Holiday in Cambodia? Chinese iGaming Investors Prepare

China remains an iGaming conundrum: in a huge economy where gambling is embedded deep in the cultural vein for players and operators alike, gambling remains illegal apart from two lotteries which the Communist government does not consider to be gambling. 

China’s Black Market

With revenue for illegal gambling operations in mainland PRC estimated at up to 10-20 times higher than combined revenues from both the legal lotteries, illegal gambling in China continues to proliferate. Unauthorized forms of gambling include unofficial lotteries, underground casinos, and betting on popular local card games and mahjong.  

Where It’s Legal

Places such as special Chinese administrative regions Macau and Hong Kong do allow Chinese operators to provide services to an eager public in this unique part of the world, but the economic scale of these small provinces remains insufficient to absorb the majority of gambling activity funded and taking place in China.    

Online Play Caters

Chinese players also are being drawn to online play, with offshore operators offering special accommodations to the lucrative Chinese clientele base such as making games available in traditional as well as modern Chinese and accepting payments from Chinese bank cards.

Something Must Give

With legal expansion necessary somehow, private Chinese investment can only circumvent through neighbouring markets, which is quite plainly a driving force spurring Cambodian regulation and iGaming infrastructural development at this juncture.

Cambodia Keeps Up

In a country that has yet to regulate online gambling but does allow land-based activity to foreigners, an official spokesperson for the Cambodian Ministry of Finance recently told the Khmer Times that the government is developing a new server through which all licensed online gambling transactions will take place to absorb a rise in online gambling. 

Tempering Expectations

As far as actual regulation, Finance Ministry deputy director-general Ros Phearun acknowledged that a gaming law is being drafted with approval expected sometime next year, while reminding that the ministry’s technical teams are still learning how to manage online gaming in an effective regulation model.   

Outside Expertise

Phearun says the Cambodian government is consulting with large foreign companies experienced on servers from the UK and Spain.

Cambodian License Update

As of Q3 2015, Cambodia had approved an additional 10 new casino licenses in the third quarter, bringing the total number of licensed gaming venues to 75 upon full operations of all new licensees.

Acknowledging Chinese Investment

With the predominantly Chinese new wave of recipient operators reportedly focusing on developing online gambling services, Phearun credited online gambling appeal as bringing that Chinese foreign investment into Cambodia.  

New Gambling Destination

The new casinos, to be built in the Cambodia’s top tourist destination of Sihanoukville on Cambodia’s southwest coast, positions Sihanoukville as an emerging gambling location distinct from the majority of Cambodia’s existing casinos clustered near the Thailand and Vietnamese borders. China is at this point Cambodia’s second largest source of tourism.

Online Chinese Investment

Chinese investors in these casinos have already indicated to Phearun that they are primarily interested in developing their online gambling operations, especially with the inland Sihanoukville location unable to attract neither Cambodian citizens nor the steady stream of Thai and Vietnamese gamblers currently funding land-based operations in Cambodia. Phearun calls online gambling the reason “why the casino industry is rising” in Sihanoukville.

Cambodian Policy, Revenues

Phearun last year confirmed as of 2015 the existence within the Cambodian government of “a clear policy to govern the industry in order to both increase the national budget and also protect national security.”

Cambodian Revenues

Phearun noted that the government had collected $28.8m in casino taxes in the first nine months of 2015, already surpassing higher than the $25m collected in all of 2014. This year’s figure for Q3 2016 is at $37.4 million in revenues already, for a year-on-year jump of 35.5%.

China’s Financial Flow

The final piece of this puzzle, as far as Chinese operators being able to divert their funds effectively to profit in the neighbouring country of Cambodia, lies with official Chinese support of Cambodia with financial aid.

Soft Loans

With China having granted Cambodia some U.S. $2.85 billion in concessional development loans from 1992 to 2014, Cambodia has been rendered economically beholden to China to no small extent. One of the ways in which Cambodia can return the favour to China back clearly is through open trade agreements, which can provide a haven for Chinese foreign investment in online gambling outside the auspices of the country’s restrictive domestic gambling laws. 

Illegal Chinese Operators

The legal online gambling operators funded by Chinese investors may also provide relief from the wealth of Chinese nationals who keep getting arrested in Cambodia for providing unlicensed and thus illegal online gambling services.

Outlook 

With rapid expansion of legal China-funded iGaming operations appearing inevitable, a fully regulated neighbour in Cambodia certainly appears an attractive option to absorb private Chinese iGaming investment.