Gambling on Taiwan

Grand Hyatt Taipei

Gambling on Taiwan

After the legislation failed to pass measures last December that would have legalized casinos, the future looked glum for the gambling industry in Taiwan. Interest has been revived and prospects look hopeful depending on the outcome of Taiwan's presidential election. With both major candidates expressing support, Taiwan may soon join the growing numbers of Asian countries to legalize gambling.

Leading analysts in the gaming market have predicted that Taiwan could surpass Macau and become the world's leader in gambling revenues. “Taiwan's market potential for casino gaming revenue, in the context of large scale integrated resort and tourism development, is significant,” said Jonathan Galaviz, a partner in Globalysis Ltd., a casino consulting company.

Taiwan has been considering legalizing gambling for at least a decade. Opponents fear that allowing gambling will also bring an increase to crime and gambling addiction. Proponents of measures to legalize gambling see it as an opportunity to control the rampant illegal gambling that is already occurring behind the scenes as well as increasing tourism.

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That gambling is becoming more accepted in the Taiwan society is evident by the success of the public welfare lottery that began in 2000. This enabled the disabled to benefit by allowing them to sell lottery tickets. This April 15 will see a new sports lottery begin with the Taipen Fubon Bank as the licensed issuer of the lottery tickets. The six year license will allow games allowing betting on various sports including horse and car racing, U.S. and Taiwanese baseball and U.S. pro-basketball. Estimates by analysts predict annual revenues from the new sports lottery to top $600 million U.S. dollars, about ¼ of the revenues generated from the welfare lottery.

Gambling has been spreading throughout Asia for several reasons. Asia has been rising in affluence during recent years. Because of this economic improvement, an Asian Development Bank advisory group has predicted that 90% of Asians will live in “middle-income” countries within the next five years. This shift of economies has created millions of consumers with money to spare for entertainment. This has given rise to increasing revenues from the tourism industry in countries where casinos have been established.

Many countries look to Macau as their example of what casinos can do for their economies. The only Chinese territory to allow gambling, Macau has overtaken and possibly surpassed Las Vegas in total gambling revenues. With it's 39 established casinos and more being planned, Macau drew over 27 million visitors last year. The gambling industry has created tens of thousands of new jobs along with the boost to the tourism industry.

More than a dozen Asian countries have already legalized gambling in the hopes of experiencing the kind of expansion and prosperity that Macau enjoys. The Philippine government is planning a huge casino complex in Manila Bay which is expected to increase the country's gambling revenues to over $1 billion U.S. dollars by 2010, according to the PriceWaterhouseCooper consulting firm. South Korea opened three new casinos last year, hoping to compete with Macau in luring upper-class Japanese gamblers.

Even the traditionally straight-laced countries of Singapore and Japan are investigating what gambling could do for their countries. Singapore recently issued licenses to build two casino complexes, one of which is scheduled to open next year. Japan's ruling party is considering legalizing gambling as a way to increase tourism but has to overcome opposition coming from their traditional pachinko industry.

One Las Vegas gambling executive is betting heavily on Taiwan legalizing gambling. Larry Woolf and his company, Amazing Holdings, have spent three years purchasing adjoining properties on Penghu Island. Woolf has already spent $50 million dollars on the first phase of his hotel project on Penghu with plans to add a casino when it becomes legal.

Penghu is a convenient point of entry for Chinese mainlanders to enter Taiwan which is the major reason Woolf has focused his efforts there. Recent lifting of laws that banned Chinese tourists has Woolf and others in the industry counting on large numbers of tourists coming from the mainland providing there is something to attract them.

No one is sure how the legalization of gambling would be handled by the Taiwan government. Although both candidates have said they would favor legalizing casinos, neither has been very specific in the details. It remains to be seen, also, if the legislative branch of the Taiwan government will support lifting the ban on gambling. Even if they do, there are still a lot of details for them to work on in the establishment of some sort of regulatory system to oversee the industry.

Critical elements that will be watched closely by businesses interested in operating casinos in Taiwan include how the revenue will be taxed and whether or not Taiwan will allow citizens to access the casinos. Industry experts are hopeful that the tax rate will be lower than Macau's 39% but no one has any specifics as of yet. Also at stake is the somewhat tenuous state of the relationship between China and Taiwan since the separation in 1949.

The time is ripe for legalization of gambling and with both candidates endorsing it, this may be the year that it happens for this tiny country. With the tourism revenue staying fairly constant the past few years, Taiwan is taking notice of the masses of visitors attracted by casinos in other countries. With the type of integrated resorts suggested for Taiwan, gambling only accounts for about one-third of the revenues generated. Other tourism revenue sources include hotels, entertainment and restaurants. The fact that the majority of revenue is generated from other activities than gambling could make it a more palatable idea to gambling opponents.

Whether a casino opens at Penghu or another location, the gambling industry is watching Taiwan closely. Many of the big companies are hoping for a foothold in what they bill as the next world's leader in gambling revenue. The industry is eagerly awaiting the day that Taiwan legalizes gambling.