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24/06/14 - Cambodia gambling on change

Tue, 24 June 2014 - Eddie Morton

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The Cambodian government is drafting a series of changes to the Kingdom’s gaming laws in a bid to draw major players from Macau and the US to the market and potentially create a new tax base from the growing, if currently illegal, online betting industry, officials say.

 

Ros Phirun, spokesman for the Ministry of Economy and Finance’s gaming and casino department, said the government is in the process of drafting stricter, more transparent regulation and investigative requirements, with an eye towards eventually regulating the now-underground online gambling scene.

 

“Currently, we are in the process of drafting a Casino Law to attract bigger casino operators,” he said, adding that a new draft could be finalised as early as this year. “While we don’t provide online licences yet, it is in the process of being studied.”

 

Online betting operators, which provide Cambodians an avenue to bet on everything from the World Cup to under-15s cricket, are not permitted in Cambodia. However, many casinos do operate these facilities with the tacit permission of local authorities.

 

For one online sports-betting operator who sets up shop in casinos on the Thai and Vietnamese border and would speak only on condition of anonymity, the government’s move to legitimise the industry is a welcome one, despite the competition that would ensue.

 

“Huge amounts of regulation and legislation must come in order for the Cambodian gaming industry, including me, to be legitimised and governed properly,” the operator said. “Having licences for online sports betting-operators will have a ripple effect throughout the entire casino industry here. It will enhance casinos’ offerings and generate more income.”

 

The scale of Cambodia’s current role in the global online betting market is unclear, according to Chris Eaton, director of the International Centre for Sport Security, a lobby group that works on behalf of legal online gaming interests.

 

But with the danger of unregulated sports betting being used to fund organised crime or facilitating match fixing, it’s an issue that demands government attention, he says.

 

Perhaps unsurprisingly, Cambodia’s rough-and-tumble casino town of Poipet on the Thai border is at the centre of Eaton’s concerns.

 

“Poipet is one of these free zones where rogue operators can establish themselves. It’s a problem location where they can set up shop and offer a global product without any strict supervision from the government,” he said.

 

“Governments, especially in Southeast Asia, need to take strong steps to regulate and supervise the sports betting industry in their separate countries. This industry is crying out for supervision.”

 

The government’s movement on improving regulation of gambling and of the casino sector as a whole is well overdue, according to Ben Lee, managing partner at Macau-based gaming consultancy IGamiX.

 

“Cambodia has a totally different regime to other countries. Their objective is to bring in investment, make jobs. That is all,” he said.

 

“Right now, the country has potential and a window of opportunity to attract high-level investment. But it is a matter of better regulation to attract them.”

 

With the Economy and Finance Ministry having granted 56 casino operating licences for 7,660 slot machines and 2,568 gaming tables nationwide, Cambodia has the busiest gambling sector in the region by far.

 

But despite the industry’s size, the Kingdom’s gaming tax regime remains minimal, with no revenue-based mechanism in place.

 

Casino and gaming-related taxes, which earned the government $22 million in 2013, are instead decided on a case-by-case basis. The formula, according to the department of casinos and gaming, is as follows:

  1. An annual licence fee of $30,000;
  2. A monthly fee calculated based on the casino’s location, number of tables and slot machines operating, and number of players;
  3. A $100,000 security deposit, payable into a government account, guaranteeing the casino in case of bankruptcy or large player winnings.

 

“This model was not necessarily a bad move, but it is time for the country to progress and install proper regulatory frameworks,” Lee said, adding that a number of large Las Vegas- and Macau-based firms had recently considered opening in Cambodia but not followed through.

 

Israeli-owned gaming firm Queenco Leisure International operates one of at least eight casinos in Preah Sihanouk province. Their Sihanoukville operation features 96 slot machines and 16 gaming tables, for which the firm pays the government a monthly fee of $50 per machine and $1,600 per table.

 

Facing cash-flow concerns resulting from low player numbers in the seaside province, the casino operator is considering selling off assets and has been stalling on paying the government’s $100,000 security payment as it seeks to fund an expansion.

 

Yariv Lerner, general manager of Queenco, said that while Cambodia’s existing tax model is lenient, the system does not always take into account the current business environment.

 

While the border casinos enjoy a steady flow of players from either Vietnam or Thailand, Lerner said the majority of Sihanouk province casino operators are struggling to pay their taxes.

 

“They [border casinos] have a net-gaming model focused on low-level players. And that is not the future,” he said.

“Cambodia needs to adopt regulatory practices such as long-term revenue-based taxation and licence agreements and minimum investment rules to improve the standard of operators across the board.”

 

According to Lerner, it is not just the issue of tax that has Las Vegas and Macau gambling giants biding their time before entering Cambodia.

 

“The biggest problem is that the industry regulator approved the [exclusive] licence to NagaWorld to operate within the best place, that is Phnom Penh,” Lerner said.

 

NagaWorld was made Cambodia’s first licensed casino operator in 1994 and was granted a 40-year monopoly status banning all other gaming operators from entering a roughly 320-kilometre radius around the capital.

 

The country’s largest gaming operator is also by far the biggest contributor to the government’s $22 million gaming income. But even NagaCorp, which generated $344.9 million in revenue in 2013, paid just $5.1 million in taxes, according to the latest annual financial report.

 

The Ministry of Economy and Finance’s Phirun declined to comment on whether the government was considering reviewing NagaWorld’s monopoly status to attract interest from larger foreign casino firms.

 

Original article

Contact author: Eddie Morton

 

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