Is the South Korean Gambling Industry About to go Bust?
South Korean Gambling in Numbers
Trillions have been earned by the South Korean government from gambling related revenues over the years. Trillions have also been won in the South Korean currency but the amount is not bad in dollars either. A report published by the Korea Taxpayer Association shows just how lucrative the gambling industry has proven to be for the government. In the report, it states that gambling has paid USD $54.56 billion (SKW 62.5 trillion) to the government in the last 15 years.
Horse racing seems to be extremely popular with the punters in the area. It contributed to nearly 37.5 per cent of the USD $54.56 billion they have earned. The lottery occupies the spot for being the second most popular gambling activity. Lotteries raked in 25.4 per cent of the total revenues. Casino revenues come in third place, with contributions totalling 12.3 per cent of the total revenues.
Tax revenue collections from the gambling industry in South Korea have more than doubled while the profits increased by four folds over the course of the last 15 years. Casinos were first legalised in South Korea more than fifty years ago. This was done via hotels that were given the legal rights to offer casino games for their foreign guests. However, despite the unprecedented growth in casino gambling, citizens of South Korea are barred from playing in their casinos.
Gambling Center Available Only to Foreigners
The casino sector itself has seen a boom in investment. Developers from all across the globe have backed South Korea towards becoming the next Macau. This is interesting, especially since Macau has faced a couple of tumultuous years, just recently. The country is also set to open its doors to their first bona fide integrated resort. Officially known as ‘Paradise City’, the resort will be located in Incheon near the capital city of Seoul.
With such massive returns coming from the gambling sector, developers were hoping for a relaxation in the country’s laws. They were banking on the government opening up the industry to the local citizens. However, it seems that is unlikely to happen any time in the near future. As a result, the developers are having to double take on the South Korean market. Factors such as Macau’s resurgence and the eminent opening of the Japanese market have created significant doubt in the minds of the investors, regarding the profitability of the South Korean market.
Gambling Lobbyists End with Sour Results
The first to have reservations about South Korea is none other than Malaysian casino giant, the Genting Group. Genting recently sold its 50 per cent stake in Resorts World Jeju. This is a USD $1.8 billion development on Jeju Island in South Korea, which is due to open later this year.
The group has defended its decision by showing the need to focus on other areas in the region. They believe that Japan and to a lesser extent, Singapore are the markets worth investing in given the present situation.
If one of the bigger casino firms pulling out of the South Korean market was not bad enough of a sign, then surely the next point must be set to hurt the country’s gambling sector. The political tension between China and South Korea has reached an all- time low. The deployment of a U. S. missile system on South Korean territory has been viewed unfavourably by the Chinese government.
David Bain of Aegis Capital Corp. commented on the situation. He suggested as a result of recent developments, visitors from China may look towards destinations other than South Korea to visit for their entertainment needs.
He said, “Mainland Chinese travellers may look to Macau and other destinations as an alternative to South Korea.”
He further added that China’s escalating economic retaliation over the deployment was designed to send a message to North Korea. In the end, Macau is set to benefit from the decrease in foreign punters coming into South Korea. Nearly half of the 17 million gambling tourists that entered into South Korea in 2016 had come from Mainland China.