| |
The
Business Times, 31 May 04
Singapore can win big with gaming
It has advantages others lack, but must permit local patronage and
address social costs
by Vikram Khanna
WITH competition in Asia's US$13 billion casino gaming industry starting
to hot up, what are Singapore's chances of capturing a decent slice
of the pie - assuming it wanted to?
Pretty good, if the views of the world's gaming giants like MGM-Mirage,
Caesars Entertainment and Venetian Sands are any indication.
Moreover, if the Singapore authorities - and the major industry players
- play their cards right, the gaming and related industries can transform
Singapore's tourism, hospitality, arts and entertainment scene, leading
to job creation and tax revenue on a significant scale - far more
than many other industries (like biotechnology) on which Singapore
has bet big.
Moreover, gaming is an industry that can create high-paying jobs without
requiring high-level tertiary skills on a large scale (which fits
well with Singapore's current skill profile). And, crucially, what
Singapore can potentially do in the gaming business cannot be easily
replicated elsewhere.
To see just how strong Singapore is as a contender, one common misconception
about the gaming industry needs to be dispelled. This is the idea
that it is a 'sleazy' industry. That is certainly true of its history;
up until the 1970s, it was associated with mobsters and mafiosos,
but that was because they were the only people willing to finance
it.
Today, the story is totally different. The world's gaming giants are
New York Stock Exchange-listed companies with multi-billion dollar
revenues, run by professional boards and they raise their funds on
capital markets. They are among the most regulated and closely monitored
companies anywhere, answerable not only to their shareholders (which
include institutions) but also to gaming control authorities and US
state governments. There are strict rules to which they must conform
in terms of who runs them, how they are run and how they are regulated.
If they step out of line, they get rapped. They can even lose their
licences to operate, virtually overnight. Moreover, their licences
are interdependent. If they run into a serious problem in an Asian
location, where say, regulations are improperly designed or enforced,
their business in other locations (including the US) can be put in
jeopardy. In short, their circumstances force them to observe the
highest standards of corporate governance and to be highly risk averse.
To the giants of the gaming industry, risk aversion means, first and
foremost, investing only in locations where they can be confident
of the gaming regulatory systems, including enforcement, as well as
legal systems (for purposes of debt collection, including cross-border
debt). The quality of infrastructure, airline connectivity and availability
of support industries also matter.
Singapore has advantages over other Asian locations (including Macau)
in all these areas, but its biggest advantage lies in the perceived
integrity of its regulatory systems. This is a matter of confidence
and trust, built up over time, and is not something other locations
can easily replicate. This is why, while many countries can invite
companies to set up casinos (or allow local companies to do so), most
are unlikely to attract large investments by big players, who need
to have a high level of comfort with the regulatory and legal (apart
from physical) infrastructure before they commit large resources.
And if they make smaller investments, these are likely to be concentrated
on gaming, rather than on integrated resorts that encompass entertainment,
the arts, retail, food and beverage, spas and convention facilities.
Thus, it is notable that despite all the hoopla, the US$240 million
invested in Macau by Venetian Sands is, in fact, a modest investment
by the standards of the gaming giants, whose major properties involve
investments of US$1 billion each, at a minimum.
Singapore has an additional advantage over most other locations in
Asia that are vying for the gaming business: it needs the tax revenues
less. This means it can afford to peg gaming tax rates at relatively
low levels (like under 10 per cent). From the gaming industry's perspective,
the lower the taxes they have to pay, the higher their expected post-tax
returns, the higher the capital investments they are prepared to make.
Better bet: In short, while many other locations can attract casinos
of some form or another, Singapore has a better shot than most at
getting major investments by big players in integrated resorts that
would span not only gaming, but also other areas.
However, there are two key issues that Singapore must face squarely
if it wants to get the full benefits that the gaming industry can
offer.
One is that it must be prepared to allow local residents to patronise
resorts, rather than confining them to foreigners or high rollers.
The 'passports only' or 'super-rich only' models will not induce major
investments and will therefore not produce benefits on a significant
scale. So-called exclusive casinos which cater to a select few are
not worth the trouble of legalising gaming.
There will also be social costs Singapore must face. Opponents of
legalised gaming have drawn attention to the possible consequences
of 'problem gambling'. It is a valid concern, which needs to be addressed.
But it should be addressed whether Singapore legalises gaming or not,
because there will be plenty of places in Asia for Singapore-resident
gamblers to go - in fact, there is choice enough already. Legalising
gaming might, in fact, enable appropriate regulations and mechanisms
to be devised to deal with 'problem gambling' that would not happen
if gaming remains illegal. |
|
