Vietnam’s casino draft will not satisfy international investors

International context and investors’ need

Over the last ten years, the casino gaming industry has been a key investment in many countries and territories such as the US, Macau, Singapore, South Korea, Japan, the Philippines, Cambodia and Russia. These countries have successfully used such investments to boost tourism and enhance economic development.

In recent years it has become clear that legalising gaming and allowing the opening of integrated resorts is suitable to social and market demands.

As such, and after taking the advice of investors and international experts, Vietnam is now working on creating a legal framework for the gaming industry to attract major investors into key projects such as Van Don in Quang Ninh province and Phu Quoc in Kien Giang province.

At recent forums, conferences and meetings, international investors have expressed interest in capitalising these and other casino projects in Vietnam.

Most would like the Vietnamese government to make some commitments regarding the industry, such as regulations on investment and tax, as well as building infrastructure to serve integrated resorts. They also would like regulations to either be made or changed in regards to whether Vietnamese citizens will be allowed to enter casinos.

A few cards short of a full deck

The gaming industry is a sensitive area and is unfamiliar to many people. International investors have recognised the Vietnamese government’s efforts to open casino gaming in Vietnam, but have also said that current regulations are not reasonable and fail to meet current market demands.

Minimum investment and capital outlay

The most recent draft decree continues to require investors to commit $4 billion and show they have the financial capacity to invest according to their commitment. The first question that arises is: Where does this $4 billion figure come from? And then: What research and calculation was it based on?

In my opinion, the figure is based on the Singaporean government’s experience in choosing two investors, namely the US’ Las Vegas Sands and Malaysia’s Genting. Their initial investment was $4 billion per project respectively, which was then raised to $6 billion to meet the market demand.

Singapore and Vietnam are very different markets. Moreover, Singapore allowed Las Vegas Sands to build a casino complex right in the financial heart of the city and Genting to build one in its internationally renowned Sentosa park. Vietnam’s requirement that an investor must commit at least $4 billion to a casino project in some random location and without careful calculation lacks a specific reason.

Article 24 in the draft decree stipulates that an investor must disburse at least 50 per cent of total committed capital, or at least $2 billion, in order to receive a licence to open a casino. However, Ho Tram Strip in Ba Ria-Vung Tau was licensed without meeting similar requirements set forth in the draft submitted for public comment in 2013. Investors in new integrated resorts will surely consider the requirements in this 2014 version an unfair practice.

Article 22 says that “the investor managing the project must have at least 5 years of experience”. There are many domestic and foreign firms and joint ventures in the hospitality, tourism and entertainment industries that operate casinos in small provinces and have five years’ experience. Are they all eligible then to invest in and manage a casino project?

Can locals sit the game?

Article 10, which stipulates that “Vietnamese aged 21 and above with competence as defined by Vietnamese law can enter and play in casinos that are allowed to accept qualified Vietnamese,” is probably the policy potential investors and Vietnamese gamblers alike are looking forward to the most. But specific regulations do not yet exist. In reality, it’s impractical to assess each individual’s competence and financial capacity before allowing him or her to enter a casino.

In other countries they only need to make sure the guest player is not a criminal, is not mentally ill, and does not owe unpaid taxes.

The regulations as stipulated by the draft are a hindrance to investors.

Going all-in

Having worked with investors for many years, especially those in the casino industry, I hope the new and revised decree on integrated resorts will meet investors’ demands.

This particularly industry needs strategic investors with international experience, such as Las Vegas Sands. The new casino decree needs to meet the demands of society, as well as investors. It’s time for senior government leaders to step in and open doors.