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Risky business

Released at: 23:08, 10/10/2014

Risky business

The Ministry of Finance's draft decree on casinos in Vietnam has failed to satisfy investors but it's hoped that the final version will find some common ground.

by Minh Tien

Quang Ninh province has recently received the green light from the government to carry out the Van Don Airport project. The government had previously announced that construction of the airport would only be considered if the Van Don Special Economic Zone project was also approved. With such a proviso, investors were reluctant to step in. A number of casino developers have followed proceedings carefully, given the Special Economic Zone may have a casino. vbvn n  nvnb  v v fj fjhf jfj f

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The most important condition investors will consider when investing in casinos in Vietnam has been addressed in the draft decree: whether casinos are open to Vietnamese citizens. Under Article 10, Vietnamese people aged 21 and above of “full competence” with “appropriate financial capacity” can enter casinos and play the tables. It hasn’t put investors fully at ease, however, as uncertainty remains over the definition of “appropriate financial capability”. 

While a definition is still to come from the Prime Minister, “full competence” can be found defined in Vietnamese law. Nonetheless, identifying which individuals satisfy both conditions is a complex and costly issue that requires the involvement of various ministries. 

Countries with a developed casino industry only insist that gamblers look as though they have normal mental capacity and that they are not a known criminal or under investigation. The unit tasked with control of casinos collates information from the databases of related State agencies and can decide if gamblers can play in just a few seconds. Article 10 may appear short and simple on the surface but establishing a database of such nature is at least five or ten years away in Vietnam. 

So casino investors remain uncertain. “After seeing the decree, many Vietnamese may think the control and management of gamblers is straightforward, but the reality won’t be so simple,” said Mr Ha Ton Vinh, Investment Adviser at the Van Don Casino Complex and Special Economic Zone. Clarification of the details is clearly needed. 

$4 billion game

Nearly six years have passed since the first draft decree on casinos was released. In that time each subsequent amendment opened up a little more potential for the industry and hope among investors. Mr Vinh believes that this was made so by the government not just out of caution but also as a means of gauging public opinion. But the slow opening up of the casino sector seems to be overly cautious and too slow. With such an approach, investors can’t be blamed for sitting on the sidelines. 

Despite the draft decree appearing to be more open, investors complained to VET that they are yet see any specific commitment from the government, especially regarding timeframes. Only a specific commitment such as this will ease the concerns of investors about becoming involved in casino complex projects, which cost billions of dollars to build and operate.
Even if the doors were opened wide to Vietnamese gamblers there are other barriers to investment. For instance, the requirement of $4 billion in initial investment capital remains in this most recent draft decree. The figure may well have reached by composers of the decree based on Singapore’s example, which allowed the US’s Las Vegas Sands and Malaysia’s Genting to build casinos in this price range. 

According to Mr Timothy Horton, General Manager of Cushman & Wakefield Vietnam, the proposed $4 billion minimum investment is at the higher end of expectations, but what it does is entice the larger, more influential groups to look at Vietnam and set a high standard of gaming in the country. “These developers will also then help to drive gambling tourism in Vietnam,” he said. “I think the Vietnamese Government needs to be very strict about who they allow to have licences so that the quality of the industry is not compromised.” 

The composers of the draft decree may have overlooked the fact that Singapore and Vietnam are two very different markets. Singapore’s government allowed Las Vegas Sands to build Marina Bay Sands in the heart of the country’s financial district, while Genting’s casino complex is built inside the globally famous Sentosa Park. “I think that if a casino complex is allowed to be built in Ho Chi Minh City’s District 1 or somewhere in the centre of Hanoi then $4 billion would not be a problem,” said Mr Vinh. “But if this is to be applied to Van Don or Phu Quoc Island then a rethink is needed.” 

Lawyer Vu Xuan Tien, though, believes stipulations on minimum investment are a must. “If we do not set this restriction then every hotel could apply to set up a casino,” he said. “How could we then regulate the quantity and quality of casinos?” His view may be shared by the government; that the industry needs giant investors with global experience like Las Vegas Sands. Mr Vinh, however, has a very different perspective. “There are very few global operators that can comply with this provision,” he said. “The few that can would also be considering far more competitive destinations.”

Mr Chris Murphy, Head of Valuations and Advisory for JLL Vietnam, doesn’t doubt that the capital restriction aims at ensuring only large-scale, reputable developers can enter the industry and that ultimately this would be beneficial. However, he also underlined that capital investment alone will not produce a successful operation. “It is necessary that the investment environment is transparent and encouraging for investment by casino operators from overseas,” he said. “Sadly, the experience so far in Vietnam is not promising, with MGM pulling out of Ho Tram Strip, citing difficulties in licensing procedures.” 

Towards a solution

After MGM left, The Grand Ho Tram Strip was granted a casino licence in April 2013 despite it failing to meet minimum disbursement provisions. The case can be considered a precedent and may be cited by future investors in calling for equal treatment. 

Nevertheless, major capital investments of national importance should perhaps be decided upon on a case-by-case basis. “By imposing prescriptive measures, the most creative solutions are not found and opportunities are missed,” said Mr Troy Griffiths, Deputy Managing Director of Savills Vietnam. 

There have been various comments on the draft decree, including both objections and support, after it was posted on the website of the Ministry of Finance for comment. “We have listened to feedback from all strata of society,” Deputy Minister of Finance Tran Van Hieu asserted. “We have gathered opinions and will now finalise the draft.” Mr Vinh will appreciate feedback being sought, as he has said that the decree is short on vision and fails to address demand within society and demand among investors. If it still doesn’t resolve the investment problems it will have to be adjusted again and again, just like previous drafts over the last six years.

Now is perhaps the time for senior government leaders to become more involved and liberate the potential of the gaming industry. Large casino complex projects may require the same level of investment, create the same number of job opportunities and contribute similar amounts to the State budget as key national projects in the oil and gas sector or the giant electronic projects of Samsung in Vietnam if given the chance. 

Only if incentives are provided that are the same as those given to the oil and gas sector and only if directives come from the Prime Minister on a case-by-case basis, as he recently did in saving Microsoft’s plan to import 39 old production lines that fell foul of the Ministry of Science and Technology’s Circular No 20/2014, can the casino industry have the opportunity to prosper. 

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