Infrastructure: Key to gaming industry success

(Conclusion)

The chance of success of the Entertainment City project of the Philippine Amusement and Gaming Corp. are good, but it is by no means a sure thing, given the challenges the country continues to face.

While all four Pagcor licensees—Bloomberry Resorts, SM-led Belle Corp., Resorts World Manila and Tiger Entertainment—have promised world-beating facilities, the problem lies at a more basic level: how to get patrons to the venues.

The main obstacle that stakeholders of the $4-billion development have to hurdle is the country’s long-neglected infrastructure, highlighted by the poorly planned Ninoy Aquino International Airport (Naia).

The oldest of the airport’s three passenger terminals sits less than 3 kilometers away from the gaming complex site, but it can take motorists as long as 30 minutes to negotiate the congested stretch of road on a bad day.

The issue is not lost on either the private sector or the government.

“We should work together to improve the infrastructure in Manila,” said Willy Ocier of Belle Corp., one of four groups out to establish casino hotel operations on the 100-hectare reclaimed property. “Belle and the other licensees are supporting the Naia Expressway project with P6.5 billion in soft financing to ensure the smooth arrival and departure experience of our visitors.”

The key to success, Ocier said, “is the quality of facilities and infrastructure.”

But there is another risk involved: the speed of the project’s implementation.

The planned elevated expressway that will bring tourists and casino high rollers from the airport straight to the Entertainment City complex is part of the government’s Public-Private Partnership program, which has bogged down in procedural delays since it was launched three years ago.

This situation was classified by investment banking giant UBS as a downside risk to the overall success of the country’s ambitions to overtake Singapore as a regional gaming hub.

“The Philippines is undertaking a major upgrade and development of its existing infrastructure, mainly airport facilities, railroad systems and road networks,” UBS said in a research report.

It warned that “failure of the government to implement these projects and resolve the current infrastructure bottlenecks could weigh on the country’s ability to increase its tourist arrivals, limiting the growth potential of the new integrated resorts.”

This risk is acknowledged by Pagcor chairman Cristino Naguiat Jr. But he pointed out that the momentum created by intense rivalry and peer pressure among the four licensees is propelling them to find private-sector solutions to public-sector problems.

“In fact, the licensees have pitched in their own funds to jumpstart the expressway program,” he told the Inquirer. “You will also see this in other aspects, like the roads in and around the site and the facilities. They are pushing it forward even without being prompted.”

There are, of course, other risks involved. Naguiat believes that the spate of bad press being experienced by one of the licensees—Japanese gaming tycoon Kazuo Okada—is part of a broader smear campaign by other casino operators to diminish the Philippines’ chances of success.

There is also the risk of a hard landing for the economy of China, where a significant number of high rollers come from—the kind of business that sustains casinos all over the world.

If these critical issues are addressed successfully, the benefits for the gaming and tourism industries, and the broader Philippine economy, are tremendous.

Pagcor estimates that the project would create direct employment for at least 40,000 workers in the entertainment and leisure sectors, as well as the construction industry.

It will also create a massive multiplier effect on the food and retails sectors, as well as in tourist sites around the country if the government is successful in making it a jump-off point for foreign visitors to sites like Boracay Island or Palawan.

If Entertainment City does become a success, it will also help mute opposition from anti-gambling advocates like Roman Catholic Archbishop Oscar Cruz, who has been tirelessly campaigning against the project because he believes large-scale gambling spawns social ills—broken families, financial ruin, prostitution, illegal drugs and money laundering.

“This project is more than gambling,” the Pagcor chief said, explaining that only 7.5 percent of total space at the site is allocated for casinos (although the bulk of revenues will come from gaming operations). “We are promoting our entire country here.”

Stakeholders agree that the country’s chances will be much better if problems like infrastructure bottlenecks are addressed early. The gaming and leisure business around the region is so attractive at present—offering average returns of 30 percent to investors—that other countries like Malaysia, Australia, Cambodia and Vietnam, apart from Singapore and Macau, have gotten involved.

When it comes to gaming, the Philippines is not the only player sitting at the casino table.