Entry barrier lowered on foreigner-only casinos

The government lowered the entry barrier for foreign investors seeking to operate casinos in free economic zones (FEZs), Tuesday.

Until now, foreign investors were required to make an investment of at least $300 million up front to build a hotel or convention center before seeking permission to run a foreigner-only casino.

According to revisions of casino-governing regulations approved in a cabinet meeting, which will only be applied to FEZs, the Ministry of Culture, Sports and Tourism will carry out pre-qualification screening for those prepared to make an initial investment of $50 million.

“We believe that the changed rules will spark development activity in FEZs and help spur sluggish domestic demand,’’ Knowledge Economy Minister Hong Suk-woo said.

The ministry will have 60 to 90 days to decide whether to license the investor or not. A licensed candidate will be required to make an additional investment worth $250 million to secure permanent approval and complete facilities within four years.
There are 17 casinos in Korea and 16 of them are open exclusively to foreigners, with Kangwon Land in Jeongseon, Gangwon Province, only allowed to admit locals.

The government has also eased the financial health requirements of the potential casino investors.

Previously, foreign investors eligible to apply for casino license here needed a credit rating higher than the BBB level and equity capital covering at least 10 percent of project costs. Debt levels needed to be lower than 50 percent above the industry average, and they must have posted a profit for at least two of their last three years of business.

Investors will still have to meet the first two criteria under the new rules, but just one of the last two.

However, critics question whether policymakers are discriminating against local gaming operators and risking attracting speculative investment in a country so sensitive about “meoktwi’’ (eating and fleeing) foreign capital.

The Ministry of Knowledge Economy, which had been pushing for the renewal of gaming laws, believes that the eased rules will jolt foreign investment in a country that is struggling to attract interest aside of its high-risk, high-reward stock market. The bureaucratic dream obviously is Korea stepping up as a gaming destination that can hold its own against Macao and up-and-coming Singapore.

Local municipalities are also expecting to benefit from the changes, particularly cash-strapped Incheon, which would try anything to attract more businessmen and travelers to the Incheon FEZ.

However, there are concerns that the eased regulations will attract investors with a short-term commitment rather than a longer one, triggering a cycle of buying and selling that may cause disruptions in the industry. Others question whether it’s really ideal for the country to have two, three or more casinos for every one of its FEZs.

Additionally Kangwon Land has been demanding more wiggle room as well, although that would not be an easy decision in a country where the lack of casinos has failed to prevent gambling addiction from becoming a social problem. <The Korea Times/Kim Tong-hyung>

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