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08/08/13 - Nepal's casino industry fights back at regulatory changes

Nepali casino operators are up in arms over the country’s new regulatory regime for their sector which had gone without direct oversight for 45 years.


The rules, adopted by the cabinet last month and put into effect with the new fiscal year that began July 16, tighten qualifications and raise fees for casino operators.  They also specify requirements for the first time for slot halls, know there as mini-casinos, in addition to imposing new taxes and restrictions.


The Casino Pokhara Grande closed its doors days after the rules came into effect, with the higher fees cited as a contributing factor. Casino Fulbari, Pokhara’s other casino, had shut its doors months earlier as the government stepped up efforts to collect fees due.


The new rules stipulate that casinos should have a paid-up capital of at least 250 million rupees ($2.6 million), with the minimum set at 150 million rupees for mini-casinos. A new annual license fee, to be paid to the tourism ministry, has been set at 20 million rupees for casinos and 10 million rupees for mini-casinos. The annual royalty fee, paid to the inland revenue department, was doubled to 40 million rupees for casinos and set at 20 million rupees for mini-casinos and now made payable in advance rather than in arrears.


"All in all, the casino operators will have to invest 350 million rupees to meet the requirements set by the new law,” Nischal Chapagain, operations manager at Casino Mahjong, told AGB. “I don't think any Nepali businessman running the casinos can do that. Those who have the capacity to invest such a huge amount are not interested in the industry.”

“It means only businessmen from India or Malaysia can run casinos in Nepal," said Chapagain whose casino was taken over in December by India’s Mahjong Entertainment, which operates another Casino Mahjong in Sikkim. The Casino Shangri-la was taken over in 2010 by an affiliate of Widetech (Malaysia) Bhd.


Blaming the new rules, Pokhara Grande staff this week petitioned the government to compensate them. "We have become jobless,” Naraj Khadka, president of the All Nepal Hotel Casino Workers’ Union in Pokhara told a local news website. “It will be difficult for us to feed our families now.”


The Hotel Association Nepal, the Casino Association of Nepal and the Federation of Nepalese Commerce and Industries submitted a joint appeal to Khil Raj Regmi, the interim government leader ahead of elections, claiming that the new rules are likely to force more closures, which could affect up to 50,000 workers. Their petition calls the rules arbitrary and says affected businesses were not consulted, with the higher fees required making operations unsustainable.


Kishore Silwal, president of the Casino Association and owner of four casinos, told the Nepali-language daily Karobar that all casinos could be forced to close. "The regulation has been introduced not to promote the casino business but to close casinos,” he said.

The new rules confirm existing practice that casinos can only operate within five-star hotels but also stipulate that mini-casinos must be in four-star hotels and neither is to be allowed within 5 kilometers of the country’s borders. Nearly all of Nepal’s dozen mini-casinos, run by three different companies, appear to fall short of one or both standards as they have sprung up in towns along the border with India, though one is under construction in Kathmandu along with six more near the border.


Some casino operators say more closures might not be a bad thing. Kumar Shrestha, operations manager at Casino Anna, says the country has more casinos than it can sustain with only foreigners allowed entry. Though both Pokhara casinos have closed, eight operate in Kathmandu.


Shrestha  argues the industry’s troubles relate in part to owners unqualified to be managers. “Most of the current owners in fact have never invested anything in casinos,” he said. “They simply inherited them.”

“We have more casinos than we need in such a small market,” Shrestha told AGB. “I think ultimately we will have only three or four casinos."


Even some union leaders agree with Shrestha. Yadav Aryal, senior vice president of Nepal Hotel and Casino Workers' Union at Everest Casino, said the benefits of clearer rules will make up for fewer casinos. "If the new regulation is implemented, Nepal will regain its lost reputation as the casino mecca of South Asia," he said.

Purna Chandra Bhattarai, chief of the tourism industry division at the tourism ministry, said: "The regulation reflects the recent changes in Nepali laws. Every company has to have a paid-up capital. How can we exempt the casinos?”


He acknowledged however that casino workers' job security was not sufficiently considered. "They have lodged their complaints and we are looking into it," he added. "If there are any serious issues, then the ministry is willing to discuss them.”


Bhattarai’s ministry will be the casino regulator under the new regulations. Gambling was banned under a 1963 law, but the country’s royal rulers then allowed casinos to open to serve foreign tourists six years later without establishing a legal framework.


While some tourism ministry officials previously suggested the new regulations might allow domestic tourists to visit casinos outside their home district or set a financial qualification for local gamblers, the final language strengthens the bar on locals gambling by putting in jeopardy the license of any casino found allowing them entry. Under the old rules, local gamblers could be fined 200 rupees for a first offense and double that for a second offense while the casino involved could be fined 300 rupees per gambler.


The new rules also impose a 25 percent tax on casino winnings, a controversial measure recently proposed in Vietnam and debated in Taiwan. 


“We are surprised Nepal is imposing it," Shrestha said. Indians and Bangladeshis are currently the main clients for Nepali casinos, with Chinese as yet making up a trickle of traffic.


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