Inside Asian Gaming

34 A Yen for Gaming Japan leads the wave of emerging Asian nations considering casino expansion this measured approach appears to be the same strategy Japan is taking in regards to developing its casino industry. The federal government is currently crafting a casino enabling and regulation policy, a procedure that has been ongoing since the govern- ment’s Special Committee on Tourism Casino Entertainment Study Group published its “Basic Policy for the Introduction of Casino Entertainment into Japan” one year ago. This slow tack toward casino gaming is markedly different from the action cur- rently taking place in other Asian nations. In parts awed and concerned about the run- away economic success of Macau’s grow- ing casino empire, Singapore, Vietnam and New Guinea have already pushed through casino enabling legislation. Asian countries with established casino industries such as Cambodia, Myanmar, South Korea and The Philippines are in the process of expanding those businesses. Nations with vibrant tour- ism economies, such as Thailand and Taiwan, are reported to be considering casino legal- ization.These countries are likely only the tip of what will be a massive wave of gaming ex- pansion throughout Asia. “Asia is without a doubt the most prom- ising market for the expansion of the global casino gaming industry,” Jonathan Galaviz, a partner in Las Vegas-based casino consulting firm Globalysis, recently told USA Today. In- deed,gaming revenueswithinAsia couldgrow by as much as 14 percent annually over the next three years, estimates New York-based consulting firm PriceWaterhouseCoopers. And at this point, it appears Japan will definitely be one of the Asian nations head- ed down the casino development path. It has long been rumored that the ruling Lib- eral Democratic Party and opposing politi- cal groups have already agreed to introduce a casino legalization measure before the nation’s Diet in the near future. Toru Mihara, an advisor to the Special Committee on Tour- ism Casino Entertainment Study Group, has hinted to local newspapers that lawmakers are looking to establish a set number of large integrated casino resorts, much like those currently found in Las Vegas and proposed for Singapore. But when this casino enabling legislation will actually be introduced is anyone’s guess. Hakubun Shimomura, lower house member and stalwart in the ruling Liberal Democratic Party, has said that there is the potential to have the casino legislation passed before the end of the year, and the first casinos up and operating by the end of 2008. Aaron Fischer, an analyst with CLSA, an investment banking group that concentrates on Asia/Pacific mar- kets, sees this timetable as much too aggres- sive, and believes a much slower pace will prevail.“[The] bill seeking the legalization of casinos could be proposed for approval in the next 12-18 months,” Fischer wrote in an article appearing in theMarch issue of Inside Asian Gaming.“Using Singapore andMacau as a guide and factoring the pace of change in Japan, casinos would not likely be operational until post 2010.” A go-slow approach to casino legisla- tion is likely because all the parties involved are aware of how much is at stake. Japan is already home to a thriving Pachinko and Pachislot trade. It is estimated that there are currently 5.5 million of these slot-like devices in operation throughout the nation, generat- ing billion of yen in yearly revenue.With such nascent machine demand, the Japan Casino Academy estimates if six casinos were to be established in and around Tokyo, the yearly revenue to the government would surpass ¥120 billion (US$960 million) under the na- tion’s current tax structure. Policy matters Once established, what will the Japan casino industry look like? Those seeking answers need to start with the “Basic Policy for the In- troduction of Casino Entertainment into Ja- pan” report, which outlines what the nation hopes to accomplish with casino gaming and how it plans on getting there. According to the report, casino gaming should help Japan in the following ways: Boost tourism — Japan traditionally has three times as many outbound as inbound tourists, a trend it would like to reverse. It is looking to make up the shortfall by attract- ing more visitors from China, India and other emerging Asian nations. A vibrant casino market will help capture more Asian tourism. Provide government revenue — Pro- ceeds from casino gaming can be used to fund education, welfare, regional develop- ment and a host of other needed govern- ment services. Enhance entertainment industry — To better compete with neighboring nations for the booming Asian tourist trade, the Japa- nese government realizes it needs to up- grade and diversify its current entertainment offering. According to the report,“casino en- tertainment can provide visitors high quality services such as shows, restaurants and ac- commodation at low prices. The provision of low-cost services at a casino entertainment complex is of great appeal for visitors, and this is why casinos are key facilities, extreme- ly