In December 2011, an American company, One Hundred Sands Limited (OHSL), managed to secure a 15-year exclusive licence to construct and operate two casinos in Fiji. The first stage of an integrated resort, The Grand Fijian Casino Resort, was expected to be completed by 1 October 2013, on a 17-acre site at Denarau Island at an estimated cost of F$290 million. If everything went according to plans, the company hoped to build another gambling establishment, in Suva, sometime in the future.
But not everything has gone according to company’s expectations. OHSL outbid SkyCity Entertainment, among others, to emerge as the preferred developer; reportedly, out of a total of 34 expressions of interest (EOI) received by the government of Fiji (12 from Fijian companies and 22 from foreign companies). However, OHSL may have bitten more than it can chew because the project appears to have run into some difficulties. The driving force behind OHSL is an American entrepreneur, Larry Claunch, whose initial foray in Fiji involved the development of 19-hectare Nukudrau Island in Natewa Bay, which he acquired in 2008. His plans to build a 5-star, $70 million resort on Nukudrau have not come to fruition and the project remains incomplete. It is now listed for sale on China Beijing Equity Exchange (CBEX) as a potential Fiji Project Transfer for US$22 million.
The Denarau casino project has been dogged by numerous delays. The construction was expected to commence in June 2013. It was suspended after the commissioning of a geotechnical report. By June 2014, OHSL had lost one of its original partners, the American-Indian Snoqualmie Tribe, which had commenced legal action to recover their initial investment of US1.5 million plus interest. At the time, OHSL announced they were partnering with Tim Manning, an Auckland property developer, and recommitted to finishing the project in the ensuing two years. Still, its failure to complete the project on schedule meant the company was in breach of its contract and had to cough up a fine of US$100,000 per month, which only added to its woes. One can only assume that the selection process would have involved a thorough due diligence on prior experience, financial backing and the capacity of the intended operator(s) to deliver the project on time, but it appears that a number of downside risks may have escaped more critical examination.
First, Fiji’s immediate neighbourhood is already saturated with casinos: three in Vanuatu (currently one is listed for sale); one in PNG; two in Solomons; three in French Polynesia; three in New Caledonia; and, there are five well run and quite famous casinos operating in Northern Mariana Islands. An obvious question arises: why submit to metooism in the midst of an already overcrowded niche market? Fiji’s attractiveness is better characterized by a blend of five key elements: peace and tranquility, friendliness and world class hospitality, unhurried and idyllic lifestyle, pristine environment with enchanting sceneries, and an assortment of superb four to five-star resorts. Excellent golfing, surfing and beaches are a bonus. When you have these why bother with casinos with all the nefarious connotations of the industry? It is difficult to reconcile the presumed allure of a fast money spinner and contributions to government coffers with all the likely negative consequences associated with the industry’s underbelly.
Second, there are many existing and proposed casinos in the broader Asia Pacific region and, at a time of flux in the industry, over reliance on aspects of casino-led recovery seems to be quite disingenuous. The government’s understandable, if over-enthusiastic embrace of the project appears to overstate the overall benefits likely to accrue from a relatively large investment (for Fiji) in what is generally perceived as somewhat unsavory and less socially-acceptable leisure pursuits of the moneyed classes. There are thirteen casinos in Australia (excluding six smaller club settings) and six in NZ; but the giant of all, Macau, has 6 casino resorts embedded within a staggering $45 billion industry. Other Asian countries also strongly compete for the casino dollar and facilities can be found in Japan, Singapore, Korea, Vietnam, Philippines, India and Sri Lanka – not to mention Las Vegas and some key European destinations farther afield.
Third, the above issues are relevant and of concern, but they dwarf into insignificance when one looks at the fierce competition that the Fijian casino will likely face from two proposed assets in Australia. Due to the proximity, they will present significant challenges for Fijian casino. The first project is already underway: it is James Packer’s $2 billion Barangaroo development with an ambitious vision to turn Sydney into a truly global city. Sydney already boasts the best harbour in the world, and combined with its beaches, Opera House and other landmarks, the project is deliberately aimed at reshaping the city to rival Monte Carlo as the preferred destination for Chinese and other high-net-worth Asian tourists. Packer wants to link with world-class sporting events, tennis, golf and F1 motor racing to attract tourists to Australia. The completed project would also incorporate facilities to cater for major international business conferences and cultural events. It is envisaged that Sydney would host the biggest and best Chinese New Year celebration outside of China. The second project is spearheaded by Hong Kong billionaire Tony Fung and his son, Justin. They are in the throes of obtaining final approval to commence construction of $8 billion Aquis-Reef Hotel Casino at Yorkeys Knob near Cairns. It is truly an audacious project set to be completed in two stages; it will have an international casino and the proposed mega-resort will be spread over some 343 hectares, surrounded by a 65-hectare artificial lake and featuring two large casino halls, nine luxury hotels with some 7500 rooms, convention centres, theatres, high-end shopping malls, an aquarium, 13-hectare lagoon, 18-hole golf course, 25000-seat sports stadium, 1800-unit staff accommodation, riding trails and an equestrian centre.
To give it some context, it will triple the region’s hotel capacity and the complex will be larger in size than Singapore’s two casinos combined. Cairns city already possesses a distinct advantage; it is the only city that has two world-heritage-listed sites: the Daintree and the Great Barrier Reef. And, unlike OHSL and its associates, the Fungs hail from one of Hong Kong’s best-known and well-connected banking families. Their project will be listed on HK Stock Exchange and not many seriously doubt their ability to execute and fund the project from a combination of debt funding, private equity and public offerings.
