Thailand is searching for an economic cure, and comprehensive entertainment facilities could be part of the solution – but only if it heeds lessons learned in Singapore and Japan, writes Jeremy Walker.
In his first policy statement delivered on Monday 11 September 2023, the newly appointed Prime Minister of Thailand, Srettha Thavisin, leader of the Pheu Thai led coalition government, announced that Thailand was “like a sick person” and it was necessary to “stimulate the economy and spending.”
The COVID-19 pandemic was disastrous for tourism worldwide, in particular for service-oriented markets like Thailand that depend greatly upon visitors from around the world to drive economic activity. Despite the reopening of its borders, the Thai economy remains fragile with government debt at a record 61% of GDP. Digital money handouts of THB 10,000 (US$280) per citizen may have some short-term impact, but more sustainable solutions will be required by the government in the long-term.
The Asian gaming industry, inexorably linked to tourism, understandably saw revenues collapse through much of 2021 and 2022, deeply impacting not only gaming operators’ balance sheets, but suppliers, workers and government coffers. However, the reopening of borders clearly demonstrated the robustness of the sector, with the major regional markets of Macau, Philippines and Singapore quickly returning to positive revenue and EBITDA growth.
Which is why Thailand, long recognized as a magnet for international tourists and already boasting an enthusiastic, largely untaxed, domestic gaming and sports betting market, would be wise to consider implementation of Comprehensive Entertainment Venues as a means of bolstering the economy, strengthening its regional competitiveness and helping the new government deliver on its election manifesto.
So what can they learn from the process underpinning the introduction of gaming in other regional markets – namely Singapore and Japan?
Set a Clear Economic Vision
Singapore is often lauded as the blueprint for new gaming jurisdictions where it tactfully balanced traditional Confucian values with the introduction of more liberal entertainment offerings. Facing the challenge of maintaining its competitiveness among other world cities, Singapore recognized the need to upgrade its leisure and business tourism offering to increase length of stay and international attractiveness of the city. The solution would be an Integrated Resort (IR) strategy that would balance Singapore’s international and business-friendly reputation with its more conservative values. The city’s pragmatic approach in discouraging but not blocking locals from gaming, via an entrance fee policy, coupled with a fair market and competitive tax system, ensured its two resorts would become vibrant and compelling world class destinations, reflecting Singapore’s unique cultural appeal.
Japan, long coveted as a gaming destination with the potential to be one of the largest tourist markets in the world, had a similar vision. It too recognized the need to upgrade its ailing tourism infrastructure and attractiveness for foreign visitors through the introduction of international 5-star hotels, hospitality, entertainment and MICE facilities. However, unlike Singapore, Japan’s process was highly prescriptive, deciding that IRs should be among the largest, most comprehensive and as a result, most expensive ever built. Coupled with one of the highest tax frameworks in an already expensive operating environment, this strategy only proved feasible for major urban locations, despite the government’s hope to stimulate regional economies.
Thailand should carefully consider what it expects IRs to do for the economy and how they will add to the country’s existing tourism infrastructure. Whilst small regional IRs will undoubtedly impact local economies, larger urban IRs with good connectivity to international airports, and access to established supply chains and skilled labor will do far more in raising both the international appeal and brand of Thailand as a tourism destination, and they will shift the needle in driving much needed macro-economic goals.
Identify Locations
Singapore clearly identified two locations before formal bidding commenced, with each positioned differently to support the city’s economic growth. The Marina Bay site would broadly focus on MICE and business clientele and was required to enhance the CBD and boost the city’s image, whereas the Sentosa site would focus more on mass market, family-friendly tourism to broaden the city’s appeal. The result was a highly competitive and efficient bidding process, with a wide array of creative submissions from many of the world’s leading gaming operators, investment groups and architects.
In Japan, which has a multi-tiered municipal, prefectural and national bureaucracy as well as a fragmented political system heavily reliant on building consensus among factional and coalition parties, the process of implementation was challenged from the start. Whilst up to three locations were up for grabs, these were not identified from the outset. Instead, a two-tiered bidding and selection process was adopted, with stage-one bidding open to all 47 prefectures, followed by a second-stage selection where up to just three locations would be approved at the national level. This process left potential investors with a quandary – whether to “go all in” in one location or spread their bets across multiple sites, without any assurance as to which location would eventually be approved by the national government. Political uncertainty, investment risk and bidding fatigue eventually saw many consortia quietly exiting the process.
Thailand would do well to identify specific sites early in the process, with unencumbered ownership, in locations that will both appeal to potential investors and achieve stated economic goals. Top of that list would be metropolitan Bangkok and the Eastern Economic Corridor.
Leverage Political Capital
Singapore benefits from a stable, consistent and predictable political system. Decisions, when in the national interest, can be made expeditiously. Before deciding to proceed with implementation, the government effectively used a 6-month public consultation and Request for Concept exercise to thoroughly assess the viability of introducing IRs. Upon conclusion of this process and wasting no time, despite opposition from some quarters, the Prime Minister and his cabinet made the decision to proceed, with the knowledge that there were risks whichever way they decided.
“Not proceeding would risk Singapore being left behind by other cities,” said Prime Minister Lee Hsien Loong on 18 April 2005.
In Japan, the initial success of former Prime Minister Shinzo Abe in gaining consensus in passing the Integrated Resort Implementation Act in 2018 was offset by delays in its implementation. The two-step bidding and selection process, which relied solely on prefectural governments’ willingness to support, took considerable time to implement. This opened the door for a vocal anti-IR lobby, driven in part by political considerations, with IRs becoming a contentious topic within many city and prefectural election campaigns.
The resulting negative perceptions in the community and media pressured government to maintain a very high bar in its regulatory framework, more than some operators and investors were willing to accept. Attempts by the industry and community groups in favor of IRs to balance negative perceptions through media outreach, CSR and educational activities, were often fruitless.
The new Thai coalition government has less than four years within its current term. It faces many economic challenges and there is significant expectation from citizens that grassroots issues will be addressed, such as increasing minimum wages and boosting job opportunities. This will require funding and economic stimulus.
In a special House committee report presented to Parliament in January this year, a non-partisan parliamentary group concluded that eight types of gambling activities should be permitted, including physical as well as online casinos and sports betting, as a means to raise tax revenues.
The report included a poll by The College of Politics and Governance, Suan Sunandha Rajabhat University, in which over 80% approved the introduction of Comprehensive Entertainment Venues. Given historic political instability, with the average government term over the past 30 years being around two years in duration, pursuing implementation without delay to leverage the new government’s honeymoon period, widespread consensus among political parties, and positive public opinion, may be the prudent path to follow.
Set a Clear Regulatory Framework
Singapore used its RFC process wisely to listen to the opinions and recommendations of potential investors and ascertain a clear roadmap for implementation and regulation that would balance both the needs of the city and those of the investment community.
Japan’s two-step bidding process was also reflected in its regulatory approach. For example, gaming license renewals, after a 10-year first term (including construction), require approval at local level before being rubber stamped at national level, adding political risk into the process. Lengthy delays in implementation that extended beyond the term limits of bureaucrats working within key positions and those of cabinet members and politicians, impacted momentum for an already complex process.
Thailand can greatly benefit from the experience of other markets and should leverage expertise from international regulatory consultants to formulate a legislative, regulatory and bidding framework that aligns both to the needs of the economy and society whilst remaining internationally competitive to maximize investor interest.
With the right strategic approach, Thailand could quickly catch and surpass many other Asian markets and take advantage of the country’s undoubted tourism potential.