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.
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
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.
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.
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.
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,