iGaming could play a big role in Cambodia’s dominance in the Asian gaming market
Lawmakers in Cambodia are looking at legislation that would fix the gaming tax rate in the country at 4 percent to 5 percent, a move that could benefit dominant provider NagaCorp and also serve as a hedge against expanded gaming in Vietnam.
ABC Online reports that in the past two years, Cambodia’s growth has been fueled by an infusion of investment capital, which doubled from $US3.6 billion in 2016 to $US6.3 billion last year. About $US5.3 billion of that came from Chinese interests.
Chinese Ambassador Xiong Bo denied speculation that more Chinese investment in the country is related to money laundering. Cambodia now ranks No. 161 on Transparency International’s 2017 Corruption Perceptions Index, making it one of the 20 most corrupt countries in the world.
If the suggestions are true, the ambassador said, “China will definitely take measures against those cases.”
Meanwhile, Hong Kong-listed NagaCorp, which opened its Naga2 addition at NagaWorld in Phnom Penh last year, “scores better than Macau on three fronts—a monopoly through 2035, lower tax, and lower labor cost,” said Morgan Stanley analysts Praveen Choudhary and Jeremy An in a February note.
The tax under consideration would fall in the “mid-single digits” of GGR for Cambodian operators, said a note from brokerage Union Gaming Securities Asia Ltd. In late 2017, NagaCorp Chairman Tim McNally told GGRAsia that the firm’s effective tax on total revenue in 2016 was “about 4.8 percent.” NagaCorp posted net profits of US$255.2 million for 2017, up nearly 39 percent year-on-year; revenues increased 80 percent year-on-year to US$956.3 million, the firm said in a filing in early February.
The proposed tax is expected to pass after general elections this year, according to Voice of America. The industry currently nets the government almost $50 million in tax revenues per year, and there is reportedly room to grow. Ben Reichel, executive director of Sydney-listed Donaco International, cited “a lot of unsatisfied demand in the region as a whole. If you look at the number of tables compared to somewhere like the USA, it’s actually a very low number of gaming tables available—which is why there is so much illegal competition.”
Outside Phnom Penh, where Naga World has a monopoly, the major casino hubs are along the border in Poipet near Thailand, in the seaport city of Sihanoukville, and to the east along the border with Vietnam, where locals have traditionally been barred from gambling. That changed last year with a decision by the government to launch a three-year trial of locals gaming at select locations. If the experiment succeeds, Cambodia may not be as attractive to Vietnamese gamblers, who now cross the border in droves to lose their money.
Reichel, whose company operates the Star Vegas casino in Poipet, says most of that resort’s customers now hail from Thailand. “The whole town operates using Thai baht,” he said. “It’s like a little piece of Thailand on Cambodian soil.”
In related news, Cambodia is also seen by some as a potential for the Philippines as Asia’s iGaming capital within the next few years. Rhys Jones, managing director of Ha Tien Vegas on Cambodia’s border with Vietnamese, told Inside Asian Gaming that a supportive government, the potential threat posed by Vietnam and uncertainty about online regulations in the Philippines could make Cambodia an attractive option for iGaming operators.
“For a long time gaming has been viewed as a boon to the economy on the borders, which really struggle for employment,” Jones said. “There are 140 casino licenses placed on the borders with Vietnam and Thailand and the government sees that as bringing revenue into the country from overseas.
“But now Cambodia is under threat in terms of the legalization of gaming in Vietnam and there is also the potential in Thailand, which is definitely a possibility. Should that evolve we’re talking about up to 200,000 jobs.
“The obvious replacement for those jobs and the income they provide is to encourage online investment,” he said, “because if these land-based casinos dry up in terms of footfall patronage, they are going to close.”
