Market insight: Tax rates and red tape on investment hamper growth in Vietnam

Thua Thien Hue vietnam
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Andrew M. Klebanow, senior partner at Global Market Advisors, gives the low-down on the strengths and weaknesses of the Vietnamese integrated resort market.

 

International Casino Review: As Vietnam’s IR offering expands, what features of the country’s casino market will make it attractive for overseas players?

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Andrew M. Klebanow: Vietnam remains a very appealing gaming and vacation destination. Overall, the country’s airport infrastructure is sound.

Its airports are modern, most runways can accommodate any size aircraft and there is ample airlift to cities throughout Asia.

The tourism industry is well-developed; the industry has developed sound training programs for hospitality employees and the industry consistently provides memorable experiences to tourists.

The country offers some of the most beautiful beaches in Southeast Asia, particularly those in and around Da Nang. Put quite simply, Vietnam is a nice place to visit.

Having said that, Vietnam has some issues that preclude it from fully developing its casino industry.

Inter-city and intra-city road infrastructure is primitive. Highway traffic rarely exceeds 50 km, making transport from airport to resorts an uncomfortable experience.

Gaming tax rates remain stubbornly high, which limits the amount of capital that casino-resort developers can commit to projects.

The gaming regulatory environment remains weak, which precludes western operators from entering the market.

Perhaps the biggest stumbling block is the central government’s arbitrary minimum capital investment requirements, which coupled with restrictions that prohibit residents from gambling in Vietnam’s casinos, makes $2bn projects unfeasible.

ICR: Following the announcement of the trial to allow local players to access selected properties, there seem to have been a spate of new developments announced across the country, what’s driving this?

AK: It appears that there are far more companies vying to develop casino resorts than there are available licenses. None of these developments are being proposed by multinational casino developers. I have seen proposals from Russian and Chinese firms.

It remains to be seen which of these developers have the capital and skill set to bring an integrated casino resort to fruition and if they have the capabilities to actually operate them.

The proximity of Vietnam to nearby Chinese markets is probably what is driving most of these proposals rather than targeting Vietnam’s emerging middle and affluent class.

The proposed casino sites are in tourist destinations and not proximate to large centres of population so, even if they were allowed to admit residents, their revenue contributions would not be that great.

ICR: What do you think the likelihood is that following the trial, the government will allow further venues to offer their services to locals?

AK: I believe that after a long trial period, the government will recognise that casino gaming is not the scourge it has long believed it to be and will eventually allow other casinos to admit residents.

Having said that, I do not believe a decision to allow further venues to admit citizens will come quickly or without restriction.

 


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