions in tourism that the Philippines offers, they will definitely be visiting the Philippines very, very soon. And if they do so, that will mean additional income for the gaming industry.
Let’s take for instance the projection that you made that by the end of the year we will have seen a gross gaming revenue recovery to 92 per cent of pre-COVID
A. H. T. – Barring any new variant or new pandemic, or any geopolitical problems within Asia, I am very confident that we will be able to achieve this year 92 per cent GGR of the pre pandemic levels. Not mentioning that there is a possibility that our foreign tourists will be coming in. That means if that happens, there is a big chance that we will be close to the pre pandemic numbers.
Still on market dynamics, the market, the industry have been talking about the Philippines as, in many ways, the most exciting and dynamic gaming market in the region. What are the main driving forces behind this trend? First move’s advantage when it comes to reopening? Other factors?
A. H. T. – We have a few foreign players coming from selected countries. We have Koreans, Japanese, Indonesians, and Singaporeans. So far, these are the main drivers. And more importantly, I think there is, if there is, revenge hopping, revenge travelling, revenge eating, and I think revenge gambling are also main drivers of these numbers.
Talking about regional competition. We are here in Macau, and the SAR is also coming back post-pandemic. How is Macau seen from the Philippines?
A. H. T. – Macau has been here from way back. In fact, if you’re talking about land-based casinos, the pioneer is none other than Macau. I believe we can coexist. There are different attractions between the Philippines and Macau. One is that, as a lot of people say, there are many things that you can do more of in the Philippines compared to Macau. Number two, Filipinos are known to be more hospitable and warmer than the people around here. So I think we can both coexist. I do not see Maha as a threat, primarily because we have both co-existed in the last few years, even pre pandemic.
Now, what maybe we should do is to continue to collaborate, because if Macau is pioneer in land-based casinos in the Philippines, we are the pioneers in online gaming. So maybe we can share some information. If they want to open up and regulate online gaming, then we can share our experience with Macau.
And how do you see things moving forward in terms of cooperation from a regulatory perspective?
A. H. T. Well, in terms of cooperation, we are moving towards privatisation. PAGCOR today is the regulator and the regulated.
Because we are wearing two hats. We, we give out licenses. On the other hand, we are also operating our casinos. So in this regard, um, I’m ready to, to learn from Macau because they’ve been purely a regulator. So that is a model that I believe we should pursue and we intend to pursue. And I tell people that the biggest challenge I will have in my life is to be able to implement the privatisation program of PAGCOR.
What’s the timeline for privatisation?
A. H. T. – We have a few things that we have to do. One, we have to clean up our properties and renovate them. They have not been touched for the last few years, since we issued licences to the different land-based casino players in the Philippines.
Two, we are trying to upgrade our equipment. As of now, we need to replace close to 3,500 slot machines in our properties. I’m targeting that by the first quarter of 2024, the delivery of these machines will arrive in Manila.
So with the new machines, hopefully we can attract more people to play and that being the case, that gives the properties a better value, of course, because you gain more GGR, you gain more customers, and the price that you can ask for will be higher than what it’s today.
Number three, we are launching CasinoFilipino.com. And that is another product that can help us gain more value. Because internet gaming is growing exponentially. So we cannot miss out on that. And then finally, we are upgrading our IT infrastructure because one of the first things that I noticed is that our IT infrastructure is still not at par with what it should be.
So if we are able to achieve and address these four issues, then I look at 2025, maybe towards the second half of 2025, as the time when the process of privatisation will start to happen.
What players do you want to attract in the privatisation process?
A. H. H. – The big players. The big players, yes. Yes.
Which players do you envision bidding for the licence?
A. H. T. – I would l be very happy if the big players here in Macau would invest in our privatisation efforts. There is already interest coming from some who I do not want to name, but there they are. They have operations in Macau and other jurisdictions around the world.
We also have our local integrated resorts in the Philippines, which are also very interested.
