No offense unmeant

Malaysian lotto company PGMC, confusingly named “Philippine Gaming Management Corp.,” has been putting out ads attacking its one and only important client in this country—the PCSO.

That is the almost 80-year-old Philippine Charity Sweepstakes Office which, according to the PGMC ads, has in effect violated the law when it awarded two contracts to another company without any bidding.

The ads also claimed that PCSO allowed the same company, called Pacific Online, which presumably was a strong competitor of PGMC, to operate in Luzon. PGMC insisted that it alone has the right to the PCSO lotto operations in Luzon.

In bold letters, the PGMC ads carried a rather brazen command to its client: “Foreign investor to PCSO: Make public copies of two contracts you awarded without any bidding.”

The ads indicated that PGMC merely wanted to protect its interests, even mentioning the interests of its “Filipino public investors.”

PGMC is a subsidiary of Berjaya Philippines, which became a publicly listed company through the backdoor when it acquired the old Central Azucarera de Pilar. Based on information from the PSE, the free float shares of Berjaya, or the shares available to the public for trading, accounted for only a little more than 12 percent.

It is also possible that those free float shares are owned by foreigners. Based on PSE information, the foreign ownership in Berjaya has no legal limit.

Berjaya’s president is Lim Meng Kwong, and its chair is Dato Seri Ibrahim Bin Saad. They both sit in the five-man board, with another Malaysian named Seow Swee Pin. Two Filipinos make up the rest of the board as “independent directors,” namely, Jaime Y. Ladao and George T. Yang.

Berjaya—and for that matter PGMC—could only be classified as a Malaysian company, owned and controlled by Malaysians, who came from a country that showed us some inhumane treatment of Filipinos in Sabah.

Anyway, PCSO chair Margie Juico would not be drawn into a word war with PGMC over those quarrelsome ads. She said it would be an expensive war, since PCSO all along considered the PGMC ad campaign as an attempt to bully the PCSO into giving in to the demands of PGMC over the lotto operations.

She said she would rather use the money for the PCSO charity work.

Anyway, the aggressive ad campaign of PGMC may be one for the business books. It may be the only case of the “contractor” attacking publicly its own client, which has given PGMC a profitable business for the past 20 years or so.

Such an overbearing conduct of the contractor is hardly the norm for corporate public relations. For sure, it will not help PGMC win another contract with PCSO. In a way, the style of PGMC in doing business may be to force its own client to submission.

It is hard to say, however, whether such a corporate behavior is the way they do business in Malaysia.

The thing is that PGMC is really just a service provider of PCSO, enjoying a lease contract for almost 20 years to operate lotto facilities in Luzon, for a handsome fee of 10 percent of PCSO’s lotto revenue.

As I have pointed out back in the early 1990s, when PCSO (then under the Ramos administration) awarded the lease to PGMC, the PGMC contract was a weird leasing arrangement.

For instance, why did it call for a percent of the total take of the PCSO as payment for the lease? Most leasing arrangements at that time required payment of a fixed amount. A lease is simply just a rent.

It was as if, by getting a percent of the total take, the PGMC was part owner of the PCSO lotto operation.

Anyway, PCSO awarded the contract in the Visayas and Mindanao to another firm, Pacific Online Systems Corp. (POSC).

Both POSC and PGMC used to get 10 percent of the total lotto take in their areas for the longest time. The Senate and the Commission on Audit have badgered the PCSO over such a generous rate for a mere “lease” arrangement, urging PCSO to negotiate for lower fees with its contractors.

Sometime last year, POSC agreed to lower its charge to 9.85 percent starting June last year. The company early this year, which was when PCSO extended the old contract of POSC that expired in March, further cut its rate to 7.75 percent.

According to PCSO, the cut in the fee of POSC was substantial, equivalent to about P1.3 billion a year, which the PCSO could use for its charity work.

Malaysian firm PGMC rejected the appeal of PCSO to lower its 10 percent rate, arguing that the contract (the one done in the early 1990s) provided for such a rate.

On top of this, PGMC sued PCSO—even going to media town over the case—regarding the award of the contracts to its competitor, Pacific Online, supposedly without bidding.

Let me see if I get it: PGMC did not want to cut its “lease” fee of 10 percent, despite the plea of its own client, PCSO, and so PGMC must be ready to bid for another PCSO contract at 10 percent, which PCSO should reject instantly, simply because PCSO already had an offer for a much lower rate of 7.75 percent, from PGMC competitor, and all those should make PCSO the object of paid ad vilification—is that it?

To our contacts in business, the refusal of the service provider—the PGMC in this case—to match at least the rate of its competitor should be ground enough to disqualify it from bidding for any business with the client, much less land another fat contract.

Business sense also dictates that the service provider should try its best to avoid antagonizing its client, perhaps even sacrificing a little of its profit by acceding to the client’s request for rate cuts, precisely because the provider is looking to get more business from the same client.

That was not the sense that we are getting from the strong ads of PGMC. The ads simply project PCSO as the bad guy, too hostile even to foreign investors like the Malaysians in PGMC and Berjaya, which already made a fortune in the Philippines.

For the Malaysian group, offense must be the best defense. Really, it meant every bad word that it threw against PCSO.