No country in Asia offers as many sound reasons for the legalisation of casino gambling as Thailand. But the very arguments in favour of legalisation also make a strong case against it.

Casino legalisation proposals have been a hardy perennial of Thailand’s vision of the future for decades. In the late 1980s, there were reportedly plans to turn the Ambassador Hotel in Pattaya, a beach retreat not far from Bangkok, into a casino-resort with up to 3,000 rooms. A 1992 coup scuttled those plans.

In 2003, former Prime Minister Thaksin Shinawatra proposed casino legalisation and commissioned feasibility studies. But a 2006 coup deposed Mr Thaksin, leaving Thais divided to the point of deadlock, on politics in general and casino legalisation in particular.

Many experts believe that Thailand will eventually succumb to the trend toward gaming in Southeast Asia. Thailand, Indonesia and Brunei are now the only members of the Association of Southeast Asian Nations without legal casinos. But knowledgeable observers disagree on many important questions, including how long it might take for the first casino to open in Thailand.

“I think within five years,” says Euro-Asia Consulting president and chief executive Steve Karoul, whose company studied casino legalisation for the Thaksin government.

“It would be 10 years from the start of formal consideration of casino legalisation for a project to even begin the construction process,” says Tourism Authority of Thailand board member Pornthip Hirunkate.

A sceptical public

In a series of exclusive interviews, Macau Business found that hospitality industry experts and observers agree on a number of points. They agree that casinos, if built, would be in resort destinations, not Bangkok (see story). Thais would be allowed to patronise casinos, probably after paying an entry tax – like Singaporeans do in their own country, only the tax would be higher than Singapore’s S$100 (MOP617).

To make casinos acceptable to a sceptical public, the government should earmark gaming revenue for a specific purpose, such as education.

Surprisingly, despite Thailand’s sometimes bloody political turmoil since the 2006 coup – anti-Thaksin demonstrators closed Bangkok’s main airport in 2008 and pro-Thaksin forces occupied the capital’s downtown shopping hub for two months last year – casinos are not viewed as necessary to boost tourism.

Experts say that only when there is broad agreement among divided politicians, plus endorsement by the royal palace, will casinos be legalised. Forging a consensus could take decades.

The case for casinos in Thailand is persuasive. Last year the kingdom welcomed around 15.5 million foreign visitors, so there is a ready market. “Thailand already attracts substantial international tourism, so a legal casino would help increase inbound traffic and also generate substantial new tax revenue or income for the government,” says Mr Karoul.

Enduring appeal

Initial research suggests casinos would increase arrivals by 15 to 20 percent. “But that could be higher, based on what we see in Singapore,” Mr Karoul says. “It would be a win-win situation for all.”

But others fear that introducing casinos might diminish Thailand’s enduring appeal to visitors. Tourism accounts for 6 percent of Thailand’s gross domestic product and 15 percent of employment, so the sector is too vital to risk mistakes.

“Casinos are not part of Thailand’s sales proposition to tourists,” says Ms Pornthip, who is also managing director of regional tour specialist Destination Asia. “Thailand is about culture, beaches, golf, cuisine, service. If we concentrate on those factors, then we don’t need gambling.”

The case for casinos is strengthened by the potential domestic market. “Thais love to gamble,” Ms Pornthip says. And they like to gamble whether or not it is legal (see story).

Casinos in neighbouring Cambodia, Laos and Myanmar, strung along their borders with Thailand, cater mainly to Thais. Legal casinos in Thailand would keep their spending at home and generate tax revenue for the Thai treasury.

“Casinos would be good for tourism. Look at what they’ve done for Singapore and Macau. But I don’t think casinos would be good for Thai people,” says Doug Harrison, managing director of Bourbon Street, a Bangkok hotel and restaurant.

The popularity of gambling among Thais means that fear of the socially adverse effects of legalisation might increase opposition to it.

