For Vietnam to be successful in attracting major international casino operators any new gaming law “will have to dramatically lower the minimum investment requirement (currently set at US$4 billion), as well as lower gaming tax rates (currently 35 percent) in order [for operations] to be competitive in the region,” says a note from Union Gaming Securities Asia Ltd.
The brokerage adds that the location for the new casinos licences would also be critical to make Vietnam more appealing to investors.
“Depending on whether or not the government is willing to settle for less, and in the context of the current China macro, it is hard to imagine a scenario where there will be significant international interest on the part of the major players … unless an integrated resort licence (with locals allowed) is available for downtown Hanoi or Ho Chi Minh City,” said analyst Grant Govertsen in a note on Wednesday.
Vietnam’s Ministry of Finance has reportedly completed a draft decree last year aiming to promote the development of the country’s gaming industry.
The new rules would very likely allow Vietnamese nationals to gamble at home, Augustine Ha Ton Vinh, an academic who says he is advising the government on liberalising Vietnam’s gaming industry, said in November. The gaming decree should however define some eligibility criteria – including a minimum gambling age and a minimum monthly income threshold, he added at the time.
The new rules would also halve the minimum capital investment required to access one of four licences still available for development of large-scale casino resorts in the country, said Mr Vinh. He said he expected the government to release the new set of rules in the first half of this year.
Union Gaming’s Mr Govertsen said that lowering gaming tax rates would be crucial for Vietnam to be competitive in the region.
Vietnam’s gross gaming revenue tax is currently set at 35 percent, although the effective tax rate is lower given that junket commissions are deductible, according to Union Gaming.
“It remains to be seen if a new draft decree will lower the effective tax rate further, which we believe would be necessary for Vietnam to compete effectively on a regional basis and attract world-class developers,” said Mr Govertsen.
Critical factor
“Assuming that locals are approved at up to four integrated resorts, the locations would be critical. Current thinking includes a north, central, south and southwest (Phu Quoc island) strategy,” said the Union Gaming analyst.
Union Gaming said it does not expect “much (if any) interest on the part of the major gaming companies … unless two or three important conditions are met: 1) locals gaming, 2) licences granted in the major cities of Ho Chi Minh and Hanoi, or 3) the minimum investment requirement is lowered substantially to a number less than US$1 billion”.
The brokerage said that should the licences be for locations outside major cities – and the investment requirement more reasonable – “a central Vietnam licence could make sense in or near Da Nang given that Da Nang remains a playground for Vietnam’s elite and could capture an outsized share of this wallet.”
Other locations could include a northern licence for places like Hai Phong or Ha Long, which “could pull from the Hanoi metro area”.
“Finally, whether or not a southern locals licence is granted to Ho Tram will effectively determine this property’s fate,” said Mr Govertsen. The Ho Tram Strip is a beachside resort 120 kilometres (75 miles) southeast of Ho Chi Minh City, the country’s main southern city. The first phase of the Ho Tram Strip opened in July 2013, with 541 five-star rooms and permission for up to 90 tables.
In the event that either locals are not allowed inside casinos or the locations are to be outside of the major cities, Union Gaming said an entirely different set of gaming developers could be in play in Vietnam, including Philippines-based Bloomberry Resorts Corp, Australia-listed Donaco International Ltd and Cambodia casino operator NagaCorp Ltd.
“Of course, in the context of a foreigners-only environment, we would expect the developers of the gaming portion of a project to want to limit their exposure to a reasonable dollar amount that would in all likelihood be significantly lower than US$1 billion,” said Mr Govertsen.
