Gambling and tourism

I saw this interesting article a few days ago from the Asia Sentinel about China cracking down on gambling. Of course, China itself doesn’t allow gaming in the mainland, but there is gaming in Macau, which is the largest gambling center in the world, surpassing even Las Vegas.

Over the past few years, a number of countries bordering or near China have competed to attract Chinese and other gamblers. This includes Vietnam, which has slowly opened casinos. Foreigners are allowed to play but there are still major income-based restrictions on Vietnamese. This has basically meant that there are few Vietnamese players.

Source: Vietnam Tourism

According to this article in the Vietnam Investment Review, as restrictions have been lifted on gambling by Vietnamese, casinos have done well. However, where restrictions are still in place and only foreigners can game, revenues have suffered, even declining in the first half of 2019. Of course the situation is much worse this year.

The article in Asia Sentinel talks about a crackdown on online gambling, but it also indicated that the crackdown also was on marketing to Chinese by overseas casinos :

Apparently tiring of the massive amounts of illegal funds flowing into gambling outside the country, China’s Ministry of Public Security has completed a harsh crackdown, arresting more than 11,500 suspects, destroying 368 gambling platforms and 148 technical programs and seizing more than US$32 billion, according to a government press release.

The key point of pain for the Chinese government is in foreign exchange. To gamble outside of China, you need to gamble in another currency, putting pressure on the RMB. And it can be substantial.

If the crackdown is sincere, casinos across Southeast Asia are going to be hurting. Vietnam is the least of the worries, although they depend heavily on Chinese tourists (32% of all tourists in 2019). For example, in late 2019 Cambodia banned online gambling, which made up a quarter of the $80m in tax revenue that the government received and was mostly targeted to Chinese. Vietnam, luckily, gets minimal revenue from gaming now, although it was supposed to be another attraction for tourists in the future.

SOURCE: WORLD TRAVEL & TOURISM COUNCIL, CHART BY VIETECON.COM

The way I see it is that the Vietnamese government may face pressures from two sides now. The first is pressure to open more gambling spots to a) attract foreigner tourists and b) generate revenues. To really generate revenues, the government probably needs to allow Vietnamese to game. The second pressure is from the Chinese government to stop offshore gambling. At least in Macau, the government gets to keep the revenue. With Chinese gambling outside of China, there is a double hit of foreign exchange and lost revenues in Macau.

I wonder if China will start to make it difficult to convert money for gambling in Vietnam. That would be a real blow to casinos there.

It will be interesting to see what happens if tourism doesn’t return to previous levels in Vietnam. tourism, as shown in the chart above, is an extremely important job sector. And it brings in a lot of money…