No bling, no buzz in Singapore

Muhammad Cohen
Asia Times

On announcing the controversial decision to build two huge new casinos just over five years ago, Prime Minister Lee Hsien Loong said, “We seek to be a global city, attracting talent from around the world, lively, vibrant, and fun to live and work in. We want Singapore to have the X-factor – that buzz that you get in London, Paris or New York.”

On Tuesday, the US$5.5 billion Marina Bay Sands (MBS), the costliest casino resort ever built, debuted on the edge of Singapore’s financial center and has already become a Lion City icon. Designed by renowned architect Moshe Safdie, the three tapering hotel towers are connected 57 stories overhead by a 1.2 hectare SkyPark which is curved at the front like a ship’s prow. MBS was developed by Las Vegas Sands (LVS), the US casino giant that, through its Sands China subsidiary, also owns the Venetian Macao and Sands Macao.

The MBS complex includes 2,560 hotel rooms, a 121,000 square meter convention center that can accommodate 45,000 delegates, a resident production of The Lion King, a lotus shaped museum, and a 74,400 square meter shopping center that blows away Singapore rivals in terms of offerings and its bright, airy design. And there’s also a 15,000 square meter casino whose main gaming floor may be the most elegant on earth.

‘No more nanny state’

“We’re closing the gap with Hong Kong and others in terms of a cosmopolitan city,” Singapore’s leading nightclub impresario, Saint James Holdings chief executive officer Dennis Foo, said. “No more nanny state.”

The opening of MBS – Singapore categorizes it as an integrated resort (IR) – comes two months after the debut of the city-state’s first casino IR, Resorts World Sentosa, a US$4.6 billion complex featuring Southeast Asia’s first Universal Studios theme park, four hotels, and its own casino. Both IRs are still in the soft opening phase.

MBS plans a grand opening in late June, but the museum and theater won’t come on line until its final pieces – a pair of crystal pavilions that will appear to float in Marina Bay – are in place early next year. Resorts World still has two hotels to add, plus what’s being billed as the world’s largest aquarium, a multimedia maritime museum, with construction possibly extending into 2012.

Despite jackhammers and cranes at both IRs, thousands of visitors are steaming in daily, mainly to the casinos, the most complete facilities so far. While some visitors simply come to gawk and cadge a free bottle of water, most have come to play. The racket inside the casinos isn’t construction, but the humming of slot machines and shouting of excited bettors.

Not dead yet?

Nothing builds a buzz like money, especially really big money, not just to stack at the betting tables but to patronize the who’s who of luxury brands and celebrity chefs the IRs, especially MBS, are introducing. Yet Singapore has been oddly reluctant to welcome high rollers to play at its casinos.

The government has stringent rules against junket agents that are vital to the VIP premium player market for Asian casinos. So perhaps the nanny state isn’t quite dead yet. For junket agents, obtaining a license in Singapore requires extensive financial disclosure as part of a full background check. Operationally, junket agents need to store full records in Singapore and disclose benefits given to their customers. So far few junket operators have shown interest.

Perhaps the biggest crimp on premium business is the advance reporting requirement. Casinos must report the arrival of junket customers three hours before they enter Singapore. Premium players generally crave privacy, hoping to avoid questions about how much money they have, where it came from and whether taxes were paid on it.

Junket agents provide services to premium players and deliver them to casinos. Players often rely on the junket agents for credit. Many countries, including mainland China, limit the amount of money that people can take out of the country for any purpose. Junket representatives lend the VIP money to play at the casinos and the player can pay it back after returning home. Gambling debts are not recognized under the law in many jurisdictions, including mainland China, so junket agents are often reputed to have criminal connections to help them collect debts. Singapore doesn’t want those criminal elements gaining a foothold within its borders.

But the city-state’s rules on junkets run counter to its tax regime. The Lion City taxes premium play at 12%, compared with 22% for mass market gaming revenue, and 39% across the board in Macau. Singapore’s government appears to be working at cross purposes, encouraging VIPs with one hand while waving them away with the other. That stance is particularly bewildering because Singapore wants to be known as the Switzerland of Asia, a safe haven for wealth, and hasn’t been fussy in the past about accepting funds from foreign businesspeople and government officials with less than perfect pedigrees.

Premium is primary

In Macau, premium-player baccarat accounts for about two-thirds of total gaming revenue, which reached a record US$14.9 billion last year. Since Singapore’s overall gaming market is estimated at between one-quarter and one-third of Macau’s, VIP restrictions risk costing Singapore casinos at least US$2 billion in gaming revenue. With a combined investment in excess of US$10 billion, the IRs will need high rollers to survive, as well as to create a buzz.

LVS chairman Sheldon Adelson downplays the lack of junket operators. “We are offering clients credit,” he said at Tuesday’s MBS opening. LVS president Michael Leven added: “We intend to run this business without junket operators as we do in Las Vegas. Assuming our process works, it will be more profitable.”

William Eadington, director of the University of Nevada Reno’s Institute for the Study of Gambling and Commercial Gaming, speculated that high level negotiations are underway between casino operators and government officials to find ways to ease the junket restrictions without admitting criminals or other unsavory elements.

”On the other side of the coin: Is there a VIP market in Asia that isn’t laundering money, trying to hide illegal funds, or evading taxes?” Eadington asked.

Without high rollers, the partially completed IRs are reliant on mass market players who are often bused in across the border from Malaysia. “There isn’t any X-factor or buzz that can be created under such a market situation,” said a veteran casino executive in Singapore, requesting anonymity. Citing the US resort dominated by elderly day trippers feeding their pension checks into slot machines, he adds, “It’s just another Atlantic City in the making.”

London, Paris, New York… Atlantic City? Not exactly what Lee Hsien Loong had in mind.

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