The Billion Dollar Q: Will More Casinos Be Opened to South Koreans?

Of all 18 casinos in South Korea, only one is legally open to locals: Kangwon Land, located in the remote highlands of Gangwon Province, where the Olympics took place last month.

60-year-old Bang Eun-keun has been a pastor at a nearby church since 1995. After Kangwon Land opened in 2000, his job description at Gohan Nambu Church, sitting at the foot of the casino, slowly evolved to include suicide counseling.

“There are countless stories of people ending their lives at Kangwon Land, some even in the casino’s restrooms, because they’ve sold their houses and lost everything through gambling,” said Bang, who has been providing counseling to gambling addicts for the past 18 years. He says many of those he helps have either attempted suicide or are on the verge of it.

Kangwon Land doesn’t have a clean image: far from it. It’s commonly seen as a place where people drain their wallets, deplete their pensions, and become suicidal gambling addicts. It’s also seen as a hotbed of corruption; just recently, President Moon Jae-in ordered the firing of 226 employees at the casino who landed their jobs through unfair practices including nepotism.

Kangwon Land’s tainted reputation, combined with its status as the country’s only legal casino for South Koreans, is one reason most casinos remain open just to foreigners, despite a growing internal debate about legalization.

Legalization for locals is a billion dollar question, but the government is firmly opposed for now: no more casinos for South Koreans.

For years, Singapore was in a similar, if not stricter, position to South Korea: Casinos were banned outright and the object of strong social stigma. The city-state’s government repeatedly turned down proposals to open one. But in the mid-2000s, the country took a radically different approach: integrated resorts.

Marina Bay Sands, Singapore. (Source: Wikimedia Commons)

One of the world’s architectural marvels,” Marina Bay Sands (MBS) is a postcard-perfect structure on the Singapore skyline, with its three hotel towers connected by a dazzling infinity pool. Sitting beneath the architectural marvel is the resort’s cash cow — its casino, open to both foreigners and locals.

Lee Kuan Yew, Singapore’s late founder, was known for his staunch opposition to gambling, reportedly saying he would allow casinos only “over my dead body.” That all changed in 2005, when he accepted that billions of dollars worth of investment shouldn’t be disallowed just because of the gaming element.

“I have had to change my attitude to casinos in Singapore when they are part of ‘integrated resorts,’” he admitted, referring to ecosystems like that of MBS combining luxury hotels, fine dining restaurants, shopping malls, convention facilities, entertainment arenas, and a casino. “We must move forward and keep abreast of the top cities in Asia and the world,” Lee said.

Gambling was approved by the Singaporean government that same year; operators were selected through an international competition to develop two integrated resorts: MBS and Resorts World Sentosa.

The economic effects of the two resorts have been staggering: In 2009, before they opened, the number of visitors to Singapore was just 9.7 million, while tourist expenditure clocked 12.6 billion Singaporean dollars. Fast forward to 2017, and foreign visitor numbers have jumped to 17.4 million and tourist expenditure to S$26.8 billion, representing increases of 79 percent and 113 percent, respectively.

The growth in Singapore’s tourism industry between 2009 and 2017. (Data source: Singapore Tourism Bureau)

The Singaporean government claims the resorts played a substantive part in the growth of the tourism sector, supporting more than 40,000 jobs throughout the economy. 22,000 employees, mostly local, are hired directly by the two resorts.

According to company filings, 80 percent of MBS’s net revenues were generated by its casino in 2017.

Foreign investors have on several occasions expressed strong interest in the South Korean market, with MBS’s parent company reportedly ready to pump as much as $12 billion into creating a gigantic resort in the port city of Busan — including, of course, a casino for locals. So far, the South Korean government has given such proposals the cold shoulder.

The success of Singapore’s integrated resorts hasn’t gone unnoticed in other countries, however. It has fuelled a rush for integrated resort supremacy in Asia, sparking arguments for following in Singapore’s footsteps and change local laws in Vietnam, Thailand, Japan, Myanmar and Taiwan, where casinos are either banned or don’t allow locals to enter. Recently, Vietnam decided to allow locals into casinos as part of a three-year pilot scheme.

Japan has been one of the most enthusiastic casino-supporters, with Prime Minister Shinzo Abe expressing his determination to get casinos legalized. The country’s Integrated Resort Promotion Law was passed in December 2016 and will permit casino entry to Japanese citizens, as long as the casinos are part of integrated resorts.

Aside from several forms of gambling including horse-racing, lottery and bullfights, gambling is by and large illegal for South Koreans. It’s not that they don’t gamble — far from it: Most Koreans who gamble go to foreign websites or abroad. In the Philippines, they are reportedly one of the top two groups of foreigners at Manila’s Solaire — another integrated resort with a casino.

Read “The Cleanest Race,” a portrait of a horse-race gambler in South Korea.

In a study released by the International Monetary Fund, South Korea’s shadow economy was estimated to have accounted for at least 19.8 percent of the country’s GDP in 2015. (Untaxed, illegal gambling is included in this figure.)

