You are in:
AMZ Holdings and the Taiwan adventure
With legislative changes afoot in Taiwan for regulated gaming on the islands, AMZ Holdings has a significant lead on any companies wishing to invest in the area, with a large quantity of beachside land on Penghu just waiting for the go-ahead. Casino International found out what the changes will mean to AMZ and for the gaming industry.
A couple of years ago we interviewed members of AMZ Holdings about their complex land acquisition on Penghu, a time-consuming and incredibly complicated series of deals that had never been attempted before. The company had its eyes fixed firmly on the future, with the potential for gaming on Penghu a real possibility, and that optimism and careful judgement looks like it has been vindicated with the recent announcement about legislative changes in Taiwan. Domestically, there is potentially a huge gaming market as the Taiwanese are Macau's second-greatest visitors after the Chinese.
Chief Executive Office Michael Treanor and Carl Burger, Executive Vice President of AMZ Holdings spoke with Casino International to explain more…
Casino International: Obviously the development with Taiwanese law related to gaming, it’s something you’ve been waiting for a while. How did it happen, can you give us some history?
Carl Burger: Gaming legislation in Taiwan has been in-progress since around 1999; someone decided well, we want gaming but we don’t want it in our backyard so the best way to do this is to push it out to the offshore islands. At that time they were trying to economically benefit the outer islands and they had an act called the Outer Islands Construction Act which was designed to encourage investment onto the outer islands, Penghu being one of them. The bill at that time didn’t find too much favour so the gaming clause came out of it, but the bill of the outer islands act does exist and it has real stipulations on how to invest etc.
Roll forward six or seven years, the bill has been re-introduced a couple of times and failed, until the present day, when the bill was actually passed, and it passed for a number of reasons: there was a change in Government this time last year – a new president came in who favoured gaming; clearly due to the economic situation worldwide, gaming is seen as one of the low-hanging fruits… On various election promises the Government decided to move ahead with the whole gaming scenario and to get the gaming bill passed.
CI: When we talked previously, we discussed the difficulty in acquiring land parcels because of how ownership works in the Islands; that took a long time to sort out, so have you actually developed the land yet?
CB: We haven’t started building yet. The island, like any island, is obviously short on land, the majority of it is held by families and we had to accumulate these small pockets of land into one large piece.
Our land comprises Central Government, Local Government and private land; over the last three years or so we’ve had to get the land re-zoned. We’ve had to take it from agricultural land – and in actual fact we became peanut farmers in terms of our designation – then gradually work our way through a re-zoning process and submission of various design plans to our current status, which allows us to build a fully-fledged five-star international resort on the land, which is 27 acres or 11 hectares.
We’ve got a building permit and the strategy has always been that we’d like to include gaming in the project, but it’s not in our best interests until we see which way the Government wants to go regarding gaming regulations. . We have everything ready to go and that’s the situation as it stands at the moment; anybody else coming in wanting to obtain private land would pretty much have to take the same route as we did which is extremely laborious, await any local government land initiative which face the same hurdles, or seek to do a deal with a qualified parcel holder such as AMZ which will provide them a faster route to operations if bidding is successful.
CI: What’s the next step for AMZ?
CB: The issue that Taiwan has for gaming is that they haven’t passed the regulatory framework under which gaming is going to move forward, so we along with every operator, have to wait and see what those guidelines are going to be so we can start to plan. There are indications embodied within the current act and there are some indications from the Council for Economic Planning and Development (CEPD) report; I should differentiate between the two; the act that was passed recently essentially only applies to the offshore islands. Of those, Penghu is certainly the most developed and is the most likely to go ahead with gaming. The whole regulatory process will be controlled by a Central Government Agency, it won’t be controlled by the local authorities at all and it will probably fall under the Department of Economics, Home Affairs or Transportation.
The islands, if they want to go for gaming, have to hold a local referendum, but all the indications are that the local population on Penghu would accept gaming. Now this referendum is an extraordinary referendum and requires the majority of votes – it doesn’t require a majority turnout at all, just a majority of votes in favour of gaming.
All casinos would have to form part of an International Tourist Resort, (or 4 to 5 star hotel as we call it internationally) , and what they’ll be doing is de-emphasising the casino and seeking integrated resorts where i other facilities such as conference, entertainment, retail etc are the primary features..
The supporting legislation, is going to be mandated by a gaming regulatory body which will be formed over the coming months and will fall under one of the Departments mentioned previously.
Also embodied within this framework is a contribution from revenues to an economic development fund around 30 billion NT dollars, which is about one billion US dollars. .
We think the gaming board will be convened by March, we see the supporting regulations being drafted probably using the CEPD recommendations, and they should be ready by the second or third quarter of this year. Sometime between April and July, Penghu will hold a referendum, hopefully that’s going to pass and that will be another step out of the way, and then there’s the licensing requirements and the bidding process, similar to what probably happened in Singapore, perhaps by the end of this year.
Now moving on to the CEPD report, they were tasked a year ago to come up with a report making recommendations for gaming in Taiwan and it was to run concurrently with the passage of the bill. This report was released at the end of December last year, it was released to the Government but it wasn’t published for public consumption, the head of the CEPD publically released some key details from that; the taxation rate would be 10 per cent, with a further 5% operational tax N We don’t know whether that’s a set minimum level but it seems to indicate that it may seek to compete certainly around the Singapore levels The report also recommends that gaming should be held offshore, and that first-tier style operators are used to operate the casinos.
At this stage we don’t have an indication of how many licences are going to be awarded or recommended but indications are that it will be between one and three.
CI: Who will be your customer for the development? Is there likely to be any dependence on China for custom?
Michael Treanor: We’re not dependent on China and Chinese tourism in order to make the casino in Taiwan successful – Taiwan has 23 million people who are prolific gamers in their own right and are a significant contributor to Macau. Of course, it would be nice if we could draw on the China market although realistically I’m not sure how likely that is. But we have a low tax rate regime proposed which means junket operations should be very profitable bringing people from South East Asia, and Taiwan’s right in the middle of South East Asia – and on top of that you have the 23 million locals.
CI: Are you looking at taking on partners in terms of development and investment to complete the project?
CB: In terms of internal expertise we certainly have the management team, we’re quite capable of running international resorts, certainly in terms of operations, but we have to be realistic. Taiwan is going to be looking for first-tier type companies, they’re going to be looking for the brand name operators of this world to come in and make an investment, so it’s not a huge stretch to say that we’re going to have to partner up with one of these companies, put in our expertise and our land and come up with a very effective team to go for one of the licences.
Since Chinese New Year and the worsening economic situation in Asia, the Government has indicated that it would like to fast track the gaming development issues. Penghu has already embarked upon roadshows to inform the local population of the issues surrounding the forthcoming island referendum. Discussions on the appointment of the governing Department in Central government are now underway, and Penghu officials are actively encouraging interested parties to visit and look at the potential on offer – they are after all in competition with potential new jurisdictions who may emerge eventually such as Vietnam and Japan and want to secure interest and market share now.
It has been a long road for us, and there are the usual regulatory issues to be worked out but we believe that we have placed our project in the best position to take advantage of any gaming uplift that will result on the island.
