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Bagong Nayon Pilipino — Entertainment City Manila

PAGCOR AND THE WORLDWIDE GAMING INDUSTRY
In country after country, there has been rapid growth in permitted gambling in
recent years, with Asia serving as the epicenter for expansion. This is the
observation of Prof. W.R. Eadington from the University of Nevada in the United
States.

Gaming experts predict that revenues from worldwide legalized casino gaming
will top US$100 billion by the end of the decade and the Asia/Pacific region
becoming the world's second-largest casino market, with revenues reaching
$18.5 billion by 2009.

Today, Macau is the world’s largest gaming market with US$5.4 billion in gaming
revenues for 2004. This special administrative region is a promise land to
investors, considering political, social and economic factors supporting its
success.

Macau citizens benefit from free education, health care and social security – all
provided by a gaming industry which supplies 70 percent of government
revenues, accounts for a quarter of the gross domestic product and employs 5
percent of the territory's workforce.

According to a report by G.K. Goh Research, an internationally-recognized

research company: “Asia is on the brink of an unprecedented wave of gaming
liberalization as some governments in the region are looking to legalize casinos
in an attempt to pull in tourist dollars, reduce the outflow of funds to regional
casinos and curb illegal gaming.”

“The willingness of several countries to consider legalizing casino operations

suggests that there is a growing acceptance of gambling as a legal form of
leisure and entertainment in Asia.”

“Countries that resist legalizing casinos face potential loss as they will lose tax
revenue and tourism receipts to neighboring countries and illegal casinos.”

To date, there are 11 countries in Asia with legal casinos. Newcomer Singapore
has now considered legalizing casino gaming and chose the integrated resort
concept for its tiny city-state. It has approved the construction of two integrated
resorts, one each on its Sentosa Island and Marina Bay area.

The integrated resort project has already attracted the Who’s Who of Las Vegas
such as MGM Mirage, Harrah's, Las Vegas Sands and Wynn Resorts all
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expressing their interest as well as other casino bigwigs such as Melbourne-

based Tabcorp Holdings Ltd., Australia's biggest gaming company; Hong Kong-
based Melco International Development Ltd., controlled by Ho; and Genting
International Plc and Star Cruises Ltd., units of Kuala Lumpur-based Genting
Group.

Table 1. Snapshots of Asia's gaming industry

Country Land-based Other forms of gaming
casino
Cambodia Yes (14) n/a
China No Lotteries
Hong Kong No Lotteries, spots betting, horse racing
India Yes (5) n/a
Indonesia No Lotteries (temp suspended)
Japan No Lotteries, pachinko and others
Laos Yes (1) n/a
Macau Yes (9) Lotteries, sports betting, horse racing,
greyhound racing
Malaysia Yes (1) Lotteries, sports betting, horse racing,
greyhound racing
Myanmar Yes (4) n/a
North Korea Yes (2) n/a
Philippines Yes (14) Lotteries, horse racing, cock fighting and
others
Singapore No Lotteries, sportsbetting, horse racing
South Korea Yes (13) Lotteries and others
Sri Lanka Yes (9) n/a
Taiwan No Lotteries
Thailand No Lotteries
Vietnam Yes (2) Lotteries, horse racing, greyhound racing

Table 2. Casino development plans in Asia

Country Developments in casino industry Annual gaming rev
(US$ bn)
Macau Massive expansion plans by all 3.57
three operators
Malaysia Sole operator expanding room 0.63
capacity
Philippines Pagcor plans Tourism Development 0.32
Zone project
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Thailand Considering plans to legalize casino n/a

Singapore Considering plans to legalize casino n/a
Indonesia May consider plans to legalize n/a
casino
Cambodia New licenses issued for slot n/a
arcades in Phnom Penh
Taiwan Considering plans to legalize casino n/a
Korea Further liberalization of casino n/a
industry expanded
Japan Considering plans to legalize casino n/a

PHILIPPINE GAMING INDUSTRY

The Philippines currently holds a huge advantage over its regional counterparts,
having the legal framework for casino gaming already in place. Also, capitalizing
on its reputation as “Asia’s friendliest”, the casinos run by the Philippine
Amusement and Gaming Corporation (PAGCOR) have helped the corporation
generate record-breaking revenues and maintain a respectable share of the
international gaming market.

