Why S’pore went into the casinos industry

Ruchika Tulshyan
Global Post

Two casino resorts are expected to boost tourism, generate 45,000 jobs and attract 10 million visitors by 2015.

First they legalized dancing on bar tops. Then they tried Formula One night racing. But this year, Singapore — where the government is known for its strict moral code — took an even more surprising plunge into yet another tourist attraction: casinos.

As the first Singaporean casino, Resorts World Sentosa, opened its doors in January, Southeast Asia watched in shock. Then, just two weeks ago, Singapore opened its second casino, Marina Bay Sands. It was the world’s second most expensive casino, built at a whopping cost of $5.5 billion.

So now the big question is, will the former strait-laced city-state become an Asian center of entertainment — and vice? Will it supersede Macau as Asia’s casino capital?

Singapore’s government appears to be determined to limit the vice and raucous entertainment as much as possible to foreigners. Singapore citizens pay a hefty $100 (US$73) to enter the casino. And there’s been no change to the country’s draconian drug laws.

So if the government is worried about vice among its own citizens, why did it enter the casino market?

“Every decade or so the government seems to think long and hard and come up with a new idea to give tourists a new reason to visit and return to Singapore. These casinos are the latest reason,” said Zakir Hussain, a political correspondent for Singapore’s national broadsheet,
The Straits Times.

As Asian economies struggle back on their feet post-recession, Singapore’s US$10 billion offering is slated to revive economic growth. And with a 13-percent rise in Singapore’s first-quarter GDP, the gamble may already be paying off.

The two resorts are expected to boost tourism, generate 45,000 new jobs and attract 10 million visitors by 2015. The multi-billion dollar projects have shareholders including Sheldon Adelson, owner of Las Vegas Sands, behind them.

Singaporeans were sold the casinos idea in 2005, when the government introduced the concept of “Integrated Resorts.” Resort Worlds Sentosa features a Universal Studios theme park, four hotels, numerous shopping malls, restaurants and bars. The new Marina Bay Sands resort houses 1,000 gaming tables and 1,400 slot machines, with similar restaurant and bar features.

Lifting a 40-year-old ban on gambling, Prime Minister Lee Hsien Loong announced the country’s decision to allow operation of not one, but two new casinos. The policy overturned the strict anti-gambling rules put in place by his father, Lee Kuan Yew, the founder of modern Singapore.

Businesses too have welcomed the unexpected venture. Ritu Jhunjhnuwala, owner of high-end Indian restaurant chain, Rang Mahal, has found ample opportunities after opening an outlet at Resorts World Sentosa. Most food and beverage operators experienced sluggish growth in 2008 and 2009, in the face of the recession, but the new resorts are likely to bring lucrative business, said Jhunjhnuwala. “The new Rang Mahal [at Resorts World Sentosa] is targeting a whole new clientele. Business has mostly consisted of IR guests during the week, but Singaporeans from the city come down for the weekend so we run quite full,” she said.

But the project is already more than S$5 billion over its initial estimates. And even with an estimated daily take of S$3.5 million, Resorts World Sentosa has quite a way to go before breaking even.

And inevitably, there is likely to be a social cost, despite the effort to put barriers around the casino business.

Drugs, prostitution and gambling debts plague Macau, Singapore’s predecessor and rival in this business. That’s after Chinese residents have to ferry across from Hong Kong and pass Macau customs before entering Macau’s casinos. By contrast, the centrally located 55-story Marina Bay Sands is in close proximity to Singapore residents.

A Bank of America-Merrill Lynch report found that 50 to 60 percent of casino frequenters are Singaporeans. But the whole point of levying a fee for Singaporeans to enter the casinos was to keep local citizens away from the vice within. From an economic standpoint too, foreign high-rollers bring in the most money.

Then there’s the spike in people seeking help for gambling-related problems. Singapore’s National Council on Problem Gambling says callers to its helpline have more than doubled since the first casino opened; 520 calls were made to the helpline in March, compared to an average of 200 calls from October last year to February 2010.

But even if the casinos fail, Singapore may still be in a win-win position, argues one economics expert.

“The biggest effect from less gambling is simply that billions of dollars would not flow from consumers to wealthy casino owners. Hey, that’s not so bad. In fact, it’s good,” wrote Larry Haverkamp, in a letter to The Straits Times, Singapore’s national broadsheet. Haverkamp is an adjunct professor of economics at the Singapore Management University. He says that even if the casinos fail, the biggest investors in the project have been foreign wealthy risk-takers, “who will still survive in luxury.”

Economic factors aside, the real question is how Singapore’s government will retain its stronghold over society. Some say vice is not new at all in Singapore; it’s just always been kept well-hidden from Western eyes.

“There are already plenty of other forms of ‘vice’ in Singapore. People are free to bet on horse racing and other sports. Everybody knows where to find prostitutes. I don’t worry about bringing vice into Singapore because it is already there,” argued one former soldier who served in the Singapore Armed Forces. Although he now resides in the U.S., the soldier has requested anonymity to protect his reputation if he searches for future jobs in Singapore. “I believe that the vast majority of Singaporeans are mature enough to manage the lure of gambling in the casinos with their own financial responsibilities,” he added.

Singapore seems to be well aware of the crime that casinos often bring. The government introduced strict rules on junketing — gambling trips for wealthy high rollers organized by independent operators — to curb money-laundering. In early April, three European tourists were charged for cheating. If convicted, two Frenchmen and a Spaniard face up to 10 years in prison. With the government’s strong law enforcement, coupled with a newly formed Casino Crime Investigation Branch of the police force, some argue that the Singaporean model is unlikely to follow the vice-ridden examples of Macau and Las Vegas.

As Singapore waits for the results from its foray into this unknown industry, one thing is for certain. With careful master-planning, the government tries desperately to retain the social mores and law and order it has earned an international reputation for. While it’s still too early to accurately assess the economic and social impact of the resorts, for now all bets are on for the success — at least monetarily — of Singaporean casinos.

Ruchika Tulshyan is a graduate of the Columbia School of Journalism. She has lived in Singapore, London and New York, and has an interest in covering international economies and markets.


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