Inside Asian Gaming

INSIDE ASIAN GAMING | October 2008 10 Cover Story C ambodia’s gaming sector has many characteristics that should make it naturally attractive to foreign investors. These include: very low taxes on gaming (based on flat fees plus a poll tax on machines rather than a percentage of the gross); and lower than regional average prices for assets such as land (even before the financial crisis deepened) and low operating overheads. Wage costs and construction costs in Cambodia are considerably lower than either Macau or Singapore. Redevelopment of NagaWorld is costing only around one sixth of the US$600 million spent just on the extension to Wynn Macau. What’s even better is that the project is being paid for from positive cash flow, rather than through debt. Inflation Cambodia is not as cheap for visitors as it once was, though. A cab ride from the international airport to down town Phnom Penh will set you back US$15 Cambodia’s Advantage Low taxes and (relatively) low overheads to US$20. That’s about 2% of a Cambodian civil servant’s entire annual salary. Even accounting for the unofficial ‘tax’ imposed on rich foreigners the world over; it still represents a hefty premium. A report published this June by the International Monetary Fund (IMF) pointed out that inflation in Cambodia rocketed in the first half of the year. The IMF report stated: “Inflation has increased sharply, the last published data indicate it rose to 18.7% in January 2008. The increase reflects both external shocks and domestic inflation pressures. External factors include higher international oil and food prices, and higher imported- goods prices due to the depreciation of the [Cambodian] riel and dollar against the currencies of Cambodia’s other major trading partners. Rapid domestic demand growth, fuelled by very high growth in commercial bank lending, has also contributed to domestic inflation pressures.” Set against the structural pressures on a growing economy, Cambodia does have a stable (some say a little too stable) government and a lot of neighbouring states with consumers who love to gamble. Politics, politics The incumbent prime minister Hun Sen has just extended his 23-year run in office with another five-year term confirmed last month in a parliamentary session that was nonetheless boycotted byoppositionMPswhoclaim irregularities in the poll. The platform on which the prime minister has built his tenure, say his supporters, is his stewardship of the economy, which is run on markedly free market lines compared to some others in the region. The national economy is expected to grow by 7% this year, slowing slightly from the 10.25% achieved in 2007, suggest IMF estimates. NagaWorld—friends in high places