The Thailand Entertainment Complex Roundtable brought industry stakeholders, politicians and supporters of the government’s Entertainment Complex Bill face to face with vocal opponents – and those in between – for a unique, open, high-level discussion on the issue of legalizing casino gaming in Thailand. It proved quite the ride.
Held at the Grand Hyatt Erawan Bangkok on 5 June, the Thailand Entertainment Complex Roundtable (TECR) was a groundbreaking event that for the first time brought together various stakeholders with contrasting opinions around Thailand’s efforts to legalize casino gaming within large-scale entertainment complexes.
TECR took place the day after a press briefing in which the government provided further details around its entertainment complex vision, including a minimum THB100 billion (US$3 billion) investment for each property and world-class performance facilities that would put Bangkok and other cities on the international entertainment map. The government also stated that it expects the opening of such complexes can help triple tourist spending and add 0.8% to the country’s annual GDP.
It was opportunities such as these, as well as concerns around how to combat problem gambling and money laundering, that were at the heart of discussions during TECR, a full-day event that comprised four detailed presentations from experienced industry experts plus a series of roundtable discussions on the contents of those presentations and other issues raised.
Around 50 guests were invited to watch the day’s proceedings from the audience, with opportunities to ask questions of any roundtable participant. These guests represented a cross-section of Thai society, with captains of industry, academics, bureaucrats, NGO leaders and politicians of many persuasions in the mix. Around 40 media were also in attendance, providing an avenue for a vital, fact-based narrative to start making its way into the public sphere.
Crucially, high-level representatives of three international operators that have expressed interest in Thailand sat at the roundtable, engaging for the first time in public discussion about this greenfield opportunity. Galaxy Entertainment Group’s Chief Brand Officer – Thailand, Kevin Clayton, Melco Resorts & Entertainment CFO Geoffrey Davis and Wynn Development President Chris Gordon answered questions from other participants around how they manage challenging compliance and social issues in other jurisdictions, while offering their own thoughts on how the government might consider implementing its regulatory approach.
The other roundtable participants were Verapat Pariyawong, a recognized lawyer and advisor to the House Committee on Finance and Financial Institutions; Narongchai Yaisawang, PhD, a university lecturer and research scholar in economics; and Parit Wacharasindhu, Member of Parliament (Party-list) and Spokesperson for Thailand’s opposition People’s Party. Parit has been a vocal opponent of the government’s Entertainment Complex Bill and wasted no time during the roundtable in challenging various claims made by both the government and the operators in attendance around the economic benefits of entertainment complexes, ensuring a lively debate.
PRESENTATION 1: GEORGE TANASIJEVICH
TECR began with a detailed presentation by George Tanasijevich, former President and CEO of Marina Bay Sands in Singapore, titled “The value of ongoing government-operator engagement and alignment”.
There are few people better placed to discuss and advise on such processes than Tanasijevich, who played a key role in securing Las Vegas Sands (LVS) one of the two integrated resort (IR) licenses on offer in Singapore when it ran its RFP process in 2005. He went on to oversee a property widely considered to be the gold standard for IRs globally – and the most profitable – while continuing to serve as Managing Director of Global Development for LVS, a role that took him to Thailand regularly during the earliest days of casino discussions.
It is notable that Thailand itself often cites Singapore and Marina Bay Sands as the examples it wants to follow in establishing its own IR, or entertainment complex, industry.
Vital to any successful greenfield industry, Tanasijevich explained, is establishing a true partnership between government and operators whereby all parties are aligned on what they need to succeed and what the stated goals are for all concerned.
“In order to make the economic impact optimal, you’re going to have to attract the right investors – and the best investors like certainty,” he said in his presentation.
“There are certain things that need to be laid out so that people know what they’re facing if they are going to pitch for an opportunity in this market.
“A collaborative process will be absolutely critical – a close alignment and integration between operators and the government. This is an essential starting point for any kind of a dialogue so that both sides can understand each other and work towards a mutually satisfactory environment where the right decision can be made. That also means an alignment of interest between operators, government and the people of Thailand, because the impact that entertainment complexes can have on the economy and on the labor market is significant.”
