CAMBODIA

Government means business with online ban

Cambodia’s online gaming ban, which came into effect as of Jan. 1st, has triggered mass layoffs and the shutdown of numerous casinos, and is not expected to be lifted due to pressure from the Chinese government.

Prime Minister Hun Sen announced the crackdown in August last year after rampant expansion of the online gaming industry, particularly in the coastal town of Sihanoukville, led to soaring crime rates and rising prices for locals.

At the time, the announcement was made, Beijing had made its displeasure at online gaming operations targeting Chinese nationals clearly known through an unusual statement through its embassy in the Philippines. Manila has moved to tighten regulation on its industry, but it has not followed through on an outright ban like Cambodia, whose economy is more heavily reliant on Chinese investment.

According to Cambodian government figures from last September, there were estimated to be about 61 casinos operating in Sihanoukville out of a total of 133 across Cambodia. About 46 percent of all new license applications had been centered on the town.

Ros Phirun, deputy director general of the Ministry of Economy and Finance, said as of early January that number had shrunk to 56 operating casinos, with no new applications pending, Nationwide there are now thought to be about 118 properties in operation.

In terms of online operators in Sihanounkville, experts estimate up to 200 may have been active prior to the ban. Local media has reported more than 7,000 workers have lost their jobs, with many seeking to return to nearby factories, while rental values and property prices have tumbled.

“On 30 December 2019, all the online gaming operators were asked to have a meeting with the Ministry of Interior of Cambodia. During that meeting, all the operators were told very clearly that there will be no more online gaming starting from 1 January 2020,” said Danny Too, general manager of Cherry Interactive. “Before that meeting took place, many non Chinese operators were still clinging onto some glimmer of hope that they can continue to operate and relocate under the protection of some prominent companies.”

The fact is many casinos have closed and not just the small operators.

The online gaming ban has placed a major question mark over the viability of Sihanoukville as a gaming hub, at least in the short term. The rampant and uncontrolled construction that had been taking place has caused untold environmental and social damage, ruining the town’s prior reputation as an unspoiled beach haven.

Without the online revenue, many of the land-based casinos willstruggle given the limited tourism footfall.

“The fact is many casinos have closed and not just the small operators,” said Dominick Stenson, casino director at Queenco Casino. “The ban has hit those that were very much reliant on online business supporting their offline live game business.”

“Many online/offline operators could afford to be very generous with their offers to their live game players, who were in a large part online agents, construction workers and related affiliates, as they fed and grew the lucrative online business.”

“The previous model, although lucrative for everyone who had a stake in the dramatic rise, was unsustainable.”

The government, with help from China, has pledged investment to upgrade the town’s sorely lacking infrastructure, including $300 million alone to rebuild roads. Construction is progressing on a new highway linking the capital with Sihanoukville, improving access to the resort.

It also plans to upgrade sewerage and drainage systems.

“The push to complete the major infrastructure changes are ruthlessly underway,” Stenson says. “The necessary road construction and drainage solution is taking no prisoners, on many occasions at the expense of small businesses who have seen their access completely blocked and with no alternative but to shut up shop and wait until it’s finished. Many casinos have seen their driveways and parking halved to accommodate the road widening.”

In the longer term, there is some optimism Sihanoukville may be a viable resort destination, supported by its proximity to a large manufacturing base in the form of the Sihanoukville Special Economic Zone, located 3km from the airport. Spreading over an area of 11 sqm, the zone will host 300 companies once fully built out with plans to employ as many as 100,000 workers.

The airport supports about 30 flights a day from Mainland China, with penetration into many second-tier Chinese cities.

“The middle to long term future is without doubt still positive,” Stenson says. “The Government is serious about making sure the city will have the right foundations to grow into a major casino and tourist destination, even if they and some influential landowners are taking a hit right now.”

Conventional wisdom says that an online presence in some form, be it streaming only on a B2B basis, or other is necessary so as to stimulate the market again, but in a more controlled manner. This I am sure will be under serious consideration once the gaming legislation is finalised sometime this year,” he adds.

Court rules in favor of Donaco in asset spat

A Cambodian appeals court has ruled in favor of Donaco International, allowing the company to retain ownership of various assets at its Star Vegas business, which were being disputed by its former Thai vendor as part of a “campaign of legal harassment” against the company.

The spat between Donaco and its Thai vendors first came about after Donaco launched legal proceedings which alleged its three Thai vendors were running a neighboring competing business in breach of their contract.

The vendors retaliated in 2018 by initiating the termination of the lease agreement with Donaco, citing the casino operator’s lack of rental payment. They also made two attempts in the lower court to seize various assets of the Star Vegas business, purportedly as security for the vendor’s claim for its FY17 management fee.

Now that the appeal court has ruled in Donaco’s favor, Donaco said there has been no further appeal in this matter.

Naga ends protest without pay hike

A group of NagaCorp workers that went on strike to dispute wages returned to work without any wage increases.

In a statement, NagaCorp said it was only a “small group” of employees that participated in the strike.

The casino operator said it obtained a court injunction from the Phnom Penh Municipal Court on January 8, which ruled that the planned employees’ strike on January 9 was considered an illegal strike and that any participant would be considered to be committing a grave offense.

The court ruling also ordered an investigation into the strike and necessary legal action against any employee involved in it, said the company. NagaCorp in its filing, noted it had a workforce of approximately 8,200 employees.