Singapore: From Straitlaced To High-Rolling
How do you let down your hair when you've had a buzz cut for years? In Singapore, at least, you try gambling. The spotlessly clean city-state on Apr. 18 announced it would license two casinos to open in 2008 as part of a bid to convince tourists that the place has more to offer than sterile office towers and shopping malls where gum chewing is banned. Singapore is "unexciting" and can't afford "to become a backwater, one of the many ordinary cities in Asia," says Prime Minister Lee Hsien Loong.
Casino operators from across the globe are lining up to boost Singapore's fun factor. Among the 19 companies that have expressed interest are Harrah's Entertainment (HET ), Wynn Resorts, MGM Mirage (MGG ), Las Vegas Sands (LVS ) of the U.S.; Melco (a joint venture between Macau tycoon Stanley Ho and Australian billionaire Kerry Packer); and South Africa's Sun International. Their proposals include everything from a branch of the Guggenheim Museum to a Formula One race track.
As boring as some might find Singapore, there's a lot about the city that gambling companies like. It has a dependable legal structure, and Asia offers growth that North America, Europe, and Australia can't match. "Singapore is probably the single biggest opportunity for gaming companies in the world today, so it's no wonder every major player wants to be there," says Jonathan Galaviz, a Las Vegas analyst with consultancy Galaviz Ong & Co. He says Singapore doesn't really need the revenue boost from the casinos, "but it needs casinos to enhance its tourism industry."
That sector could use a jolt. Even as Asians start traveling in ever-greater numbers, Singapore's share of the region's tourism pie has fallen to 5.8% in 2004 from 13.1% in 1991. Last year tourism accounted for 3.3% of Singapore's gross domestic product, down from 6.1% in 1993. Now, Singapore is hoping to triple its tourism revenues from last year's $5.9 billion by 2015.
That's important as Singapore has been forced to shift its economic focus since the Asian financial crisis. The low- and mid-level manufacturing that was the country's mainstay has moved to China and elsewhere in Southeast Asia. Diversification into higher-value areas such as pharmaceuticals and biotech hasn't made up the difference. The casinos could add 35,000 jobs, Merrill Lynch & Co. estimates. "Singapore needs new growth drivers in the services arena and integrated casino resorts will help diversify the economy," says Tim Condon, chief Asia economist for ING (ING ) Bank.
The benefits could be substantial. The two casino resorts -- one on reclaimed land near downtown and the second on Sentosa Island -- are together expected to cost as much as $5 billion. The casinos would add 0.5% per year to Singapore's GDP during the three-year construction phase and at least 0.4% annually once they open, Merrill estimates. By some estimates, the casinos could boost government revenues by $1 billion annually within five years.
There are some potential hitches in the plan. Singapore isn't alone in looking to gambling. Japan, Taiwan, Thailand, and Indonesia are considering casinos as well. Macau, meanwhile, has 18 casinos in operation, with another seven under construction. There has also been substantial local opposition in Singapore to the plan. The government rejected casinos as recently as 2002 but looked more closely at gambling as it became clear that tourism revenues weren't going to recover. This time around, the debate over the issue was vigorous -- unusual in buttoned-down Singapore -- as religious and civic groups voiced concern that the casinos could foster prostitution, drugs, and gambling addiction. Time will tell whether those fears are borne out. But perhaps the level of debate is the true sign that Singapore is letting its hair down.
By Assif Shameen in Singapore