MAR
20, 2018 @ 11:15 PM 8,134
Japan
Sending A Strong Message On Casinos That Global Gaming Giants Don't
Get
https://www.forbes.com/sites/muhammadcohen/2018/03/20/japan-sending-a-strong-message-on-casinos-that-global-gaming-giants-dont-get/#3556526b17b3
Muhammad
Cohen , CONTRIBUTOR
Japanese
authorities seem determined to ruin the party before it ever
starts.
International
casino operators’ pulses have been racing since Japan took its
first giant step toward casino legalization in December 2016. But
Japanese authorities seem determined to ruin the
party before it ever starts. Details about Japan’s integrated
resort implementation bill, the final legislative step to legalize
casinos in the world’s third-largest economy, keep dribbling out,
and most dismay the gaming industry. The government’s hardline
approach doesn’t appear to be working for anyone.
Under
the rules outlined, the casino industry is unlikely to build on the
grand scale -- Las Vegas Sands founder Sheldon Adelson suggested a
$10 billion integrated resort -- that Japan’s market potential
would otherwise dictate, yet the restrictions haven’t convinced the
skeptical Japanese public that IRs are a good
idea.
Since
a panel of academics and businesspeople submitted suggestions to
Prime Minister Shinzo Abe’s government last August about creating
integrated resorts -- not casinos, but multibillion-dollar
integrated resorts with features to drive tourism, using gaming as
their economic engine -- few details revealed about the IR plan
have pleased the casino industry. The Abe government’s recent
proposals to ruling Liberal Democratic Party lawmakers fit the
pattern.
Size
limit
Media
reports indicate legislation will limit the size of casinos to
15,000 square meters (161,400 square feet), or no more than 3% of
the IR’s total area, whichever is smaller. That’s the rule in
Singapore, seen as the gold standard for IR development. But
Singapore has two casinos for a metropolitan area of 8.5 million,
counting Johor Baru across the causeway in Malaysia. The
Tokyo-Yokohama metro area has 37 million people, meaning half as
much gaming floor for more than four times the people. The Osaka
metro area, including Kyoto and Kobe, has 17 million people. Gaming
executives accept the principle of casino size limits but reject
the 15,000-square-meter maximum as too small.
The
government is proposing a laddered tax rate starting at 30% for
revenue up to Y300 billion ($2.8 billion), about last year’s gaming
revenue at Singapore’s Marina Bay Sands, the world’s most
profitable casino, rising to 50% for revenue above Y400 million.
Singapore taxes VIP revenue at 12% and mass revenue at 22%. Las
Vegas’ gaming levy is 7%, and private casinos in the Philippines
pay 15% on VIP and 25% on mass. Macau at 39% is the only
jurisdiction in Asia with an effective tax rate comparable to the
Japan proposal.
Casino
giants are also unhappy with proposed limits on casino visits for
Japanese nationals and foreign residents to three within seven days
and 10 within 28 days, part of broader measures to combat gambling
addiction, a key public concern. There’s also grumbling about
requiring specific IR elements, such as convention facilities, as
part of the tourism promotion objective, instead of letting
developers make their own choices based on local conditions. About
the only thing casino operators find palatable is the proposed
entry tax of Y2,000, well below Singapore’s S$100 ($70) rate, but a
long way from free.
Billionaire
Sheldon Adelson, chairman and chief executive officer of Las Vegas
Sands Corp., calls Japan the "ultimate business opportunity" for
integrated casino resorts, and says LVS would spend $10 billion to
build one. But not under the conditions Japan is proposing.
(Kiyoshi Ota/Bloomberg)
“The
good news is that it appears that legislators want to get the bill
passed, even if, from an external foreign perspective, it appears
as if they are making the entire process rather more convoluted and
drawn out than it perhaps needs to be,” Spectrum Asia CEO Paul
Bromberg says.
Consensus-building
Jay
Defibaugh, an analyst at investment bank CLSA in Tokyo, says it’s
simply the Japanese way of doing things. “This is part of the
consensus-building process, with the ideas floated to the related
parties -- operators, potential Japanese corporate and local
government partners, politicians, bureaucrats -- so that they can
be aware and express opinions.”