Tanasijevich, who explained that the legalization of casinos within large-scale entertainment complexes could be one of the biggest sources of foreign direct investment in Thailand’s history, added, “If Thailand is going to move forward it needs to be competitive in how it establishes its legal and regulatory environment, because this is not the first market this type of business has been established in. There is already a framework that has been set that is based on experience and lessons learned. It is also something that operators and industry expect, so you don’t want to start from scratch with a blank sheet of paper. Instead, you should be looking at trying to create something that is based on international best practices, adjusted for local conditions to make sure it’s right for Thailand.
“Ultimately what people will be looking for is a situation where operations can be conducted efficiently and safeguards are put in place to protect people who might be at risk. That would ultimately ensure a win-win situation for everybody involved.
“But I think you also have to face the fact that, regardless of whether you think entertainment complexes are favorable or not, people are going to gamble, so the choice is whether or not you want it to happen in Thailand legally through a structured regulated framework.”
Tanasijevich said that any decision on legalizing casinos must be made by Thailand and the Thai people but expressed his hope that, whatever decision is reached, it is based on facts.
“I recognize that this can be an emotional issue,” he said. “Some of the emotion is driven by fear and other concerns, but I also think some of those concerns are shaped by misperception, so events like these are very important to share information, to exchange ideas and to move forward with grounding in what this opportunity might mean for the country.”
PRESENTATION 2: GEORGE CHOI
George Choi, Head of Global Gaming Research for Citi Research, provided an analyst’s perspective when he took the stage for a presentation titled “The promise of ECs: Why do it at all?” Choi’s comprehensive talk began with an overview of the state of casino legislation across Asia – who has welcomed entertainment complexes (or IRs) and who hasn’t – as well as an analysis of the potential economic benefits to Thailand and real-world non-economic benefits.
His numbers, assuming development of five entertainment complexes nationwide, suggest foreign direct investment of around US$18.8 billion – not accounting for future expansion and reinvestment projects.
While the Thai government has flagged a minimum investment of THB100 billion for each complex, Choi said he expected a competitive bidding process to drive investment into Bangkok properties to US$6 billion, falling to US$4 billion in Pattaya and US$1.4 billion further afield.
To put his estimates into perspective, the Citi analyst noted that Macau’s operators have invested more than US$50 billion since liberalization in 2002, including US$17 billion by Sands China alone. Singapore has also seen more than US$26 billion between just two operators when current expansion projects are taken into account.
In South Korea, the two integrated resorts located near the airport in Incheon have invested just US$2.7 billion between them due to the lack of locals gambling.
“Foreign investors are willing to invest so long as they see growth potential,” Choi explained.
Assuming a tax rate of around 17%, representing the blended tax rate in Singapore, five entertainment complexes in Thailand would generate an estimated THB51 billion (US$1.55 billion) in annual gaming tax revenue, create between 35,000 and 50,000 direct jobs and provide a welcome boost to tourist numbers. Singapore, for example, enjoyed 20% year-on-year growth when its IRs opened in 2010, rising from 8.6 million arrivals in 2009 to 11.6 million in 2010 and 13.2 million in 2011.
“In our view Thailand needs to be proactive and constantly refresh its tourism offerings in order to stay competitive, and we think entertainment complexes can help,” Choi stated.
Choi’s presentation sparked a vibrant roundtable session in which Parit challenged the maths behind his forecasts, primarily on the back of the THB50 million (US$1.5 million) bank deposit requirement for locals gambling that currently forms part of the Entertainment Complex Bill.
With the Citi analyst acknowledging that his numbers rely on relatively open access to the locals market, Parit expressed concerns over the vailidity of the bill because it means, in his opinion, that the government was either not properly informed on operator concerns or was aware and had chosen to push ahead anyway.
If it was aware, he added, this would mean the government has either not acknowledged the fatal blow the THB50 million requirement would deal to its legal casino hopes or is simply appeasing opposition voices with the intention of removing the requirement at a later date.
In response, Clayton admitted the requirement “would be a deal breaker and certainly a deal breaker for a multibillion-dollar entertainment complex for Thailand.
“If Thailand puts a huge restriction on locals going into a casino environment in Bangkok or other locations around Thailand, then the investment that would be made in an entertainment complex would be of a reflective scale,” he explained. “It wouldn’t be the tourism attraction that Thailand deserves and warrants, but if you open up the market [to locals who already gamble in underground casinos] and allow gambling to occur in an entertainment complex in Thailand, you’re fulfilling the needs of the Thai people.”
