Nanny takes to gambling - Tuesday 12th of April 2005
It's not the kind of thing one expects from an orderly cradle-to-grave nanny state but the smart money says it's almost a sure bet the Singapore government will announce the legalization of casino gambling on Monday.
This may be the clearest sign yet that founding strongman Lee Kuan Yew is no longer in charge. Though he stepped down as prime minister 15 years ago, Lee has remained in the cabinet under a succession of titles - he is now "minister mentor'' - that speak to his continuing authority.
The famously moralistic Lee says he is as opposed to having casinos in Singapore now as he ever was, but that it's ``a judgment call for a younger generation of leaders to make.''
This generation, which counts Lee's son and Prime Minister Lee Hsien Loong as its foremost member, takes pride in their mentor's legacy of building a stable, prosperous country. But like other offspring of parents who have worked their way up from poverty to middle-class comfort, the new leaders want something more than squeaky-clean sidewalks and one-party rule: They want Singapore to be cool.
Macau is Asia's hottest spot at the moment, making the cover of global news magazines, beating all comers with the growth of its tourist industry, spurring Wall Street investors to fly halfway around the world for a look around and nurturing a conflict-free atmosphere.
Though Singapore officials are careful to distinguish their ambitions from those of tiny Macau - Foreign Minister George Yeo last year said, ``We don't want to be a Las Vegas, we don't want to be a Macau, we don't want to have the crime and the sleaze'' - Singapore's image wasn't much different than the one Macau is leaving behind, before Lee Kuan Yew scoured the place: A corrupt, economically adrift, trading hub plagued by organized crime and violence.
Macau is transforming itself in a fraction of the time it took Singapore. Chinese state media outlets this month hailed Macau's success at surpassing Singapore in per-capita gross domestic product. Macau's 2004 per-capita GDP of HK$175,694 actually still trailed Singapore's HK$202,162, but Macau's figure rose at more than double the pace of Singapore's.
Traditionally a meeting place just for patrons of gambling and prostitution, this weekend Macau hosts the annual conference of the Pacific Asia Travel Association and autumn will bring the East Asian Games. Far more expos and sporting events are promised as new venues open in the coming two years.
The SAR's booming casinos are producing so much tax revenue for the government that long-frozen civil service salaries are getting a boost, a pricey light-rail system is under study for the territory and businesses and residents are enjoying tax cuts.
Singapore, unlike most governments that consider legalizing gambling, isn't short of revenue. Officials, however, are concerned about the country's long-term outlook.
Singapore can't hold out much longer against the global tides that have seen manufacturers decamp for China from other developed countries. More, though tourist arrivals have been growing, the pace is much slower than that of other Southeast Asian countries. As a result, Merrill Lynch analysts calculate that Singapore's share of the regional tourism market is barely half what it was two decades ago. Total tourist spending in Singapore has yet to return to pre-Asian financial crisis levels.
Like their counterparts in Hong Kong, Singapore officials are keen to once again make their city a must-see for every new globetrotter and are convinced new attractions are needed. They have tried repeatedly to turn offshore Sentosa Island into a destination resort, to little effect. They don't see Hong Kong Disneyland as a model since, as a Singapore Ministry of Trade and Industry factsheet notes, the government is picking up most of the HK$22 billion tab for Disney.
Singapore's indirect approach is a bit closer to the West Kowloon Cultural District. Where Hong Kong proposes to have a developer underwrite new museums and theaters through selling and renting residential, retail and office space, Singapore would have the companies it selects use casino winnings to finance new arts and entertainment facilities on Sentosa or in town.
Casino operators bidding for Singapore's favor have taken the hint. Las Vegas Sands, which owns the Sands Macau, has partnered with the renowned Guggenheim Museum for its Singapore bid; the Guggenheim already has a branch in the company's flagship Venetian casino resort in Las Vegas. The Genting Group, which owns Malaysia's only casino and Star Cruises, has joined up with the Universal Studios theme-park chain.
