How Vietnam Win Foreign Investment

Feb 10, 2017

How Vietnam Is Changing Its Gambling Rules To Win Foreign Investment

A year ago, the Asian gaming landscape appeared bleak. Macau was in the dumps, even after $5 billion in new resorts from Melco Crown and Galaxy Entertainment debuted. South Korea had more licenses available than qualified bidders, and in Australia, Hong Kong investor Tony Fung gave back a casino license for a mega-resort near the Great Barrier Reef. There were so few attractive opportunities in the region that Asian companies were looking at Europe as an alternative, bidding for licenses on Cyprus, a divided island at the confluence of disputes between Greeks and Turks, Arabs and Israelis, Shias and Sunnis. A year later, Macau is back, the Philippines is reporting record numbers despite political and regulatory issues, and in December Japan took the first step toward casino legalization in the world’s third largest economy. Now, Vietnam, another of Asia’s most wanted but seemingly out of reach markets, plans to open the door for local play on an experimental basis. Billionaire Lim Kok Thay’s Genting Group, Sheldon Adelson’s Las Vegas Sands and former Adelson lieutenant William Weidner have all shown interest in Vietnam, and a successful experiment with so-called open casinos could lead to major investment by international players.

Vietnam interests global casino companies because it has a long-term economic growth trajectory and 90 million people supporting a thriving gambling market that’s now mainly seen at border casinos and domestic underground play. With local play plus the 600 million strong Southeast Asian market, Vietnam casinos won’t be completely reliant on visitors from neighboring China. With a tropical climate, a pair of UNESCO and Natural World Heritage sites, more than 3,400 kilometers of coastline, much of it beach lined, Vietnam has great potential as a tourist destination that casinos can enhance.

Communist Party ruled Vietnam already has eight casinos for foreign passport holders only. In order to build on the scale necessary to compete internationally, investors want a local customer base. Korea limits its citizens to a single, remote casino and has struggled to get IR investments in the US$1 billion range. Most recently, Genting pulled out an IR project on Jeju Island, which has visa-free access for mainland Chinese, but no casino admission for the millions of Koreans who make Jeju the country’s most popular domestic tourist destination.

Vietnam wants to encourage investment by allowing limited local play. The new decree, reportedly nearly a decade in making, permits citizens to enter casinos if they can show monthly income exceeding 10 million dong (US$449) and, as in Singapore, pay an entry tax, set here at 1 million dong. Applications for casinos to participate in the trial open on March 15 and the government has not set a limit on the number that can open to locals. Admit local players, a casino must be part of a project with a planned investment of at least US$2 billion – IRs were previously required to invest US$4 billion – half of it already expended. The three year experimental period will begin when the first open casino is approved.

A preview of the decree indicated that a pair of Vietnamese-owned developments, which had already been designated as integrated resort sites, would be eligible for the experiment. The resort on Van Don Island in the country’s far northeast is slated to open later this year when a nearby international airport is completed. The IR on Phu Quoc Island in the far southwest facing Cambodia already has hotel and other facilities, making it the most likely candidate to kick off the experiment, a source in Vietnam says.

The official decree’s apparently broader eligibility suggests The Grand- Ho Tram, controlled by Wall Street’s Philip Falcone and opened in 2013 as Vietnam’s largest casino hotel, could be next. Ho Tram developer Asian Coast Development Ltd has invested more than US$1 billion for its 550 room hotel, Greg Norman designed golf course and second hotel tower under construction, part of a planned string of beachfront resorts two hours south of Ho Chin Minh City, the former Saigon, Vietnam’s commercial capital. The Hoi An South IR in central Vietnam, majority owned by the family of late Hong Kong billionaire Cheng Yu-tung through Chow Tai Fook Enterprises, with minority partners Macau junket operator Suncity Group and local investor Vinacap, and an expanding Banyan Tree resort near Hue are both likely to apply once they’ve reached the investment threshold and can accommodate guests.

The experiment is likely to succeed because Vietnam’s government wants it to. The country craves more foreign investment, more tax revenue – last week the government announced plans to legalize sports betting – and more tourists to stoke economic growth. It’s taken almost 10 years, but the government and gaming industry are on the same page. Once the experiment begins, we’ll see if they can stay in harmony for three years.

Source: FORBES