Clayton noted that Singapore had expressed similar reservations ahead of its RFP in 2005 but ultimately realized if it didn’t have external investors making multibillion dollar investments in a manmade attraction in Singapore, the brand would be impacted and the tourism numbers affected accordingly.
“The only way you can make this work is by allowing people to go into the casino, maybe with certain conditions attached, because it will attract multi-billion-dollars worth of investment, it will make this country far more effective and it will generate a huge amount of jobs as a function of that,” he said.
“By putting a number on somebody’s assets and making that the restriction on whether somebody can go into a casino environment changes the [economic] model significantly and would mean that Thailand would not attract the level of investment I think it deserves as a nation.”
PRESENTATION 3: GEORGE TANASIJEVICH
Tanasijevich returned for his second presentation of the day, titled “Fact from fiction: What is an EC?”, where he delved into some of the misconceptions that greenfield jurisdictions commonly hold around casino-resorts.
His series of slides highlighted some of the core features of leading integrated resort developments across Asia, specifically the luxury hotels, high-end restaurants and expansive MICE facilities they typically offer. As an example, Macau currently boasts 29 Michelin stars across 19 starred restaurants – ranking 10th globally for Michelin-star density. Notably, every single one of those restaurants is located within an integrated resort.
In Thailand, the term entertainment complex has been coined to better represent the true nature of these multi-faceted properties, with Tanasijevich applauding the government for adopting this strategy.
“Singapore took a similar approach when it coined the phrase ‘integrated resorts’, and the purpose of that was to make sure that people didn’t think that this was just a casino,” he explained.
“Many in this room would have had experience in Japan and the efforts to work with the government to pass legislation there. The reality is Japan never got over calling these integrated resorts or entertainment complexes a casino, and that was unfortunate because it sends the wrong signal to the public about what these things actually are. The casino piece really represents a very small proportion of the project physically.”
Tanasijevich acknowledged that although the casino space usually accounts for less than 10% of total IR floor space, it typically accounts for more than 80% of a resort’s revenue (Las Vegas being an outlier in this regard). However, this is a positive, he explained, because this outsized casino revenue can underwrite the cost of assets that in isolation do not generate sufficient returns to attract private sector investment.
“The best example of this is convention center and MICE facilities,” he said. “If you look around the globe, the great majority of MICE facilities are owned by governments because they know it’s in the best interest of the market [to build them]. They’re not concerned about capturing the value within the four walls of the MICE facility but instead what the impact on the market will be.
“It’s unusual for the private sector to invest in such facilities [because they are concerned about capturing the value within the four walls], but it makes sense for somewhere like Marina Bay Sands to do so because that drives traffic midweek to the property; they stay in the hotel rooms, dine in the restaurants and shop in the malls, so it’s a very positive, symbiotic relationship where certain infrastructure that would normally be paid for by taxpayer dollars can be paid for by an investor in an entertainment complex.”
In the roundtable discussion that followed, participants asked for clarification on how the gaming versus non-gaming revenue mix typically plays out in other jurisdictions across Asia, prompting Tanasijevich to point out that exactly how casino space is officially calculated can differ from market to market but in any instance should be sufficient to reflect market demand.
He also made it clear that “what is being considered for Thailand is not to turn Thailand into Las Vegas or Macau. Instead, this is a situation where Thailand is considering adding a tourism asset that is currently missing from the menu it offers to tourists. Entertainment complexes represent a piece of tourism infrastructure that doesn’t exist today.”
PRESENTATION 4: LAU KOK KENG
Rounding out the day’s presentations was Lau Kok Keng, Head of Intellectual Property, Sports and Gaming for Rajah & Tann Singapore, who provided a highly detailed and captivating exploration of Singapore’s experience in legislating and developing an integrated resort industry.
Titled “Rule of Law: What are the guardrails?”, Lau’s presentation went back in time to detail the history of gambling regulation in Singapore, highlighting its historic opposition to most forms of legalized gambling and what was at the time deemed a stunning decision by then Prime Minister Lee Hsien Loong to open a tender to develop two integrated resorts with casino gaming.
This was a powerful session, largely due to the broad similarities Lau was able to draw between the casino debate in Singapore and the contrasting views being aired in Thailand today. Opponents of Singapore’s IR were concerned that casino gaming would “corrupt the moral fabric”, lead to instances of domestic violence and create rampant problem gambling.
