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Investors Eye Philippines as Macau Casino Fortunes Sag

Macau’s tumbling casino fortunes amid an ongoing crackdown against organized crime by Chinese authorities has Pacific Rim investors searching in a new direction to satiate demand in the region’s massive consumer-gambling market — new mega-casino developments in the Philippines.

philippines-flagSeveral international financial outlets have reported on a handful of new proposals that may cement the Philippines’ growing status as a gambling destination.  Among the latest is a joint proposal between two development corporations, one each from the US and Macau, that would spend $1 billion developing two new Philippines casino resorts.

Sino-American Gaming Investment Group, run by the Denver-based consultancy company RiskWise Group, and Macau Resources Group, a division of Sino-America Gaming, are seeking to build two casino resorts on Cebu and Napayawan islands, which are growing tourist destinations that are not close to Manila. All of the companies above are controlled by or share strong links to Denver-based investment manager Michael Foxman, who is driving the projects.  Foxman, in an interview with Reuters, also cited bringing on Banyan Tree and Marriott as possible resort development partners, and has also inked a deal with an unnamed Las Vegas gaming partner.

Whether that unnamed partner is a new face in the region or is an existing Macau entity remains to be revealed.  Caesars Entertainment has recently expressed its own interest in developing a resort-destination casino in the Philippines as part of its own international expansion plans.  Overall, the Philippines casino market is expected to experience high-single-digit growth for the next several years, topping the $5 billion mark in annual gambling revenue by the end of the decade, according to various financial reports.

One factor possibly weighing in favor of Foxman’s proposals are that the Philippines regulatory body, PAGCOR, is likely to believe that projects in outlier locations such as Cebu Island are likely to be a greater long-term boost to regional development.

It’s also possible that Foxman’s unnamed Vegas gaming partners include one of the major existing US players in Macau — Sheldon Adelson’s Las Vegas Sands Corp. or Steve Wynn’s Wynn Gaming.  Both Las Vegas Sands and Wynn Gaming have taken huge revenue hits at their Macau mega-casinos in recent months as Chinese authorities have instituted a lengthy crackdown against the “VIP” system that has driven the Macau casinos’ success.

Well-heeled Asian gamblers cannot bring millions in cash to Macau casinos because of the territory’s money-transferring laws, so instead the gamblers had arrived, for nearly two decades, using licensed junketeers as intermediaries.  These licensed junketeers — Paul Phua, of a recent high-profile US sportsbetting case, is one of the most prominent of these intermediaries — essentially controlled most of the revenue going to and from the Macau casinos, settling up with the Asian high-rolling gamblers on their own, apart from the official Macau casino economy.

Such a system, of course, was tailor-made for corruption, and Macau’s casino economy has shrunk for 10 straight months following a crackdown launched last summer by mainland Chinese authorities.  Those same Asian gambling whales (a million dollars in wagering on a typical casino visit is a normal baseline for being considered a “VIP”) have steadily been pulling their money out of the Macau casino economy and visiting other locales instead.

The Philippines and South Korea are at the front of a large list of countries in the region who will likely gain at Macau’s expense.  One factor that remains to be seen, however, is how deeply the corrupt junket system becomes embedded into the growing Philippines market, and to what extent PAGCOR will control the illicit flow of funds that literally defined Macau’s explosive growth.  Already, according to several reports, more than 60 such junketeers serving as intermediaries for high-rolling Asian gamblers have become licensed to work with Philippines casinos.

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