useful in boosting the entertainment in- dustry as a whole.” Provide economic stimulus—The eco- nomic “ripple effect” generated by casino resorts can help lift otherwise depressed city or regions. Casino gaming can also provide much-needed jobs to these areas. To accomplish these goals, the report suggests setting up the following casino framework: • Gaming resorts should be multifunction- al, and offer a host of goods and services in addition to casino gaming. • Development of these gaming resorts should be phased to judge impact. • Ini- tially, these resorts should be restricted to just two or three areas within Japan, based on a number of factors including economic need, ability to attract foreign tourism, etc. However, multiple licenses can be awarded in each of these chosen destinations. • The federal government will award the casino licenses and will appoint a minis- ter to establish and oversee a framework of rules and regulations regarding all as- pects of casino operation. • Local government authorities or asso- ciations will be awarded the licenses to operate casinos. They, in turn, will select the developers/operators of the gaming resorts through a competitive bidding process. How these deals are structured in terms of revenue and expenses will be determined between local groups and ca- sino operators. • Casino operators will be expected to pay the government a graduated levy based on gross gaming revenue. • Levymoney will be dedicated to promot- ing domestic and international tourism in addition to regional and national services as determined by local and federal legis- latures. • Local governments have the right to en- act bylaws aimed at curtailing local casino demand. These bylaws can include limits to business hours, entrance fees, mini- mum and maximum bets, etc. • Casino advertising and promotions will be subject to regulation. • Measures must be put in place to address problem gam- ing, diminish wagering’s impact on the young and offer a safe and sound gaming environment. Location lobbying CLSA’s Fischer sees the rules and regulations proffered by the Special Committee on Tour- ism Casino Entertainment Study Group as straightforward and fairly logical. “I guess what is slightly strange is that the local gov- ernment is the official operator of the casino, but in practice the private contractor will as- sume total responsibility aside from transfer- ring the taxes to the government,” he stated. “Even so, it might be difficult for some local governments to even manage the adminis- trative functions. It seems more likely that a new central government department would need to be established to manage the vari- ous casino operations across the country.” Another item that will eventually need to be clarified is where exactly the casinos will be located. Fischer believes that at least one of the initial two areas designated for casino development will be the island of Okinawa. “Okinawa would appeal to Japanese and the development would provide an added eco- nomic boost to the area, which continues to be negatively affected by the downsizing of the US armed forces. As an island off the mainland, Okinawa represents a good test- ing ground for casinos.” According to Shimomura, at least 20 oth- er locales have already expressed interest in being the host site for a multiuse casino en- tertainment complex. Reportedly among the communities seeking the honor: Kyushu and Hokkaido. Tokyo would also appear to be another natural spot for casino development. How- ever, according to Fischer, it appears the city is more interested in playing host to the 2016 Olympic Games. But he did not rule out that a region within Tokyo, such as Yokohama or Obaida, may lobby for casino development designation. At this point, all is speculation, and will continue to be so until gaming legislation is formally introduced into the Diet. Until then, all regions of Japan have an equal chance of driving away with the casino prize. By Paul Doocey, Editor of International Gam- ing andWagering Business (IGWB) magazine. Reprinted with permission from IGWB . magine how different the US automo- tive industry might look today if, during the first gas crisis of the mid-1970s, Japan car makers had decided to risk it all and flood the market with their then-current prod- uct—cars designed with Japanese, instead of American,concerns inmind.Chances are that when the gas crisis ended and Americans went back to old buying habits, the go-for- broke strategy would have severely crippled Japan’s automotive giants, and maybe Ford or General Motors would still be the number one maker of cars today in America instead of Toyota. Fortunately for Toyota, instead of push- ing all in 30 years ago, the company took a long-term approach to the automotive in- dustry and international expansion. Sure, it immediately introduced some cars to take advantage of market trends, but it also in- vested billions of yen in research, develop- ment and technology, steadily improving its products and gradually taking over the US and world markets. In a classic case of history repeating itself, 35 I