``This is the kind of proposal the government is thinking of - where casinos are built simply to make the entire resort viable,'' said Minister for Trade and Industry Lim Hng Kiang. ``For the developer, they can make money from the hotel but cannot make much from the other entertainment so they have casinos which bring in 30-50 percent of the revenue and this more or less subsidizes the entertainment.''
Officials see these attractions as crucial supports to keep long-haul airline passengers stopping over in Singapore and to help entice top scientists to move there. ``The development of our tourism industry cannot be viewed in isolation from other sectors of our economy,'' says a proposal factsheet from Lim's department.
Macau officials similarly intended that the SAR's own gambling liberalization would produce more than just new casinos too, hence their selection of American entrepreneurs Steve Wynn and Sheldon Adelson as new operators on the strength of their respective records in drawing families and conventioneers to Las Vegas. Although, three years on, Macau has little more than their promises and construction sites to show for its diversification drive.
Singapore, as one might expect, is taking a sterner approach. Under its proposed guidelines, chosen developers will be penalized if after five years a majority of their resort revenue still comes from gambling. The government has pledged to pick no more than two winners. Each will be allowed only a single location of restricted size and guaranteed 10 years' exclusivity. Gaming taxes will be set at 15 percent, far lower than Macau's 39 percent net rate.
And this being Singapore, nanny must get involved. To dampen local casino demand, Singapore residents will have to pay either S$100 (HK$475) a day or S$2,000 a year to play and no casino advertising will be permitted in local media. Casino staff will be required to monitor customers for signs of problem gambling.
Jonathan Galaviz, an Asia gambling market researcher in Las Vegas, expressed concerns last autumn that such restrictions would deter international casino operators from bidding in Singapore. The published guidelines aren't as strict as he feared. Indeed, the government received 19 applications by its deadline February 28, nearly matching Macau's haul of 21 in 2001.
Until last Tuesday, Singapore officials insisted they had not decided whether to go forward with casino gambling or not. Ostensibly, the decision would be swayed by whether any of the bidders made a sufficiently spectacular proposal, and by public opinion. But many observers saw the deck as stacked and the process designed so that the government could sway enough public doubters by having the bidders' lavish promises in hand before it formally endorsed casino gambling. Even last autumn, Galaviz put the odds of Singapore moving forward at 95 percent and now, he says, chances are higher.
That's despite the unprecedented public opposition the casino proposal has aroused, especially from religious groups in the conservative city. Surveys have found public opinion almost evenly split on the casino issue. But Singapore is not a democracy.
``The government cannot govern by referendum,'' Prime Minister Lee said last month. ``The casino is not an issue of national survival or sovereignty that deserves to be settled by a referendum ... Nor is it an issue of conscience or fundamental principle like abortion or organ transplantation, because we already have many forms of legal gambling in Singapore, so there is no need for a free vote in parliament ... It is a policy matter.''
Industry watchers expect the government to announce a decision on whether to have one or two casino resorts and the disqualification of several of the 19 bidders on Monday. An early victim is likely to be New Century Group Hong Kong, which has annoyed Singaporean officials for years by operating gambling cruises targeted at their citizenry. Greek Mythology (Macau) Entertainment Group, owner of the new Greek Mythology Casino in Macau, will probably also be cut.
The fate of the other publicly announced local bidder, the joint venture of Hong Kong-listed Melco International Development and Australia's Publishing & Broadcasting Ltd (PBL), is less clear. Though PBL's Crown Casino in Melbourne is commonly held up as a successful high-class resort, the Ministry of Trade and Industry's factsheet singles out Crown, along with ``the gambling halls of Macau,'' as an unattractive model because of its dependence on gambling revenue, especially from local patrons; Melco is controlled by the family of Stanley Ho.
PricewaterhouseCoopers, which advised Macau on its gambling liberalization, is reprising that role in Singapore. Bidders who make the first cut will be due back in Singapore to make follow-up presentations before the end of the month. Analysts say the vetting process should take up the rest of the year. Merrill Lynch expects Singapore's first casino resort then to open in 2009.
