Almost despairing of the state of casino regulation in the Pacific Rim, Spectrum Gaming Group Managing Director Frederic Gushin kicked off a panel discussion at Global Gaming Expo by saying, “Asia represents the best and worst of casino-style gaming. If Singapore (“the gold standard”) is the best, Cambodia’s rampant fly-by-night casinos and Laos’ Golden Triangle one would be the worst, in Gushin’s view.
“These casinos add new dimensions to the term ‘Wild Wild West,'” he said of the unregulated casinos, notorious for money-laundering and human trafficking. Even so, Asia is becoming more competitive than ever, he concluded.
No discussion of regulation in Asia can avoid Macau and Spectrum’s Asian senior vice president, Paul Bromberg, flashed back to consultations he had with the local authorities two decades ago about how to implement a competitive casino market. Their desire at that time was to migrate all gambling from downtown to the Cotai Strip. That hasn’t happened and Bromberg believes the new gaming law passed by the Macanese legislature is an attempt to reinstate that intent.
Complicating matters is that the new law invokes “national-security” concerns of a sweeping nature, under which the Beijing government can deprive any casino operator of its concession if it’s deemed a security risk.
“That level of supervision has never been seen before anywhere else,” Bromberg warned.
Former casino executive Daniel Cheng agreed. The Cotai Strip “has been astronomically successful, [but] the goals of the government are not necessarily financial,” he said. “Junkets are likely to become a thing of the past” as Macau strives to be “a tourist destination of international repute. … It’s a pretty tall order, but that’s what the government wants.”
RS Global Gaming Finance Managing Director Roy Smolarz sounded an ominous note, seeing a close correlation between the financial crackdown in Macau and that on free speech in Hong Kong. “It’s no secret that the central government is not particularly enamored of the large-scale gamblers who would come, typically on junkets, to fuel the VIP activity.”
Those junketeers were deemed to lack financial credibility and were suspected of tax evasion. “Perhaps that led to the small but substantive, one percent increase in the gaming tax,” Smolarz said.
Smolarz likened the current state of affairs in Macau to the family-fun era of Las Vegas, which embodied the rise of amusement-park amenities. Macau’s history is dominated by high-level gambling, but high rollers are now being blacklisted by Beijing, Smolarz said. “I’m very wary of the near-term revival of the [gross gaming revenue] numbers,” he continued, citing the gap between Las Vegas’ $15 billion in annual casino revenue and what Macau had it in its glory days. “It’s going to be a struggle for Macau to get past that $15 billion for the next few years.”
China’s long shadow extends into other jurisdictions, continued Bromberg, noting the greater difficulty of moving money around and in the same amounts as before. It is now very difficult for Chinese VIPs to play internationally, unless they have funds stashed offshore, and Bromberg said the government is literally dragging citizens off international flights if they’re suspected of heading overseas to gamble.
By contrast, Cheng said, Singapore has done well, because of how it handled the COVID-19 pandemic and reopened when the disease ebbed. He also credited a decade of megaresort success to a tax structure that emphasizes high-roller gambling, yet is lower than that found in the Philippines or Macau. Singapore, said Bromberg, had the will to be the acme of gaming regulation, whereas most regulators “start hard, then relax,” adding that Australia may have relaxed too much.
Regarding Australia, where dominant Crown Resorts and Star Entertainment have been embroiled in still-evolving scandals, Bromberg said, “The main lasting lesson is a clear decision was made around 2005 to relax the regulatory structures around Australia. It started with allowing junkets to enter the country. There was no investigation of them.” Also, casino regulation was lumped in with liquor licensing and there was a consequent brain drain from gaming-oversight bodies.
Therefore, Bromberg argued, governments and casinos became too close. The conclusion of the recent Royal Commission report, he said, was that the government must no longer let casinos self-regulate: “If you let the wolf guard the henhouse, they’re going to take full advantage of that situation.”
Turning to Vietnam, Thailand, and Cambodia, Cheng prophesied that as far as implementing regulatory best practices is concerned, “It’s always possible, but the will is not there.”
Regarding Thailand, specifically, he said, “They shouldn’t follow in the footsteps of Japan. The government did a lot of things wrong.”
He and Bromberg differed over whether the government lacked the willpower to impose the kind of regulation that would draw major international companies; Bromberg thinks it doesn’t and Cheng maintains the big firms would come regardless. The former predicted “a debacle” compared to Thailand’s recent legalization of marijuana, in which something intended to be medicinal became recreational and ubiquitous, leading to a public outcry.
This prompted Bromberg to despair of Thailand and Vietnam alike. “Why would [Las Vegas Sands] invest in a country that has no proper regulation?” He said that other nations don’t see the hard work that goes into crafting a regulatory framework like Singapore’s. “They just think you pass a law and it’s going to work.”
Smolarz also had few kind words for Vietnam, saying the government tried to induce large-scale international investment by promising a near-term solution to the problem of locals play (illegal at all but a few casinos). Flash-forward 10 to 15 years and no such solution has emerged. At least no locals ban was foreseen in Thailand, although entry fees (such as Singapore’s) or even means-testing are anticipated. Cheng said foreigners-only casinos in Thailand would be a non-starter, “not profitable at all.”
As for the other elephant in the room, Japan, the panel’s consensus seemed to be that the federal government was expected to follow the Singapore model, but had largely blown it. Cheng called it “a fantastic jurisdiction, regardless of what the final [integrated resort] situation is.” However, “The government left a lot of money on the table.” The 30 percent tax rate was criticized as excessive and surprising. “It’s not the Holy Grail like it was when we first started talking about it 10, 15 years ago,” Cheng said, predicting that Singapore-sized 40 percent returns on investment wouldn’t be coming from the Land of the Rising Sun.
Bromberg cited another federal-government failing, the absence of probity investigations as part of the mandatory province-company mating dance. This could mean, he explained, that a casino operator that wouldn’t pass federal muster could still emerge as a top provincial choice. “That was an awkward situation,” stemming from a lack of strong regulation at the top.
China interposed itself one last time as the discussion ended with consideration of the geopolitical situation in the Pacific Rim.
“Geopolitical issues are looming very large,” concluded Cheng, citing a “splurge” of Cambodian casinos being closed because of that country’s sensitive relationship with China. The Chinese player is, despite everything, number one in Asia, he said. “The Chinese government has the power and the will to turn off the tap whenever they want. How and why they do it is all geopolitics.”