Introduction
Legalized gambling in Asia is poised to create huge revenues and huge booms in tourism, which in turn means major development for the hospitality industry. The great success seen in Macau has caused the rest of Asia to re-think what was once an anti-legalized gambling attitude. Moreover, the increase in middle class residents has allowed more local disposable income, which has continued to fuel the gambling economy.
Macau
Macau recently overtook Las Vegas as the number one gambling economy in the world,1 but it is a change that has taken a number of years. Since the laws changed in 2002 to allow foreign entrepreneurs to open casinos, the Macau market has boomed.2 The economics of Macau’s casino are industry are simple: growth. Slot machines are driving much of that growth, as this graph shows:
Macau’s gaming statute relies on a series of concessions and sub-concessions to gaming providers, which are supervised by the Gaming Inspection and Coordination Bureau.4 Macau casino operators face a steep tax rate of up to 40% to operate, but the volume of revenue has clearly been enough to prevent the tax from deterring casino operators.5
China
The remainder of China still makes gambling illegal, with recent crackdowns on internet gambling,6 similar to sentiment in the United States. However, the legislation seems to stand in stark contrast to the history of gambling in China, leaving some to refer to gambling as China’s national pastime.7 While gambling in the majority of China seems like it will not occur, it is possible that an area like Hong Kong may be granted Macau-like casino rights.
SingaporeSingapore is now re-considering their stance on gambling, having dropped their ban in 2005. Two major developments are under way, set to open in 2009 and 2010 respectively.8 This decision has faced vocal opposition, and winning the hearts of the people seems to be one of the more difficult tasks.9 However, the limited grant of casino space may foreclose many from venturing into the Singapore market until the two developments are complete and have shown their validity.
South Korea
South Korea now has 17 casinos10 which are doing quite well, but the internet gambling business has recently faced a considerable crackdown.11 South Korea even showed growth in the gaming sector during their recession in 2001.12 Of course, there have also been significant issues with gray-market gambling in Korea, which operates much like pachinko in Japan.13
Taiwan
Taiwan is still considering gambling, although PricewaterhouseCoopers predicts that it will be limited to one casino.14 Should this be the case, the competition to secure that one spot will likely be fierce. It remains to be seen what style of gambling regulation Taiwan would put in place to control this, but it can be expected that it will likely be a single concession.
Japan
Japan has had a very peculiar form of legalized gambling in place for years: Pachinko. For those unfamiliar with the game, pachinko involves controlling the rate at which ball bearings enter a pinball-like board.15 Winning players are rewarded with more ball bearings. These ball bearings can be traded in for prizes, but not cash. However, upon exiting the pachinko parlor, a small booth can be found somewhere nearby, and that booth will trade cash for tokens that are among the prize choices. Pachinko is already huge business in Japan, with over 30 million yen spent by players in an average year.16 However, other than pachinko, horse racing, and the lottery, gaming is illegal. Specifically, casino gaming is completely forbidden.17
However, Japan may be on the verge of legalizing casino gambling.18 New legislation has been presented to legalize casino gambling, which is estimated to pass by June 2008. The bill adopts an approach similar to that employed in Singapore in order to dispel the negative image gambling has in Japan. While only time will tell if Japan actually ends up legalizing casino gaming, the odds seem favorable at this juncture.
Philippines
In the Philippines, a large new casino complex is planned for Manila Bay called PAGCOR City,19 which stands to dramatically increase revenue.20 The Philippine Amusement and Gaming Corporation (PAGCOR) is in charge of regulating the gaming industry, both land based and virtual.21 PAGCOR has been operating since 1976, and is a general success story in terms of generating government revenue through gaming.22
Broad Based Implications
This new proliferation of legalized gambling means that the hotel franchise counsel may need to seek expert assistance as more franchisors may become interested in adding gaming to their properties, or creating new gaming properties in these new locations. Much like the Caribbean, hotel chains that do not traditionally enter into the gaming arena may see the opportunity Asia presents and decide to pursue the additional revenue gaming has to offer. However, like franchise law or international trade law, gaming will continue to be a highly specialized, regulation heavy area where mistakes are not a luxury the client can afford. The language barrier can only serve to complicate this matter.
Typically, a chain wishing to have gambling on premises will handle these operations in house. That structure means that gaming specific staff will need to be hired and a whole host of gaming specific rules and procedures will have to be put in place. Moreover, the gaming areas of the hotel should be planned from the inception of the new hotel’s creation. This can maximize their friendliness to gaming specific elements, especially security concerns, including surveillance cameras, money counting facilities, and secure money storage.
The hotel industry is used to compliance on a number of other fronts, from franchising to health codes. Gambling is another animal in the administrative law menagerie, and as such has a whole series of rules and regulations all its own. Some of these take the form of licensing, others as mandatory procedures for the casino to follow. In any case, strict adherence to the governmental rules can make or break the operation, and as such hotel management will need gaming compliance counsel to educate their staff and help craft the necessary elements to remain in compliance. The difficulty comes in the last of standardization across Asia. If a hotel operator wishes to take advantage of multiple gambling states, they will need to re-analyze their existing procedures for each new state they enter to maintain local compliance. The complexity involved will resemble the difficulties faced by international hotel franchise counsel, where franchise rules can similarly vary from country to country.
Moreover, many manufacturers of gaming machines worldwide will now be looking to export their machines to these new gaming areas. Of course, with any technology, there are always a host of trade regulations to be concerned about. These can include the International Traffic in Arms Regulations (ITAR)23 and Export Administration Regulations (EAR).24 This new wave of Asian gambling may prove to be a significant source of work for those who deal in international trade in Asia. Of course, the volume of machine sales is relatively steady despite the status of casino projects merely because machines have a limited lifespan. Thus, the import/export aspect of the new casinos could extend well past the franchise concerns that exist at the outset of hotel project development.
Conclusion
As gaming continues to spread worldwide, more legal business will accompany it. Since there is little standardization worldwide of gaming laws both land based and online,25 any company interested in capitalizing by adding casinos in other countries will need the assistance of counsel that understands the country specific gambling regulations. Of course, the greatest barrier for many will be that of the language, which could bode well for attorneys who speak the various Asian languages. In addition, between the widespread issues of internet gambling and the proliferation of casino gambling across Asia and other parts of the world, attorneys experienced in gambling regulations may soon be in significantly higher demand.
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