Legalisation efforts will have to overcome determined anti-gambling forces that portray themselves as protectors of Thailand’s dominant Buddhist traditions. Monks and their supporters have thwarted three attempts since 2004 to list Thai Beverage, maker of Chang beer and Mekong whisky, on the Bangkok stock exchange.

Philosophical issues

Observers note an increased appetite in recent years for public displays of moral propriety amid widely tolerated vices, including prostitution, illegal gambling and drinking. Thailand has the highest per capita alcohol consumption in Asia.

“You could write a book about the cultural and social issues entwined with gambling here,” says author Christopher Moore. Mr Moore writes about the cultural roots of the Thai language and studies the darker fringes of Thai society for his crime fiction series featuring detective Vincent Calvino. “You’re dealing with a set of philosophical issues that people have very strong feelings about. That doesn’t encourage logical discussion,” he says.

“Opposition is driven by religious and royalist considerations,” says Nigel Cornick, chief executive of real estate company Binswanger Brooker. “It’s not about politics. There’s been opposition to casinos long before Thaksin came into power.” But he says casino legalisation “might move higher up the agenda” after parliamentary elections due within a year.

“Everyone in Asia is aware of the success of both Macau and Singapore. I think sentiment has changed dramatically over the past two years,” says Mr Karoul.

“I think the Thai people would support legalised casino gaming, especially if the tax revenues could be controlled and go towards social programmes for the poor, elderly, and sick,” says the gaming consultant.

As well as religious opponents, those that cater to the propensity among Thais to gamble would fight hard to stop casino legalisation. These include predominantly rich and powerful investors in border casinos, and the backers of pervasive illegal gambling.

The only legal forms of gambling are betting on the occasional race meeting and the government-run lottery, which had sales of 91.8 billion baht (MOP24.5 billion) in 2006, the latest year for which data is available. An underground lottery, which accepts smaller bets and offers a wider variety of options, reportedly does 10 times more business.

Mr Thaksin, a former police officer, has said he advocates casino legalisation to combat illegal gambling and the corruption it breeds.

Open access

“The only way you remove the illegal gambling, and the corruption that goes with it, is via open access,” says HSBC regional gaming analyst Sean Monaghan. This means letting Thais gamble legally, which is likely to inflame domestic opposition.

“To get the legislation passed, the government would need to preach the value of legalisation,” he says. “The value argument is only credible when the casinos come with major infrastructure builds and are targeted to drive international
tourism.”

Mr Cornick, with his knowledge of the property business, agrees. “If Thailand goes for it, they’ll go for it in a big way to leverage a lot of infrastructure for MICE, community facilities, and other tourist amenities,” he says.

He doubts that Thailand’s frequent political upheavals will deter investment. “People tend to overestimate the political risk in Thailand,” he says. “People who’ve been coming here for a long time have seen it all before.”

Mr Monaghan says finance would not be an obstacle to the development of casinos. “Investors would back casinos in Thailand if they had the opportunity,” he says.

Free enterprise

The degree of investor enthusiasm and shape of any facilities depend on ownership and licensing decisions that are unlikely to be taken for years. Investment rules that require majority Thai ownership in many cases are due for reform. They do not, however, apply to US companies because of a 19th century bilateral treaty.

“If it’s an international operator, they would most likely want an integrated resort,” Mr Cornick says. “But it could go to a local company, and existing structures could get upgraded.” He estimates that it would take five years to construct a new integrated resort, while an upgraded resort could open much faster.

As for licensing arrangements, he says: “It would make sense for the government to have control of the revenue stream to ensure that the casino delivers social good. If it’s in the hands of the private sector, there’s bound to be leakage.”

A one-time legalisation consultant, Mr Karoul sees the other side of the same coin. “Thailand might like to hold the licence and find an operator but I do not see that as a viable option for attracting large, qualified international operators, due to Thailand’s past reputation for having a very high level of corruption,” he says.

“Free enterprise will be far more acceptable, as long as all of the regulations and procedures are well documented in advance and remain highly visible to the public at all times.”

