Inside Asian Gaming

INSIDE ASIAN GAMING | October 2008 12 Cover Story I t’s tricky tomake an accurate assessment of the overall revenue growth of the Cambodian casino market, as only NagaWorld is listed on an internationally recognised bourse and many casino operating companies are privately owned, with no obligation to reveal their numbers to anyone but the taxman. As a rule of thumb, it’s probably safe to say Cambodia’s current annual gaming revenue growth is less than 60% but more than 12%. If that sounds vague, it is, but at least scientifically so. The upper figure is based on the revenue growth reported by NagaWorld for the first half of 2008. The lower figure is based on the increased tax take from gaming projected by the Cambodian government for 2008 compared to 2007. CheaPengChheang(correct),secretary of state at the Ministry of Economy and Finance, told IAG :“Cambodia currently has about 29 casinos,mostly alongour borders with Thailand and Vietnam, which employ more than 15,000 people.We expect more casinos in the future, particularly near the Vietnamese border.” Low tax The Ministry of Economy and Finance says it expects to earn US$18 million in national income from gaming in 2008 as against US$16 million last year. This is decidedly modest when one considers NagaCorp alone made US$26.4 million profit in the first half of 2008 on revenue of US$109.1 million. If Macau’s tax regime, based on a percentage of the gross and equivalent (after payments to social causes) to 40%, were applied to Cambodia, then NagaCorp would be paying US$43.6 million in tax for the first half of 2008 just by itself. Instead, Cambodia opted last year for an annual flat fee (over and above the initial gaming licence fee) plus a product-based tax per machine for every unit above an agreed threshold of inventory. Lacking standards The Asia/Pacific Group, the body promoting the adoption of international financial standards in the region to prevent crimes such as money laundering and terrorism financing, did a mutual evaluation visit of Cambodia in July 2007. It was scheduled to do a follow up visit in late 2008, though so far no date has been announced. What the APG found in July 2007 was that only NagaWorld, of the country’s then 21 casinos, operated an internationally recognised system of record keeping for cash transactions, known as customer due diligence. This had been done, the APG report noted, “in the absence on any obligation imposed by the authorities,”as the Ministry of Economy and Finance had not set a threshold for CDD and record keeping. The risk of getting into trouble with regulators back home is a well-rehearsed argument for foreign investors giving Cambodia a wide berth. People and governments change though, so such arguments may not hold up forever. As we explain later though there may be even more pressing market-based concerns linking back to regulatory haziness. Numbers Game Hard numbers are equally hard to come by in Cambodia’s gaming industry