Japanese
public opinion remains strongly against casinos -- gaming addiction
legislation, promised along with the IR bill, will lift public
support, Defibaugh says -- and scandal swirling around Abe over a
land sale involving his wife won’t help the IR cause. “The level of
public opposition is not surprising,” Bromberg, whose company
advises on gaming regulation, says. “I do find it surprising,
however, that the pro-IR lobby has not managed to implement an
effective PR strategy outlining the potential benefits. But it
doesn't seem to be getting in their way.”
Indeed.
Abe and LDP casino supporters appear determined to push ahead
regardless of public opposition. International gaming companies
need to understand that Japan can create IRs without them, too.
Once the IR bill is law, expect Japan Inc to enter the game, ready
to marshal the financing and skills needed to create iconic,
uniquely Japanese IRs. If international companies want to be
involved, it will be on Japan’s terms.
Japanese Gambling Industry Will Top Singapore And Pose A Threat To
Macau
Wednesday, May 30th, 2018 | Written by Renee
With the Japanese Integrated Resorts (IR) Implementation Bill close
to being passed, casino operators from around the world are lining
up to become one of the first three companies to open an integrated
resort in the country.
The passing of the IR Bill in the country, which will finally open
the doors of Japan to the gambling industry, has made significant
progress in recent weeks and the House of Representatives passed a
bill last week that details gambling addiction anti-measures. The
passing of the anti-gambling addiction bill is crucial to the
development of the IR Bill, since it was one of the requirements
that was needed to be drafted before the IR legislation moves
forward.
The passing of the gambling addiction anti-measures shows that the
Japanese lawmakers are serious about pushing for the IR Bill this
year. In fact, members of the ruling Liberal Democratic Party (LDP)
are considering to extend the current Diet session beyond June 20
to accommodate deliberation of a number of bills, including the IR
Implementation Bill.
The developments on the IR Implementation Bill come after the LDP
and its coalition partner Komeito settled on the specifics of the
incoming gambling industry. According to their deliberations last
month, there will be a total of 3 resort casinos that can be first
licensed in Japan, with a second round of approvals to come 7 years
after.
Locals will
be strictly discouraged from playing in the
casinos, their entries capped at three times a week and 10 times a
month. They will also be required to pay a ¥6,000 (US$56) entry fee
to walk in to the casinos. Casino floor space is capped at 3
percent of the total resort, and companies will be paying a flat 30
percent tax rate.
Industry Bullish About
Japanese Casino Market
Despite the tight restrictions on the gambling market in Japan, MGM
Resorts International is bullish about the potential of the market.
MGM Resorts is one of the many casino operators who are eager to
obtain a license and set up operations in Japan. MGM CEO James
Murren, is aware that MGM will face stiff competition from the
likes of Las Vegas Sands Corp, Melco International and the Genting
Group as they bid to win the first three licenses.
Singapore has just two casino operators in the country and with
Japan planning to license three operators, it is just a matter of
time before Japan surpasses the Singapore
casino market.
In a statement, Murren said, “Companies and municipalities that
have been silent up until now would start moving. Three resorts
would generate billions of dollars, making the market vastly larger
than Singapore. But I do not want to get ahead of big presumptions
to assume that the Implementation Bill is passed until it is. I am
still 56 and will be patient for years to come.”
US Investment Bank Morgan Stanley echoes Murren’s predictions and
said last month that the value of the Japanese casino market will
be around $20 billion. If Japan were to accomplish this feat, this
would make the country the second
biggest gaming market in the world and pose a
challenge to Macau – the biggest gambling hub in the world.
MGM Confident Of
Entering Japanese Market
MGM Resorts has been one of the multinational
companies that have supported the Japanese casino industry ever
since talks of integrated resorts started. MGM was quick to
congratulate the National Diet when they first passed the IR
Promotion Bill in 2016, and asserted early on that the company is
“well-prepared to pursue future expansion efforts.” The company has
also provided Japan with white papers and market research on the
positive impact of casino resorts in the country, and academic
research on preventing problem gambling.
In the first quarter of 2017, MGM began boosting its Japanese
operations by expanding its Tokyo office, hiring new staffers, and
putting in place Tokyo-based staff to focus on market research and
building connections with local companies.
Later last year, Murren began aggressively promoting MGM as the
perfect company to be awarded one of the very first licenses.
During his presentation at the Bank of America Merrill Lynch 2017
Japan Conference he said that MGM is ready to put in $10 million to
open an integrated resort in Japan by 2025.
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(2018-06-03 01:55:20)