Under its present leadership, PAGCOR has flourished into one of the most
profitable corporations in the country today. PAGCOR Chairman Efraim C.
Genuino’s visionary approach, coupled with his business savvy and no-nonsense
management, has propelled the state-run gaming firm to the second highest
position in terms of gaming revenues in Asia, next only to Macau.

In 2001, PAGCOR posted over P17.46 billion total income, exceeding by almost
20 percent the P14.62 billion income of 2000.

In 2002, the corporation posted P20.21 billion, which earned for it the distinction
as the most profitable corporation in the Philippines for 2002 according to the
Securities and Exchange Commission.

In 2003, while most countries with casino gaming industries suffered greatly from
the effects of the SARS scare, PAGCOR kept its shortfall to a minimum. It
earned P19.43 billion for that year.

In 2004, PAGCOR beat all previous income records by posting a record-breaking

P21.90 billion, the highest ever in its history.

In the May 2004 issue of the International Gaming & Wagering Business (IGWB)
publication, the PAGCOR-run casinos produced close to US$400 million in 2003.
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However, in the face of growing competition in the region and other countries
worldwide, the Philippines’ hold on market is threatened. With this in mind,
PAGCOR has developed a plan that once realized, will put the country on the
map as the next tourism and gaming hotbed in Asia.

THE PAGCOR VISION

As early as 2001, Chairman Genuino envisioned transforming state-run gaming

firm into a “global corporation with a global mindset and a Filipino heart.”

Taking the cue from Las Vegas and other gaming capitals of the world, where the
entertainment industry takes precedence over casino gaming in terms of
generating revenues, PAGCOR began to re-invent its casinos into world-class
tourist destinations providing top-notch total entertainment.

The biggest step made by PAGCOR towards realizing this vision is the
development of the proposed Bagong Nayon Pilipino-Entertainment City Manila
project (Entertainment City).

The proposed Entertainment City is in the right position to succeed considering

that Asia is a growing market, having the highest population and most affluent
citizens. The Philippines, meanwhile, is strategically located and is accessible by
both sea and air.

The proposed project is the first-of-its-kind in the region. It is a massive, fully-

integrated entertainment and leisure complex offering wholesome fun, thrill and
excitement for people of all ages. Although, designed to be a global City of the
Future, it will reflect the best of the natural charm, vibrant culture and warm
hospitality of the Filipinos.

The Entertainment City is set to rise on a stretch of prime reclaimed land

between Roxas Boulevard and the panoramic Manila Bay. It is easily accessible
from the Ninoy Aquino International Airport (NAIA), seaports, as well as the major
commercial and urban centers.

The proposed project will be divided into specialized areas which will feature:

• first-class theme hotels

• amusement parks
• educational and cultural complexes
• shopping malls
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• a commercial district
• sport stadia
• restaurants
• convention halls
• state-of-the-art theaters
• gaming centers
• race tracks
• residential villages
• a hospital district
• and other facilities at par with international standards.

One area will carry a Tropical theme featuring white sand beaches, lush
mangroves and lagoons, all facing Manila Bay and its stunning sunset. The main
attraction of this tropical theme is a representative habitat for tropical flora and
fauna complete with waterfalls and rain effects to recreate an authentic rainforest
experience.

The second area will be a majestic Winter Park with large ice skating rinks, as
well as real snow and skiing facilities. Clustered around this area are shopping
malls, arcades and casinos, hotels and restaurants which will all carry the winter
wonderland motif.

Meanwhile, a Marina Complex will also be built and will feature exciting facilities
such as a walk-through glass tunnel showcasing the marine life of the Asia-
Pacific region. It will also include winding canals with boat rides that will recreate
the romance of Venice and Amsterdam.

Another important feature of this area is a fishport and seafood restaurant which
applies the concept of the Fisherman’s Wharf in San Francisco.

Aside from these, there will be a Boardwalk to provide convenient public access
to a pedestrian promenade with specialty restaurants and outdoor cafes and an
observation tower which is envisioned to be the tallest in the world.

One of the much-awaited highlights of the project is the transfer of the Nayong
Pilipino Park to the site.

