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Macau on the Mekong
Chinese-run casinos in Laos give mainland gamblers an atmosphere that’s just like home, just over the border. They could threaten Macau, except for one key ingredient
Legal casinos in the mainland are the single biggest threat to Macau’s position as the world’s premiere gaming destination. That is unlikely to happen in the foreseeable future but the next closest thing is taking shape right now in Laos.
Mainland owned and operated casinos in two special economic zones (SEZs) in northern Laos target mainland gamblers. New roads connect the casinos to the mainland and a high-speed railway is in the works. Each casino is controlled by a different consortium and both claim to be the first step in ambitious plans to create destination resorts alongside industrial and agricultural projects in an investor-friendly, tax-free environment, supported by both governments.
“The basic slogan of investing in SEZs is ‘you invest, we welcome; you make fortune, we make development’,” according to Golden Triangle Special Economic Zone chairman Zhao Wei. His Hong Kong-registered Kings Romans Group, known as Dokngiewkham in Chinese, opened the Kings Romans casino in December in Ton Pheung, next to the Thai border. It is connected to the mainland and Yunnan province capital Kunming by a new road. It is accessible from Thailand by ferry across the Mekong River. A bridge spanning the river is due for completion in 2013, extending the expressway to Bangkok.
Half a billion
“Macau on the Mekong”, the Kings Romans has 150 tables and 170 electronic gaming machines on a 15,000 square metre gaming floor, according to Kings Romans executive E. Abbas. The group says it has spent US$500 million (MOP4 billion) in the SEZ so far. Nightclubs, karaoke lounges, saunas and shops surround a four-star hotel. Two more are planned, for a total of about 1,200 rooms.
On the border with Yunnan province, the Boten Golden City casino in the Royal Jinlun Hotel opened late in 2007 with 150 gaming tables and 300 machines, plus a sports book with live telecasts. The hotel has about 300 rooms, with more on the way. The SEZ admits mainland tourists without a visa.
The Lao village previously on the site was moved about 20 km to facilitate the new development. It emphasises and exacerbates the zone’s isolation from Laos.
“Revenue derived from Laos is not significant,” according to a statement from RGB International, which operates gaming machines in Ton Pheung. “However, we would like to explore it more in the years to come.”
On a good month, gaming revenue from each casino reaches US$10 million. They pay minimal tax, offer strong incentive deals to junket operators and the SEZ status grants them virtual autonomy to write their own rules. Both casinos do a healthy business in telebetting, for example. Policing is by Chinese guards employed by the zone’s mainland investors.
Second home
Most strikingly, inside the casinos, it could be the mainland. Everyone speaks Mandarin, the food is Chinese. Everything for sale, from cigarettes to sex, comes from the mainland and is paid for in renminbi.
It sounds like a nightmare realised for Macau. But the casinos at Boten and Ton Pheung, like their predecessors on the frontiers with Cambodia and Burma, face substantial challenges, some of which management can overcome and one big one they cannot.
The Chinese Foreign Ministry has warned against gambling at Boten following reports of kidnappings (See report below).
“Anything on that border has a sort of question mark against it. These places have their own private police forces and militias,” says a regional gaming executive familiar with the industry in Laos. “Security, especially for high rollers, is a major issue. There are none of the protections you’d have in Macau.”
Kings Romans Group runs another casino on the border in Mong La, part of Burma’s Shan state, an area said to be overrun by drug lords and reputed to be a centre for money laundering. The company denies those activities take place but questions remain, especially since its investors’ identities have not been made public.
Laws in Laos and its SEZs do not promote transparency. “It’s unlikely that the current regulations in Laos will facilitate the involvement of the major US gaming companies and, as such, it’s difficult to see similar quantum of investment; without these factors I can’t see another Macau being created,” HSBC senior gaming analyst Sean Monaghan says.
Trading places
Macau may fall short of the standards some global sophisticates expect, but it is worlds ahead of Boten and Ton
Pheung. Laos border SEZs have a single casino each, limited accommodation and rows of shops in garage-like structures selling goods you could find in the mainland. Amenities are on the drawing board but may never progress.
Moreover, the area’s previous attractiveness as an ecotourism destination is being undermined by rubber plantations and other SEZ projects. Mainland travellers describe the SEZs as “China ten years ago” and an “eyesore”.
Management can potentially address these situations but it can’t do much about geography. Mr Monaghan places “location next to Guangdong province” at the top of his list of factors for Macau’s success. Laos is next to Yunnan province, which has just half the population and 2 percent of the GDP of Guangdong, the mainland’s wealthiest province, 1,400 kilometres away.
Worse still, Ton Pheung and Boten are not just far from Guangdong, they are also barely convenient to Yunnan and the rest of the mainland.
“If you’re south of Kunming, then you’ll go there,” the industry source says, noting that the area is sparsely populated farm country. Boten is 12 hours by road from Kunming, while Ton Pheung is another three-and-a-half hours southwest on the Thai border. Yet Ton Pheung focuses on Chinese customers, with Thai gamblers reportedly urged to play out their stakes and leave.
“Even if you could convince junkets [from beyond Kunming] to come here, there’s no way to get them here,” the source adds. The only airport in the region is 45 minutes from Ton Pheung and three hours from Boten, offering only a handful of domestic flights each week.
International connections are via Laos’ capital Vientiane to the south, which has its own casinos, albeit oriented toward Thai gamblers (see the report below). “If you’re getting on a plane, you’ll have to go to Vientiane, but then you might as well go to Guangzhou and across to Macau,” the source said.
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