It is “not a surprise” that Cambodian officials might be seeking to present soon to the country’s cabinet a draft gaming law for the country, said Tim McNally (pictured), chairman of casino operator NagaCorp Ltd, in comments to GGRAsia.
But he added he wouldn’t speculate regarding a media report the document would propose a 4-percent to 5-percent tax on casino gross gaming revenue (GGR). NagaCorp currently pays a flat tax – adjusted upward on an annual basis – levied on its gaming tables and slot machines.
The Khmer Times newspaper had reported on Tuesday that a draft version of the gaming law – which has been several years in the making – would go to cabinet before the end of this month.
“I had been privy to other conversations… that they [the government] were going to try to do something before the end of the year,” Mr McNally told us.
“It’s not a surprise that it’s likely to come within the reported timetable. I think they have been trying to complete and move the process,” he added.
NagaCorp, operator of the NagaWorld casino resort, has stated in filings to the Hong Kong Stock Exchange that it has a 70-year licence for land-based casino gaming, valid until 2065, and a 41-year gaming monopoly, ending in 2035, for activities within a 200-kilometre (124-mile) radius of the Cambodian capital, Phnom Penh.
Regarding a possible GGR tax for the Cambodian market, and the rate at which it might be levied, Mr McNally noted: “I wouldn’t speculate on the number… the Ministry of [Economy and] Finance and others have always said they are aware of the competitive nature of the gaming industry in the region – in East Asia – and they would be mindful of that and try to keep Cambodia competitive in terms of taxation.”
In July, NagaCorp reported a 20.3 percent year-on-year increase in net profit to US$150.6 million for the six months to June 30. The growth was fuelled by a 39.6-percent jump in GGR.
According to those company results, it paid the Cambodian government US$462,362 per month for the first six months of 2017 for gaming operations and US$214,500 per month on non-gaming business, amounting to an aggregate US$4.1 million for the first half.
Mr McNally noted the firm’s tax contribution on gaming under its existing, flat tax-based commitment, had been adjusted upward by 12.5 percent each year “whether our revenue goes up or down” and that the group’s effective tax for total revenue in 2016 was “about 4.8 percent”.
The Cambodian government has stated that one of the objectives of a gaming law was to encourage direct investment in the country’s gaming sector by other foreign companies. The news heralding possible casino regulation comes shortly after a study indicated Cambodia’s oversight of its financial sector had been improving.
A mutual evaluation report on Cambodia, published on September 5 by the Asia/Pacific Group on Money Laundering (APG), said Cambodia had made “significant improvements to its level of technical compliance” regarding international standards promoted by the Paris-based Financial Action Task Force (FATF) relating to “criminalisation of money laundering and terrorist financing; customer due diligence; record-keeping; and suspicious transaction reporting”.
The APG – a Bangkok, Thailand-based financial watchdog with international membership – added that “further improvements in technical compliance are necessary to make Cambodia’s regime effective in the context of serious money laundering threats and vulnerabilities”.
NagaCorp’s chairman Mr McNally noted in his comments to GGRAsia regarding the possibility of the Cambodia market opening up to new investment from overseas casino operators: “We have always said publicly or otherwise – as a publicly-listed company – that competition is something we would embrace rather than be concerned about; as long as the government respects our territorial monopoly and terms and conditions.”
The NagaCorp chairman was asked whether the company was concerned a Cambodian gaming law might lead to more online gaming licences being issued in Cambodia, and whether this might upset China. The latter country is regarded by investment analysts as a key source of customers for Southeast Asian bricks and mortar casinos, and China criminalises unlicensed forms of online gambling and actively seeks to prevent its citizens from gambling online either at home or overseas.
Mr McNally stated: “Our [group's] companies exercise self-restraint. For a long time we have had an online gaming licence or we could – theoretically – be involved in it [but are not]. We are very sensitive and aware of restrictions and limitations [in this field] regarding China.”
Asked whether the firm operated in NagaWorld proxy betting – a system where a person not physically present in the casino relays instructions, usually via telephone, to a representative or “proxy” sitting at the casino table – or allowed junkets to do so, Mr McNally said: “No. We run straightforward casino table gaming operations. I think there’s some proxy betting activities at [other operators’] border casinos… and also remote gaming, interactive [digital casino] gaming is I think concentrated at the border areas…”
He added: “Regarding online sports betting, that’s an area we have not ventured into; maybe the law will provide greater clarity… we will wait and see what the provisions are.”
Cambodia’s licensed casino sector has developed during the near 20-year tenure of the country’s leader, Prime Minister Hun Sen. The APG’s latest report said that as of December 2016, the country had 63 licensed casinos.
But the domestic political climate has recently become more clouded. The English-language Cambodia Daily, a newspaper that had been critical of the government, recently closed after being presented with a US$6-million tax bill, and a leading opposition politician, Kem Sokha, was recently detained on accusations of treason.
Mr McNally was asked whether the company had any concern that Cambodia’s current domestic political scene might erode public sympathy for the casino industry in general and for NagaCorp in particular.
He stated: “No. People are more concerned about our numbers; our [business] performance. For us the business environment continues to be favourable. The [anticipated] gaming law provides a structure and clarity. We will leave politics to the politicians.”
Mr McNally added that an additional development attached to the NagaWorld site – the TSCLK Complex, also known as “Naga2″ – was “still on” for an October opening.
The US$369-million Naga2 will feature gaming facilities with capacity for up to 300 tables and 500 slot machines, according to NagaCorp’s website. It will also include VIP rooms. The property will addtionally offer 1,000 extra hotel rooms.
Regarding the group’s planned casino resort investment in Primorsky Krai, in the Russian Far East, Mr McNally stated, referring to a summit held earlier this month and attended by world leaders including Russia’s President Vladimir Putin: “Our company participated in the Eastern Economic Forum last week in Vladivostok. We had very productive sessions, we made a number of presentations, and we are still going to move forward with the timetable of [opening] around March 2019.”
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