The Nayong Pilipino is a unique, interactive educational park featuring miniature

versions of renowned Philippine tourist attractions. It showcases the country’s
rich cultural and historical heritage as well as true-to-life depictions of its natural
and made-made wonders.
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Also to be developed within the Bagong Nayong Pilipino project are equestrian
sports facilities and a go-kart race track. There will also be a grand amusement
themepark with thrilling rides and state of the art games.

Finally, areas will also be developed for commercial, office and residential use
while an integrated transportation hub will be constructed to serve as a central
station to the different modes of transportation within the project. The
transportation hub will have ample parking areas and will also serve as the main
terminal for a state-of-the-art monorail system.

THE ENTERTAINMENT CITY MANILA AND PRESIDENT ARROYO’S

MEDIUM-TERM PHILIPPINE DEVELOPMENT PLAN 2004-2010

The proposed Entertainment City project is consistent with President Gloria

Macapagal-Arroyo’s Medium-Term Philippine Development Plan 2004-2010
(MTPDP 2004-2010), particularly in terms of generating additional income for the
government, creating jobs, and boosting Philippine tourism through the
development of special tourism economic zones.

According to the MTPDP 2004-2010:

The tourism industry is among the sectors that have

the potential to boost the Philippine economy. It can
be a powerful economic growth engine if developed
in a sustainable manner. It deserves to be a top
priority for national development because of the
following reasons:

• it is a powerful and efficient industry;

• the impacts on social development are broad and
deep;
• it creates strong peripheral benefits;
• the Philippines can compete and win;
• and helps maintain cultural integrity, essential
ecological processes, biological diversity and life
support systems.” (Chapter 5:Tourism p.69)

As seen in the graph below, tourism is one of the biggest sources of revenues
and offers broader opportunities for job generation.
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This is precisely the rationale behind the development of the Bagong Nayon
Pilipino-Entertainment
Entertainment City Manila project.

THE BENEFITS

The project is in the right position to succeed considering that Asia is a growing
market,
ket, having the highest population and most affluent citizens. There is also a
marked increase in regional rather than intercontinental travel.

The proposed project will already provide tangible benefits for the government
before, during and after its
ts co
construction.

Even before construction of the project commences, PAGCOR may already

generate millions of dollars worth of revenues in the form of advance lease
payments from future locators and other investors. It also serves as a vehicle for
other government
nt agencies to deliver their program agendas.
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Meanwhile, during the project’s development, the local construction industry will
be revitalized because of the requirements needed by this massive undertaking.
In the process hundreds of thousands of local employment opportunities shall be
created.

Once completed, the Entertainment City Manila is expected to:

• Generate US$7 billion in direct tourist receipts

• Create five million jobs for local workers
• Generate US$10 billion in Gross Domestic Product by 2010

Aside from these, the government stands to benefit from:

• Remittances to the National Treasury are estimated to reach P135 billion

over the 10-year projection period
• Franchise tax to be remitted to the BIR will aggregate to P14.2 billion in
the same period.
• Taxes to be paid by locators, meanwhile, are expected to amount to P3.2
billion
• Locators to the zone are also projected to bring in foreign investments of
at least US$1.4 billion within the first three years.

These do not include direct benefits the project will bring to other industries such
as transportation, communication, food service, and entertainment.

According to McKenzie & Co., an internationally-recognized consultancy firm, the

proposed Entertainment City project has all the ingredients of a Tourism
Development Zone and is expected to be a major contribution in making the
Philippines a premier tourism destination.

And above all, investors are assured of the sustainability of the project since it is
under the direct control and protection of the government through PAGCOR.

Challenge

The biggest reason why this project has yet to take-off is the pending expiration
of the PAGCOR franchise (PD 1869) in 2008.

House Bill 3409, which will extend the franchise of PAGCOR for another 25
years, was approved in Congress in the third reading and is now pending in the
Senate. It was transmitted to the Senate as early January, but has yet to be
tackled.
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Time is of the essence, especially now that other countries such as Singapore
and Thailand are in advanced stages of legalizing casinos in their respective
nations. Later, we might find ourselves losing out to these newcomers. Already,
our hold on the international gaming market is becoming slim. Our legislators
must act now.