Vietnam and the Philippines want to move into the top tier of Asian casino destinations. Each country recently opened five-start casino resorts meant to anchor new casino districts, Solaire Resort and Casino in Manila and The Grand-Ho Tram Strip in southern Vietnam. My Asia Times article outlines some key similarities and differences between the two developments and their environs.
One of the oddities in the story is MGM Resorts International’s unkept promise to manage the initial resort in southern Vietnam’s Ho Tram Strip under the name MGM Grand Ho Tram, while US casino operators have steered clear of the Philippines.
The surprise isn’t that MGM withdrew from Vietnam, but that it ever considered it doing business there. As a Las Vegas operator, MGM is legally obligated to follow Nevada state regulations wherever it does business. The company ran into the extraterritorial reach of US regulators when New Jersey ordered it to divest in its holdings in Macau or in Atlantic City’s market-leading Borgata Hotel, Casino and Spa due to its partnership with Pansy Ho. Ho’s father, Macau’s venerable casino kingpin Stanley Ho, has been long been suspected of underworld ties, though he’s never been charged with a crime.
MGM has tried unsuccessfully to sell its half of Borgata for the past three years, and early this year, applied to New Jersey regulators to keep it. The company argued that its 2011 MGM China public listing reduced Ho to a minority partner, though she still holds the co-charperson title and is seen by some as the tail that wags the dog there.
When MGM agreed to manage Ho Tram’s first resort in 2008, there was no reason to believe that Vietnam’s gaming regulations would meet US standards. Vietnam didn’t even have a gaming law back then, and it still doesn’t have comprehensive regulations. Rules that exist are created behind closed doors and handed down by decree.
Those circumstances didn’t deter Pinnacle Entertainment, a second tier US casino company which bought into the Ho Tram project in 2010 and agreed to operate Ho Tram’s second resort. Whether Pinnacle or others build addition Ho Tram resorts will hinge on the success of The Grand. Pinnacle has since hedged its bets, writing down its entire $117 million investment in Ho Tram.
Pinnacle wasn’t alone in its enthusiasm for Vietnam, a country of nearly 100 million that has a land border with China and history of hostility with the Middle Kingdom. Las Vegas Sands, owners of the Venetian in Las Vegas and Macau, expressed serious interest in building its own billion dollar resort in Vietnam, if the country would let it citizens gamble, a step that Vietnam remains unlikely to take.
By contrast, no US gaming operator has shown any interest in the Philippines, though it has a population size similar to Vietnam, higher GDP per capita (in purchasing power terms), and a proven gaming sector for local and foreign players. The main reason cited for the US cold shoulder is that Philippine gaming regulator Pagcor also operates casinos and that dual role troubles US authorities. From the perspective of a layperson, not a lawyer, that seems to be an excuse, rather than a reason.
There’s no denying that the Philippines in general, and Pagcor in particular, have a history of corruption. Casino magnate Steve Wynn used former Wynn Resorts vice chairman Kazuo Okada’s investment in a Philippines casino as a pretext to buy out Okada at a significant discount, sparking a battle of the billionaires playing out in law enforcement agencies and courtrooms on both sides of the Pacific. Among other things, Wynn claims associates of Okada, chairman of Japanese pachinko giant Universal Entertainment, gave $40 million to a consultant close to Pagcor’s former chairman, who already faces unrelated graft charges.
As bad as that sounds, at least the Philippines has a semblance of regulation and rule of law, qualities that have been significantly strengthened under reformist President Benigno Aquino. For a Macau Business special report on Philippine gaming (see pages 48-54), I spent hours talking with Pagcor and other government officials as well as business people, and I was convinced Pagcor has the will to regulate gaming to regional standards, in other words, as strictly as Macau, which has proven good enough for US authorities other than New Jersey.
Between the bribery allegations and land issue, there’s a growing chance that Okada could lose his Phippine casino license or choose to sell out under that threat. Pagcor says it wants four resorts in Entertainment City, as currently planned, so an Okada withdrawal would open the door for an American operator to move in and give Manila’s world class ambitions a big boost. The Philippines doesn’t need a US casino operator to become an international gaming destination, but it would lend credibility, just as MGM did for Vietnam during its brief engagement there.
At this stage of the global gaming business development, having a casino destination without an American brand is like having a soda fountain without Coke or Pepsi. However, as Asia continues to overshadow Las Vegas as the hub of the global gaming business – last year gaming revenue in Macau alone topped the entire US commercial casino industry – it behooves American casino brands to get in the game where the money is, to ensure they remain the industry’s Coke and Pepsi rather than become the next Kodak and Chrysler.
They may also want to listen to Solaire’s chief executive officer and controlling shareholder Enrique “Ricky” Razon Jr, the Philippine billionaire who runs global ports operator International Container Terminal Services. A welcome gale of fresh air at last week’s Forbes 2013 Global CEO Conference, Razon noted, “Everybody talks about China and India. I make more money in Madagascar than in China and India combined. Nobody wants to be there, so we want to be there.”
Totally globalized native New Yorker and former broadcast news producer Muhammad Cohen is author of Hong Kong On Air, a novel set in his adopted hometown during the 1997 handover about television news, love, betrayal, high finance, and cheap lingerie. See his bio, online archive and more at www.muhammadcohen.com; follow him on Facebook and Twitter @MuhammadCohen.