Observers see the giants of the Las Vegas Strip - MGM Mirage, Las Vegas Sands, Wynn Resorts and Harrah's Entertainment - as the companies to beat. Their executives talk of investing more than US$1 billion (HK$7.8 billion) to realize their Singapore proposals. MGM and Harrah's have each paired up with Singapore government-linked property developers for support.
But even casino enthusiasts doubt whether a Singapore casino can be as profitable as the Sands Macau or the upcoming Wynn Macau, given the government's guidelines. Indeed, contrary to the government's intention, Merrill Lynch forecasts that only a third of a Singapore casino resort's revenue would come from tourists.
``Regular gamblers tend to stay local where possible,'' wrote analyst Daniel Lian of Morgan Stanley, who questions the government's cross-subsidization strategy. ``This suggests to us that Singapore's proposed casino would by itself struggle to attract a critical mass of foreign clientele, thus undermining the economic logic of the project.''
Because of the stay-local tendency, few observers expect Singapore to lure away many gamblers from Macau. By Merrill Lynch's estimate, the mainland and Hong Kong are by far Asia's biggest source markets for casinos, giving Macau a big edge over Singapore.
Still, Manila-based casino consultant Kelvin Tan expects Macau to lose about 10 percent of its China business to the newcomers. But Galaviz says Macau should recoup that loss in part as Southeast Asians who get a taste for casino gambling in Singapore decide to wander north for more action, as with Americans who fly to Las Vegas after visiting Native American casinos.
Singapore's key markets are likely to be Malaysia, Indonesia, Thailand and locals. ``I don't see there being virtually any shared market with Macau,'' says Scott Fisher, who researches the global casino industry for American consultants The Innovation Group.
Merrill Lynch ranks Singapore itself as the region's sixth-largest source market, behind Taiwan, which is another key Macau market, and estimates Singapore's gamblers spend about US$40 million (HK$312 million) a year in Macau.
Most of that money might stay in the Singapore casinos when they open, but some Singaporeans will choose Macau to avoid creating a public record of their gambling habit at home in registering to enter. Ricardo Siu, research coordinator at the Institute for the Study of Commercial Gaming at the University of Macau, sees privacy as a key marketing advantage for Macau's casinos.
Singapore casinos will also be keeping careful records of their high rollers as the government is offering a discounted tax rate of 5 percent on gross revenue generated by players who deposit at least S$100,000 upfront.
Merrill Lynch says this will enable the Singapore operators to pay the highest gaming commissions in the region, which could lead to their dominating the Asian high roller market, arguably ``the most price sensitive in the world.'' It adds, ``In markets such as Macau, where 75 percent of play is undertaken under some form of commission arrangement, the party who pays the most commission secures the player.''
Contrary to the stay-local formula, both Singapore and Macau are counting on their future casino resort developments to be magnets for distant visitors. ``In the long run, if Macau clones itself into a `Las Vegas in Asia,' with massive non-gaming tourism, the two destinations will compete with each other fiercely and negative effects for both will appear,'' says Zheng Gu, a tourism professor at the University of Nevada-Las Vegas. More gloomy, Tan forecasts that Singapore's move will dry up the stream of unannounced big casino resorts in Macau.
The two city's ambitions will inevitably clash over conventions. Speaking at a think tank forum, Singapore tourism consultant Christopher Khoo noted that Singapore is already Asia's top convention city and the third-biggest player in the world market. With its own casinos, Singapore should find it easy to block Macau from making a big entry.
A bigger worry is that Singapore's move will be the catalyst for other Asian countries to succumb to legal casino fever. Merrill Lynch forecasts that Thailand will follow suit next January and that Japan, Taiwan and India will then ante up too.
Macau's casino industry isn't losing sleep over this possibility, especially since several players in the local market are bidding in Singapore. ``We have a long history with the gaming business,'' says Manuel Joaquim das Neves, director of the Macau Gaming Inspection and Co-ordination Bureau. ``People from the mainland prefer Macau to Singapore. In my personal opinion, it would not affect us too much.
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