There were also calls, much like there are in Thailand at this very moment, for the government to hold a referendum on the issue to gauge public opinion.
“Our Prime Minister rejected that suggestion, for good reasons,” Lau explained.
“He said policy is not something that can be outsourced by the government to the people, because the general public lacks knowledge and expertise to make complex political policy decisions for the country. He said referendums may aggravate divisions within society by encouraging polarization and oversimplification rather than genuine debate, and that, because members of parliament are democratically elected, they should be the ones making that decision because it is a policy decision and they are ultimately accountable to the people for their decisions.”
Another key moment in the Singapore debate, Lau recounted, came when the Prime Minister instructed his ministers to openly express their own thoughts on the issue of legal casinos within integrated resorts, rather than have them follow party lines.
In response, a notable speech was made by the Minister for Muslim Affairs.
“Muslims comprised about 16% of Singapore’s population, and of course their religion prohibits gambling, but the minister said there is a difference between personal morality and public morality and when you make a decision on whether or not casinos should be allowed in this country you’ve got to make that decision based on public morality. What’s the difference? Personal morality is what you believe is good for you, your family and your community, while public morality is based on shared values and norms that undergird your society as a whole – not what each individual member believes would be right or wrong for themselves.
“So, bear this in mind as you debate whether or not to allow for entertainment complexes in your country.”
As Lau observed, the Singapore model has been incredibly successful, underpinned by a strong regulatory framework that includes effective guardrails against problem gambling and social ills.
It has also proved transformative from a tourism perspective, with Singapore’s IRs to this day contributing between 1% and 2% of annual GDP.
“We changed tack from squeaky clean to a country with a thriving casino industry whose skyline is defined by the three towers of Marina Bay Sands with the Skypark on top,” Lau said.
“Marina Bay Sands is to Singapore what the Taj Mahal is to India and the Eiffel Tower is to France, and that’s a big irony given that our founding Prime Minister – the most important person in our history – once said [about casinos], ‘No, over my dead body!’.”
ROUNDTABLE DISCUSSION
After the conclusion of the four presentations and a hearty buffet lunch at Grand Hyatt Erawan Bangkok’s “The Dining Room”, attendees returned for the afternoon session in which roundtable participants launched into a detailed discussion about many of the topics raised in the morning, as well as a raft of other concerns. Audience members were also encouraged to ask questions of any of the roundtable participants.
There were two notable absentees from the roundtable – both from the dissenting side of the argument. Thanakorn Khomkrit, Secretary-General of the Stop Gambling Foundation withdrew at 8:30pm the night before TECR, while Atawit Suwanpakdee, Chairman of the Committee for Industrial Reform Legislation for the United Thai Nation Party, failed to show on the day.
IAG’s Vice Chairman and CEO, Andrew W Scott, noted during his roundtable opening remarks, “A number of those who are against entertainment complexes in Thailand and who are vocal about that, when it actually comes to sitting down and talking intelligently and authentically about these issues, have opted out.”
Credit must therefore go to Parit, a strong opponent of the Entertainment Complex Bill, as well as Verapat and Narongchai – who would better be described as concerned yet open-minded on the issue – for taking the time to be part of the event.
Parit voiced a series of concerns with the bill and specifically the government’s modelling around the economic benefits entertainment complexes can bring to Thailand. At the prior day’s press briefing, government representatives indicated potential tourism revenue of THB100 billion to THB200 billion (US$3 billion to US$6 billion) annually, with GDP growth contribution of up to 0.8% and government revenue of THB10 billion to THB40 billion (US$300 million to US$1.2 billion) annually through taxes and license fees.
Parit also pressed the attending operators on anti-money laundering concerns and whether they believed the Entertainment Complex Bill provides sufficient protections in this area.
Wynn’s Gordon responded by confirming that his company, like others, has conducted its own economic studies which “don’t completely align with the government’s. We’re more conservative because we are a publicly traded company, so we’re very, very careful about what we project,” he said.
“But [our studies] still show a very healthy market. I don’t want to defend or not defend the government study, but we did our own independent study with our own independent consultants and it does show that there’s a very strong market here in Thailand.
“In regards to security measures and whether these are in the law, companies like ours can only come here if there are rigorous regulations, because we are so heavily regulated in other jurisdictions that you need to have [comprehensive] anti-money laundering regulations and all the compliance in place which is essential for a healthy gaming market.”
