Cambodia tightens regulations to please China

Cambodia’s leadership has announced plans to halt the expansion of gambling in the country, likely as a move to align itself more closely with China, its main regional ally, in hopes of restoring Chinese visitor numbers. Gaming expert Ben Lee discusses in this week’s Under the Scope how Cambodia is transitioning towards a regulated gaming environment, aiming to eliminate illicit activities and establish a solid regulatory framework possibly by the latter part of this year.

Despite experiencing a period of growth in online gaming, which attracted substantial Chinese investment, Cambodia has outlawed such activities and has been actively suppressing attempts to continue them.

Ben Lee, Managing Partner at iGamix, suggests that these recent announcements might be China’s way of exerting pressure on Cambodia to clamp down on its online gaming sector, reiterating that online gambling is already illegal in the country.

Cambodia is taking action on its commitment, with reports of nearly 500 individuals arrested in operations targeting online gambling and scams within just the first two months of the year.

However, Prime Minister Hun Manet’s statements also indicate increased oversight of the land-based gambling industry, suggesting that the country may not only refrain from issuing new licenses for land-based casinos but could also revoke existing ones.

Cambodia has been slow in implementing comprehensive casino legislation, with the ‘Law on the Management of Commercial Gambling’ enacted only in November 2020.

This led to the establishment of the Commercial Gambling Committee of Cambodia (CGCC), composed of 11 members from various ministries and government bodies, overseen by the Ministry of Economy and Finance.

Ben Lee highlights that the CGCC has appointed an independent advisor to enhance and streamline Cambodia’s gaming regulations. This may lead to changes in gaming policies, with a likely uniform investment requirement for land-based casino licenses and new rules for scrutinizing the background of all participants in the gaming industry, including casino operators and junket operators.

Smaller border casinos will be affected by these changes, and even major operators like NagaCorp, which holds a monopoly gaming license in Phnom Penh, cannot escape the impact.

Before the COVID-19 pandemic, junkets were a significant source of VIP revenue for NagaCorp. However, with the decline of junkets in Macau and the trend towards a more mass-market approach, attracting customers, whether Chinese or others, becomes crucial for operators.

Despite locals being prohibited from gambling in Cambodian casinos under the 2020 licensing framework, reports suggest that locals continue to gamble, often avoiding severe penalties through bribes. Oversight in VIP rooms is also lax, with larger bribes enabling evasion of consequences.

Efforts by the CGCC and the government to clean up the industry have already influenced investor decisions, with some international players redirecting their investments elsewhere rather than facing the evolving regulatory environment.

Century Entertainment, listed on the Hong Kong Stock Exchange, terminated its agreement to operate gaming tables in Dara Sakor, a Chinese-backed investment zone aimed at becoming an entertainment and gaming hub.

Despite challenges, Cambodia managed to remove itself from the Financial Action Task Force’s grey list last year, a feat the Philippines has yet to achieve. This, coupled with a robust regulatory framework, could bolster investor confidence. If China decides to reopen its borders, Cambodia stands to benefit not only from the return of tourists but also from their spending habits, potentially revitalizing the property market, which has suffered since the Chinese departure.

If the industry can maintain high standards and learn from the experiences of other countries like the Philippines, there may be potential for Cambodia to reconsider online gaming, a revenue stream that could greatly benefit the country’s ongoing recovery efforts.

Original Story by: AGB