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Vietnam is a jurisdiction to closely watch, as significant change is now likely to happen. It already has an established, albeit small, gambling industry taking in seven licensed casinos, a state run national lottery and more than 60 provincial lotteries. Current local law prohibits casinos from admitting Vietnamese gamblers unless they hold a foreign passport, and although the enforcement is weak, the country is believed to be missing out on more than $800m a year in tax revenue from Vietnamese people gambling in neighbouring countries like Cambodia. Sports betting and online gambling, except for the sale of lottery tickets via the internet with incumbent Vietlott, are illegal. And while the government is working on regulation of online betting, the black market revenues are in the billions of dollars.
These figures have made lawmakers sit up and take note, and consider ways of broadening the scale and scope of current gambling regulations in land based and online. This, in turn, could throw up opportunities for new operators and suppliers to enter the fray.
Vietnam’s legal casino and gambling industry generated gross gaming have been steadily growing and is believed to be reaching $400m in 2016. The bulk of which comes from electronic gaming machines; at the time they were located in four-star hotels in Hanoi and three-star hotels in Ho Chi Minh City but a tweak to the law states they must sit in five-star hotels anywhere in the country. Of the seven licensed casinos, five are located close to the Chinese border in the north and are to a large extent reliant on Chinese visitors. The government had already given green light to develop integrated resorts in 4 regions and are considering to endorse 2 more.
After years of contemplation and discussion and proposals on changes on the regulatory framework and investment requirements it seems that now with the new Cabinet in place it funnels into final decision making. Although the draft bill has yet to be approved by the prime minister, it is believed to happen over the next months.
Changes in the gaming regulation are necessary to drive the tourism industry and tax income. What has held back foreign investors in Vietnam were the immense investment requirement of $4 billion in combination with the absence of a regulated local market as Vietnamese are not allowed to gamble unless they hold a double passport.
Already back in 2014 the Ministry of Finance completed a draft decree that would allow Vietnamese to gamble in casinos under certain conditions, but the conditions were unworkable and the draft never got approved. The latest draft bill stipulates that Vietnam will start a 3 year trial with Vietnamese being able to gamble in 2 major integrated resorts (at Van Don island and Phu Quoc) once they acquired their licenses and open their doors. There is a minimum income requirement for the Vietnamese of around $450 monthly and this is considerably lower than in earlier draft bills. Tapping into the local sector to grow the market will achieve a more sustainable business in the long-term. In Vietnam, two-thirds of the population are under 30 years of age and the consumer middle class is expected to double by 2020, providing operators with a large opportunity. Not only is the local market less volatile, it is not so reliant on the level of VIP play that has thrown Macau into turmoil in recent months and years.
A major breakthrough in the latest draft bill is the investment requirement that will be lowered with 50% to $2 billion. At the same time the tax rate will be rather high approaching 40% but there will be deductions allowed on marketing and promotional expenses. The lower investment requirement in combination with the possibility to tap into the local market will be a huge game changer and attract foreign capital for the 2 new integrative resort projects that will be approved. Consequently, tax revenues will soar. Vietnam is also considering to allow slot operations at some international airports and although that process is in its infant stages, it clearly show Vietnam’s commitment to further regulate the industry and boost tourism and tax revenues.
The approval of the bill will likely mark the start of more reforms. Online gambling is next on the list. The Ministry of Finance has put forward a proposal to legalize sports betting for punters above 18 year olds. This is done to stamp out rampant illegal sports betting operations and bookies.
Betting will be limited to certain matches approved by FIFA and regulated by the Ministry of Culture, Sports and Tourism. Included in the proposal are horse racing betting and greyhound racing betting. However, the proposal also includes a daily limit of around $45. By setting this limit, it is expected that the high rollers and VIPs will continue to use illegal sportsbook operators or offshore operators and hence defeats the purpose of stamping out such operations. In any case, once approved the regulated sports betting could be a major windfall to the state coffers as Vietnam is a soccer-loving country that already experiences massive growth in social gaming. The 2016 revenue for social gaming is expected to reach $250 million compared to $150 and $100 million in 2015 and 2014 respectively. In terms of the number of people playing it doubled from 20 million to 40 million in just one year. If the government decides to proceed, it will unlock the true potential of gambling in Vietnam.
Operators looking to Asia to expand their geographical reach and to drive growth should take a closer look at Vietnam. The direction of regulation, its size and economic growth levels provide solid opportunities.