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Title LOCZ Enters Yeongjongdo Island as Casino Market Finally Opens to Foreign Businesses

March 18, 2014

Ministry of Culture, Sports, and Tourism grants preliminary approval for LOCZ to enter Korean casino market and prepares measures to prevent foreign investors from “eating and running.”

Yeongjongdo Island may become Korea’s Las Vegas.

(Seoul=Yonhap News) Shin Yuri = The South Korean casino market has opened to foreign businesses for the first time.

On March 18, the Ministry of Culture, Sports, and Tourism announced that it gave the green light to the opening of a foreigner-only casino after assessing the bid filed by the Lippo and Caesar Consortium (LOCZ Korea), a venture between Chinese and American companies.

The assessment focused on LOCZ Korea’s credit status, investment amount, capital characteristics, and various other factors.

LOCZ Korea successfully acquired approval after meeting several reinforced conditions, such as improving its credit rating and increasing its investment amount, after its previous bid was rejected last June.

The approval of the permit for this casino project is intended to attract more foreign tourists, revitalizing the economy and creating new jobs in the service sector. The move is also expected to spark intense competition among foreign casino businesses that are looking to enter the Korean market. However, some citizens have voiced concerns over how the project may also induce an indiscriminate inflow of speculative foreign investment capital. With this concern in mind, the Ministry established a few safety measures, such as a three-year effective period of the permit and mandatory approval by the Ministry of any business permit hand-over.

LOCZ Korea, a consortium of the Chinese company Lippo and American company Caesars Entertainment, submitted an application for pre-assessment, stating they will invest KRW 746.7 billion in Midan City, on Yeongjongdo Island, by 2018, and build an integrated resort by putting up KRW 2.3 trillion in construction costs by 2023. LOCZ Korea still needs to acquire permanent permit for the casino from the government in January 2018, after an evaluation of its adherence to the original investment plan. The government emphasized the nature of the “preliminary license” to LOCZ Korea, and set several conditions, including an annual accounting audit, execution and performance reports, single-account investment management, and the exclusive use of the investment deposit for business purposes only. Additionally, the government urged the corporation to develop a clear plan for domestic job creation. If these conditions are not met, the government will take specific actions, such as canceling the preliminary license and refusing to grant the permanent license.

“If LOCZ Korea carries out its investment as planned, we will grant the final approval,” commented Kim Ki-hong, the minister of culture, sports, and tourism. He also said that, from now on, the government will scrutinize and strictly supervise the implementation of the investment plan.

The consortium’s plan includes the construction a 7,700-m2 casino, larger than any other foreigner-only casino in Korea, by April 2018. This is expected to create 8,000 jobs during the construction period, between 2014 and 2018, and dramatically increase tourism revenue to KRW 890 billion by 2020.

The approval also draws attention to the possibility of transforming Yeongjongdo Island into a Korean Las Vegas.

In addition to LOCZ Korea, several other foreign companies are vying to set up shop on Yeongjongdo Island, including Universal Entertainment and Las Vegas Sands Corp. Furthermore, the biggest domestic casino company, Paradise Group, is currently building its own casino resort on Yeongjongdo Island, with an investment of up to KRW 2 trillion by 2017, and Grand Korea Leisure is following suit.

However, foreign corporations will ultimately target Koreans as potential customers, possibly causing controversy down the road.

Last year, foreigner-only casinos operating in 16 locations in Korea recorded 2.707 million customers and KRW 1.375 trillion in sales, representing 13.6 percent and 9.7 percent increases, respectively.


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