Japan will remain the key Asian casino market to watch in 2019, even though it is unlikely to have any operating venues before 2025 at the earliest.
Industry observers expect the country’s authorities to announce either some specific criteria or general major requirements for the three so-called integrated resorts (IRs) that will be allowed there in the first phase of liberalisation. More detail is also expected on the formation of an oversight body to be in charge of casino regulation with effect from July 2019.
Elsewhere in Asia, passage of a long-discussed draft gaming law prepared for the Cambodian government – which is due to regulate the country’s gaming business – has been touted as possible in 2019. Meanwhile, online gaming operations in that country – and in the Philippines, another key Asian gaming jurisdiction – might come under increased scrutiny by interested authorities, several industry consultants remarked to us.
The “biggest” announcement to watch out for in Japan’s nascent gaming scene during 2019 would be the country’s Ministry of Land, Infrastructure, Transport and Tourism (MLIT) giving detail on what convention and other tourism-related facilities would be required for an IR project. So said Mike Tanji, chairman of Tokyo-based Gaming Capital Management Inc in comments to GGRAsia. He expected that would happen “by July”.
Detailed regulation regarding shareholding structure and operation of such resorts “would take longer, so that it is not highly likely” that the public would know the “final” details in 2019, Mr Tanji remarked to us in an emailed statement.
Another key event to watch for in Japan in 2019 would be establishment of a casino oversight body, referred to locally as the casino administration committee, remarked separately Mr Tanji and Paul Bromberg, chief executive at gaming due diligence consultancy Spectrum Asia Ltd.
Japan’s new body, to be an external bureau of the Cabinet Office, will reportedly be in charge of casino regulation, including licensing control, probity and background checks, but will not be involved in day-to-day vigil of casino operations.
Mr Bromberg said he believed Japanese prefectures that wished to host a casino resort would “continue their efforts to attract interest from operators and investors”, and would be preparing in 2019 the steps needed for the request for proposal (RFP) phase. The latter would come “mostly likely in 2020”.
There was still a number of variables to be determined regarding Japan’s casino story, Mr Tanji told us. Among them was “various political matters,” including the “national priority for local development”. The latter could affect the criteria to be applied when local governments were invited to make their bids to the national authorities, as well as which prefectures would ultimately be deemed suitable for hosting such facilities.
Mr Tanji added that each proposed resort concept would in likelihood need to be a good cultural fit locally and also have a “certain cultural impact to show the direction of Japan globally”.
He further stated that merely having “a combination of a number of facilities would not work, and a simple coordination with Japan’s tradition and culture may not work either”.
Many of the major casino brands across Asia and beyond have made public their desire to be involved in resort operations in Japan. Most – including MGM Resorts International and Melco Resorts and Entertainment Ltd – have expressed a preference for a metropolitan rather than small-town location .
“It should be noted that the [IR] licensing process is separated from the location decision process,” noted Mr Tanji. This meant that “theoretically” it would be possible for an overseas operator to be chosen as a partner for a Japanese local government but then not be accepted by the national authorities for gaming licensing. Despite the potential for commercial risk posed by such a set-up, Mr Tanji told us: “I do not think Japanese government would change this structure.”
He added: “This means that local government shall be careful in choosing an operator from scratch. Accordingly, it is quite likely that local governments would prefer to work with Western-country-licensed operators.”
Regarding other developments in Asia, Andrew Klebanow, senior partner at business consultancy Global Market Advisors LLC, told us he believed that the passage of Cambodia’s gaming legislation could be expected “some time in 2019”. The long-heralded draft bill – known as the Law on the Management of Integrated Resorts and Commercial Gaming – was currently under review by the Council of Jurists – a body under Cambodia’s Council of Ministers – Mr Klebanow added.
It would “provide a robust gaming regulatory regime, licensing requirements, transparent reporting and reasonable tax rates”. Mr Klebanow added in emailed remarks to us: “These are essential if Cambodian political leadership wants to elevate its gaming industry into a major driver of tourism.”
Hong Kong-listed Suncity Group Holdings Ltd, headed by Macau junket boss Alvin Chau Cheok Wa, recently announced a deal to run a casino in Cambodia on behalf of a third party, with operations likely to start in 2020.
Mr Klebanow noted that casino operators in Poipet and Bavet – two Cambodian border towns serving consumers from neighbouring countries where casino gambling is banned – had been investing in more hotel rooms in bid to drive gaming revenue.
“Hotel rooms remain the most important non-gaming amenity that casino operators can add that will drive incremental gaming revenue. The casino operators in both Poipet and Bavet recognise their importance as such: new hotel towers are rising behind several of the casinos in those markets,” Mr Klebanow stated.
Internet-based gaming out of some Asia-Pacific jurisdictions could come under greater scrutiny in 2019, said Mr Bromberg. That could include attention from authorities in particular countries because their nationals are being targeted as consumers, or scrutiny from pan-national bodies concerned about cross-border money flows.
“Online gaming operations in the Philippines and Cambodia, to name but two key locations in Asia, will come under increased scrutiny by regulators and law enforcement,” Mr Bromberg remarked to us. Forms of online gambling said to be hosted from those nations include live streaming of live-dealer casino table games, typically aimed at customers based offshore.
Mr Bromberg added the use of cryptocurrencies in gaming-related business “will become even more controversial in 2019, with governments examining how and whether it is feasible to regulate the blockchain technology used”.
For the coming year, Macau would “continue to transition into a mass and premium-mass market”, suggested Mr Bromberg. The consultant said additionally he believed there would be “even greater focus” on how the scenario for refreshment of the gaming rights for the six Macau gaming concessionaires would evolve.
Banking group Morgan Stanley said in a recent note it expected no decision on Macau’s gaming licence refreshment until the city gets a new chief executive, in December 2019.
The concessions of the six current Macau operators expire on various dates in either 2020 or 2022. First to mature are the respective current licences of SJM Holdings Ltd and its sub-concession, MGM China Holdings Ltd. Those rights expire in March 2020.
“The only issue that will likely still be decided” by the current Macau administration would be whether to extend SJM Holdings’ concession and by implication the sub-concession of MGM China spun from it, Macau gaming attorney Jose Alvares, a partner at Macau-based CA Lawyers, told GGRAsia.
“In my opinion that should be granted so as to ensure a level playing field for the 2022 tender,” he noted.
Though he added any such decision “should be announced no later than six months prior to the expiration as the concessionaires have some obligations pursuant to an eventual expiration.”
Mr Alvares further stated: “Such obligations include acquiring the venues where casinos are operated by the same and which the concessionaires do not own.” This was in order to ensure that – in the event of expiration and no new gaming rights being obtained – “the casino reverts to the government upon expiration,” in the manner anticipated by the existing gaming law framework.
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"This decision [regarding the concession extension] strengthens our capacity to finance the business. We have a whole series of different scenarios we are now working through"
Chief executive of Macau casino operator MGM China Holdings