In a bid to expand the tax base and attract more inward investment, the Vietnam Communist Party issued two decrees in February that would allow its citizens to engage in in casino, racing and international football betting. But will betting be able to show its true worth in a particularly cautious country?
Change is afoot in the old-Old World, a vast corner of the planet once awash with anti-gambling sentiment.
In recent years a growing number of emerging economies in South and East Asia have opened their markets to foreigner-only casinos – a form of development policy designed to attract foreign direct investment and a more wealthy breed of tourists, while protecting their own citizens from the social dangers of gambling.
In Vietnam at least, this last redline is being redrawn. The twelfth politburo of Vietnam’s Communist Party has this month officially given the green light for its own citizens to place wagers in the country’s casinos for the first time; a seminal step for and old regime traditionally reluctant to embrace a more socially and economically liberal world.
In conjunction, prime minister Nguyen Xuan Phuc has issued a second decree that would allow Vietnamese citizens to place bets on horse racing, dog racing and international football, and crucially, for foreign operators to provide these services.
“There are huge opportunities in Vietnam in 2017 for local and foreign interests,” says Albert Climent of Bluesea Gaming. “This will open up a whole new different spectrum of investment opportunities in the region, especially those related to horse racing and high street betting shops.”
Having posted an average of around seven percent growth every year for the last decade, Vietnam is expanding at a formidable rate and carries one of the fastest growing middle classes on the planet. In years prior, communist ideology, inefficiency and corruption had held the country behind, but popular pressure and seeping pragmatism in the party has pushed the state to loosen its grip on segments of economic activity. In doing parts of the economy have boomed, but the overhangs of heavy state-ownership (still some 40 percent of GDP) has left other areas woefully uncompetitive, and Vietnam still struggles with a fluctuating budget deficit.
“They need tax revenues,” reiterates Alexandre Legendre, a Hanoi-based partner at Leadco Legal Counsel, which advises foreign investors on Vietnamese gaming. “The fiscal situation of the country is under pressure.”
The foreigner-only policy has helped only so far. A saturation of similar regimes in the region means attracting new investors has become infeasible without the promise of access to the lucrative domestic market – a cohort understood to have a healthy proclivity for gambling.
Gambling policy has long been used by the communists as a fiscal instrument, but only tentatively. Ho Chi Minh himself, Vietnam’s revolutionary founder, relied on lotteries to fund schools and hospitals during the war years. Since then state lottery has been part of the social contract, as has one state-run dog racing tack where roughly $1m worth of on-track betting handle has been permitted.
Yet this paternal approach to gaming has done little to prevent the Vietnamese from betting. According to Augustine Ha Ton Vinh, an academic and gaming advisor to the government, an estimated $800m is spent by Vietnamese nationals on gambling, in neighbouring casino jurisdictions such as Cambodia Malaysia and Singapore. While an underground market for sports betting, through illegal bookmakers and unlicensed foreign websites, is thought to be vast.
The Institute for Regional Sustainable Development in Hanoi estimates an additional foreign investment of only $3bn in Vietnamese gaming could increase GDP by 0.58 percent in the first year alone. And there is far more than that planned already.
There are at least four foreign investments totalling $8bn now planned for large scale casino projects since the game-changing decree was issued. In addition two South Korean investors, one Hong Kong-Chinese and one Australian firm are planning horse racing developments with initial commitments ranging from $100m and £1.5bn each. It is currently unclear which foreign firms are looking to invest in the new sports betting market.
“It’s taken almost ten years, but the government and gaming industry are on the same page,” says Muhammad Cohen, editor of Inside Asian Gaming. “The experiment is likely to succeed because Vietnam’s government wants it to.”