Inside Asian Gaming

INSIDE ASIAN GAMING | November 2010 12 looks on the low side. An alternative proposal—to part-privatise Pagcor—was recently put to its senior management, according to a person familiar with the process that IAG has spoken to. The idea is to introduce more market discipline to Pagcor, while still providing a revenue stream for the government in the form of tax levied on gaming and from licensing fees. Under the proposal, up to 49% of Pagcor would be floated on the Manila stock exchange. There is a precedent in Asia for doing something similar. As we report in our story ‘Wakey Wakey’ in this edition, Grand Korea Leisure, a state-owned casino operator in South Korea under the Seven Luck brand, floated 30% of its stock on the Seoul bourse last November as part of a drive to make the enterprise more commercially minded. A similar approach applied to Pagcor could go a considerable way to providing reassurance for foreign investors that their money will be safe. Cover Story Strip Development Is Ho Tram finally on track? VIETNAM V ietnam is another Asian gaming jurisdiction that already has casinos. But none of the five existing properties are open to Vietnam’s 85.8 million nationals. That’s a pity from the industry’s point of view to put it mildly, given that Vietnam’s GDP grew by 6.4% in the second quarter of 2010, according to Vietnam’s General Statistics Office. Probably the most famous casino in Vietnam is one that hasn’t yet been built. The Ho Tram project was conceived as a US$4.2 billion bells and whistles resort in the heady days before the global financial crash of late 2008. At that time, it seemed any casino licence granted anywhere in Asia was a licence to print money. Even during that bull run, however, a number of analysts questioned the viability of such a large capital investment in a market without input from local players. The consortium behind the project—Asian Coast Development Ltd (ACDL)—remained resolutely upbeat. Its success in bringing in MGM MIRAGE (now MGM Resorts International) as the brand partner for the resort was taken by some as a sign of the impending opening of the Vietnam market to local players, which in turn would drive further investment confidence. It hasn’t happened so far. Then came the global financial crash, and even an established Asian operator such as Las Vegas Sands Corp in Macau found it difficult to raise project debt for its Cotai 5 and 6 project. Funding A lot has reportedly been going on behind the scenes to organise funding for Ho Tram. But the only notable developments seen by outsiders in the last two years have been the clearing of vegetation in preparation for construction, the replacement in April this year of Mike Aymong as Chairman of ACDL, with former MGM MIRAGE President of Global Gaming Lloyd Nathan brought in as CEO, and the announcement that the project would be divided into six phases, consisting of five distinct resorts¬—two with casinos. The financial engine room for the scheme will be the first of these two casinos. The 50-year licence granted by the Vietnamese government allows for a resort-wide total of up to 180 gaming tables and 2,000 electronic games. Earlier this year, sources told IAG that Vietnamese banks were willing to underwrite up to US$250million on the first phase funding, provided a similar contribution was made by ACDL. In September, there were suggestions that ACDL had come up with US$150 million, taking the first phase total funding to US$400 million, and that construction would start early in 2011. Those rumours appeared to be confirmed in late October when the English-language media in Vietnam ran a story saying local government officials had visited the site with representatives of Ho Tram Project Company Limited, and that construction work had restarted on 12th October. Confirmation The report stated: “Accordingly, from October 12, Ho Tram Strip project—Phase 1 had officially restarted including items: one 19-storey five-star hotel (including 541 rooms), restaurant area, low-voltage station areas, wastewater treatment area, golf club.” It continues: “The investment capital of Phase 1 is US$165 million as estimated; It is expected to complete and put into business in October 2012. Then, the investor will implement the next phases. “Ho Tram Strip is the i n t e g r a t e d The Ho Tram Strip—not quite as imagined in the original drawings?