Cybersecurity is a main issue and concern, as you have pointed out in your speeches, and that is an area where Macau has made significant progress over the past few years. Yes. Do you see cooperation taking shape on that front?
A. H. T. – Yes, I think this is one of the areas where we can cooperate with the regulatory entity of Macau, to help each other.
Our cybersecurity is very weak at this time. That is the reason why I, together with the board, have put emphasis on the need to make an upgrade.
Have you been in contact with Macau’s gaming regulator (DICJ)? Have you been holding meetings?
A. H. T. – I have not yet, but I intend to do so very soon. I’m just trying to, my best first to, to work on things that I have to concentrate and focus on and then once I think I am able to, to say that we are more stable, then my intention is to, to get in touch with the regulators in Macau.
In addition to Macau, we have Singapore as a well-established gaming jurisdiction and, on the other hand, the market in Indochina and the potential emerging markets of Thailand and Japan. How do you anticipate regional competition playing out?
A. H. T. – With regards to Japan and Thailand, we’ve been hearing about these plans for quite a while, and nothing has happened. And as I would say, I’d only treat them as competition when it happens, because even when they give out their licences, if they do so, they will still have so many years for them to start up.
In your stated mission as PAGCOR head, you have repeatedly stressed the importance of tackling the problems generated by Philippine Offshore Gaming Operators (POGOs) as well as illegal gambling. Can you give us a brief overview of what is being done and what the future steps are in order to try to bring this under control?
A. H. T. – With regards to the overseas gaming licences (POGOs), what we have been making sure of since I assumed office is that they are in the gaming business and should be in the gaming business alone.
However, what is happening is that when using their licence, some have veered away from what they’re supposed to do and are involved in criminal activities.
You have crypto investment scams, and you have dating scams.
Since the start of May, basically the last two months, we have been closely monitoring all of our licences, and we are in close coordination with the different government agencies for us to be able to stop all these illegal activities.
With regards to illegal online gaming operators, we are in close coordination with the government agency, the Department of Information and Technology. And we inform them. As soon as we are aware or are told that there is an illegal online gaming operator, we immediately inform that government agency and right away cut the internet line or internet, connectivity of these illegal online gaming operators.
The Philippines is taking the lead in terms of online gaming operations, a market that has been growing exponentially. Tell us about your regulatory approach to internet gaming. How to get it right?
A. H. T. – We are actually new at this. I should say that this is an evolving process. We have not perfected the structure, and it is my belief that by doing so, we will be able to come up with a structure that will be beneficial to all those who will be interested in doing so.
I should say that we have been successful, and if we are right in our projections, 25 billion pesos in GGR will be generated this year which is not bad for our third year only in regulating online gaming. From 8 billion in 2020, now we’re at 25 billion. So in that regard, we are successful.
What we are still, and what I believe we still have to look into, is really being able to fight the illegal operators. So one of the things I’m going to do is bring down the rates that we collect so that then the illegal operators willsurrender and get a license.
About tackling money laundering practices [Philippines has been on the grey list of global anti-money laundering watchdog Financial Action Task Force (FATF)], what actions have you been taking?
A. H. T. – We have a very strong anti-money laundering department. They are very strong in the sense that they are monitoring every activity that we have that can violate anti-money laundering laws and regulations.
We are in constant touch with the Department of Finance, Securities and Exchange Commission and with our own anti-money laundering department in the Philippines.
So we, I can say that so far we have been given a very good grade by the government, by the national government, in our response to anti-money laundering issues.
One of the objectives that the Philippines has is that, hopefully, by early next year, we will be taken off the grey list.
Do you have an action plan and further measures in the pipeline to meet that target?
A. H. T. – We not only PAGCOR but the entire Philippine government, has an action plan. The main objective is that by 2024, we will be out of the grey list.
This is very important for me as president of the PAGCOR Board. And it’s not only about the image of PAGCOR, but also the image of the president of the Philippines and that of the country in general.