South Korea’s bold plan to become a global gambling hub is falling apart; The Incheon Free Economic Zone has scrapped a $280 billion plan to develop a gambling center that would rival Macau

August 2, 2013, 4:19 PM

Incheon’s Casino Dreams Fall Apart

By Kwanwoo Jun

South Korea’s bold plan to become a global gambling hub is falling apart. The Incheon Free Economic Zone of South Korea said Thursday it scrapped a $280 billion plan to develop a fishing village off the country’s west coast into a gambling enclave that would rival the Chinese territory of Macau. The plan collapsed because Eightcity–the business consortium that includes the South Korean unit of luxury hotel operator Kempinski AG–failed to attract enough investment, officials at the Incheon economic zone said.he government has been seeking to boost tourism to South Korea to help cushion the blow from slowing exports, which account for half of the country’s economy. The development in Incheon was part of efforts to build more casinos that would draw Chinese tourists en masse. There are 17 casinos in operation in South Korea, but only one is open to locals.

The Eightcity development would have created a resort complex with casinos, hotels and other entertainment facilities on a patch of partially reclaimed land 2.8 times larger than all of Macau. The contract was signed six years ago but construction never started.

Incheon Free Economic Zone officials said the consortium had repeatedly broken the deadlines for attracting investment since the contract was first signed in 2007. They finally canceled the contract on Thursday, a day after the last extended July 31 deadline, after Kempinski failed to raise its promised $40 million to pay local land owners in the Yongyu-Muui district near the Incheon international airport.

KI Corp., Kempinski’s South Korean unit and the consortium leader, declined to comment. Korean Air Lines Co. and Daewoo Engineering and Construction Co. are also part of the consortium.

The Incheon Free Economic Zone now plans to find new developers to replace the Eightcity consortium for fresh projects yet to be decided, officials said.

In June, Seoul’s tourism ministry turned down applications for casino licenses from international bidders: Japanese magnate Kazuo Okada’s Universal EntertainmentCorp. and a consortium including Las Vegas-based Caesars Entertainment Corp. and Indonesian conglomerate Lippo Group. The ministry said they all failed to meet qualifications for the casino business in the country, without specifying details. Officials speaking on condition of anonymity said at the time that the bidders were assessed using various criteria like financial health, business experience, reputation and their proposed investment.

The Korea Casino Association said the country’s gambling revenue totaled 2.46 trillion won ($2.19 billion) in 2012–way behind the $38 billion that Macau, the world’s biggest gambling market, generated last year.

Singapore launched its first casinos in 2010 and already posted $6 billion in gross gambling revenue the following year.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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