Inside Asian Gaming

INSIDE ASIAN GAMING | November 2009 Cover Story 8 monopoly has been granted within a 200 kilometre radius of the capital Phnom Penh, and a sole concession has been reserved for a project near Siem Reap. But in border towns such as Bavet, serving the Vietnam market, casino licences appear to have been issued on a ‘who pays wins’ basis. A similar free-for-all has been seen in slot club licensing, with club operators being allowed on occasion to set up what in effect are quasi-casinos next door to the full service concession. In Vietnam, MGM MIRAGE may be bringing ‘brand equity’ to the Ho Tram project, but it doesn’t appear to be bringing hard cash. Money talks and unless MGM MIRAGE can use its name as leverage to help put a funding package together, it won’t have much clout with the Vietnamese government, nor much ability to protect its brand identity from creeping ‘localisation’ in terms of things like quality of customer service. The message from Asia then seems clear. Feel free to use the term ‘market liberalisation’ in relation to gaming. Feel free to talk about it in terms of an historical trend. Don’t assume, though, that Las Vegas-style gaming will spread around the region on a franchise basis in the manner of McDonald’s. There are too many exceptions to too many rules for that to happen any time soon. toward greater market efficiency via privatisation or part privatisation. Grand Korea Leisure, an operator of two casinos in the capital Seoul and one in Busan under the Seven Luck brand, plans to sell off some of its equity soon on the Korean stock exchange. The government is expected, however, to retain a 51% holding. Without the opportunity for foreign investors to take majorityownershipandwithout theopening up of all the casinos to domestic players, the appetite of outside investors for a move into the Korean market is probably limited. In the Philippines, although market access is open from the players’ perspective, market transparency is arguably limited. The Philippine Amusement and Gaming Corporation (PAGCOR) is an operator-cum- regulator tasked with remitting a certain amount of cash every year to central government, but not subject to the market disciplines imposed by private shareholders seeking efficient capital management. That, in itself, is arguably a recipe for trouble. Added to that, public policy on gaming tends to suffer from a lack of continuity, as the top people in PAGCOR are political appointees of the country’s president, and the faces change every time there’s a change of tenant at the presidential palace. In Cambodia, there’s a twin track approach to market liberalisation. A casino an entry fee for locals. That may happen, but let’s not forget that Singapore has already effectively loaded the dice of its casino market by imposing strict limits on the amount of floor space allocated to gaming in the resorts (five percent). An earlier plan to restrict the amount of revenue that could be drawn from gambling to 50% of total revenue was dropped as impractical. Some analysts initially questioned the wisdom of LVS and Genting spending US$10 billion between them in a market with those kinds of restrictions. While open market access has been a huge factor in the decision of foreign investors to pour billions of dollars into the Macau market, it is not the only factor to be considered. The level of political risk in a market is also important. In that sense, Singapore probably scores better than any other Asian market for its transparency and low levels of risk. Getting into Singapore is tough, but once you’re in, Singapore gives every indication it will play fair with its investment partners. Here’s what Wong Kan Seng, Singapore’s Minister of Home Affairs, said when introducing Singapore’s casino regulatory law to parliament in 2006: “Through this Casino Control Bill, the Government is committed to a number of measures to provide greater certainty and support to investors of our integrated resorts. This is because the integrated resorts require heavy investments. We want them to succeed after the investors have committed to spend billions of dollars on the projects. For instance, the casino tax rates will remain unchanged for 15 years. The two casino operators will also enjoy an exclusivity period of 10 years. During this period, no new casinos will be allowed. The lease of the land on which the integrated resorts will be sited will be for 60 years and they will be allowed to operate a casino for 30 years, subject to the suitability of the casino operators to run them.” Contrast this with the macro and micro economic tinkering to the Macau market emanating from across the border in Mainland China. National interest In South Korea, Asia’s second biggest casino market by betting volume, gaming operators were originally incorporated as state owned enterprises, with all the potential for bureaucracy and inefficiency that such a system usually entails. In recent years, however, there has been a movement South Korea’s Seven Luck casinos are to be part-privatised