Super-casinos open in the island republic

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Super-casinos open in the island republic

Postby DM101 » Tue Mar 30, 2010 9:04 am

Anxious to boost revenues in a time of economic uncertainty, the Singapore government legalized gambling. It sold lucrative gaming licenses and levied a tax on winnings. But the advent of state-sanctioned gambling brought a rise in social problems such as addiction and crime and within three years, the government closed the gaming houses.

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That was in 1823, four years after Sir Stamford Raffles first unfurled the British flag on the island of Singapore. Some 187 years later, Singapore is hoping that its latest experiment with legalized gambling turns out rather better.

The first of Singapore's two super-casinos, the US$4.5 billion Resorts World Sentosa, flung open its doors on the auspicious first day of the lunar New Year, February 14. The US$5.5 billion Marina Bay Sands will follow on April 27.

Setting aside its deep-seated puritanical instincts, the ruling People's Action Party has made a big double bet. Firstly, that the casinos will attract enough punters to allow the operators, Malaysia's Genting and America's Las Vegas Sands, to recoup their massive investments and boost the wider Singapore economy. And secondly, that the casinos can thrive without leading to an increase in prostitution, addiction and organized crime, the sort of problems that tend to proliferate around gaming houses in Asia.

At stake is Singapore's carefully-cultivated international image as a safe and orderly commercial hub and the domestic credibility of a government that clams legitimacy from always knowing best.

The government's decision to legalize casino gambling in 2005 sparked a rare public debate, with tens of thousands signing a petition against the move.

The government's rationale was economic, with Prime Minister Lee Hsien Loong saying in 2005 that he wanted to give Singapore the "buzz" that you get in London, Paris or New York to ensure that tourists and expatriate workers keep coming to the city-state. In particular, the government was said to be counting on cash-rich mainland Chinese who are looking for places to lay bets far from prying eyes in Macau, which is much closer to China but which has operatives on the watch for officials seeking to gamble away government funds.

The two casinos are thus crucial to the government's target to attract 17 million visitors by 2015, up from the 9.7 million tourists last year who spent S$12.4 billion (US$8.9 billion), according to the Singapore Tourist Board.

The government, which has warned that the economy must be radically retooled if it is to achieve solid growth, hopes the revenue from the tax on casino winnings as well as other spending by casino visitors will provide a much-needed lift to its coffers.

Having euphemistically dubbed the casinos "integrated resorts", the government hopes that, in time, the attached hotels, restaurants and theme parks will generate the bulk of the revenue, reducing Singapore's dependence on the pure gambling take.

But Michael Leven, the chief operating officer of Las Vegas Sands, has said that he expects 75 percent of revenue to come from the gaming tables in Marina Bay Sands' first year of operation.

Just over a month after the soft opening of the first casino and weeks before the second opens, it is too early to say whether Lee can succeed where the British failed. So far the signs are mixed. On the social front, the government has banned more than 29,000 bankrupts and those receiving state benefits from entering the casinos and has tried to convince families of gambling addicts to have them excluded.

It has also insisted that Singaporeans pay a hefty entry fee of S$100 (US$71.28) per day or S$2,000 per annum to make them think twice before heading to the baccarat tables or slot machines.

But there have already been a number of casino-related problems, with several people charged with trying to cheat the house and some petty crimes like mobile phone theft and Singaporeans attempting to evade the entry fee.

On the financial front, the challenge is perhaps even tougher. The government in January took the crucial decision to severely restrict the operation of Macau-style junkets, the middlemen who bring in high-rollers in exchange for commission from the casinos.

In Macau, junket-assisted VIP gamblers are believed to account for about 60 percent of gaming revenue. The junkets also provide mainland Chinese gamblers with the lines of credit that are vital given China's currency export restrictions. This approach makes it less likely that Singapore would suffer the vice, violence and illegal side-betting that sometimes accompanies the junket business in Macau. But it will make it much harder for the casinos to bring in the crucial VIP gamblers. With junkets largely out of the picture, the casinos will have to run their own lending operations, which bring with them the risk of bad debts and messy disputes.

Anecdotal reports suggest that Resorts World, which is on the entertainment-focused island of Sentosa just off the southern coast of Singapore, has been reasonably busy since it opened. But the company has remained tight-lipped.

Resorts World is reported to have received 35,000 punters in its first two days, compared to the 114,000 that passed through the doors of the Venetian in Macau when it opened in 2007. A report in Singapore's Today newspaper claimed that the casino generated gaming revenue of S$40 million (US$28.5 million) during those first two days, though industry analysts believe that figure is far too high. Las Vegas-based Union Gaming Research has suggested that US$7-8 million per day is a more likely ballpark figure.

A research note released by Credit Suisse last week suggested that the S$100 levy may be putting off many Singaporeans, depriving Singapore of the casual gamblers who are able to pop into Genting's Malaysian casino, for example.

"We are surprised that not a single taxi driver we questioned has been into the casino yet, due to a casino levy of S$100 imposed by the government," analyst Loke Foong Wai wrote in the note. "Only few of our overpaid Singapore colleagues have ventured into the casino, for the same reason."

Credit Suisse is among the bears on Singapore's casino industry. While market expectations for 2010 casino revenue range from US$3 billion to US$6 billion, Credit Suisse is projecting US$2.6 billion.

By contrast, Las Vegas' 37 casinos generated US$6.1 billion in 2008, while Macau's 31 casinos generated US$13.5 billion.

If Singapore were to overtake Las Vegas in its first few years, it would be some achievement. But the danger is that, in the rush to recoup the huge outlay by Las Vegas Sands and Genting, the casinos and the government will be forced to put caution to one side.

"My concern is they overspent on the two integrated resorts," said Ronald Tan, a Singaporean gaming consultant, in a recent interview with the government-controlled Straits Times newspaper. "Instead of allowing both casinos to open in a more relaxed way during the first few years, the IRs are now under tremendous pressure."

The government will have to pull off a delicate balancing act to ensure that success on the gaming tables does not prove to be, in Raffles' words, "highly destructive to the morals and happiness of the people".

Source: http://asiasentinel.com/index.php?optio ... Itemid=233
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