Investors may still harbor concerns about the legal framework but Vietnam has at least been sending out the right signals over the future of casinos.
The latest draft of a decree on casinos in Vietnam retains provisions on a minimum initial capital investment of $4 billion from international investors, aimed at excluding small investors and attracting major players with experience and capacity and committing them long term.
$4 billion bind
An expert on the casino industry, who preferred to remain anonymous, told VET that the $4 billion figure is quite subjective. It was first mooted a few years ago, based on the experience of the Singaporean Government with the US’s Las Vegas Sands and Malaysia’s Genting, where the initial investment capital was proposed by the investors themselves. Due to changes in market needs, however, it ended up at more than $6 billion.
The expert made the obvious point that Vietnam and Singapore are two totally different markets with dissimilar institutions, regulations, and business models. The Singaporean Government allowed Las Vegas Sands to build Marina Bay Sands right in the heart of the country’s financial district, while Genting was permitted to build theirs at the famous Sentosa Island resort.
“The $4 billion requirement in Vietnam is completely different to the cases in Singapore, Macau, and even the Philippines,” he said. “Given that no specific research or calculations have been made it may well scare investors away.”
Not many investors will readily part with $4 billion if they can’t see a bright future for their investment.
Ho Tram Strip in southern Ba Ria Vung Tau province provides a handy example. The complex was previously granted an investment license after over $4 billion in initial investment was committed and the investor expected mobilizing capital would be a fairly straightforward matter. But with the government still to determine whether Vietnamese citizens can roll the dice, the casino market remains at a standstill, catering only to a small niche of expats and foreigners, with Ho Tram Strip receiving investment in phases.
Another ambitious casino project is at a resort complex in northern Quang Ninh province’s Van Don Economic Zone. Together with the Quang Ninh Airport project, local authorities expected it would be a catalyst for a complete change in the development of the economic zone. The “$4 billion barrier”, though, has seen many investors shy away.
In an effort to push the project forward, the SunGroup, a domestic investor, proposed it complete the entire infrastructure before inviting casino investors to come and try their luck. By dividing the project among a few investors the $4 billion requirement shouldn’t be too hard to meet.
The Nam Hoi An Resort project, meanwhile, received an investment license in 2010 with an expectation of quickly creating a modern complex with a dazzling casino for Quang Nam province. The project was conducted under a joint venture between Genting and VinaCapital. After four years of inactivity, though, Genting decided to pull out, which made finding new investors no easy task. The project recently restarted, however, with the first phase at a modest $500 million, divided among VinaCapital and two new Asian partners.
According to Professor Ha Ton Vinh, an expert on casinos in Vietnam, all executives and representatives of international strategic investors he has bumped into at international conferences and seminars on casinos over the last five years have expressed interest in investment opportunities in Vietnam, especially in large cities.
Check, raise or fold?
The market reacted positively when the contents of the draft decree became public in 2014, which included the statement “Vietnamese people aged 21 and above of ‘full competence’ with ‘appropriate financial capacity’ can enter casinos and play the tables.”
According to Professor Vinh, this was one of the conditions expected most by investors as well as Vietnamese gamblers, despite the definitions of “full competence” and “appropriate financial capacity” remaining unknown. “Identifying which individuals satisfy both conditions is a complicated and costly issue that requires the involvement of various ministries,” he said. “It’s practically unfeasible.”
He said that in countries with a developed casino industry, authorities only insist that gamblers look as though they have normal mental capacity and that they are not known by police or under investigation. The unit tasked with control of casinos collates information from databases or from related agencies and can make a judgment on whether an individual is granted entry within seconds.
“With the way things stand now in Vietnam it would be very difficult for investors to make investment commitments as there are too many unnecessary barriers in place,” Professor Vinh believes. “Investors need clarification on the details related to the issues above from the government and will suggest it follow the common practice of countries with a developed casino industry.”
From the perspective of an investor, Mr. Don Lam, CEO of VinaCapital, feels optimistic about the latest signs. In discussions with VET recently he argued that doors being opened to Vietnamese gamblers would contribute to the development of the market.
As soon as VinaCapital begins its Nam Hoi An project, he went on, there will be thousands of jobs and stable incomes for local people. “We even believe the project will help to develop neighboring areas,” he said. “This would also be a highlight in investment attraction in Quang Nam province, helping other investors to see the goodwill of the government and provincial authorities in better supporting investors.”
Mr. Lam is also confident the project will become a popular destination, attracting not only domestic but also regional and even international tourists by providing them will almost every service they may need for a convenient and enjoyable vacation: “As a foreign investor, VinaCapital and our partners support the government’s policies relating to the casino industry and firmly believe that those policies will promote the industry in a very positive way, generating income for the State budget, creating more jobs and stable incomes for large numbers of people.”
While the market focuses on the happenings at Nam Hoi An, it is no less important that the Office of the Government announced in January that Prime Minister Nguyen Tan Dung had approved investment guidelines for tourism, services and resorts, with casino developments for Phu Quoc Island off the coast of the Mekong Delta’s Kien Giang province.
The Prime Minister also assigned the Ministry of Planning and Investment to work closely with the Kien Giang Provincial People’s Committee and related government agencies to conduct further research on Phu Quoc’s specific case and report back to him for further consideration after the official decree is issued.
Phu Quoc Island has been a focus for resorts and tourism development and if it were to be heavily invested in would have a substantial opportunity to become a successful latecomer and a highlight of “casino industry”, despite the fact that questions remain over who its investor may be.