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Say wat?

Newsdesk by Newsdesk
Thu 29 Oct 2009 at 16:00
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It seems some Cambodian government officials are under the impression foreign gaming investors have short memories.

Word reaches Asian Gaming Intelligence that the authorities are considering issuing a raft of new slot club licences in at least one of the towns near the frontier with Vietnam. How this will go down with gaming operators that have already sunk a significant number of dollars into the ground to build full service casinos there isn’t clear.

Cambodian officials appear to be persisting with ‘who pays wins’ licensing despite the pain suffered by investors following the sudden closure of the Phnom Penh slot club sector earlier this year. Supporters of the Cambodian approach argue there was a very specific and unusual set of political circumstances that led to the great Phnom Penh market implosion.

The European or Macau model of strictly limiting the number of concessionaires in a market is normally accompanied by demands by government for a healthy slice of the gross revenue in tax. Gaming operators in Cambodia, by contrast, pay a modest and flat tax on a per machine and per table basis, thus arguably creating incentives for new start ups and opportunities to build the market through free market competition. Leaving aside the tax issue, in free market Nevada in the United States, the assumption is in favour of issuing new licences to applicants. The hard part there is passing the probity test.

There is a slight problem with this free market approach when applied to Cambodia, and it’s more to do with the probity of the system than the probity of the applicants. A ‘who pays wins’ licensing system creates an incentive for officials to issue as many licences as they can get away with in return for ‘processing fees’ (i.e., a percentage off the top). It also has the potential to create licence fee inflation. This is exactly what happened in Phnom Penh. The hotter the market became, the more the fees rose, until a point was reached whereby the endgame for investors was obscured by speculation on and trading of club licences, rather than by pursuit of the core business of creating gaming entertainment.

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The IAG Newsdesk team comprises some of the most experienced journalists in the Asian gaming industry. Offering a broad range of expertise, their decades of combined know-how spans multiple countries across a variety of topics.

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