South Korea’s Ministry of Culture, Sports and Tourism has revised its guidelines for tourism fund loan support, allowing for the first time casino operators to borrow from the Tourism Promotion and Development Fund for new construction or expansion projects.
According to a report by Seoul Economic Daily, casinos have now been added to the list of businesses eligible for facility loans as of the fourth quarter loan round, which began accepting applications on 31 August. This represents the first time casinos have bene included since the tourism fund’s facility loan program began in 1998, the report states.
It is suggested that this may represent an olive branch by the government to the casino industry amid plans to increase the maximum annual contribution rate paid by casinos to the fund from 10% of GGR currently to 15%.
At the recent IAG Academy Summit, Chen Si – the COO of Singapore’s Resorts World Sentosa and former CEO of Korea’s INSPIRE Entertainment Resort in Incheon – warned that the increased levy would not only have an operational impact but also see banks revise their models, potentially affecting operator’s ability to refinance.
“This is such a big variable in the model that it will have some material impact on financing,” Chen said.
“To be honest, I was puzzled by the announcement because Korea is about a US$2 billion market, so 5% of that is US$100 million. Does the Korean government really need US$100 million? It’s not material to them [like it is to the industry], so I don’t really know the intention behind that.”
Casino operators had until now only been allowed to borrow from the fund for working capital, capped at 50% of operating expenses over the previous year to a maximum of KRW3 billion. Seoul Economic Daily said the revised guidelines allow operators to borrow up to KRW15 billion for new construction or expansion and up to KRW8 billion for renovations on top of working capital.
However, it quoted an industry official as stating, “Extending the scope of loans to facility funds is a positive but the discussions on raising the contribution rate and introducing license renewals are moving forward at the same time, so we are concerned that the expanded support may be a carrot for tighter regulation.”
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