Inside Asian Gaming

December 2011 | INSIDE ASIAN GAMING 31 In Focus could become a holiday playground for the newly-rich of China and India. It shares land borders with both and has been a trading partner for the two great civilisations for centuries. India and China both avoided getting dragged in to the West’s sanctions gesture and have continued to trade with Myanmar during the diplomatic crisis that followed the 2007 crackdown. An important question from Western casino investors’ perspective is whether a future Myanmar government would pass enabling legislation to make casino gambling an officially-sanctioned industry. Most sophisticated casino investors seem to have one of three reactions to the ‘Myanmar spring’ notion. The first is to point out that if indeed an economic and political thaw has set in, it’s still very early days. No one is likely to invest integrated resort-style amounts of cash into a casino project until it’s clearer where the country is heading, legally- and politically-speaking. The second is that the Western casino brands won’t be able to touch the place— at least officially—until Western sanctions are lifted. The third is to point out the Heath Robinson-like tendencies of Myanmar’s financial services industry. As a Chinese businesswoman born in what was then Burma—and who speaks and reads the language—put it to this correspondent: “You can’t trust the banks. Take cash if you want to do business there.” So under those circumstances, the usual suspects—Chinese business folk less squeamish (and less fearful) about doing business with ostracised countries than are Westerners—are likely to be the first ones in. In terms of general trade, they’ve been there for years. Not only do Chinese entrepreneurs generally have a higher tolerance for risk; they also tend to have better connections to the local power brokers. No cheques please—Myanmar financial services need major reforms beforeWesterners will feel happy doing business there “T he people who would be comfortable with Myanmar as it currently is are predominantlyAsianentrepreneurswhodon’t have to adhere toeconomic sanctions the way American or European investors have to,” says Ben Lee of iGamix Management and Consultancy, based in Macau. Mr Lee recently guided some Asian investors on a trip to the country to investigate gaming investment opportunities in the main cities there. “The people I was working with aren’t looking at the border casinos. They’re looking at hotels in cities like Yangon and Mandalay with a view to purchasing, improving and refurbishing the infrastructure, and putting a gaming operation inside—provided the properties get the necessary permission from the authorities,” he explains. Even Asian investors can’t, however, ignore the sanctions issue. “There are some big hotel brands interested in having a casino-hotel operation in Myanmar. But until sanctions are lifted, they will have to use secondary companies if they are going to invest—as they have done in the past,” suggests Mr Lee. “We’re not talking about new build. There is plenty of existing infrastructure that is underutilised. There are hotels that haven’t done very well because of the [international] sanctions. That was probably because the capital investment was too high to start with, and the sanctions had an impact on roomoccupancy levels. But this year the number of European visitors has actually increased—in particular the number of Germans. A couple of the big German tour organisers have started taking customers there, as have the Japanese.” “The mainland Chinese are already in there in droves. The Chinese are building a huge gas pipeline from the Andaman Sea, south of Yangon, all the way to the border with China. Jade, coal, precious and semi-precious stones, gold and silver, are all being mined in Myanmar, and in return, the Chinese trade themmanufactured goods and construction material. The newly built highway that links Mandalay to the border with southern China is busy with a stream of trucks in both directions. “We also visited one of the major hotels in Mandalay, where one and a half floors were permanently occupied by a Chinese engineering team—they even had their own dining room,” says Mr Lee. It’s precisely at the start of the curve—before the rest of the international community welcomes back the country from political isolation—that the best investment value is likely to be available. And while China tends to get singled out for criticism due to its willingness to deal with some of the world’s less palatable regimes, in reality, where there is money to be made or strategic interests to protect, all countries tend to act unilaterally. In the case of Western countries, that often involves taking an outcast nation’s leadership to task in public, while secretly talking to it and even trading with it behind the scenes. You can see a 21st century version of the ‘Great Game’ (where Britain and Russia wrestled for supremacy in central Asia in the 1800s) being played out in Myanmar now. US Secretary of State Hillary Clinton’s recent visit to Myanmar’s leaders was just the public tip of a very large diplomatic iceberg. “The Americans must be feeling a little bit left out in this current phase of growth,” suggests Ben Lee.“But the US—despite the sanctions on Burma—has in recent times built the largest US embassy in the whole of Southeast Asia in Yangon,” he adds. There are good reasons for the West to cosy up to Myanmar. Not only is the country strategically important—located in the zone that divides Southeast Asia from Southwest Asia—but it is also resource-rich; with abundant natural gas, oil, jade, rubies, marble, granite and timber to name just a few of its goodies. And where there’s a resource boom, there’s very often money to be spent on gambling. China has been merrily exploiting Myanmar’s natural resources for years. But despite this early lead, it isn’t inevitable that China will remain Myanmar’s chief or dominating trading partner, or that it would necessarily dominate any openly permitted casino industry. Myanmar has a track record of periodically asserting its economic and cultural nationalism. After Burma’s independence from Britain in 1948; first ethnic Indians and then ethnic Chinese—many of whom had come there during the colonial era—were squeezed out of the economy and then the country. The Road to Mandalay Asian investors look at casino-hotel opportunities in the cities