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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Gambling Beyond Nevada: Casinos OK'd in Singapore

19 April 2005

Singapore announced Monday that it would allow construction of a pair of Las Vegas-style casinos, giving two gaming operators a potential for a significant revenue jump by the end of the decade.

Prime Minister Lee Hsien Loong revealed the government's decision to end a four decades-long ban on casino gaming in an address to Parliament after months of mulling the economic pros and social cons of gambling.Advertisement

The government decided to allow two casinos in the city-state, one as part of a resort with other attractions on the island of Sentosa, with the other near downtown at Marina Bay on Singapore's main island. Both projects, worth a total of $3 billion, will be five minutes by car from the central business district.

Wall Street gaming analysts have speculated the casinos in the Singapore market could exceed $1.5 billion in annual revenues based on Asia's population and plans by the government to double its tourism numbers to 17 million visitors a year and triple the annual tourist spending to $18 billion.

"The word we had been getting out of Singapore was they were going to approve both sites," Legg Mason gaming analyst Steven Wieczynski said. "So the announcement was pretty much expected. This will eventually be significant to whichever company wins these contracts."

Deutsche Bank gaming analyst Marc Falcone said: "Asia remains one of the most significant growth opportunities in gaming throughout the world, buoyed by a large population, increasing wealth, and with a huge propensity to gamble.

Singapore has received nearly 20 proposals from international and Las Vegas-based gambling giants angling to build a casino in Southeast Asia's most prosperous country. Bidders include Wynn Resorts Ltd., Harrah's Entertainment, MGM Mirage Las Vegas Sands Corp. and Kerzner International ltd.

"It was positive news that Singapore decided to allow casinos at both sites," said Wynn Resorts President Ron Kramer, whose company is bidding for the Marina location. "I think we're planning a terrific development and we're looking forward to continuing the process."

The gaming companies submitted conceptual plans for the gaming sites, which also included integrated resort elements, including hotels, convention space, restaurants and other amenities.

Singapore is now expected to seek full-blown proposals from the companies and decide on the operators by the end of the year. The casinos are expected to be operating by 2009.

The front-runner for either casino is not clear but MGM Mirage's partnership with CapitaLand, a government development entity for the Marina site, could give the company an edge.

"We do believe that a partnership with CapitaLand has an obvious advantage," Harry Curtis, a gambling analyst with JP Morgan, wrote in an investor's note.

MGM Mirage spokesman Alan Feldman said the company could be helped by its partnership.

"We are impressed with the government's professionalism in the handling of this matter, and we are very much looking forward to the continuation of the selection process," Feldman said.

In a statement, Las Vegas Sands President Bill Weidner said the company intends to follow through with its conceptual proposal for Marina location that includes a Guggenheim Hermitage Museum, cruise ship terminal and monorail.

"We remain deeply committed to building a destination resort of which all Singaporeans will be proud," Weidner said.

Harrah's submitted proposals for both locations with Keppel Land Ltd., a Singapore developer. In a joint statement, the companies said they believe the government has made the correct decision, one that will expand Singapore's tourism economy.

Lee cited efforts by some of the world's great cities to reinvent themselves with transportation, cultural and other development projects. In his address, he warned that Singapore could become an Asian "backwater" unless it competes with its neighbors.

"In Asia, Shanghai is full of drive and energy. Hong Kong is opening its Disneyland, Hong Kong is also talking about opening a casino to compete with Macau," Lee said.

"Will Singapore be part of this new world, or will we will bypassed and left behind?" said Lee, whose father, former Prime Minister Lee Kuan Yew, was instrumental in shaping Singapore's development since independence in 1965. "We want Singapore to have the X-factor, that buzz that you get in London, Paris or New York."

Falcone said the tax rate being proposed by the Singapore government is reasonable based on the location.

"The tax rate could be 15 percent, lower than Macau (40 percent) but about double Nevada," Falcone said. "Considering the Singapore opportunity could be a monopoly, the tax rate is actually quite attractive and could result in an overall larger market size."

Singapore leaders predicted the casino projects would create 35,000 jobs and would also keep Singapore residents from gambling hundreds of millions of dollars annually in such destinations as Macau and Perth, Australia.

Singapore's Cabinet had encouraged citizens to speak up on the casino plan, triggering lively exchanges in the media, on Internet chat sites, in offices and homes. For a while Singaporeans appeared to be split evenly in the debate -- unusual in that Singaporeans so rarely challenge their government's plans.

"The ministers themselves were evenly split," Lee said. "They also shared the qualms of the public about the social impact."

The Associated Press contributed to the report.