#150 © Copyright 2008, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I. Nelson Rose, www.GamblingAndTheLaw.com

Macau’s gross gaming revenue is slowing. Still, the only legal casinos in China made more in the first three quarters of 2008 than they did in all of 2007. And that was more than all the casinos on the Las Vegas Strip.

Singapore is next, with the first of two gigantic integrated resorts, or “IRs” as they are called, set to open in 2009.

Vietnam, which has small casinos restricted to foreigners, had a ground breaking on its own billion dollar IR. And legalization of casinos is being discussed in Taiwan, Japan, Mongolia and Thailand.

So, are these all going to look like Macau or Las Vegas? Not a chance.

Each jurisdiction’s legalization of casinos is unique.

The differences are due, in part, to the divergence in local culture and the forms and philosophies of the governments involved. You would not expect North Korea to treat gambling the same as the Philippines. But, the differences are primarily the result of historic accidents.

Gambling spreads when governments find it difficult to argue morality, when the state itself is selling lottery tickets, licensing horseracing and at least tacitly endorsing social and charity games. Technology also plays a role, allowing off-track betting on horseraces and lotteries to move from paper tickets to online wagers, including cell phones and video lottery terminals (“VLTs”).

But the major impetus for expansion is usually the legalization of a more attractive form of gambling in a nearby jurisdiction. The sight of all that disposable income, some from a state’s own citizens, going across the border to another state, does more than anything else to weaken even anti-gambling lawmakers. No one would have predicted ten years ago that Singapore would be the next great casino market. And it would not be, if Macau, itself the result of a historic accident, had not shown how successful Las Vegas-style casinos can be.

It is doubtful whether the central planners of the People’s Republic of China would have intentionally created places like Macau and Hong Kong. Macau always had casinos under the Portugese. Hong Kong developed the world’s largest racetrack, in terms of money wagered, under the British. On the mainland, on the other hand, gambling has been, and still is, one of the sins that can be punished by the death penalty.

Hong Kong became a Special Administrative Region of China in 1997, Macau in 1999. But the PRC pledged it would allow the capitalist systems there to continue.

When Portugal controlled Macau, a company owned by one of the richest men in the world, Stanley Ho, had a monopoly on casinos. As with all monopolies, the restriction on casinos to one company severely constrained the industry’s growth. But three years after the turnover, the new rulers of Macau decided to issue more casino licenses and put them out to bid. This opened the door to foreign operators, and, more importantly, foreign money.

Unlike American casinos, the majority of gaming revenue came from table games, not slots. Traditional Chinese beliefs give the number nine great importance, so the domino game of pai gow, which translates as “make nine,” and particularly the card game of baccarat, are hugely popular.

The attraction was how much those tables made: Ho’s 340 tables won an average of about $10 million a year. An average Las Vegas gaming table won only about $730,000. Stanley Ho’s 11 casinos had revenue of approximately US$3.5 billion a year; at least that was the amount reported officially. And this was before the Beijing government made travel from the mainland easier.

The opening of the Macau market was thus radically different from what is taking place in Singapore. Macau was a massive expansion of an already thriving industry. Singapore presently prohibits all casino gambling.

The two jurisdictions have different views of the role of law. Macau comes from the Portugese legal tradition, where the emphasis is on general principals put into a code and then interpreted by officials. And, despite its power to govern itself in many areas, Macau is still a part of China. These forces sometimes lead to government by decree, such as when Macau’s Chief Executive, Edmund Ho, simply announced that there would be a moratorium on new casino projects. Now, no one knows exactly how many casinos Macau will eventually have.

Singapore comes from the English common law tradition, with its emphasis on the power of precedence and rules of law. Singapore knows exactly how many casinos it will have: two. It went further than any western state or country in announcing that it has frozen the tax rate on casinos for ten years.

Singapore also has a strong tradition of social control and stability. When considering legalizing casinos, it took a step back and asked, “Why do we regulate gambling?”

The answer is threefold:

1) To keep the bad guys out

2) To prevent or at least lessen the negative social impacts, and

3) To fulfill the purposes for legalizing casinos in the first place.

Performing background checks and requiring investments of more than US$1 billion took care of the first.

Singapore is taking care of the second by having more protections in place than any other casino jurisdiction, starting with the requirement that residents of Singapore cannot enter the casino unless they pay S$100 (about US$67) each day.

And Singapore knew exactly why it was legalizing casinos. The IRs will be magnificent draws to foreign visitors.

Macau was at a disadvantage here, because it already had an established casino industry built on a complicated system of junkets, private rooms and unreported credit. Singapore had a clean slate.

If Singapore’s IRs succeed, we will see similar developments in many Asian countries. But each will be different. In Japan, for example, any plan for legalizing casinos has to take into account the enormous number of gray market slot machines found in pachislo halls. The government of the Philipines has repeatedly proposed IRs, but the country already has government-owned and operated casinos, and, more importantly, a strong local Catholic Church that does not want more gambling.

Korea mostly limits its casinos to non-residents. So far, only a few have succeeded in attracting large numbers of high rollers. Many of those are Japanese. What will Korea do if high rollers in Tokyo find it is easier to take a train then a plane to gamble?

Inevitably, there will a loosening of restrictions.

And this is what we are going to see throughout Asia. IRs, and even large casinos without resorts, cannot succeed unless local residents have easy access and are allowed to gamble.

But the great unknown is China. With few exceptions, multi-billion-dollar IRs throughout Asia will fail if China decides once again to make it too difficult for mainland Chinese to travel.

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© Copyright 2008. Professor I. Nelson Rose is recognized as one of the world’s leading authorities on gambling law and is a consultant and expert witness for governments and industry. His latest books, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.