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The 'Casino Strategy' in Laos and Cambodia: a Risky Bet on the Future

Kings Romans Casino in August 2012 (© 2012 / Danielle Tan)
Kings Romans Casino in August 2012 (© 2012 / Danielle Tan)
Publication date : July 2015
Author(s) : Danielle Tan E-mail
Areas : Laos, People\'s Democratic Republic of, Cambodia
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Laos and Cambodia appear to have been the poor relative of Asian studies over the past decades, especially when concerning the political analysis of their contemporary situation. While the end of the bipolar world has paved the way to economic liberalization policies in the remaining communist countries in Asia, increasingly rapid socio-economic changes occurred without offering a glimpse of any political renewal. It seems that in both countries the neoliberal transition is far from leading to a democratic transition, contrary to what the “transitology school”-Samuel P. Huntington, for example-claims by linking closely together neoliberal reforms and process of democratization. This theory gives a central role to the elites who are supposed to be the engine of the democratization process.

The Neoliberal Transition in Laos and Cambodia

In both countries, however, the conversion to a market economy has in fact helped the revolutionary elite remain in power. The alliance with private investors-in particular, with the Chinese-effectively provided Lao and Cambodian leaders with privileged access to private capital and public goods, thus facilitating the conversion of the revolutionary ruling elite into managers of a privatized state. This political economy of predation, in which the state has become the primary tool of primitive accumulation, is occurring at the expense of the poor-particularly the rural population and the ethnic minorities-through a land-grabbing strategy legitimized by the building of a “developmental state” myth that meets the requirements of international donors.

In Laos, for example, the communist leaders have skillfully endorsed the regional integration policy promoted by the Asian Development Bank (ABD) since 1992 through the GMS (Greater Mekong Subregion) Program, which brings together five countries in the Mekong region, and two Chinese provinces, Yunnan and Guangxi. This transnational project aims to transform the former battlefield of the Cold War to marketplace by removing borders and improving transport networks, thus allowing the free movement of goods and people. Regional integration is presented as an unexpected opportunity to emerge from poverty, to transform Laos from a “land-locked” into a “land-linked” country by becoming the pivot of the GMS economic corridors.  


The GMS Economic Corridors
Map of Christian Taillard,
in « Un exemple réussi de régionalisation transnationale en Asie Orientale :
les corridors de la Région du Grand Mékong »,
L'Espace Géographique, >2009/1, vol. 38, pp. 1-17.

From the beginning, the ADB has financially supported Laos in its ambition to become the crossroads of the GMS and the “battery of Southeast Asia”-for that purpose, the government plans to build more than 70 dams including ten on the mainstream of the Mekong River. The ADB also technically helped Laos implement its strategy for attracting foreign investments, which was promoted through the motto of “Turning Land into Capital.” More specifically, the rationale is to foster the country's development by capitalizing on its main comparative advantage, that is to say its abundant and largely unexploited land and natural resources. Foreign investors are granted favorable concessions in order to implement mega-projects (industrial plantations, commercial agriculture, mining, dams, special economic zones, etc.). These projects would yield significant revenues for the state, thereby reducing poverty by generating employment and income for local communities (see http://www.decide.la/en/ for a global, comparative and localized overview of the projects).

The Gambling Industry: the New Fashionable Model for Development

Over the past years, the development of casinos in Laos and Cambodia has been emblematic of this neoliberal transition. The objective is to attract foreign tourists, especially the Chinese, the Thai, and the Vietnamese-where gambling is strictly prohibited and punished by law in those countries-in order to create a dynamic of touristic development and attract further investment through a favorable tax treatment. In Laos and Cambodia, the law only forbids their citizens to gamble in the casinos, but in practice, its application remains flexible. The success of the gambling industry in Macau (USD 44 billion in 2014) and Singapore (USD 6.5 billion in 2014)-which eased its prohibitive policy in 2010-has reinforced the conviction of the Lao and the Cambodian governments that casinos had a strong potential for economic growth.

In Cambodia, the casinos have mushroomed since 1993 in border towns located in Koh Kong, Poipet, Pailin, Chong Jom near Thailand, in Bavet, Ha Tien, Phnom Den near Vietnam, then in Sihanoukville, and finally in the capital, Phnom Penh. There are now nearly 57 casinos spread throughout the country. In 2014, the gambling industry generated USD 25 million in tax revenue, an increase of 15% per year. NagaWorld, the biggest casino in Cambodia is expanding and holds a lease and a license until 2065. Its owner, Chen Lip Keong, a Malaysian Chinese businessman, has become a billionaire by engaging with the gambling industry. In 2013, the Hong Kong-based NagaCorp Company reported net profit of USD 140 million on revenue of USD 345 million, both up 24% from 2012.

