WEEKLY FEATURE: Hopes Fade in Vietnam

Investors looking for a more open market in Vietnam have found disappointment instead. New regulations have been submitted to the National Assembly, which will maintain the current ban on casino gambling by Vietnamese citizens—ensuring that the Grand Ho Tram casino hotel (l.) will continue to struggle—and if approved will require a commitment of at least $4 billion to be considered for a license.

The provisions of a new draft decree on the regulation of Vietnam’s casino industry erect substantial barriers to entry in the form of a US billion investment commitment and the retention of laws that currently bar Vietnamese nationals from participating.

Developers will only receive an investment certificate after spending half the required commitment, or $2 billion, according to the draft, which also requires them to show at least 10 years’ experience in the industry to qualify for licensing.

The measure throws into doubt a massive mixed-use leisure complex with a casino proposed for the popular tourist spot of Halong Bay. Developers include Halong resort operators Tuan Chau Group, Australian property developers ISC Corp. and U.S. regional casino operator Penn National Gaming.

The one bright spot in the draft, which was written by the Ministry of Finance and submitted to the Standing Committee of the National Assembly for consideration, is the scrapping of an existing rule that caps gaming space at 3 percent of total floor area and limits gaming positions to 2,000 slot machines and 180 tables.

The big blow, the locals ban, remains in force, however. It is estimated that Vietnamese spend some $800 million in foreign casinos every year. Cambodia’s monopoly NagaWorld casino in Phnom Penh generates more than 40 percent of its gaming revenue from Vietnamese.

Still, a number of provinces are seeking casinos in hopes of boosting their local economies. Minister of Planning and Investment Bui Quang Vinh says his office has received 10 proposals to date. But, as it stands, observers believe the new rules will ensure the market remains small—it consists currently of six modestly sized foreigners-only venues in the far north near the Chinese border, in Halong and the nearby port city of Haiphong and farther down the coast in Da Nang.

It could also mean that the largest investment ever in resort gaming in Vietnam, the $530 million Grand – Ho Tram on the South China Sea about 90 kilometers from Ho Chi Minh City, will continue to struggle. Through February, Ho Tram posted only $5.5 million in gaming revenue after nearly seven months of operation.

For incumbent operators, the news is bad for some—such as the country’s oldest casino, the Do Son in Haiphong, which has been losing money the last five years and will likely continue to do so—and potentially good for others, like the casino at the Silver Shores International Resort in Da Nang, which recently received local approval for more tables games, and like ASX-listed Donaco International, which is doing a tidy business at the Lao Cai International Hotel in Chinese gamblers from neighboring Yunnan and is slated to open 400 new hotel rooms and 18 more table games on May 18.