Fourth, the Fijian government’s support for the project appears to rest on the delivery of the nation’s first 1500-seat, state-of-the-art conference and convention facility, and a 300-room hotel when stage two is completed. In June 2012, the Permanent Secretary of Tourism, Elizabeth Powell, advised the Fiji Institute of Accountants’ Congress that the casino would boost government revenue and taxes; plus, she argued, it would entice more visitors to Fiji, encouraging them to stay longer and spend more. Faced with challenges of ever-increasing demands for services, it is hard for any government to overlook other revenue streams from auctioning of gambling licences, gambling taxes and/or ownership of gaming facilities. Currently, Fiji imposes a gambling turnover tax on all service providers of gambling activities at the rate of 15%. Whilst more benign forms of unregulated gambling existed in Fiji for many years (lotto, scratches, bingo and sports betting), it is a quantum leap from these to establish legalised casinos, notwithstanding proposed checks and balances, and other assurances of controls expected from the Fijian Gaming Commission Control Board.
Fifth, the experience in two neighbouring countries should give cause to rethink of the strategy. In its 2006 report, Oxfam established that a foreign-owned casino in Vanuatu, operating since the 1980s, neither generated an increase in tourist numbers nor contributed to any economic growth. In fact, it found that all casino profits were repatriated overseas and none of it was ploughed back into the economy by way of investment. More disturbingly, the report found that in recent times, the wealthy tourist numbers had diminished and the casino was being patronised more and more by the poor locals and female market vendors, in the hope of capturing that elusive quick buck. For Vanuatu, the casino had created a growing social problem of gambling. In the same year Fiji issued its first casino licence, the Solomon Islands Democratic Party also called for the reform of its gambling laws (in June 2010) in view of perceived social problems attributable to casinos in its capital, Honiara.
In view of the foregoing, it is not at all surprising there is continuing, but understandable, disquiet in certain quarters. In June 2012, the Fiji Council of Social Services expressed its concerns about lack of consultation and regard for proper social impact studies. The objections from Chiefs, CCF, Churches and NGOs didn’t carry sufficient weight to overturn the original decision to grant the licence to OHSL. Despite the 2014 election result, the current Opposition Party, Sodelpa, has unambiguously stated that it wants Fiji to be a casino-free country, and opposition to casinos appears to be common amongst the grassroots. Those who know Fiji well argue religion plays a major part in the lives of all three dominant ethnic groups, and many fear casinos will have negative influence on their religion, and may lead to the erosion of their tradition and culture. Historically, Fiji had witnessed widespread opposition to the idea of opening a casino. Past governments of all complexions were equally tempted but lacked the political will. They all had no choice but to shelve any proposal for casinos due to strident objections from individuals, NGOs, religious organisations, civil societies and even some members of parliament.
For the detractors though the pendulum appears to have swung too far towards greater permissiveness and acceptability of gambling in the Pacific, Asia, USA and the rest of the world. Whilst the lawmakers seek to restrict gambling activities and regulate gambling behaviours, by their very nature, it is nearly impossible to fully mitigate social costs or completely disrupt problem gambling behaviours. And, therein lies the germ of the problem according to a study by Prof. N.S. Schull of MIT. In her 2012 book Addiction By Design: Machine Gambling in Las Vegas (PUP) she argues the gambling facilities are specially engineered to make them seductive and exciting for the visitors to spend more at the casinos; slot machines and video gambling, which now account for some 85% of gaming industry’s profit, are designed to hold visitor attention and maximise their ‘time on device’; the machine algorithms and the strategies employed by casinos ensure visitors do not depart early and keep on playing; and, the architecture of the casinos is crafted to promote prolonged periods of gambling. They all aim to separate players from their money.
We can argue about who is actually responsible for the inevitable gambling addiction in some, and what responsibility, if any, the politicians or the industry as a whole should have. But Schull also suggests: “The whole modus operandi of the industry is to approach the human being as something that’s manipulable. So, I find it disingenuous that they then turn around and argue that 100 percent of the responsibility for any harm is on the person.” Under the neoliberal global agenda driven by notions of free enterprise and individual responsibility it is more difficult to challenge what the pro-choicers regard as irritating social considerations. And, direct access to power by the industry lobbyists will ensure the pollies are constantly reminded of their campaign contributions. So, as always, spin doctors will deliver to the industry what it wants by obfuscating and circumventing any obstacles in its path, and operators will continue to routinely employ sophisticated tactics to achieve their goals.
For decades American-Indians have relied on casino industry to lift them out of poverty, despair and destitution. Today, some 310 reservations in USA continue to accommodate many of America’s poorest 1%. They continue to languish in abject poverty in zones of hopelessness that offer little more than corruption, alcoholism, lack of education, lack of job opportunities and remoteness from main centres: factors that guarantee their failure and ensure they remain on the fringes of the mainstream American society. This exists in the world’s largest, and one of the most advanced and richest economies. There are many salutary lessons to be learnt here that should have equal resonance in a diverse, conflicted and unequal society like Fiji.
Fiji has a small population with abundant resources, which it should be able to exploit responsibly and astutely to achieve economic development. Stable democracies have built their prosperity on enlightened property rights, commitment to free enterprise and free markets, good governance and adherence to the rule of law. Fiji has time to take a more objective and critical view of its growing reliance on tourism. Rich Asians are not the panacea for all global economic problems and hopes of a casino led recovery in Fiji may turn out to be chimeric. It may be difficult for the government to extricate itself from the complexities of its contractual obligations to OHSL but the failure of the licensee to deliver the project on time may well have provided an opportunity to ditch the project in its entirety. Its timing may be a blessing but it remains to be seen if the government will take advantage of this manna from heaven for the benefit of all Fijians.
Sydney, November 2014