If revenues generated by the casinos are increasingly becoming important for the Cambodian economy, they are, however, dependent on the regional geopolitical situation. For example, in 2009 and 2010, border disputes with Thailand dramatically reduced attendance in border town casinos for the benefit of Savan Vegas Casino in Laos. Only Poipet, home to the largest concentration of casinos in Cambodia, has managed to maintain its activity (USD 7.5 to USD 12.5 million in tax revenue very year). In the future, it will be increasingly difficult for Cambodia to keep its attractiveness if Vietnam finally decides to allow its citizens to frequent the casinos located in its territory in order to prevent capital and profit flight to Cambodia or Singapore.

The competition starts to be harsh also with Laos. The first casino, Dansavanh Casino Resort, was built in 1996 about sixty kilometers from Vientiane, on the banks of Nam Ngum Lake. The casino is managed by a joint venture between Syuen Group, a private Malaysian (Chinese) company and the Lao military, which owns 25% of the share capital. The company has invested USD 200 million. Since the 2000s, casinos projects have increased rapidly, especially in the form of special economic zones. In the South, the Macau-based Sanum Investment Ltd. opened in April 2009 Savan Vegas, which is located close to the Savan-Seno Special Economic Zone in Savannakhet. The casino is attracting between 8,000 and 10,000 visitors a month, the vast majority is Thai but we can also find Lao gamblers. The government owns 20% of the share capital, as well as ST Group, a Lao private company. Sanum has invested USD 85 million in Laos and planned to develop other casinos until the government has threatened to close the complex if the group does not pay USD 23 million in retroactive taxes. In 2012, Sanum's Slot Machine Club in Thanaleng outside Vientiane was taken over by the authorities and given to the Lao partners of the group; The Paksong Vegas project in the province of Champasack was canceled as well as another casino project in Thakhek Special Economic Zone. Sanum is awaiting arbitration through the World Bank's International Centre for the Settlement of Investment Disputes to recover USD 400 million for lost investments.


Casinos and Special Economic Zones in Laos (© 2015 / Danielle Tan)

In the north, the government has granted 99-year concessions to private Chinese investors to transform the drug enclaves of the Golden Triangle-infamous for being one of the world's leading centers of opium production in the world-into a gambling Mecca. The two Special Economic Zones, Golden Boten City, at the Chinese border, and the Golden Triangle, in Bokeo Province, have turned into little more than Chinese enclaves on Lao territory, where stories of murder, kidnapping, pirates, drugs, human trafficking, and sex trade regularly hit the headlines. In April 2011, the Lao government shut the Boten casino down, but decided to give another chance to Hong Kong Fuk Hing Travel Entertainment Group, the company that runs the Golden Boten City Special Economic Zone.

 
Golden Boten City in March 2008
30-year concession (renewable twice) -
USD 103 million of investments - 1,640 ha.
(© 2008 / Danielle Tan)
  Golden Boten City in July 2012 - a Ghost City(© 2012 / Danielle Tan)

Despite the resistance displayed by the villagers expropriated by Kings Romans Casino and some allegations that the company is linked to money laundering and drug trafficking, the Lao government continues to actively support this project of 10,000 ha in which it owns 20% of the share capital. This is hardly surprising given the Hong Kong-based group has invested more than USD 644 million since 2007 and plans to inject USD 2.2 billion by 2025 to create a real modern city with an airport, an industrial park and eco-tourism facilities.


Kings Romans Casino in August 2012 (© 2012 / Danielle Tan)

While the Deputy Minister Somsavath Lengsavath told the press (The Nation, September 9, 2013) that casinos “have made no good contribution to development... so we don't want them anymore,” the Lao government has recently approved the construction of two other casinos: one in the area of Khonephapheng waterfall, in Champassak Province; the other, named “Asean Paradise Savan City,” in Savannakhet Province. The latter is a USD 10 billion mega-project operating under a joint venture that involves the Lao government (30%), the Asean Union Group (a Malaysian company), and the Hong Kong-based Savan City Company, which belongs to Thai investor Chanchai Jaturaphagorn.

Beyond the State's Reach. Casino Spaces as Enclaves of Development or Lawlessnes?

While many commentators see these casinos as enclaves of lawlessness, my research attempts to show that these states are less passive than as it seems. Their development strategy blurs the boundaries between the formal and informal economies, legal and illegal practices, but the very practice of straddling these distinctions is a technique of state formation, which contributes to consolidate the power of the ruling elites.

Danielle TAN
Research associate at the Institute of East Asian Studies (IAO-ENS Lyon)
Adjunct Lecturer at Sciences Po Lyon
tandanielle@hotmail.com

In the framework of the three-year pilot program (2014-2016) “Rethinking Asian Studies in a Global Context” coordinated by IIAS and funded by the Andrew W. Mellon Foundation (see http://rethinking.asia/forum-3-3), I am co-convening with the University of Macau and the National University of Singapore a workshop on the impact of casinos in Asia at the Center for Khmer Studies in Siem Reap, 21-23 August.


For more information,
see: http://rethinking.asia/event/beyond-states-reach-casino-spaces-enclaves-development-or-lawlessness


 
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