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may further loosen restrictions on locals participating in casino gaming,” noted Green. The industry will also be closely watching progress in Hoiana, where a multi-billion dollar resort complex, partly backed by Suncity Group Holdings, is expected to open its first phase by the end of the year. The broader political and economic landscape is also favourable. GDP growth in 2018 was in excess of seven percent, and the government is among the most stable in the region. The only significant question mark is around exposure to China, where a US trade war and territorial disputes in the South China Sea could cause issues. “Vietnam has the greatest upside potential, as it has some impressive new resort developments coming on stream, and the Hoiana project is hugely ambitious. If more local gaming is permitted, it will be a very attractive market for gaming operators,” said Green. Beyond Vietnam Elsewhere in the region, Cambodia is expected to finally adopt new gaming legislation
this year, though as Green notes, it is unlikely to herald a real change in regulatory approach. “Enforcement will likely be selective, and it is hard to see any licence in Cambodia, apart from that held by Naga, having material intrinsic value. Without value to protect, there is no real incentive to comply with applicable regulations,” he said. There is certainly growth to be had in Cambodia’s casino market in 2019, but it remains incredibly fragmented. The market added some 52 licences in 2018 alone, and the country’s Ministry of Economy and Finance said there were 150 active licensees at the end of the year. One upside could be the inflow of investment from China, with Cambodia arguably China’s primary ASEAN ally when it comes to claims over the South China Sea. Over the border in Laos, it looks likely that casino licences will continue to be restricted to three. Despite Macau Legend’s pledged $300 million investment in Laos, progress will be slow. “I don’t expect to see much uplift in the Lao PDR market, notwithstanding Macau Legend’s investment in it,” said Green. “It lacks critical mass and infrastructure, and is open to
predation by Cambodian border casinos, which I believe will likely survive any new legislation for gaming regulation in Cambodia.” Myanmar is even more of an unknown quantity. In September, the country’s lower house passed a bill that would permit the establishment of foreigner-only casinos. However, the Rohingya crisis, high inflation and a lack of political reform do not provide a particularly appealing backdrop, even if GDP growth should top six percent in 2019. Green notes that the market is not likely to “generate significant excitement among prospective operators, especially those accustomed to investing big in casino developments.” Risk profile The risk profile of all four of these markets remains tightly tied to the fortunes of China, and to a lesser extent, Thailand. “Chinese and Thai gamblers are really a focus of all four jurisdictions,” said Green. “China is not currently performing, as an economy, as well as it has since 2009, and there may be renewed pressure on expatriation of capital, as there was from mid-2014. “I don’t see any indication that Thailand is about to move to legalise casinos, which should ensure that the border casinos in Laos, Vietnam and Cambodia retain traffic from Thai gamblers.” But it will still be tough for multiple emerging jurisdictions to enjoy strong growth when all are competing for the same player base. “One concern for these countries will be market saturation and eventually dilution of the viable players,” said Karoul. “When that happens, ‘cut throat’ competition will kick in and that is when we will see numerous deals that just do not make economic sense for the casino operators, and unfortunately many of them will eventually go out of business.” Similarly, operators will need to closely look at how they go about acquiring players, particularly in newly-emerging markets that will suffer greater volatility than would be expected in Macau. “One cannot just continue to buy business via bad offers, high commissions or discounts that are not sustainable, so the strong will survive short-term but the weak will go under and out of business. Being under-capitalized will definitely hurt some operators in these volatile markets,” said Karoul. Ultimately, while there are certainly highgrowth opportunities in the region in 2019, only those with an appetite for risk need apply.
Asia Gaming Briefings | March 2019
