Inside Asian Gaming

INSIDE ASIAN GAMING | March 2009 4 Editorial Editor and Publisher Kareem Jalal Director João Costeira Varela Business Development Manager Matt Phillips Operations Manager José Abecasis Contributors Michael Grimes, Desmond Lam Steve Karoul, I. Nelson Rose Richard Marcus, Shenée Tuck Andrew MacDonald James J. Hodl William R. Eadington Graphic Designer Brenda Chao Photography Ike Inside Asian Gaming is published by Must Read Publications Ltd Suite 1907, AIA Tower, 215A-301 Av. Comercial de Macau - Macau Tel: (853) 6646 0795 For subscription enquiries, please email subs@asgam.com For advertising enquiries, please email ads@asgam.com or call: (853) 6646 0795 www.asgam.com Printed by Unique Network Printing Factory Ltd. Tel: (853) 2828 2832 Fax: (853) 2828 2830 E-mail: unique@macau.ctm.net As discussed in “Taxing Vice” on page 26, the global economic meltdown will pressure cash- strapped national and local governments to raise taxes on gaming and other so-called vice industries. It could also prompt the lifting of bans or restrictions on gaming and other vices. California, for example, is considering a proposal to legalise and tax marijuana, while other US states are looking at taxing pornography. Singapore’s first casino at the Marina Bay Sands integrated resort (IR) is scheduled to open at the end of this year, followed by the second, Resorts World Sentosa, in the first quarter of 2010. Although Singapore will boast a lower gaming tax rate than its major regional rivals, it plans to levy a S$100 (US$65) entry fee on its citizens and permanent residents entering the casinos (admission for tourists will be free). The fee is ostensibly a means to prevent the rise of problem gambling, but it will jeopardise the financial viability of the IRs, depriving them of local demand and posing a serious administrative challenge by necessitating the identification of all casino visitors. The “exorbitant” entry fee is viewed by critics as either a blatant money-grab that will destroy local demand for the IRs, or another misguided attempt by the nanny state—notorious for banning chewing gum—to protect its citizens from themselves. Neither explanation is satisfactory, however. Aware of the potential knock-on economic benefits of the IRs, the business-savvy Singapore government must want them to succeed and knows the entry fee puts them at risk. Meanwhile, a true nanny state would prefer to identify problem gamblers among its population by allowing them unfettered access to the IRs, rather than compelling them to continue feeding their addictions at illegal or overseas casinos. Las Vegas Sands Corp (LVS) was awarded the bid for the Marina Bay site in May 2006. The news surprisedmany who believed companies submitting joint bids with government-linked Singapore- based property developers were much more likely to win. LVS’ Vegas-based rivals, Harrah’s and MGM Mirage, had both teamed up with partners affiliated with Singapore state investor Temasek Holdings on their bids—Harrah’s with Keppel Land and MGM Mirage with CapitaLand. The odds of LVS winning the bid were seen as having plunged after the withdrawal of its proposed equity partner, Singapore property firm City Developments Ltd. By choosing LVS over one of the Temasek-linked bidders, the Singapore government demonstrated what former Merrill Lynch gaming analyst Sean Monaghan described as “a sense of accountability missing in many other nations in both Asia and the rest of the world, where lesser bidders are often able to secure contracts by marshalling political influence.” The Singapore government had listed the selection criteria for the operator of the Marina Bay resort as knowledge of Asia, a proven track record in the meetings, incentives, conventions and exhibitions (MICE) business, experience developing properties of the scale and quality of the planned Marina Bay resort, a track record in attracting all segments of visitors, and no problems with probity. LVS ticked all those boxes and apparently offered greater long-termvalue to Singapore than the bidders with Temasek links. Cynics may counter that if a Temasek-linked entity did have a stake in the Marina Bay IR, the Singapore government would have been less inclined to impose an entry fee, which will obviously hold back casino revenue. In setting its gaming tax rate well below the rates in Malaysia and Macau, however, the government seems more concerned with ensuring the IRs are competitive and contribute to its broader employment- and tourism-boosting objectives, than merely grabbing as much tax revenue from them as possible. The casino entry fee could even be an indirect policy tool to achieve the government’s intention to limit the contribution of gaming within the total IR revenue mix. Singapore’s comprehensive Casino Control Bill establishes strict limits on the proportion of total floor space at the IRs that can be devoted to gaming areas. The original draft of the bill had even included a rule requiring IR operators to limit the contribution from gaming to 50% of total revenue, but fortunately for the operators, the government decided to scrap that explicit requirement, deciding instead that it was sufficient to clearly state that the IRs should have substantial non- gaming attractions. The Singapore government wants to emulate modern-day Las Vegas, using the IRs to position itself as an integrated leisure and business tourism destination, while skipping the early stages of Vegas’ evolution from hardcore gambling getaway—where Macau still finds itself mired. The casino at Venetian Macao is doing just fine, but the retail and entertainment offerings have floundered, and promising attempts to drag major conventions and exhibitions away from Hong Kong have stalled. Inside Asian Gaming’s sources in Singapore suggest the casino entry fee is merely a temporary measure to win quick public acceptance for the introduction of casinos in the city-state. After the IRs open, if all goes to plan, they will create thousands of jobs and boost tourism. The IRs will increase demand for various local goods and services, as well as boosting tourism. Once the IRs start operating and theoretical concerns about a rise in problem gambling give way to real economic benefits, increasing segments of the local population will join the chorus of support for the IRs. The government will then find a convenient way to abolish the fee. Kareem Jalal We crave your feedback. Please send your comments to kareem@asgam.com Another Take on Singapore