Inside Asian Gaming

Dec 2007 | INSIDE ASIAN GAMING Regional Roundup 35 in five Vegas-themed casinos (125 tables and 500 slots), 10 restaurants, and a 200-acre country club. Project capex on phase one is estimated at US$500million,and the scheme could be completed by 2017. Although the track record of the an- nounced partners is not in doubt, commen- tators have raised some questions about the ability of the Vietnamese government to de- liver such an international standard resort, given the levels of administrative corruption reportedly prevailing in the country. Under threat South Korea has a perpetual sword of Damocles hanging over its casino indus- try, given that by law most of its product (16 out of 17 casinos) is restricted to for- eign nationals—overwhelmingly Japanese visitors. If Japan ever gets its casino liber- alisation act together, then Korea’s revenues could be badly hit, unless the government allows more venues to open to its own citi- zens. Only one resort—Kangwon Land—is currently allowed to do so. This integrated casino resort started operations in October 2003 and currently features 132 tables and 960 slot machines. It plans to expand its ca- pacity to 200 tables and 1,140 by the end of the first quarter of 2008. The resort has hotels, an amusement park and golf course as additional revenue streams to support the casino business. Deutsche Bank gaming analyst Younroe Kim said recently that Kang- won Land should capture a 20% plus market share in Korea within the next two to three years. DB expects the company to maintain its monopoly position as gaming supplier to Korean residents until at least 2015. Of the casinos open to foreigners, Grand Korea Leisure, a subsidiary of the Korea Tour- ism Organization, opened three new casinos under the Seven Luck brand in the first half of 2006—two in Seoul and one in Pusan. David Green says: “Korea hasn’t gone forwards in my view. It’s pretty stagnant. It’s in a fairly politically sensitive area of the world and it’s not really on the main route for people in South Asia and East Asia. Japanese visitors will probably keep going until some- thing else comes along.” Japanese junkets That “something else” mentioned by Mr Green may already be here, despite the fail- ure of the Japanese government to grasp the nettle of casino liberalisation.An increas- ing number of Japanese junkets are report- edly coming to Macau, attracted by the su- perior quality of its product when compared to the Korean offer. There are also direct business links between the Japanese leisure industry and one of the Macau operators, as the Japanese gaming machine maker Aruze Corp—manufacturer of Japan’s highly pop- ular pachinko machines—is a shareholder in Wynn Resorts. Aruze founder Kazuo Okada has been on the Wynn Resorts board as vice chairman since 2002. Aruze has also been working with Wynn to lobby for casino le- galisation within Japan. At present in Japan , the only truly legal gaming is betting on sports such as horse racing and cycling and playing the national lottery, which taken together generates US$60 billion in tax revenues per year ac- cording to Deutsche Bank. This number is excluding revenues from Pachinko, the pin- ball-type game played by an estimated 17 million Japanese, which in regulatory terms falls in to a grey area but which neverthe- less generated total estimated revenues of US$248 billion in 2005. Not just yet Over the medium- to long- term, Japan is expected to lift its banongambling toboost its domestic tax take and perhaps help the tour- ism industry. The whole scheme has fallen by the wayside recently though, thanks to a com- bination of events. Firstly, the government bill expected to legalise casinos was delayed until 2007 because of changes in the parliamen- tary timetable.Then political crisis gripped the country’s governing Liberal Democratic Party, with prime ministers arriving and departing in quick succession, in a reminder of the revolv- ing door politics and ‘grey man’ leadership that have marked much of Japan’s post-war government. It has been a sharp contrast to the charismatic and dynamic leadership of the elegantly coiffured Junichiro Koizumi who led the country for a record five-and-a-half years. It has left gaming industry analysts wonder- ing whom among Mr Koizumi’s successors will have the political authority to shake the coun- try again from its administrative torpor andde- liver legal gaming as part of a wider economic reformpackage. Deutsche Bank says operators consider Tokyo as the prime location for the first casino, specifically the Odaiba waterfront district. Other potential sites include Osaka (near Universal Studios) and the resort areas of Hokkaido and Okinawa. Stop go In Taiwan ,lotteries are currently the only legal form of gaming. Despite the fact that the government has been making noises for several years about liberalisation, analysts familiar with the issues say they will believe when they actually see it happen. Taiwan’s famously robust parliamentary politics frequently involve fist fights among MPs,who are also noted for their opacity and passivity when it comes to actually passing legislation. President Chen Shui-bian has been hobbled by controversy over official policy toward China and allegations of corruption against his family.His vice president,Annette Lu, is thought to be pro-gaming—though as the old political joke goes, when it comes to elections, Ms Lu is probably on the side of Annette Lu. Although it’s possible the po- litical log jam over gaming could be broken after the presidential election scheduled for March next year, investors shouldn’t hold their breath. The best medium-term bet is the outlying Penghu Islands, where the lo- cals have voted in favour of casinos as a way of boosting the local economy. Unanswered questions In the Philippines , the Philippine Amuse- ment and Gaming Corporation (PAGCOR),the country’s monopoly casino operator-cum- regulator,recently put out a tender document for a casino resort development at Manila Bay, but David Green says there are still a number of question marks over terms and conditions that need clarification before potential inves- tors can crunch the numbers and consider a workable business model. As far as Thailand is concerned, David Green thinks that despite the recent prom- ise of parliamentary elections by the military leadership that seized power in a bloodless coup in September 2006, the casino liberali- sation issue is on hold indefinitely. Ruled out He says: “Thailand is certainly not going to happen now. I think with Thaksin going, it has put the whole programme further back. He was susceptible to suggestions about it. Before Thaksin was removed, there was sup- posed to be some sort of referendum on ca- sinos,which of course didn’t happen once he was evicted. I don’t see Thailand happening any time soon if at all.” Kangwon Land