By Ichiro Suzuki
Las Vegas Sands founder and CEO Sheldon Adelson announced earlier this month that he is pulling out of bidding for an integrated resort project in Yokohama, Japan that is scheduled to open in the latter half of the 2020s. In Asia Mr. Adelson wants to concentrate on his businesses in Macau and Singapore, he says. The deepest recession since the Depression-stricken 1930s must be a a part of the reason for his withdrawal from a bidding process since it is casting dark clouds over tourism. It is quite natural that Mr. Adelson backs off from a mega project that might require $6 billion of private capital, the amount he invested into Singapore’s Marina Bay Sands. The Japanese government has been exploring an opportunity to have integrated resorts, an euphemism for casino, since the early years of this century, as a way to boost domestic demand to lift growth. Gambling has been illegal since the late 19h century. It was outlawed amid a social problem that gambling-addicts who were unable to pay back debt ending up with selling off their daughters, at a time when the country was in dire poverty. In reality, gambling has always stayed in the Japanese society. In a private place, people often bet money, sometimes more than a small amount, at a mahjong table played by a groups of four. Betting is openly allowed on horse, motorcycle, cycle or boat racings. Such racing events are run by local governments for public purposes of contributing to local coffers. It’s very easy to bet since tickets can be bought through smartphones these days. In addition, there are pachinko parlors in every downtown section in the country. Pachinko is not technically considered gambling since the parlor gives winning players some goods, not money. However, those goods can be converted into cash right away at a kiosk across the street. There are slightly less than 10,000 pachinko parlors in Japan at present, down from over 18,000 a quarter century ago. Pachinko parlors are often run by North Koreans. It is often suspected that parlor owners are illegally funneling money to their home country run by a dictator that Japan has no diplomatic relationship with. Of course there is no shortage of gambling addicts in Japan. At the very least, proposed casinos, only on three locations, are far less accessible to addicts than pachinko parlors that can be found almost everywhere. Casinos are not in the middle of a downtown section. If one is built in Tokyo, transportation would cost a minimum of 2,000 yen ($18) for a round trip to a proposed site from the city center. On top of it, residents of Japan are required to pay an admission fee of 6,000 yen ($55) each time one enters a Casino. This admission fee compares to SGD150 ($105) that was raised last year from SGD100. One would spend 8,000 yen just to get to and enter a casino, and most likely still lose money on gambling. This is grossly less economical than playing at pachinko parlors. It is an utter hypocrisy to oppose casinos without doing anything on pachinko parlors due to the sheer number of pachinko guests. Integrated resort projects would have better acceptance if they were sold to the public as tool to ripping off the top 1% and well-off foreign tourists, as a way of redistributing income. In addition to concerns on gambling, a fair number of people oppose integrated resorts due to blatant xenophobia. These people do not like to see ‘gaishi’ or foreign capital scooping a cream of the gaming industry. This is a typical post-WWII attitude among Japanese against big, bad foreign capital that had an eye on fledging Japanese industries. In the decades that followed the war, the Japanese government enforced tight capital controls and regulations to protect the industries that were trying to recover from the devastation. The Unites States kindly acquiesced to such trade barriers amid the Cold War. Defending allies and the free world took precedent over trade practices those years. Nonetheless, some companies always sought a way to get into the Japanese companies, most notably car makers. Experiences in these years cemented Japanese views on foreign capital, and such views persist to this day. In casino, many people see foreign capital stealing profits that could have been made by Japanese corporations. They rarely understand that winners of the bids are risking vast amount of their own capital in the first place. Profits are not guaranteed, of course. It takes deep know-how, in order to screw profits out of invested capital in an integrated resort. No one in Corporate Japan is well equipped with this softer side of the business, on top of the fact few are capable of making investments worth several billion dollars. It’s not simply building a massive box, and it takes skills to manage not only casinos but also operating shopping malls and large scale hotels. Too many people don’t get it, displaying hostilities to foreign capital that they think are trying to make easy money. As the Nikkei reports, Mr. Adelson was not too happy about the concession presented by the Japanese government: a right to operate an integrated resort for ten years that can be renewed every five years. That does not seem overly generous to entice investors who would risk billions of dollars. It does not look attractive especially considering a fewer number of foreign visitors in a post-Coronavirus world, at a time when China’s top 1% is growing richer at a less astonishing rate than in the past. About the author: Mr. Suzuki is a retired banking executive based in Tokyo, Japan.
Suggested reading: Japan’s casino plans remain dicey as Las Vegas Sands pulled out https://asia.nikkei.com/Business/Travel-Leisure/Japan-s-casino-plans-remain-dicey-after-Las-Vegas-Sands-pullout