As Penghu gears up for a casino gaming referendum, Global Market Advisors (GMA) has stated that a future casino market in Taiwan would be up there with Japan in terms of how lucrative it could be.
The analytical group has issued a thought-leadership piece entitled, “History and Current Status of Gaming in Taiwan,” authored by Bill Bryson, who heads GMA’s office in Taipei, serving greater China.
The white paper provides an informative historical perspective on the attempts to legalize gaming in Taiwan, the current status of efforts to promote casino gaming in Taiwan, and the associated legislative mechanics. Insights on the upcoming casino gaming referendum to be held in Penghu, and the likelihood of gaming on the islands of Matsu and Kinmen, are also provided.
“Taiwan is very interesting to the biggest corporations in the global casino industry,” Mr. Bryson stated. He continued, “Taiwan has shown an interest in creating a casino gaming industry on Taiwan’s offshore islands, with a focus on economic and tourism development. The question is whether or not this interest will persist after the recent handover of the government to the Democratic Progressive Party. While not a certainty, and despite some recent starts and stops, GMA believes there is reason to be optimistic.”
Andrew Klebanow, Senior Partner at GMA stated: “Taiwan ranks with Japan as a potential lucrative casino gaming jurisdiction. The pending referendum in Penghu, and the possibility of a referendum in Kinmen, has renewed interest in Taiwan among foreign casino operators. GMA’s thought-leadership and advisory support will hopefully serve the purpose of keeping interested investors apprised of developments in this emerging gaming venue.”
Taiwan has long been a venue of interest among foreign casino investors, originally because of the importance of Taiwan as a source of customers and more recently because of the potential to reach Chinese customers through the ever-increasing transportation and tourism links between Taiwan and China.
The paper states: “The effort to bring casino gaming to Taiwan, however, has been a journey of stops and starts over the past 25-plus years, though there has been fairly steady progress since 2009. Fast forward to 2016, and Penghu is once again preparing to hold a casino gaming referendum. The question is – will this be a repeat of 2009, or will it herald an era of casino development in Taiwan? While the former is possible, there is reason to be optimistic about the latter. The passage of a referendum in Penghu, which locals consider part of Taiwan, would likely force the legislature to pass the draft Act. Should the draft Act pass, then the process of accepting and processing applications for casino licenses would likely begin, assuming, of course that the provisions of the draft Act would create an operating environment acceptable to international casino resort operators.”
While the OIDA theoretically applies to all of Taiwan’s offshore islands, there are three islands – Penghu, Kinmen and Matsu – that are generally considered suitable for the development of casinos. Two of the three have already held referenda on casino gaming, with one referendum resulting in approval of casino development and one referendum resulting in a rejection of the casino gaming proposal.
The smallest of the islands – Matsu – is a so-called “frontline” island controlled by Taiwan but located just a few kilometers off the coast of mainland China. In terms of area, Matsu is about the same size as Macau, though it is divided into two main islands – Beigan and Nangan – and includes an array of smaller islands. In addition to being the smallest of the three eligible islands, Matsu is also the most mountainous, and therefore the most problematic from a development point of view.
GMA stated: “While Matsu is the one eligible island to pass a casino referendum, much has changed since the 2012 referendum. First, the Magistrate who championed casino gaming as a means of bringing badly-needed development funds to Matsu has been succeeded by a Magistrate who is less enthusiastic about casino development. Moreover, the failure of the LY to pass the Act has diminished the interest of foreign gaming companies in Taiwan in general, and Matsu in particular.”
In the event that Matsu ever regains its status as the primary target of interest for casino development in Taiwan, and given both its proximity to mainland China and the difficulty of getting there from Taiwan, the main customer market would be mainland China, with Taiwan as a secondary market. This potential dependence on the mainland market adds a layer of uncertainty as to the potential success of any casino development in Matsu, particularly given past comments and statements made by mainland China’s Taiwan Affairs Office as to its willingness to allow mainland tourists to travel to Matsu to gamble.
Penghu is the second largest of the eligible islands, with an area a little under five times the size of Macau, and is located in the Taiwan Strait. Like Matsu, Penghu is actually an archipelago, with one large main island and a number of smaller islands, the largest of which are connected by bridges, but some of which are only accessible by boat. Penghu held an unsuccessful casino gaming referendum in 2009, and may be the next island to hold a referendum.
GMA said: “Much has changed since 2009, however. In particular: 1) the County Magistrate of Penghu County is a member of the DPP and supports the referendum; 2) Penghu’s representative in the LY is a member of the DPP and is expected to support the referendum; 3) the referendum enjoys the support of the county chamber of commerce and other local business organisations; and 4) the draft Act, which has been submitted to the LY, addresses many of the concerns raised by the anti-gaming activists in 2009. While not a certainty, these new circumstances suggest that the planned 2016 referendum might succeed.”
In the event of a successful referendum, the target market for a casino in Penghu would be much more diverse than the target market for Matsu. Given the ease of travel between Taiwan and Penghu, the popularity of Penghu with Japanese tourists, and the upgrades that have been made to the airport over the years, the target market would be primarily Taiwanese and Japanese players, with additional play possible from Chinese and other Asian players. Penghu is not as dependent on mainland tourists as Matsu and Kinmen, meaning that there are fewer uncertainties about the island’s potential customer market.
Kinmen, another of Taiwan’s frontline islands, is the largest of the eligible islands, with an area that is more than five times that of Macau. Unlike Matsu and Penghu, however, Kinmen is a single island with lots of developable land.
Kinmen became the main focus of potential casino investors after the first Penghu referendum failed in 2009, and the former Magistrate of Kinmen County had indicated in his discussions with foreign investors that he would seriously consider holding a referendum if he was re-elected and if the LY passed the draft Act. Neither of those conditions has been met, and the new Magistrate’s attitude towards a potential casino referendum is not yet clear.
GMA explained: “Even if the Kinmen government were to decide it was worthwhile to put their existing tourism flow at risk by holding a referendum, it is not clear that there would be enough support among the residents of Kinmen County to pass the referendum. In the event that a referendum did pass, however, the main source of customers – given the island’s proximity to Xiamen and the Chinese mainland, and the relative difficulty of getting to the island from Taiwan – would be mainland China. There are many levels of uncertainty at this point as to whether or not mainland customers would be allowed to travel to Kinmen if casinos were established on the island.”
Penghu has already begun the necessary process for holding a casino gaming referendum, probably by the end of the year. The supporters of the referendum have collected far more than the number of signatures required to initiate the referendum process and the petition for the referendum is being processed by the County’s referendum commission. This means that a DPP-governed county, with the support and approval of the DPP-led county government, will soon hold a referendum to approve the establishment of casinos.
GMA concluded: “Passing legislation that would bring billions of dollars of investment and thousands of jobs into the offshore islands (particularly a DPP-governed island) might seem like a desirable enough outcome that the party might be willing to set aside its former opposition to casino gaming on the offshore islands. Of course, the LY also needs to be mindful that the Act needs to be workable for foreign investors and operators. Short license periods, excessive tax burdens and excessively high minimum capital requirements can all act to dis-incentivize reputable casino investors/operators from considering Taiwan’s offshore islands as a potential venue for their next casino gaming investment. Hopefully the LY can produce an Act that would make Taiwan an attractive casino investment jurisdiction.”