Vietnam gambling bill nears, challenges lurk

Vietnam’s Ministry of Finance will host a conference in late October seeking input on its draft bill to legislate gambling in the hopes of boosting foreign investment and tourism and recouping revenue being spent by locals in neighbouring countries.

The conference will seek input from various ministries and the general public. After this, a revised decree will be ready for the Prime Minister’s consideration and clearance from the National Assembly, which meets in late November. The Prime Minister is expected to sign the final version before the end of this year.

However, the draft as it stands may not attract the major foreign casino investment the government has been seeking.

The Ministry of Finance released a draft decree of the bill on August 14th, which provides at least in part for access for locals -- a provision keenly hoped for by foreign investors. However, on closer reading, the legislation may prove unenforceable and may deter participation.

Under the draft decree, Vietnamese citizens who are 21 years old or above will be able to enter casinos in the country.

Article 10 of the draft decree stipulates Vietnamese citizens must have a minimum monthly salary of 15 million Vietnam dong ($700), and show “financial competence” or some valuable assets (saving books, etc.). Foreign passport holders and overseas Vietnamese can enter without any restrictions.

Some of the stipulations in Article 10 of the draft decree have raised eyebrows with the vague use of words such as “financial competence,” a requirement which will surely be difficult to enforce.

No government agency at this point has the jurisdiction over the assessment of the players’ “financial competence” and capabilities. In reality, it’s impractical to assess the players’ financial capacity before allowing them to enter a casino.

To deter local players with modest financial capability and to mitigate the negative impacts of gambling addiction, Vietnam plans to impose an entrance fee, such as that used in Singapore.

However, that amount has not been set yet. The draft decree suggests the Prime Minister will determine the amount and conditions for Vietnamese to gamble.

There are some crazy discussions out there in the general public about the need to impose hefty entrance fees of $500 for each daily visit, an amount that investors will certainly laugh at and run away from the project.  

In addition to proofs of “financial competence”, local Vietnamese will also have to have no criminal record or tax debts.

The draft decree, moreover, did not address a number of issues of particular interest to investors and the public. Nobody knows if the government will allow local Vietnamese to enter the existing Grand Ho Tram casino and the two planned integrated resorts in Van Don and Phu Quoc islands, not counting the six small casinos spread around the country and a few dozen gaming parlors in five-star hotels.  

At this time, only Van Don has received some indications that locals are allowed to enter.

There are also other provisions in the draft that foreign investors may find hard to swallow.

The integrated resort must be a $4 billion complex consisting of tourism, shopping, convention center, entertainment, etc. and under Article 24 of the draft law investors will have to disburse at least $2 billion before a gaming license is issued.

The integrated resorts as contemplated by the Vietnamese government will be located in special and isolated economic zones. At this point two areas have been identified and approved, one in the Van Don island in Ha Long Bay, North Vietnam and the other on Phu Quoc Island in Kien Giang province, South Vietnam.

The requirement to commit at least 50 percent of the $4 billion investment up front was not a requirement for the Grand Ho Tram in Ba Ria-Vung Tau, an integrated resort about 2 hours from Ho Chi Minh City. The Grand Ho Tram gaming license was issued in April 2013 and the casino was opened in July the same year after an initial investment of about $500 million. If they have to stick to the terms of the new 2014 decree, investors in new integrated resorts will surely consider the requirement an unfair practice.

There are also major question marks over taxes, which may be as high as 60 percent -- a rate which will kill all investors’ desire to come in. The current gaming and special consumption tax rates are around twenty five to thirty percent, in addition to corporate income taxes. The Prime Minister and his advisors will have to strike a balance between the need to maintain various taxes to help the state budget, investors’ interests and the need to control local admission and gambling addiction.

Some other restrictive terms in the draft decree involve the limited number of tables and gaming machines. For any investment of $20 million, the investors will be allowed to operate 1 gaming table and 10 electronic gaming machines. With a registered capital of US$4 billion, the operators will have a chance to operate 2000 machines and 200 gaming tables.

Marina Bay Sands in Singapore, for about the same investment, features about 2,500 gaming machines and 600 tables.

The draft also has not touched on issues of gross gaming tax and the length, conditions and exclusivity of the gaming license. There is no discussion about the need to establish a national gaming control board or commission to help steer the government in the right direction and away from potential problems with investors.

However, I’m optimistic the government is committed to ensuring the gaming industry is on a solid footing and will work to implement positive changes before a final version is sealed.