Vietnam - Casino builders need ‘skin in the game'

VietNamNet Bridge – An enterprise applying for a casino license would be required to develop a fully integrated complex that complies with the casino operation master plan.

The enterprise would also have to have been established and in operation for at least 10 years, according to a draft decree on casino development recently circulated for comment by the Ministry of Finance.

The new requirements would certainly narrow the number of foreign developers qualified to participate in this developments, but not to an extent that should make officials worry, said Mark D. Capasso, executive director of the hospitality and gaming group at the real estate services firm Cushman&Wakefield.

"Most of the developers that are looking to expand into Asian markets are major players anyway, with incredible track records," Capasso said.

"Therefore this step will help insure the integrity of the industry in Viet Nam," he added.

The draft decree would also require a casino developer to inject at least 50 per cent of the committed investment capital into the project. This would ensure the developer has "skin in the game" and help guarantee the completion of the project, according to Cushman&Wakefield.

The draft decree would also limit the extent to which foreigners and overseas Vietnamese could invest in casino projects.

"Anytime you limit participation, you limit the chance of making money; however some form of social control may need to be implemented to protect the local populace from themselves," said Capasso.

"Most developers in situations like this are used to dealing with such social controls," he pointed out.

In the US, gaming control is done on a state level via a gaming commission or control board, he noted. Positions on the board were usually appointed to avoid influence peddling in elections and insure the integrity of the industry.

Capasso's colleague Leon Cheneval said that the only licensed casino project in Viet Nam of any significant scale was MGM's Ho Tram Strip, which would feature 180 gaming and 2,000 electronic gaming machines.

Other developers, including Las Vegas Sands and Donaco Singapore, were also joining forces to take a seat at Viet Nam's gaming table, said Cheneval, who saw this as an indicator that major operators with experience and knowledge in the industry were willing to invest in Viet Nam.

Capasso claimed that "the likelihood of finding a developer will depend on the size and depth of the market and the current and planned competition that will result from the government's shift into gaming. If there are a limited number of licenses granted, or a monopoly is granted the likelihood is higher than if there are no limit to the licenses".

The two primary models that Viet Nam could take into consideration would be Macau and Singapore, which both offer integrated resorts, he said. However, the integrated resort was not necessarily a requirement for these projects but was driven by market forces.

"There's not much chance for anyone to invest the required capital that Viet Nam is asking for without doing an integrated resort," Capasso said.

"It should be noted that Macau chose a few developers to build casinos and granted a master licence to Las Vegas Sands for the entire Cotai Strip. Las Vegas Sands then sold other concessions to other developers. However, in Singapore, a monopoly was granted to Sands. Both systems seem to be working well," he added.

To attract foreign investment into this particular sector, the Government would need to provide transportation linkage to and from the property and points of interest, including airports, he said. Development incentives (tax rebates, land concessions, etc.) may be needed but should be doled out carefully, since these incentives can often hurt more than help.

Source: VNS

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