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By Dr. Oliver Massmann
On 20 January 2017, the Government issued a long-awaiting casino business Decree No. 03/2017/ND-CP. This Casino Decree for the first time allows local Vietnamese to gamble at specific casinos approved by competent authority on a 3-year trial basis. According to public media, only 02 casinos are open to Vietnamese individuals on a 3-year pilot scheme, which are located within complex resorts in Phu Quoc District, Kien Giang Province (South Vietnam) and Van Don District, Quang Ninh Province (North Vietnam). A small likelihood that Ho Tram Resort would join the list.
Four days later, the Government issued Decree No. 06/2017/ND-CP, which also for the first time legalizes international soccer betting in addition to horse racing betting and greyhound racing betting. This Betting Decree together with the Casino Decree have fully opened the door for gaming business in Vietnam.
The issuance of these Decrees is the Government’s attempt to retain tax revenue resulting from casino activities and limit foreign currency loss to other neighboring countries. According to a survey, Vietnam loses about USD800 million in tax revenue annually from gamblers who cross the border to Cambodia. The loss may continue rising if the restrictions applied to local Vietnamese are not fully lifted in the future, as Vietnam’s ultra-rich population has been growing faster than any economy in the world (320% from 2006 -2016. The highest growth is expected to continue during 2016- 2026 (about 170%).
These Decrees take effect in the midst of rising tourists, especially mid- and high- income ones to Vietnam. In July 2017, the United Nations World Tourism Organization ranks Vietnam as the 7th country with highest tourism development speed, only after Nepal and Korea in the region. The General Statistics of Vietnam also announced that in the first six months of 2017, international tourists to Vietnam increase by 30.2% compared with the same period last year. Tourists from Asia mainly account for those visiting Vietnam, followed by European visitors. We expect an increasing number of gamblers from Macau, Hong Kong and China will visit Phu Quoc this year.
Almost right after the issuance of the Casino Decree, many foreign investors have looked at Vietnam’s casino market such as Las Vegas Sands, Banyan Tree, Crown, Chow Tai Fook and Sun City. Although the Casino Decree sets out a 3-year trial period, investors should not wait until such period lapses. The casino Decree is the best opportunity ever for them until now and they have been waiting for this for too long already (about 8 years). It could be risky to invest as no one knows what might happen after these three years. However, as said, the opportunity is out there and investors should rush to meet the 3-year deadline. The Casino Decree sets out very strict conditions for foreign investors to be qualified for the Certificate of registration of investment in casino-included entertainment complex, including the requirement that the project contain at least hotels, service, tourism, commercial and entertaining areas and conference centers. The minimum investment capital must be USD2 billion. Thus, for new investors, it will take them around two years to apply for the license and build the complex. For existing investors in Vietnam, they will need at least one year to expand the project to meet requirements in the Casino Decree.
History shows that casino establishments are often located in difficult economic-socio areas or areas where national security must be balanced. Thus, investors should consider these factors in addition to the investment project’s level of contribution to local tourism development and budget. Currently, there are seven licensed casinos in Lao Cai, Mong Cai, Do Son, Bac Ninh, Ha Long and Da Nang. Four complex resorts are now at the development stage, namely Van Don (Quang Ninh), Nam Hoi An (Quang Nam), Phu Quoc (Kien Giang) and Ho Tram (Vung Tau).
Casino business, as defined by the Casino Decree, means prize winning games on (i) electronic gaming machine with prizes (i.e. - men vs. machine) and (ii) gaming table with prizes (i.e. – men vs. men).
(1) Gaming machines used for prize-winning business for foreigners. These are defined as gaming machines with prizing programs and special equipment for casino games. Prize-winning electronic gaming machine means a specialized electronic device to play prize-winning games installed therein. The playing process between players and machines is entirely automatic.
Prize-winning electronic games are lottery games played on prize-winning electronic game machines by players who pay money and may win money.
(2) Gaming machines which the players receive prize not to be converted into cash or kind any form, or to be converted in small things such as toys, candies, etc. and not being gaming machines for prize-winning business for foreigners.
If an investor wants to do business in gaming machines Type 1 (import, distribute or do prize-winning business), they must have a Certificate of satisfaction of conditions for business issued by the Ministry of Finance. One of the conditions to get such certificate is they must have a “tourism residential establishment which has been classified as five star or higher by the competent authority”. An investor then needs to cooperate with such hotels in Vietnam on a BCC contract basis.
If an investor wants to do business in gaming machines Type 2, there is no restriction on foreign ownership. However, the machines must satisfy certain technical requirements and if they intend to open a gaming shop, such shop must also comply with conditions in law.
Meanwhile, casino business is also treated as a conditional business sector the satisfaction of which is evidenced by a certificate of satisfaction of casino business conditions (“Casino Business License”). A casino must be located inside a larger resort complex or the like. Local Vietnamese will be permitted to gamble at specific casinos approved by competent authority on a 3-year trial basis (i.e. – calculating from the first day opening of the authorized integrated resorts) if they are 21 year-old or above and has monthly salary of VND10 million (about US$440) or more, just to name a few conditions. Number of gaming tables and gaming machines depends on investment size. That is, for each US$10 million lot that the investor actually releases, a package of one gaming table and ten gaming machines are permitted.
Growing mid to high income people will have more demand for high class integrated resorts. If the Vietnamese are allowed to gamble, development in integrated resorts with casino is a smart decision to make profit in Vietnam. In addition, the government will benefit from tax payments from these resorts and casino businesses.
Dr. Oliver Massmann is the General Director of Duane Morris Vietnam LLC.
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