Developing in stages
Hong Kong-listed casino operator and developer NagaCorp Ltd. has broken ground on a casino resort in Russia’s Primorye region. Tom McNally, chairman of the Cambodia-based company, told GGRAsia, “We had the groundbreaking ceremony at end of May and will be moving forward with construction of the first phase.”
The budget for the first phase will be in range of US$150 million to US$200 million, he said. The resort is likely to be built in three phases in the Russian Far East near the port of Vladivostok, which shares borders with both China and North Korea.
The development is part of an economic regeneration plan known both as the Integrated Entertainment Zone of the Primorye Region and the Primorsky Entertainment Resort City, or PERC.
Meanwhile, Lawrence Ho’s Tigre de Cristal resort is also under way in the zone and is due to open in late August, according to a Hong Kong filing in May by Ho’s Summit Ascent Holdings Ltd. Tigre de Cristal is expected to have 119 hotel rooms, 800 slot machines, 25 VIP gaming tables, 15 mass-market baccarat tables and 25 other mass-market tables.
NagaCorp previously said its resort would have 100 gaming tables, 500 electronic machines, a 2,000-seat theatre, a karaoke complex and spas, reported GGRAsia.
In a 2014 annual report, NagaCorp stated that its strategy of “diversifying its business geographically and expanding into a new casino market will drive revenue growth in the long term.”
To date, investors have pledged $2.2 billion to the Primorye. Adding to its appeal, the area is about a two-hour flight from Beijing, Seoul and Tokyo, home of 300 million avid gamblers. A low tax rate and affordable labor costs also make investment in the Primorye seem like a sure bet. Goldman Sachs predicts gross gaming revenues in the region will reach $1.7 billion by 2020.
But despite investor enthusiasm, Pravda reports that most Russian citizens “have only negative associations when they think of gambling business.”
In an interview with the publication, Samoil Binder, deputy executive director of the Russian Association of Gambling Business, said part of the reason is because Vladimir Putin strongly opposes gambling. In 2009, when the Russian casinos closed, more than 400,000 people lost their jobs, he said.
“The state lost $2 billion dollars in taxes, mainly in regional budgets. Moscow lost 18 billion rubles. When people ask me what has your gambling business done for Moscow, I tell them, ‘This business transferred $40 million for the construction of the Cathedral of Christ the Savior. Have you seen the modern Novy Arbat Street? It was rebuilt on the money from the gambling business.’”
He also said closing the casinos only served to increase illegal betting. “The number of underground casinos and slot machines in Moscow and the Moscow region is larger now than it was during the time when gambling was legal and law-abiding. They do not pay taxes, of course. All this game will continue until the authorities realize their mistake.”
