Russia's casinos get a stay of execution
In 2006, Russian President Vladimir Putin submitted a plan
to the Russian Parliament that would limit the $6 billion gambling industry in Russia to just
four special locations or “zones”. This plan in concept was passed in April
2008 and calls for all of the casinos in the country to relocate to one of the
four zones before June 2009. Once passed into law the new measures will
prohibit any new casinos to be opened after the new year as well as doing away
with any gaming facility that is worth less than $23 million. This would
eradicate the smaller gaming institutions from operating completely and
allowing only the more established and profitable facilities to remain
operating.
The zones, located in and around the Primorie District
around Vladivostok, the Baltic commune of Kaliningrad, the Rostov and Krasnodar
regions on the Black Sea coast bordering the Ukraine and the Altai Republic
bordering Kazakhstan and Mongolia, would be the only areas where gambling of
any sort would be legal.
Recent reports being received from various world media
agencies say the plan to move the casinos appears to be temporarily on hold,
thus giving the Russian casinos more time to plan and move their current casino
operations. Since the plans passing, the Russian Casino industry has
intensively lobbied the Parliament to extend the 2009 deadline because of the
costs and time involved to tackle such a huge undertaking. Although no
“official” substantiation in the granting of this extension has been given. The
new deadline would give the casinos five additional years, until 2014, in which
to move their facilities and operations into the four zones.
Many reasons have been giving for the restructuring of the
gambling industry into the four zones. One of the reasons given for this
massive redistribution of the industry is to entice gambling related tourism by
centralizing and focusing the industry into smaller and more concentrated
areas. By having the casinos limited to these zones instead of just having gaming
institutions haphazardly spread over the country, it will be easier to
advertise and promote casino industry and hopefully increase tourism from
within and outside of the country. The current distribution scheme or lack
thereof, worries politicians and residents alike as there are currently no laws
in place to determine where the gambling facilities may or may not be
constructed.
The restrictions are also seen as a way to control where
gambling establishments are established as currently they continue to “pop-up”
throughout the country. Some of these gaming locations, while consisting of
only slot machines, have sprouted up next to local area schools. This has
caused some concern in the Parliament and among the parents in these areas. The
deputy chairman of the parliament committee, Vladimir Medinsky, responsible for
drafting the law states "This is a business based on vice. It brings no
good." He continued to tell the Associated Press that "It hasn't been
banned altogether, because it is a natural vice and should therefore be
controlled.”
The gaming organizations believe that there do need to be
some restrictions in how the industry is managed but they see the new
legislation as more of a prohibition than a management effort and are pressing
lawmakers to postpone the enforcement of or redesign the law to allow casinos
to be allowed through Russia instead of confined within zones. Yevgeny Kovtun,
the vice president for the Association of Gambling Businesses within Russia says "In the U.S. people know about Las Vegas from childhood, but in Russia gambling
tourism doesn't exist. Before, a person would pop into a casino or slot-machine
hall between the metro and his house. Now ... the gaming companies will have to
entice him to the Pacific coast." The Association believes that the
government is assuming that any Russian who wants to gamble would be more than
willing to buy a plane ticket to fly to the remote areas where the casinos
would be located. Mr. Kovtun believes just the opposite that by restricting the
gambling to the four zones that the gaming business would suffer catastrophic
losses and it could quite possibly never recover from.
Another concern is the sheer cost of the property
development and subsequent move of casinos into the four zones. The estimated
cost of the establishment of these zones is estimated to exceed 727 billion
rubles or roughly $31.2 billion. This staggering amount is roughly two times as
much as Russia will be
paying getting ready for the 2014 Olympics on Sochi. The four regions are anxiously
awaiting optimistic investors to come up with approximately 580 billion rubles
(80 percent of the total funds needed) while the remaining amounts would be
appropriated through the Finance Ministry. If the Ministry denies the funding
then the 1 January, 2009 deadline could be delayed.
Several feasibility studies suggest that the revenue
generated by the four zones would exceed $17.5 billion through the attendance
of and estimated crowds of over 9.4 million. According to the studies the Azov-City
zone would be the highest contributor in attendance as well as financially with
approximately 6.7 million persons and $11.2 billion respectively.
These results of these studies astounded the financial
market as their previous estimates show that an expected 2 percent of the 3.5
million gamblers would travel to one of the zones to wager. This would indicate
that only 70,000 people would be in attendance which is a vast difference in
the studies’ 9.45 million. Also the financial numbers don’t add up as Russia’s best
years of gambling only produced about $6. It is not clear if the forecasts
expected a high influx of foreign gamblers to attain the speculated numbers.
It is clear that some management actions need to be taken
with regard to the gaming industry in Russia. The industry itself agrees
in principle but believes the current plan is overly restrictive and is
designed to eliminate gambling more than control it. More planning and thought
needs to be put into any law or policies to monitor and regulate the gambling
in Russia.
Before this complex nut can be cracked, a decisive plan that has the support of
the government and the industry needs to be developed with all parties working
together in order to achieve this common goal.
Gaming House Korona (C)opyright , No unauthorized reproduction