InVision Hospitality chief development officer Charles Blocker imagines another arrangement. “Maybe the state would own the land and/or the bricks and mortar and lease it to an operator,” he says.

“Thai tourism authorities think the country needs gambling to be competitive with other destinations in the region,” adds Mr Blocker, whose company specialises in hospitality investments. “It’s more of a defensive measure than about wanting to have casinos here.”

Crime pays, handsomely

Chulalongkorn University economics professor Pasuk Phongpaichit estimates that 70 percent of Thai adults gamble regularly. For “Guns, Girls, Gambling, Ganja”, the 1999 book still widely considered the definitive word on Thailand’s illegal economy, Ms Pasuk valued Thailand’s underground gambling industry at 344 billion baht (MOP110 billion).

The main forms of illegal gambling are the underground lottery, football betting and casinos, ranging from back-alley dumps to posh penthouses.

“Those places tend to be pretty well localised,” says Christopher Moore, who writes about the seedy sides of Thai society in his crime novels. “It’s not like you can just walk into these places, especially as a “farang” [foreigner].”

Thais also gamble on cockfights and kickboxing.

Ms Pasuk wrote that Thais are no more prone to gambling than other nationalities. However, in 2004, former Prime Minister Thaksin Shinawatra’s government valued illegal gambling at 1.8 trillion baht or about 8 percent of gross domestic product – an extraordinary figure for a country with such limited legal betting. Even that estimate was likely to be incorrect, put forward as it was by a government that advocated casino legalisation.

Gamblers’ losses were pegged at 353 billion to 415 billion baht. With such sums at stake, the beneficiaries of illegal gambling – including criminals in charge and the authorities they pay off – will not go down without a fight. You can bet on that.

Location, location, location

If Thailand legalises casinos, whether or not integrated resorts are developed to house them depends on where they might be built and who wants to build them.

“I do not think that the government will approve a casino in Bangkok, in order to protect the poor,” says consultant Steve Karoul, who studied casino legalisation for the government of deposed Prime Minister Thaksin Shinawatra.

Casinos in Bangkok would also increase the imbalance of economic activity between the capital and the provinces, where 80 percent of Thailand’s 65 million people live.

“The question for Thailand is who gets it, which province,” says realtor Nigel Cornick.

“There would be a lot of political jockeying for position,” Mr Karoul says. “However, I do think that they would approve Pattaya initially and possibly add on Phuket and maybe Chiang Mai.”

“If you want a place where its visitor profile fits gambling, that’s Pattaya,” Mr Cornick says. The seaside resort, a two-hour drive from Bangkok, attracts 6 million foreign visitors a year and is the top tourist spending destination in Thailand, he says. Its airport handles a steady flow of international charter flights for group tours and is being upgraded.

Pattaya has plenty of luxury accommodation and condos for weekenders from Bangkok, plus a burgeoning expatriate population. It is best known as a raucous, raunchy holiday spot for Europeans.

“There’s plenty of real estate along the northeastern seaboard where you could put in a casino,” Mr Cornick says.

Phuket, an island off the southwest coast about one hour by air from Bangkok, has recovered from the December 2004 tsunami and gained popularity among buyers of second homes and extreme telecommuters. But Phuket’s tourism business remains seasonal, running from November to April.

A casino resort could boost off-season occupancy rates. It would also be relatively insulated from Thailand’s poor, in line with previous proposals to isolate casinos on islands off Pattaya.

Any benefit would, however, come at a cost.

“If a casino went to Phuket, you might get a different kind of tourist that might be a detriment to Phuket,” Mr Cornick says, pointing to the island’s quiet, classy reputation.

There is double the danger of values clashing in Chiang Mai, in the northern highlands, considered the nation’s cultural capital. Defenders of the country’s Buddhist tradition would blanch at the idea of a casino there. But as the only viable candidate in the north, Chiang Mai could be a key card in any political deal over casino legalisation, because it is in a region where Mr Thaksin finds his popular support and where there is resentment of the richer, more developed south.