Vietnamese reforms gather pace

Casino development projects frozen in various stages of development could gain new momentum as the communist nation considers a trial program to permit local entry to casinos and moves to launch soccer betting

 

Signs that Vietnam may relax its 21-year prohibition on allowing its citizens into the country’s casinos are set to increase interest from international investors whose gaze has recently wandered north toward Japan and South Korea.

 

A string of projects, involving Pinnacle Entertainment Inc., Genting Group, Las Vegas Sands Corp. and other companies that are frozen in various stages of development could gain new momentum, though investors in the gaming sector, as in other industries, have seen their hopes for Vietnam rise and fall repeatedly over the years.

 

The latest positive signal came from Nguyen Sinh Hung, chairman of the National Assembly, and his deputy who each said last week that the Politburo had discussed the issue of local access. “I agreed with allowing Vietnamese to gamble at casinos on a pilot basis, provided there is a legal foundation,” Hung said, according to Tuoi Tre News. “A regulation allowing Vietnamese to gamble at the Van Don Special Economic Zone on a pilot basis should be added to the draft decree.” 

 

This was music to the ears of investors such as Malaysia’s Lim family which controls the Genting Group and Australian-listed Donaco International Ltd., which operates the Lao Cai International casino hotel near the Chinese border. “Any move to allow local Vietnamese to access casino gambling would certainly be beneficial,” Ben Reichel, Donacao company secretary, told AGB. “[Officials] see what has happened in Macau, Singapore and the Philippines and the impact it has had on tourism.”

 

Vietnam, like many Asian governments, bars those without foreign passports from access to its seven casinos. Indeed, a government decree issued earlier this month set a maximum penalty of 200 million dong ($9,480) for gaming halls that allow in Vietnamese without foreign passports. But the bar on gambling by locals is bending around the edges.

 

The National Assembly Standing Committee last week gave its approval to draft regulations governing betting by locals on international soccer matches and horse and dog racing. Legal soccer betting would be new, but pilot racing programs last year brought in 2 billion dong from horses and 1 billion dong from greyhounds, according to Uong Chu Luu, vice chairman of the National Assembly.

 

The reforms are intended to channel gambling revenues flowing to underground operators or casinos in neighboring countries to taxable companies. Phung Quoc Hien, chairman of the assembly's finance and budget committee, referred to the outflow of money to casinos in Cambodia, Singapore and other countries as “foreign currency bleeding”.

 

A survey conducted by the General Department of Crime Prevention and Control found that at least 3,600 Vietnamese travel to Cambodia each day to gamble. NagaWorld in Phnom Penh, Cambodia’s largest casino, counts Vietnam as its biggest source of customers.

 

“Moves to liberalize the Vietnamese market would be negative for Cambodian casinos,” an official with a Cambodian operator told AGB. “We are monitoring the situation closely to see how it develops.”

 

Liberalization is some time off in any case. Even if the draft casino decree is put into effect in January as the National Assembly has discussed and criteria set for which Vietnamese might be allowed casino access, the trial program would still await selection of a developer for the proposed $4 billion integrated resort on Van Don island, to be followed by licensing and construction. Officials from Quang Ninh province east of Hanoi have been soliciting investors for at least four years for the project, but the prospect of access to the local market could nudge a deal forward. 

 

Assembly chairman Hung this week sent the draft casino decree back to the finance committee to get more government input. “The draft decree seems very stringent but it is short of important rules actually, especially those on casino planning and others relating to issuance of business licenses,” he said, according to the Saigon Times.

 

“We have to make clear where casinos should be developed and how many casinos we should have,” he said last week, adding that he supported the idea of mandating that casinos be part of multifaceted “integrated resorts” as Singapore has required. 

 

Indeed, the draft decree sets a daunting investment threshold of $4 billion for casino investors and requires that they have 10 years of experience in the sector. This follows a provision in a decree issued earlier in the month that restricts the opening of new slot halls to five-star hotels; many existing halls are in three- or four-star properties. 

 

Some large operators will welcome the high investment threshold. Asked about proposed projects in Hanoi and Ho Chi Minh City, Sheldon Adelson, chairman and chief executive of Las Vegas Sands, which invested $6 billion in its Marina Bay Sands resort complex in Singapore, told the Vietnam Investment Review last year: “We will pay whatever it takes to build [integrated resorts]. If each building needs $2 billion, we will spend it. If it needs $3 billion, it’s OK. And we are also ready if that goes up to $4 billion.” 

 

He set one key condition in speaking with the Thanh Nien newspaper in 2011: “I will never invest $5 billion-$10 billion in setting up a casino in a place where local people are not given access to that casino.”

 

Ho Tram Project Co., which is backed by US operator Pinnacle Entertainment and US hedge fund group Harbinger Capital Partners, also supports a high investment threshold. The Grand-Ho Tram Strip resort, the first phase of the company’s planned $4.2 billion seafront complex 125 kilometers east of Ho Chi Minh City, opened this month. Colin Pine, general director, told AGB that officials should consider local access “only in large-scale integrated resorts within a clear regulatory framework as international practice has proven that to be the most effective and safest form of casino gaming.” The scale of investment required “helps to ensure that the owners and operators will be professional and responsible to protect their investment”, he said. 

 

In an unstated contrast with Adelson, Pine said integrated resorts are best located away from large urban centers “as there then is a requirement for planning and that removes a large element of impulse gambling”.

 

Local investment bank VinaCapital has been seeking a replacement partner for its planned $4 billion Nam Hoi An integrated resort in the central province of Quang Nam since Genting pulled out last year. VinaCapital has reportedly asked  local officials to extend the timeline for the project's development but still hopes to open a first phase in 2015.

 

Amruta Karambelkarm, a Southeast Asia scholar at Jawaharlal Nehru University in New Delhi, said successful casino reforms in Vietnam would likely nudge other governments in the region to follow suit. Commented Ben Lee, managing partner at IGamiX Management & Consulting in Macau, “It’s a new era of development for the Vietnamese government [and] it’s a win-win scenario for both government and investors.”