Inside Asian Gaming

February 2014 | INSIDE ASIAN GAMING 19 S outh Korea’s government, led by President Park Geun-hye, has not been in office long, but has already had time to do what appears to be an abrupt about-face on the requirements for new casinos. And with a market geared towards Chinese tourists, proximity to areas with little penetration by Macau, and talk of liberalization, the possibility of eased restrictions is generating plenty of interest. The gaming sector is geared towards tourists, and the fastest- growing segment of the tourist market is Chinese, which has quickly drawn level with the number of Japanese visitors and is poised to overtake it. Of Asia’s major gaming destinations, South Korea receives by far the largest number of Japanese visitors and is third- most popular for Chinese, behind Hong Kong and Macau. With the government looking to encourage both tourism and foreign investment, it announced a plan in July 2013 to invest a total of US$72 billion in the development of eight “Free Economic Zones” by 2022, with a long-term goal of attracting as much as $20 billion in FDI. Destination-scale casinos are viewed as an important plank, and to attract both foreign and domestic developers, the government is prepared to provide a friendly tax and regulatory environment sweetened with other incentives. One of those eight zones—Yeongjongdo, near Incheon—has been set aside for casino development. It is considered a key to this effort because of its proximity to China. Official plans call for the licensing of up to five resort-scale casinos over the next decade or so, though to date the government has approved only one: a joint venture between Paradise Group, one of the two operators that dominate the country’s foreigners-only market, and Japanese pachinko giant Sega Sammy Holdings. (The country’s other major operator is Grand Korea Leisure, a semi-private entity with several properties under the Seven Luck name.) Paradise and Sega Sammy plan to open a US$730 million integrated resort at Incheon that will dwarf all of the country’s current casinos in terms of size and attractions. It is slated to open in phases beginning in 2016 with two hotels, a theme park, a convention center and a casino featuring 450 table games at full build-out. Elsewhere, progress has been mixed. A highly ambitious development—all of US$290 billion worth—in Yeongjongdo, called EIGHTCITY, was scrapped last year due to lack of funds by one of the principal developers, although there is talk of reviving it on a more realistic scale, and the government rejected a joint-venture resort proposal by Caesars Entertainment and Indonesia’s Lippo Group and a proposal by Kazuo Okada’s Universal Entertainment. Caesars’ debt problems were widely seen as the reason for their rejection, while Universal’s legal problems in the Philippines and elsewhere may have contributed to its lack of success. However, as the new year unfolded, the government seems to have realized that its requirements were too onerous. January whispers of easing standards looked to have been confirmed in a statement by President Park in early February affirming her belief in tourism as a key to economic growth, and reports now say the government will ease requirements on foreign investors interested in developing resorts. The news appeared to have been anticipated. In December, it was reported that Caesars and Lippo had made a fresh pitch for a US$2 billion resort covering 330,000 square meters in Yeongjongdo. In January, it was learned that Universal had bought property in Yeongjongdo. A third potential player, PNC Financial Services, a US COVER STORY SOUTH KOREA Change of Heart The government, led by President Park Geun-hye, appears to have changed its mind about eligibility for resort casino licenses and plans to ease entry requirements. The US$290 billion EIGHTCITY project proved a bridge too far.