THW : Hong Kong Racing Provides Lessons



by Jenny Ortuoste for BusinessWorld

Wednesday, 20 June 2007

Suggested heading: Hong Kong racing provides lessons

An AFP feature on the Hong Kong Jockey Club (HKJC) was printed last week in this paper, and it’s interesting to note that the HKJC has almost the same problems that we do here. Number one is illegal bookmaking, which “cuts their annual take by up to HK$25 billion [P149.3 billion]”.

According to Philracom’s current chairman, Gen. Florencio Fianza (formerly with the Philippine National Police), local bookie operations are estimated to gross as much as P22 billion annually. Since they do not pay taxes or incur the operational expenses and effort of conducting races, the illegal activities of bookies are extremely lucrative. The most conservative estimate of the bookie take places it as just the same as legal racing’s annual sales, or just over P9 billion.

The attraction of bookies lies in their offering a premium of 10-15%, which is lower than the government-imposed tax on winnings and prize deduction of 35%. (However, there is a ceiling on dividends that bookies will pay out.)

Also attractive to patrons is the convenience they offer; they will pick up your bet and deliver your winnings to your home. Despite an intense anti-bookie campaign launched by the industry and national law-enforcement agencies in April 2006, there are still many bookies especially in Manila, more than the number of legal OTBs; some operate in areas where there are no OTBs.

One of HKJC’s tactics to combat this threat was to have the government tax total HKJC profits rather than total money bet on horses (which is the way it is done here). This made betting cheaper for punters as they do not have to carry HKJC’s 17.5% takeout, thus they would be more amenable to patronizing legitimate betting stations.

Former congressman (now Mandaluyong mayor) Benhur Abalos last year filed a bill that seeks reforms in the taxation scheme for racing, but it is still stuck in the legislature. Many industry insiders believe that lowering taxes and increasing the racing clubs’ take (in the case of Manila Jockey Club, only 8.5%) will have an effect of actually boosting sales and making racing more popular as a leisure activity. Payoffs would be larger, and clubs would have more resources for infrastructure, equipment, and advertising and marketing.

Other lessons that can be learned from HKJC? They are contemplating “revolutionary reform” as they respond to other threats from football, golf, casinos, and lotteries.

Locally, substitute products also abound in the form of cockfighting, casinos, lotto, and other gaming activities. Surely racing’s bright boys can come up with their own winning strategies. For starters, an intensive marketing and promotional campaign (within the limits imposed by advertising codes) would bring the sport to the attention of the public, most of whom have never even heard of horseracing.

Next, upgrade essential track equipment currently being used such photo-finish cameras, starting gates, and the like. This is a must and is non-negotiable.

Along the way, “think global”, as HKJC is doing. Membership in an international racing organization such as the France-based IFHA (International Federation of Horseracing Authorities), which promotes “good regulation and best practices”, would help legitimize our brand of racing in the international arena and expose us to the latest methods for improvement.

Handicapping should also be more along international lines. Our system is unique and works for us, but it is flawed and can be improved.

Philippine racing still has a long way to go approach even a fraction of what Hong Kong racing is now. But we will get there. Eventually. ***

Photo: Mitsubishi Electric’s Diamond Vision installation at HKJC’s Sha Tin Racecourse won a Guiness record as the world’s longest TV. The 8 meter by 70.4 meter screen can display up to 40 individual images and three angles of the race at the same time. (2003)

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