MANILA, September 19, 2005
 (STAR) By Zinnia De La Peña - The Philippine Stock Exchange (PSE) is proposing the privatization of the Philippine Amusement and Gaming Corp. (Pagcor) through a combined sale to an interested investor and an initial public offering (IPO) as part of efforts to boost liquidity in the capital market.

PSE president and chief executive officer Francis Lim made the pitch before lawmakers in a recent congressional hearing on the Pagcor charter.

Lim explained his proposal would raise P80 billion for the national coffers which would substantially help the government in its revenue-raising programs to address the fiscal deficit.

"Given the outstanding financial and operational performance Pagcor has demonstrated through the years, we believe that a Pagcor IPO will definitely attract both local and foreign investors and hence, will be a catalyst to greater activity in the capital market," Lim said.

He said a Pagcor IPO will also encourage other profitable government-owned and controlled corporations, including the Philippine Charity Sweepstakes Office, Development Bank of the Philippines and Home Development Mutual Fund, to follow suit.

Lim pointed out the rigid listing and reportorial requirements imposed by both the Securities and Exchange Commission (SEC) and the PSE to publicly listed companies are necessary to improve transparency, promote good corporate governance practices and bring about a more level playing field, particularly in Pagcor’s management of its gaming operations.

Lim added the national government’s residual ownership of 40 percent in Pagcor will provide it with continuing revenues via cash dividends.

He said a Pagcor IPO will likewise disperse the corporation’s ownership to the investing public pursuant to its constitutional mandate.

Together with other capital market players, Lim said the exchange will vigorously work with Congress in implementing this proposal through a bill designed to address relevant issues pertaining to the privatization of Pagcor.

"We believe that the privatization process, if approved, must be open and transparent to withstand public scrutiny," Lim said.

"It should be handled by capital market practitioners who have the unique experience of managing similar transactions in the past such as the Petron IPO," he said.

Pagcor remains the government’s biggest source of non-tax based revenues and its third-largest revenue earner after the Bureau of Internal Revenue and the Bureau of Customs.

Pagcor’s income has been growing at an annual average rate of 16 percent since 1986. It has figured as one of the top two corporations, as listed by the SEC, since 1995.

Under its charter and bylaws, all of Pagcor’s earnings, net of operating expenses, will accrue to the government. About five percent of Pagcor’s net winnings are remitted to the BIR, and 50 percent of its earnings after franchise tax goes to the National Treasury. The agency also allots a chunk of its earnings to the President’s Social Fund.

The PSE is hoping to attract more companies, including wiring harnesses giant Yazaki Torres Manufacturing, leading pharmaceutical firms United Laboratories and Pascual Laboratories Inc., and paint manufacturer Dutch Boy Philippines to list their shares.

The exchange earlier signed an agreement with the Board of Investments for the strict enforcement of the Omnibus Investment Code of 1987 which requires companies that are registered with the BOI to list at least 10 percent of their shareholdings on the stock exchange within 10 years of securing tax and other incentives.

The PSE is tapping profitable BOI-registered firms to improve the supply side of the market with a more diverse menu of stocks available to the public.

There are at least 1,000 companies registered with the BOI, and if at least 10 percent of them list on the stock exchange, it will increase the depth of the country’s equities market.

Among the likely candidates for listing are information technology-related companies such as those involved in the fast-growing call center business. There are about 60 call centers operating in the Philippines, but only one is listed on the bourse.

Last year, the PSE saw only two companies list, namely International Exchange Bank and PetroEnergy Resources Corp. which was listed by way of introduction.

Only two companies have so far listed on the PSE this year – the Manila Water Co. Inc. and SM Investments Corp.

The PSE has just over 230 listed companies, one of the fewest recorded in Asia.

Chief News Editor: Sol Jose Vanzi

All rights reserved