South Korea’s first casino was built in the 1960s: Laws were revised to allow casinos for foreigners so the country could “earn foreign currency.”

“The longstanding law on casinos exclusively for foreigners is what has made the topic taboo,” said Yoon Tae-hwan, a tourism professor from Dong-eui University. “It is an outdated law, implemented when South Korea’s economic power was not comparable to what it is today — to ensure people’s money didn’t go to the wrong place.”

Only two other Asian countries maintain a similar contradictory practice of allowing foreigners into casinos while banning locals: Nepal and Cambodia.

Since the 1960s, casinos in South Korea were managed as a “gambling business” by the National Police Agency. Only in 1994 were casinos classified as a “tourism business” and managed by the Ministry of Culture.

Then, Kangwon Land came along, hoping to change the casino landscape. In 1995, in an attempt to revitalize the economy after the closure of coal mines in Gangwon, the government passed the Special Act on the Assistance to the Development of Abandoned Mine Areas.

Kangwon was launched in 2000 as the country’s first and only casino-for-locals, as a partially government-owned venture.

“The casino has to date claimed hundreds of lives,” argued pastor Bang.

According to Statistics Korea, between 2007 and 2016, the average suicide rate per 100 thousand person in Jeongseon county (where Kangwon Land is located) stood at 53.9 people, the highest among all 18 cities, counties and boroughs in Gangwon Province. The figure is also one of the highest in all of South Korea. Bang points the finger at the casino.

“I realized I have to fight for that casino to disappear until I die. This isn’t about religion. It’s about helping desperate people,” he said.

Proponents of a casino-for-locals point to Kangwon Land’s financial success. According to data from the National Gambling Control Commission (NGCC), in 2016 alone, Kangwon’s revenue was 1.63 trillion won ($1.5 billion) compared to 1.28 trillion won ($1.18 billion), which is the combined revenue of all foreigner-only casinos.

Kangwon Land has a higher revenue than the combined revenue of all foreigner-only casinos in South Korea. (Data source: NGCC)

Professor Yoon is confident that integrated resorts like MBS can have a substantial impact on South Korea’s economy.

For several years now, there has been talk of building massive integrated resorts with casinos for locals: Proposed locations have included Seoul, Busan, Jeju, and even Saemangeum, a reclaimed land home to the world’s largest dike.

“If South Koreans are allowed to enter integrated resort casinos, there cannot not be negative side effects. But as seen with Singapore, it is not impossible to avoid such side effects with sufficient safeguards,” Yoon said, referring to strict regulations enforced by the Singaporean government.

Singaporean ‘safeguards’ include charging locals an entrance free of S$100, banning financially vulnerable citizens, and implementing an exclusion system whereby an individual can ban a direct family member from entering the casino.

According to the Singaporean government, gambling addiction over the years has actually decreased, from 4.1 percent in 2008 (before the resorts opened) to 0.7 percent in 2014.

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South Korea’s approach, for now, is inextricably linked to the trauma inflicted by the history of Kangwon Land.

“The government has consistently maintained the principle of not allowing another license,” said an official at the Ministry of Culture, refusing to be named. “We need to consider factors, including negative national sentiment and the socio-economic costs of gambling addiction.”

Elaborating on the term “national sentiment,” the official cited a recent survey in which respondents identified “domestic-entry casino” (read: Kangwon Land) as being the most problematic gambling business (50.9 percent). The survey didn’t actually ask whether people were for or against casinos.

On the other hand, 65.7 percent of citizens in Busan, South Korea’s second-largest city, were in favor of an integrated MBS-style resort open to all, according to another recent survey commissioned by Busan’s Chamber of Commerce and carried out by Yoon.

It’s not clear what the socio-economic costs of gambling are. The official from the Ministry of Culture quoted NGCC data from 2009, which valued the costs at 78 trillion won ($72.5 billion) annually, a surprisingly large figure that was almost five times the size of all legal gambling revenues in 2009.

“We have never commissioned a study of the socio-economic costs of gambling addiction,” an anonymous official at NGCC said, distancing himself from the 78 trillion won figure, which he described as “not credible.”

In fact, the original press release on the 2009 data, deleted from the NGCC website but available on Google Cache, was titled, “Annual Socio-economic Costs of Gambling Addiction: 78 Billion!” A search of the National Assembly Library catalogue also reveals that the research was in fact commissioned by the NGCC.

No matter what studies say, locals who have directly observed the impact of Kangwon Land, like pastor Bang Eun-keun, remain firmly convinced of gambling’s detrimental effects. “According to the Korean Constitution, the state has a duty to protect its people,” he said. “We should never allow another domestic-entry casino.”

 

Cover image: Casino chips. (Source: BootstrapGiver via Pixabay, CC0 Creative Commons)

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Raphael is a journalist and freelance fixer. He has an MA in Korean Studies at Korea University, and worked at Edelman Korea for three years, representing some of South Korea's biggest conglomerates.