Balutan: No such thing as ‘sweetheart’ deal

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“I would like to correct the notion that this is a ‘sweetheart deal’. There is no such thing as ‘sweetheart deal’. The truth is, we cannot afford the interruption in our online lottery operation should the ELA expire without a corresponding substitute. We will risk losing P89 million daily or P2.7 billion monthly based on 2017 revenues.”

This was Philippine Charity Sweepstakes Office (PSCO) General Manager Alexander Balutan’s reactions to unfounded accusations regarding the agency’s extension of the Equipment Lease Agreement (ELA) with Pacific Online Systems Corporation (POSC) for one year starting August 1, 2018.

POSC is the lotto online system for Visayas-Mindanao and some parts of Luzon. The decision to extend POSC’s contract that expired last July 31, 2018 was covered by a Board Resolution No. 0229 Series 2018.

The Board resolved to approve the extension of ELA with POSC for another year, which is sufficient to complete the Nationwide Online Lottery System (NOLS) bidding process under Republic Act No. 9184 until a new lottery system is fully realized, and to ensure unhampered operation of the lotto with the reduced lease fee rate from 7.7% to 6%.

The projected total sales in 2018 of the online lottery is P30.9 billion (or P30,973,902,470 to be exact), which translates to P9.1 billion (or P9,106,327,326.18) allocation for the Charity Fund and P4.5 billion (or P4,553,163,663.09) allocation for the Operating Fund.

“The stoppage of operations would also affect the livelihood and income of more than 8,614 total active Lotto agents and operators nationwide as of June 2018,” added Balutan.

In anticipation of the expiration, PCSO conducted procurement of the NOLS through public bidding last June 2017, with approved budget for the contract amounting to P10.9 billion.

However, the procurement process was impeded and subsequently cancelled when Philippine Gaming Management Corporation (PGMC), provider for Luzon, filed an application for temporary order/writ of preliminary injunction, wherein the Regional Trial Court of Makati City, Branch 143 issued a Writ of Preliminary Injunction last August 10.

The arbitration case reached the International Chamber of Commerce, International Court of Arbitration (ICC-ICA) to resolve the limited issue of “exclusivity” and all matters related to it.

“PGMC is claiming that it has the exclusive rights to supply online lottery equipment under its ELA with PCSO, which it said we allegedly violated when we allowed POSC to operate and provide lottery equipment in Luzon,” explained Balutan.

Subsequently, a Final Award dated February 20, 2018 was issued in ICC-ICA 20105 CYK/PTA finding that PGMC has no exclusive right to supply online lottery terminals and equipment in Luzon, which Arbitral Award was confirmed by the RTC of Makati City, Branch 143.

The PCSO Board was advised by the Government Commission for GOCCs that it is vested by law with the legal capacity and authority to exercise all corporate powers and conduct business of PCSO taking into consideration our legal obligation and duty to always act in the best interest of the agency, with utmost good faith in all our dealings with the property and monies of the PCSO.

“We were also advised to exercise extraordinary diligence in the conduct of business and in dealing with the properties of the PCSO,” Balutan said.

In addition, the Office of the Government Corporate Counsel (OGCC) and the PCSO Legal Department have advised that PCSO immediately undertake the procurement of the NOLS; and presented their options to ensure the continuity of the online lottery operations in light of the impending expiration of ELA for online lottery terminals and equipment.

“Extending the contract of POSC would be for the best interest of and most advantageous to the government. I was also authorized by the Board to sign the agreements/contracts and documents necessary to implement above extension,” Balutan said.


Meanwhile, PCSO has resumed its applications for prospective bidders of Small Town Lottery (STL) in the provinces of Masbate and Antique.

Applications for both provinces will be opened until August 23, 2018.

STL is a regular game by PCSO authorized by the national government through Section 1 of Republic Act 1169; while AACs are corporations or cooperatives duly registered with the Securities and Exchange Commission (SEC) or with the Cooperative Development Authority (CDA), respectively that applied, been duly qualified and expressly authorized by the PCSO to conduct STL in a particular area.

“STL is a jueteng killer. Lahat ng illegal numbers game andyan na lahat—jueteng, masiao, pares, swertres, atbp. STL na ang kanilang generic name,” said Balutan.

For the first semester of 2018, STL has registered a whopping P12.3 billion revenues, up by 146.85-percent or P7.4-billion increase compared to the same period last year.

“Figures don’t lie. This is just a testament of PCSO’s success in implementing STL across the country and the government’s fight against all forms of illegal numbers games,” said Balutan.

STL has also hit a record high employment with 79 Authorized Agent Corporations (AAC) operating the STL nationwide.

As of June 2018, the expanded STL has provided 311,436 jobs, a 40-percent increase compared with the same period last year, which is only 222,896 employees.

This workforce comprises those who could not pass the nitty-gritties of job fairs because of their lack of education, old age, or they are physically disabled.

“These cobradores are earning more than P7,000 up to 8,000 a month, which is good enough to feed their families. By the end of the year, STL workforce is projected to double by 600,000. We saved them from vices (e.g. drugs) and from being exploited by criminals. At least we are giving our countrymen the opportunity to have a clean and decent job, and it’s not coming from illegal,” Balutan said.

The lottery game was conceptualized and implemented during the time of former President Corazon Aquino to eradicate the illegal numbers game jueteng being controlled by gambling lords who do not remit taxes to the government.

The PCSO Charter, or RA 1169, particularly on revenue allocation, provides that the revenue of the PCSO shall be allocated to 55 percent for prize fund (payment of prizes), 30 percent for charity fund (various charity programs and service) and 15 percent as operating fund (maintenance and operating expenses).



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