Thailand Seeks Tax Revenue With Plans To Legalise Casinos

July 1, 2024
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Thailand is moving forward with plans to legalise integrated resorts in an effort that has already attracted interest from some well-known gaming companies, including Las Vegas Sands and Genting Group.
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Thailand is moving forward with plans to legalise integrated resorts in an effort that has already attracted interest from some well-known gaming companies, including Las Vegas Sands and Genting Group.

Last month, Prime Minister Srettha Thavisin ordered the finance ministry to draft a bill to create entertainment districts that would host legal casinos to boost tax revenue, tourism and employment.

According to a report by Malaysia’s Star newspaper, 16 government agencies have submitted their input on the economic and social impacts of building casinos to the finance ministry. The ministry is expected to revise the bill within the next month before it is submitted to the House of Representatives.

Casinos are illegal in Thailand and the only sanctioned gambling is state-controlled horse races and lottery. Reuters reports that illegal wagering on soccer and underground casinos are commonplace.

“The potential for a Thailand gaming industry is real and Thailand has come competitive advantages over other Southeast Asian markets like Vietnam, Cambodia, Laos” and others, said Vitaly Umansky, an analyst with Seaport Research Partners in Hong Kong.

“The Asian gaming market is not yet oversaturated and a country the size of Thailand can easily support a gaming industry even with competition already in place in neighboring jurisdictions,” Umansky said. “While there would be more competition in the international customer base, the Thailand local demand should be robust.”

However, Umansky said, the scale of the market will be dependent on what the legalisation process looks like, what the regulatory environment will wind up being, and importantly what casino properties actually wind up getting built and which companies wind up running those properties.

“The scale of the market will be limited by the supply that is created and how it is run,” he added.

Brendan Bussmann, managing director of the Las Vegas-based advisory firm B Global, said Asia still has opportunities for gaming expansion.

“The biggest question that remains is what do those markets look like because you have varying levels of regulation in these markets. Thailand has several hoops to jump through if it is to be on par with a Singapore or a Macau versus a lesser regulated market.”

“Thailand needs to determine its policy goals to see what type of market it desires to achieve,” Bussmann added. “Its success may vary in the eye of the beholder depending on what level of regulation they seek — and that’s not just gaming regulation."

Gaming Companies Monitoring Thailand

Las Vegas Sands and Wynn Resorts are among the gambling companies monitoring developments in Thailand.

“We absolutely have interest in Thailand,” Sands chairman and CEO Rob Goldstein told analysts during a first-quarter earnings conference call on April 17. “It’s early days, though we still have work to do with the numbers and understanding it. It’s a very, very exciting market in a lot of levels.”

Craig Billings, CEO of Wynn Resorts, told analysts during a first-quarter earnings call on May 7 that the company is potentially considering a greenfield development in Thailand. 

“In Thailand, it’s early days, and we have yet to see the regulatory and licensing structures,” Billings said. “We will continue to closely monitor advancements of the legislative process.”

Genting Group and MGM Resorts International are also reportedly evaluating potential opportunities in Thailand, should the government approve entertainment districts, which include integrated resorts.

“While operators haven’t said much publicly regarding specific criteria they’re looking for, a few factors that are important when considering the viability of an IR investment include: gaming tax rate, degree of competition or exclusivity, license tenure, minimum required investment, ability of locals to gamble, existing tourism infrastructure, position or casino floor size limitations,” said Colin Mansfield and John DeCree, analysts with CBRE in Las Vegas.

“Thailand could be an interesting opportunity, but most market participants (us included) are more focused on the UAE, which seems to be more imminent.”

Thailand’s Political Risks

Any discussion on gaming legalisation in Thailand also requires questions being asked about political risks that companies might face. Umansky said this was one of his two main concerns, with the other being a regulatory environment that does not comport with what will be required.

“Thailand is not Singapore, both from a regulatory and political risk perspective,” Umansky said. “The political situation is Thailand is fluid and we could definitely see a government change during or before the development process and definitely after construction is complete.”

Currently, the prime minister is facing an ethics case, which could potentially lead to his removal from office, according to the Bangkok Post. If Srettha is removed from office, the legalisation of casinos could be delayed.

“It’s a heavy lift to ask a company for billions of dollars in investment in a region that has not always been the most stable” Bussmann said. “You have to have a lot of guarantees and a long runway to make these pencil out.”

If tourism is the goal, Bussmann said, a low tax environment is needed that allows for significant investment, but a long-term license structure is also needed that does not allow for instability all packaged in a strict regulatory environment.

“We have all seen what happens when you have a high tax rate and ask for significant investment even in a strict regulatory environment,” Bussmann said. “Thailand needs to lean on those that understand gaming, local laws and culture.”

He added that this is not something they can build from within or just put pieces and parts from the spectrum of gaming regulation that likely will not work.

This type of political risk did not exist when Singapore was doing its legalisation process.

“Political volatility is nothing new for gaming companies, particularly those already operating in the broader APAC region,” Mansfield and DeCree said. “However, this could potentially increase the cost of capital when penciling out development costs to account for a risk premium.”

Still, instability and weak electoral mandates are a chronic feature of Thai politics, and the progress of the integrated resort initiative has enjoyed unusual, all-but-unanimous support in the legislature.

The absence of no votes in parliament’s approval for its committee’s report into casino development came despite enduring gambling taboos in the majority Buddhist nation.

That near unanimity was also driven by exasperation with corruption of police and other officials by underground casinos, and the prospect of reducing the flow of Thai gamblers to barely regulated and dangerous casino operations on the nation’s borders with Cambodia, Laos and Myanmar.

Umansky said that although some may point to Macau say there was great uncertainty in the beginning, it is important to remember that when Macau first issued concessions, there was not a demand or expectation that there would be multi-billion properties built.

“The large-scale development in Macau came naturally as the market proved itself and the six operators became more comfortable with building out the large-scale projects that are now in the market,” Umansky said.

The number of entertainment centres that will be approved has yet to be determined. Multiple reports put the minimum investment at $2.75bn, with an expected tax rate of 17 percent.

Umansky said Thailand government’s strategy of demanding numerous multi-billion-dollar developments is not realistic or feasible at least for the foreign casino operators. There may be local investor or developer interest in doing something, but even this size is not realistic.

“We are unlikely to see large scale (multi-billion integrated resorts) built in Thailand, unless we have a real strong regulatory regime, greater political stability and a proper bid process,” Umansky said.

Additional reporting by Martin John Williams.

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