Emerging and potential markets Beyond Macau and Singapore Hold key for region’s growth

The Asian region still holds the perhaps greatest potential for new players and markets in the gaming industry, despite the current economic conditions. Much attention has rightly been paid to the explosive growth of the Macau gaming market and the emergence of Singapore as a future leading Asian gaming destination.

Keen operators and investors, however, should also pay close attention to Asia’s lesser-known gaming markets as well as those countries considering legalizing casino gaming. Following is our country-by-country assessment of these second-tier and emerging markets.

CAMBODIA

Apart from the NagaWorld casino monopoly in Phnom Penh, many casinos exist in border areas, such as Poipet, Pailin and Koh Kong. These cater primarily to Thai patrons, with Bravet catering to Vietnamese patrons.

There had been a huge growth in slot parlors in Phnom Penh, but all slot parlors were suddenly closed at the end of last year, and are unlikely to be allowed to reopen in the foreseeable future.

There is no regulation of the gaming industry, a lack of transparency and rampant corruption in Cambodia, all of which will prove key barriers to legitimate international casino operators. There is unlikely to be any change in this status quo, although the nature of the industry is changing due to the increase of virtual or online casinos, such as Pailin Flamingo casino.

Several foreign investors have looked at potential casino projects in Sihanookville and Koh Rong, but none has reached fruition. Likewise, permission has been granted for a Korean invested casino hotel development in Siem Reap, where the Angkor Wat world heritage site is located.

CHINA

Many people forget that gaming already exists in China, but in Macau only. Further legalized gaming expansion is unlikely in the foreseeable future given that gambling remains illegal under the country’s constitution. That said, slot parlors and more lotteries are likely to be allowed in due course, most likely in Shanghai or on southern Hainan Island.

INDIA

Casinos in Goa have opened to foreign visitors and there is considerable potential due to the emerging middle class. Despite the announcement by the northeast state of Arunachal Pradesh in February 2008 that it intends to legalize casino gaming, cultural and religious issues will have to be overcome before other Indian states follow the same path. Legalized gaming is likely to expand slowly over the next 5-10 years.

INDONESIA

Casino gaming is illegal, and cultural and religious barriers mean that this situation is not expected to change. However, casino projects are being discussed on BintanIsland — one hour by ferry from Singapore — that would be open to non-Muslims only and could supplement, not threaten, the two Singapore integrated resorts now being built. Bintan would have to be anointed as a Special Tourism Zone, and this is being considered after the July Presidential election. Nothing is likely to change on Java — although illegal casinos do exist in Jakarta.

JAPAN

If casino gaming is legalized in Japan, it would be an investment favorite due to the country’s large, wealthy population. Interest has been growing over the last 18 months among major gaming industry investors and developers. A political consensus was required and apparently now exists for legalization to proceed. Existing pachinko and pachisuro “gaming” industries are also being consulted during the legalization process.

However, the movement toward legalization of casino gaming has been delayed due to political and economic instability. Upon legalization, there will be considerable excitement in the gaming industry, although the number and type of casinos has yet to be decided. It is likely that the Japanese government will initially authorize two or three integrated resort or MICE- (meetings, incentives, conventions and exhibitions) type projects.

LAOS

There are presently two casinos in operation: Dan Sa Vanh — one hour by car from Vientiane — and Savan Vegas Hotel & Casino in Savannakhet. Both rely entirely on Thai patrons. There is unlikely to be any major change in the industry in the foreseeable future.

MYANMAR

There are two casinos on islands off the southern Ranong province of ThailandMyanmar side of the Mekong River in the north of Thailand also catering to Thai patrons. Two casinos operate in Minelar, in the Shan State Special Region No. 4, on the Chinese border catering to PRC nationals and there has been a huge recent growth in slot parlors in the capital Yangon. However, a complete lack of regulation and transparency, together with rampant corruption and Myanmar’s reputation as a “narco state” provide key barriers to legitimate international casino operators. catering to Thai patrons and several small casinos along the

TAIWAN

Taiwan has potential as a gaming destination due to its wealthy population and proximity to ChinaJapan. Preliminary legislation has been passed, with two casinos planned, including one on Penghu Island and one on another outlying island. A referendum on the issue is taking place on Penghu later this month. and

However, there remains strong opposition to casino gaming for social reasons. In addition, it is not known how patrons will be able to access the casinos and whether there could be direct travel from the Chinese mainland, a prospect that seems remote. The type of casino and numerous infrastructure issues thus still have to be resolved, so it is expected to be some time before the first casino opens.

THAILAND

Gaming is broadly prohibited, with the following exceptions: Horse racing (Bangkok, Chiang Mai, Khon Kaen), government lottery, and Muay Thai boxing matches in Bangkok.

There is huge potential due to the existing developed tourism industry and associated infrastructure. Governments associated with former Prime Minister Thaksin Shinawatra have indicated over the last six years that they would like to legalize a gaming industry, as Thailand would otherwise lose out to neighboring countries with legal gaming industries.

There is presently too much political instability and too many vested interests in illegal gaming and casinos in neighboring countries to effect any change in the foreseeable future.

VIETNAM

There is presently one legal casino, owned by the Stanley Ho’s STDM at Do Son in the north of Vietnam near Haiphong — one hour by car from Hanoi. Three smaller “gaming clubs” are also allowed to operate in the north of Vietnam: • Royal International Gaming Club at Halong Bay • Lao Cai International Casino, on the border with China • Li Lai International Gaming Club at Quang Nin Province

Access to casinos is allowed to foreigners only and the patrons of all of these facilities are predominantly Chinese nationals bused in from China. There are no available revenue figures, no regulation and no transparency.

Slot parlors open to foreign passport holders are legal in five-star hotels. Rules of entry are often ignored, however, resulting in frequent government crackdowns.

Legal casinos are expected to open in the south in the future, notably in Danang and Vung Tau, but pledged investment (cost of entry) will be high — possibly unrealistic unless local entry permitted

A Canadian company, Asian Coast Development Co., Ltd, was awarded the right in May 2008 to open a casino as part of a proposed US$4.2 billion integrated resort development in Vung Tau, one hour by car from Ho Chi Minh City. The company has since signed a management contract with MGM Mirage, but the future viability of the project remains questionable without Vietnamese patrons.

Casinos will cater to non-Vietnamese only for the foreseeable future, yet the country has huge potential due to the rapidly growing tourism industry. Other major problems include endemic corruption, government interference and considerable red tape. The government remains concerned about the high level of illegal betting on soccer and lotteries and is thus loathe to liberalize or open its gaming industry.