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    Southeast Asia
     Feb 12, 2010
Singapore lets the crapshoot begin
By Muhammad Cohen

SINGAPORE - The first casino in Singapore, the US$4.6 billion Resorts World Sentosa, opens on Sunday. But don't expect pigs to fly, lions to lie down with lambs or Satan to buy snowshoes.

"Casinos are new to Singapore but gambling is not," Singapore Management University president Howard Hunter said. A majority of Singaporeans already gamble, whether it's through Singapore Pool's enormously popular lotteries, 72 racing dates a year at the Singapore Turf Club, slot machines at many private clubs or the family mahjong game over the Lunar New Year holiday, which begins on Sunday.

Casinos at the center of multi-billion dollar retail and

  

entertainment complexes - Singapore refers to them as integrated resorts (IRs) - change the scale and scope of the gambling opportunities. They also seem to run against the hard-driving ethos of founding father Lee Kuan Yew and the family's little island nation that could. But casinos do fit the Singapore tradition in a key way: the city-state and the gaming table are both all about playing by the house rules.

Singapore authorities have showed flexibility, allowing Resorts World Sentosa (RWS) to open its casino in time for the Lunar New Year holiday, which is celebrated across much of the region, even though the Universal Studios segment isn't fully operational. The theme park will be open only for evening previews (at the discount price of S$10 (US$7), with full operations at least a week away. Final preparations and testing of the world's largest Universal Studios and first in Southeast Asia will continue during the day during the soft opening period.

Singapore also showed flexibility in late 2008 when Marina Bay Sands IR developer Las Vegas Sands (LVS) teetered on the brink of bankruptcy. That crisis led authorities to allow partial openings for both IRs. Despite bending the rules in these two cases, don't bet on Singapore letting the IR operators always getting their way.
RWS, a subsidiary of Malaysia-based Genting, began pushing for its casino license weeks ago, hosting a charity event in December and declaring its casino "ready" for business last month. RWS opened four hotels on January 20 and began running television ads promoting aspects of its integrated resort, including the unopened theme park. Approval to open the casino didn't come until the RWS had its centerpiece - the theme park, not the casino - ready for guests.

"Singaporeís goal is to open an integrated resort, not just a casino. The operators will need to learn how to operate in this type of environment. Singapore will not allow anything to damage its international image and will wait until the IR is truly an IR," University of Nevada-Las Vegas Singapore campus Dean Andy Nazarechuk said.

Last weekend's low-key announcement of the casino license approval has set off a frenzy of activity this week. Opening for Lunar New Year is considered auspicious. While it's better to have the casino open for the holiday than not, experts are divided on how much of an advantage RWS will get.

"If they are opening a major part of the hotel as well as the casino with associated F&B [food and beverage] and retail components, it should be a significant opening for them," leisure consultant YWS Asia operations director Michael Stewart said. "Chinese New Year is big even in Las Vegas."

CLSA head of Asian gaming and retail research Andrew Fischer said, "They will definitely have the first mover advantage. It will give RWS time to sign up players to their loyalty programs under the S$2,000 [US$1,418] annual fee." Singapore citizens and permanent residents are required to pay a casino-specific admission tax - to the government treasury, not the casino - of S$100 a day or S$2,000 per year.

But Platform Asia's Ling downplayed the timing of the opening. "RWS opening for Chinese New Year is not significant at all. This is not the Macau golden week", the holiday period following China's October 1 National Day that fills Macau's casinos. "A first move does not secure their long-term market share vis-a-vis Marina Bay Sands."

A spokesperson for Marina Bay Sands, the US$5.6 billion IR scheduled to open near Singapore's financial district in April and displace RWS as the world's most expensive casino resort project, offered good wishes to its rival. "Congratulations to RWS and to Singapore. The Year of the Tiger will be a year of magnificent change for Singapore."

However, parent company Las Vegas Sands chairman and chief executive officer Sheldon Adelson expressed a different point of view late last year. "I'm glad that they are opening first," he said, according to published reports. "This is sailing in unchartered [sic] waters. We'd rather they make the mistakes and we learn from it, rather than we make mistakes."

Stock market reaction reflected divided investor opinions. Genting shares in Singapore and Kuala Lumpur surged early on Monday amid enthusiasm about the license approval, but finished the day down significantly and hadn't revisited their highs through Wednesday trading. The smart money is less concerned about when the IRs open than with what will happen when they do.

A ticket to ride
Late in the afternoon on (Western) New Year's eve, Singapore's Casino Regulatory Authority (CRA) issued its long-awaited regulations on junket operators. In Macau, where VIPs account for two-thirds of gaming revenue, junket operators provide a crucial link to high rollers, especially those from mainland China.

Junket operators identify VIP players and deliver them to casinos, but that's just part of their role. Due to currency limits on travelers leaving China, mainland gamblers rely on junket operators to provide them with credit. Due to the difficulty in ensuring repayment of gambling debts in China, junket operators are believed to employ strong-arm collection methods. Macau junket operators are frequently suspected of having underworld ties.

While leaving plenty of wiggle room for junket operators who want to try to qualify to do business in Singapore, the CRA's regulations virtually guarantee that no high roller will want to come to Singapore on a junket. The most onerous provisions require advance notice to the CRA about junket players and organizers at least one hour before they arrive in Singapore. The only thing most VIPs enjoy less than losing is having anyone's government keeping tabs on them. Junket operators will also have to document all benefits given to their players, with the records stored and available in Singapore.

"My view is that [CRA regulations] will prevent mainland Chinese junket operators from freely entering and operating in Singapore," Macquarie Securities senior gaming analyst Gary Pinge said.

The CRA doesn't require similar advance notice for VIP players that casinos attract independently. Singapore also has one of the world's lowest tax rates on VIP play at 12%, roughly a third of the rate levied in Macau. So there is incentive for both the casino operators and VIPs to get together independently, but gaming experts doubt that will happen.

"The authority prefers the casinos to cultivate their own direct VIP players, and that is a difficult task for many casinos, especially in Asia," Platform Asia senior partner Felix Ling said. The key issue is credit, Ling said, which casinos are reluctant to provide without collateral. Singapore law says gambling debts are enforceable in its courts, but judicial clout generally stops at the border.

Deterring junket operators will cost Singapore's casino operators billions of dollars in potential gaming revenues. At this point, it's a sacrifice authorities are willing to force on local casinos in the name of playing by Singapore's house rules.

For the IRs to succeed, particularly with the VIP market crimped by stringent regulations, they will need to do precisely what the Singapore government wants them to do - significantly expand visitor arrivals and spending. Even then, the IRs will need to outperform the world's most profitable casinos to date to earn decent returns, analysts say.

Some experts believe that Singapore will eventually demonstrate flexibility on junket rules to improve the IRs' odds on their collective US$10 billion-plus bet. But remember that they're playing on Singapore's turf, and never forget the most important rule that applies to almost any betting: the house always wins.

Former broadcast news producer Muhammad Cohen told Americaís story to the world as a US diplomat and is author of Hong Kong On Air, a novel set during the 1997 handover about television news, love, betrayal, financial crisis, and cheap lingerie. Follow Muhammad Cohenís blog for more on the media and Asia, his adopted home. (Copyright 2010 Asia Times Online Ltd. All rights reserved. Please contact us for information on sales, syndication and republishing.)


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