Parit also expressed extreme doubt over claims that the development of entertainment complexes can provide meaningful economic benefits for a country that already prides itself on its tourism offerings.
Clayton responded by stating, “The driver of economic benefit in the context of entertainment complexes is tourism.
“Entertainment complexes lead to greater growth, and I know you have shown some skepticism about that, but the evidence suggests that putting entertainment complexes in place does lead to incremental growth – primarily because of some of the headline attractions.
“An entertainment complex includes hundreds of millions of US dollars of investment in headline attractions, whether that’s arena performances or exhibitions or business travel, so there is economic benefit.”
Clayton also highlighted the fact that entertainment complexes are not so much about boosting raw tourist numbers – “bringing more backpackers is not going to achieve your stated goals”, he explained – but about attracting higher-yielding customers with the ability to spend more. Likewise, he noted that entertainment complexes have proven to increase length of stay, particularly in Singapore where average length of stay of visitors now sits at 3.5 days. This compares with the high proportion of transit or one-night travelers that typically passed through Singapore prior to IR development.
Thailand, Clayton added, currently averages two nights per visitor.
“If you consider that Thailand had around 36 million visitor arrivals last year, you can imagine the economic impact it would have if everyone stayed for just one more day,” he said. “Obviously not all of those visitors are going to visit entertainment complexes, but you only need a fraction of those to recognize the additional attractions that these buildings offer to have a massive and very real impact on the cities and areas in which they are located.”
A common theme of the day, and one raised by both Parit and Verapat during the roundtable sessions, was the lack of clarity across many of the government’s policies. The question was asked: how can stakeholders or the public trust the Thai government to implement thorough and effective regulatory policy on issues like responsible gaming and anti-money laundering when so few details around these had been made available in the public sphere?
Clayton acknowledged that there was always going to be a thirst for knowledge around any new industry potentially coming to town, and the lack of certain details was inevitably frustrating. However, he explained that such policy is typically nutted out after initial legislation is passed. Singapore, he noted, had “four to five years” to work through such issues between the launch of its RFP process in 2005 and the opening of its two IRs in 2010.
Melco’s Davis also reminded attendees of the value of a regulated gaming environment, particularly on social issues like problem gambling.
“It’s really irrefutable that social protections are better served within the construct of a structured, regulated, legal gaming context rather than what you might have today with underground gaming where people aren’t getting the treatment they deserve,” he said.
“100% of [Melco] staff, including myself, goes through responsible gaming training every year. We’re all trained to spot people with gaming issues and provide them with support. That’s the sort of thing you get when you go into an unregulated market, and I would offer similar commentary around money laundering which again isn’t addressed in unregulated markets. When these things happen in an unregulated market, you don’t have the resources or the focus that you really do get in a structured environment.”
Clayton said the best way forward for Thailand was to give itself time to bring all stakeholders together to work through the missing pieces.
“I don’t think it’s unusual for the Thai government to not have all the data,” he said. “I know it’s frustrating, and if I was on the other side of the table I would be the same, saying, ‘I want more and I want it all before we make a decision’. It’s a little unfortunate because you’re not going to get that, quite clearly.
“So, I think we should give ourselves a little bit of an opportunity to bring together interested parties, stakeholder groups, people who are for and people who are against, people that are experts in what we classify as being best-in-market around the world, and work through that detail.”
GAUGING SUCCESS
TECR was never about changing opinions, but it has served as a vital first step towards reasonable and informed debate with a view to educating stakeholders about an industry that is brand new to Thailand.
Central to that ambition is local media coverage, and IAG has been heartened to see considerable coverage of the expert views tabled at TECR make their way into the mainstream Thai media. The Nation, Thansettakij, Post Today, Bangkok Biz News and Prachachat Turakij were just some of the outlets to cover TECR, with a majority of articles in the Thai language, while The Bangkok Post more recently published a commentary piece from IAG’s Andrew W Scott.
Next steps in the process could include the formation of an Advisory Board allowing ongoing discussion about the Entertainment Complex Bill and other matters related to the legalization and regulation of casino gaming.
As Verapat acknowledged during TECR, it is crucial for Thailand to seek out international experts like those who participated in TECR to further inform the ongoing entertainment discussion, because right now the country does not have a frame of reference to understand the nuances of industry issues.
One thing is for certain: the journey has just begun.
