‘Foreigners only’ law may dent Korea’s casino plans

‘Foreigners only’ law may dent Korea’s casino plans

Thursday, May 22, 2014 – 10:09

Bae Hyun-jung

The Korea Herald/Asia News Network

MACAU – The casino business is one of the very few industries that has been enjoying double digit growth over the years, especially in Asia, but whether South Korea will be able to take its share of the pie is yet to be seen.

The greatest factor in its chances of success is whether the government will open up the market and end the ban on gambling for Korean citizens, according to a leisure business expert.

“Compared to Macau or Singapore, Korea’s gambling market is small, but it offers huge opportunities for global operators that plan to expand their business,” Steve Park, managing director of market entry consulting firm KORE, told The Korea Herald.

Park, who is also the executive director of the Integrated Resorts Industry Development Forum, attended the eighth annual Global Gaming Expo Asia 2014, in Macau this week, to speak about the Korean gaming industry.

According to global consulting firm PricewaterhouseCoopers, the world’s casino market is expected to amount to $187.2 billion in 2015, 55 per cent up from 2010.

It was against this backdrop and anticipation for future profit growth that the South Korean government recently voted to create foreign-invested casinos and mega-sized integrated resorts in the country.

In October 2013, a joint consortium of Las Vegas-based Caesars Entertainment and Indonesian conglomerate Lippo Group was granted a license to initiate a $1.9 billion casino resort project near Incheon International Airport on Yeongjongdo Island.

“The casino industry is likely to take a significant leap in upcoming years, boosted by the government’s recent series of plans to establish large integrated casino resorts and to allow foreign capital to participate,” Park said.

According to the Ministry of Culture, Sports and Tourism, 2 out of 10 tourists to Korea last year visited casinos during their visit and half of them were of Chinese nationality. Also, the number of Chinese gamblers in South Korea soared by 245 per cent from 2009-2013.

“But should Korea fail to make the right move at the right time, it might irrevocably fall behind in the global market.”

Park’s guarded stance largely referred to Japan, which expects to legalize the casino business as early as June this year, in the hope of activating the industry by the 2020 Tokyo Olympic Games.

“Of course, the actual processes will take years, as Japan currently does not have the necessary infrastructure, much less the operating system,” he said.

“But once Japan legalizes casinos and moves on to details, a large sum of investment capital will then flow into the Japanese market, leaving little for Korea to profit from.”

In order to prevent that from happening, the consultant suggested that South Korea consider abolishing the law which bans local residents from using casinos, except the state-operated Kangwon Land Casino ― a regulation which has been in force since the 1970s.

“The casino business, more than any other sector, involves an economy of scale, and thus requires a hard investment,” Park explained.

“The global big players will hesitate to commit themselves to the Korean market, as long as the ‘foreigners only’ regulation persists.”

He admitted that the lift of the ban and the resulting expansion of the gambling business would also give rise to a number of controversies, such as gambling addiction.

“The Korean public has a general sentiment of fear against gambling, and that is quite understandable, considering the consequences,” he said.

“But Korea seems to have decided to go down that road and seek growth in the market, so what it should do at this stage is to prepare itself with preemptive measures and, most of all, to open up for investment.”

 

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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