Integrated Resorts in Thailand, Part III

In a series of analytical publications, IGB delves into the prospects for the Thai gambling industry.

Following the green light for gambling in the country, the legalization process is rapidly gaining momentum. Prime Minister of Thailand, Srettha Thaweesin, has outlined a goal of inaugurating a land-based casino within two years. This marks the initial step towards establishing "integrated entertainment complexes" featuring gambling in tourist hubs across the kingdom.

Columnist Muhammad Cohen's investigation delves into the challenges awaiting the Thai gambling industry, including the removal of illegal structures from the black market and the complete legalization of the sector. Key questions surrounding whether citizens will be permitted to gamble are also addressed, providing comprehensive insights into the future of the gambling industry in Thailand.

Navigating Legalization: A Strategic Approach

"We must integrate existing players in the gambling business," asserts Suranand Vejjajiva, a senior official in the governments of Prime Ministers Thaksin Shinawatra and Yingluck Shinawatra. "Lawmakers should convey to current illegal operators that there's a pathway for them to operate within the legal framework. They can operate legally, with the government turning a blind eye to their current activities. However, once regulations are in place, stricter penalties will ensue if they persist in illegal activities."

"The legalization process must consider the interests of industry stakeholders," remarks Fredrik Gushin, whose firm has advised Singapore on regulatory matters. "However, the final legislative decision should be guided by various factors, including government policy objectives and rules conducive to attracting investment and reputable operators. Ultimately, the government bears the responsibility for the final decision, taking into account input from diverse stakeholders, including representatives of the existing gambling industry."

"Success hinges on incorporating the right elements while eliminating the wrong ones," highlights an experienced casino executive with extensive experience in the US and Asia. "The critical question is whether legal operators can effectively compete with illegal ones."

Reflecting on Macau's casino liberalization, the executive notes, "In the early days, the regulatory structure wasn't as robust as it is now. Las Vegas operators maintained their licenses, but they were aware of and accepted the prevailing circumstances. Illegal activities, particularly involving junket promoters, were rampant, with over half of the revenue attributed to illegal operations. It took Macau two decades to eradicate illegal activities and establish a fully legal gambling industry." 

Navigating Opposition to Legalization

Public opposition, fueled by concerns over crime and gambling addiction, has hindered the licensing of Integrated Resorts (IRs) in Japan and remains a significant challenge for proponents of legalized gambling in Thailand.

"Religious and social considerations will spark crucial debates, leading to compromises and viable solutions," notes Kaplan, whose expertise lies in hotel real estate. "I'm optimistic that there's sufficient positive momentum both politically and among citizens to mitigate public resistance."

However, Suranand emphasizes that the issues extend beyond religious and moral concerns. "If the government grants licenses to large conglomerates without clear benefits for local provinces, opposition will intensify," he explains. "Simultaneously, the thriving illegal gambling and online betting scene in the country presents a challenge. Casinos alone won't solve these issues without robust government support and law enforcement."

Gushin underscores recent government crackdowns on illegal gambling establishments, indicating a firm commitment to legalization efforts in Thailand.

Effectively addressing illegal gambling while retaining gambling revenues domestically necessitates allowing locals to gamble. "I advocate for Thai citizens to have access to gambling establishments within Thailand," asserts Suranand. "Many Thais currently travel to Cambodia for gambling, so there's little merit in further promoting this trend."

Introducing a Pay-to-Play System

There's growing support among experts, including former politicians and cabinet ministers, for implementing a tax on local residents who wish to gamble in casinos, mirroring Singapore's model. This sentiment echoes the findings of an iGB survey on Thailand's gambling landscape.

"I was initially skeptical until I witnessed the system in Singapore," remarks a former bi-continental executive. "In practice, the entry fee acts as a deterrent for locals who may not afford to gamble excessively, thereby preserving the establishments."

"Restricting locals' access to gambling venues poses challenges," acknowledges Kaplan, emphasizing the need for time to develop local regulations. "We're likely to emulate Singapore's model, but with additional requirements and measures for family protection." He advocates for clear and objective guidelines, such as minimum income thresholds for gambling and robust responsible gambling measures.

Gushin proposes that funds generated from entry fees should be allocated, at least partially, to establish a comprehensive socially responsible gaming program, aimed at minimizing potential harm associated with legalized gambling in Thailand.

In terms of the timeline for casino openings, Jason Turnbull, Managing Director of Inspire Advisory Group Vietnam, anticipates challenges in meeting the two-year deadline. He suggests the establishment of temporary sites while long-term solutions are being developed.

"By engaging qualified experts and adhering to international best practices, along with robust laws and governance requirements, authorities can facilitate a relatively seamless transition and integration of gaming," Turnbull concludes. 

Debate Over the Timeline

David Leppo, a prominent businessman in the Mekong region, argues that a two-year timeline for the introduction of Integrated Resorts (IRs) is overly ambitious. He emphasizes the complexity of navigating political, royal, religious, and law enforcement dynamics, suggesting that it will take four to five years to strategically address these multi-layered issues and garner public support for legalization.

Contrarily, Kaplan holds a more optimistic view, advocating for a faster timeline. Last year, he predicted approval within three years and anticipates that the government will initiate license tenders late this year or early next year, with winners announced by June 2025.

Under Kaplan's projected timeline, successful licensees would have eight months to open their casinos, likely in a temporary capacity while the full-fledged IRs are constructed. He points to the success of Sands Macao, the world's most successful pop-up casino, which celebrates its twentieth anniversary this month, as a testament to the feasibility of such temporary setups.