Carlo's Think Pieces

Reflections of a Filipino in the Netherlands

Privatizing PAGCOR

Posted by butalidnl on 31 July 2010

I think that President Aquino’s plan to privatize PAGCOR is a good idea. In the first place, it will remove the government’s hand from directly “promoting” gambling. And if it does it the right way, government will continue to earn revenue from PAGCOR.

Separation of Functions
By privatizing PAGCOR, the government would have the opportunity to separate its task of regulating the gambling industry, from its task of operating a gambling business. This should mean that gambling will be more regulated than it is at present, with the combined functions of PAGCOR.

The government should first set up a special Gambling Authority, which would take on the task of regulating all forms of legal gambling – cockfighting, lotto, sweepstakes, Small Town Lottery and casinos. This new body would determine where casinos would be allowed, etc. This way, the new body should be able to concentrate on regulation of all gambling; and not be “distracted” with the task of maximizing revenue. This latter task should then go to the management of PAGCOR.

Government Revenue
The government should then  impose a special tax on casino operations, so as to “discourage” gambling, and at the same time raise money from these – as a sort of special “sin tax”. This tax will be in addition to the usual business tax. This way, the government will be able to earn money from gambling, but not be involved in managing the gambling system itself.

The object of government should not be to maximize incomes from gambling, but rather to make the best out of a bad situation – i.e. that people feel the need to gamble.

Shares in PAGCOR
The government seems to be studying the possibility of selling PAGCOR to a single entity, either domestic or foreign. I think this will end up with a privately-owned  casino monopoly, which will not be desirable. The solution that I propose is to sell 50% of  PAGCOR shares on the open market, as an IPO (Initial Public Offering), preferably to Filipinos. The government will retain 25% as a “Golden Share” , to help ensure that PAGCOR will be operated correctly (according to the government, that is). And the final 25% will be sold to a management group, which could be auctioned off to either domestic or foreign parties.

Or the government could do it there other way around, by first auctioning off the 25% to a management group, and then later selling 50% to the general public.

This way, the management will control only 25% of the company. Enough for it to have a decisive say in the day-to-day operations, but not enough to control the direction or objectives of the company. They will not be able to sell it to another party or diversify, since the government controls one fourth of the shares, and will not agree to such changes.

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