Outlook for PH gaming sector murky, says Fitch

The long-term prospects of the Philippines’ much-hyped gaming sector is under question due to various risks including weak infrastructure, geopolitical tensions that may discourage the entry of VIPs and the possibility of sudden policy changes.

In a new report, debt watcher Fitch Ratings said while gaming revenues would likely grow by double-digit rates until 2015, the outlook beyond that point was murky.

“Fitch Ratings expects double-digit gaming revenue growth to continue at least well into 2015, when City of Dreams Manila will be operational for a full year, and before the next wave of Macau projects come online,” the firm said.

“Growth trajectory past 2015 is difficult to forecast given the risks and constraints,” Fitch’s Gaming Jurisdiction Surveillance Monitor report on the Philippines read.

Prior to being opened up to private investments, the Philippine gaming sector was described as mature, with growth having reached a plateau.

Despite the liberalization, Fitch cited risks to the industry’s growth, not least of which was the Philippine Amusement and Gaming Corp.’s (Pagcor) conflicting role as regulator and casino operator.

Pagcor, Fitch pointed out, runs 12 casinos in the country—three of them in Metro Manila, competing for market share with privately-run joints.

Other risks include the Philippines’ below average World Bank governance indicators relative to investment-grade peers, nascent transportation infrastructure relative to the ambitious tourism initiatives such as the Pagcor Entertainment City in Pasay, and uncertainty related to corporate income taxes.

Fitch also noted the risks from legislation that restricts operations including the imposition of entry levies, and sudden changes in licensing requirements.

In 2007, the government passed legislation that allowed Pagcor to award provisional licenses to private operators.

This led to the development of Resorts World Manila and the awarding of licenses for four large-scale casino resort developments in the area dubbed Entertainment City in Pasay.

So far, of the four casinos expected to open up in the Entertainment City, only one—Solaire Resorts Manila of port tycoon Enrique Razon Jr.—has opened up.

The three other casinos expected to open in the area are by the Travellers International Hotel Group, a joint venture between Genting Hong Kong and Alliance Global; the City of Dreams, a partnership between Melco Crown and Henry Sy’s Belle Corp.; and Kazuo Okada’s Tiger Resorts.

Fitch also said that the ongoing territorial dispute with China may discourage more Chinese high-rollers from going into the country.