Inside Asian Gaming

MAY 2015 inside asian gaming 13 Cover Story Even though Cambodia doesn’t border China, geography favors its gaming industry. The kingdom is wedged between Vietnam and Thailand, countries with a combined population approaching 200 million with no legal casino gambling open to their citizens unless, in Vietnam, they also hold foreign passports. Cambodia has similar rules, though enforcement is a far cry from Singapore or Vietnam, where everyone must present a valid passport or national ID card for entry. Relaxed regulation is part of Cambodia’s gaming environment. Coming out of the dark times of the Khmer Rouge regime that massacred an estimated two million people and devastated national institutions, followed by Vietnamese occupation, the new government institutions established in the 1990s had more important issues than establishing a comprehensive casino regulatory framework. Rules have arisen largely ad hoc, although Cambodian authorities say national casino legislation could be drafted this year. Gaming taxes are assessed monthly per machine and table with no revenue component. For busy casinos, that means effective tax rates in the single digits. For opposition politicians, it means casinos are an untapped potential revenue source. Casinos have also helped make tourism a plank in Cambodia’s economic revival, providing both attractions and service jobs where experience rather than academic credentials matter most for advancement. Cambodia’s GDP grew 7% last year, the second-best performance in Asia, behind China, and since 2000 the kingdom has been the sixth fastest growing economy in the world, according to Hong Kong’s Political and Economic Risk Consultancy. “Business is booming,” Global Security Services Managing Director John Muller, working in Cambodia since the early 1990s, says. Tensions between Vietnam and China and internal political conflict in Thailand have spurred greater foreign investment interest in Cambodia, he notes, abetted by government investment in infrastructure, much of it financed by China, a strong ally of Prime Minister Hun Sen, who has held power for 30 years. Hun Sen’s Cambodian People’s Party had its parliamentary majority reduced in the 2013 election. Post-election political and labor strife brought barbed wire to the streets of Phnom Penh, though pay raises and moves toward reform and combating corruption have calmed the situation. “Cambodia is a country that still has huge political risk,” Spectrum Asia CEO Paul Bromberg says. “Hun Sen and his party feel they’ve done so much for the country, they can’t understand why many people aren’t happy.” PERC assesses business risk in Cambodia for this year slightly higher than for 2014, despite the easing of border tensions with Thailand and increased internal stability. Even if the opposition wins the 2018 election, economic policies are likely to remain largely unchanged, according to multiple observers. PERC attributes increased business risk to a weak educational system, challenged to produce a sufficiently skilled labor force to meet business demands. PERC also sees risks to tourism from internal factors in Vietnam, Thailand and China. Nevertheless, Cambodia’s GDP looks set to grow at 7.5% this year, likely the fastest rate in Asia. It’s a heady brew that continues to nourish the gaming industry. NagaCorp has come a long way from the barge in the Bassac River, just downstream from its confluence with the Sap River and mighty Mekong, where it began gaming operations 20 years ago this month.