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Number 1 Shimbun

A Lesson in Gambling from South Korea

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The only casino in Korea open to the country’s citizens

has helped to revitalize a whole region.

But there are costs, and the experience

can provide some lessons for Japan

by Patrick Zoll

 

T

he four huge wheels on the tower over the mine head stand silent. Slowly rusting away, the industrial monster is a witness of times long gone by. Once the landmark of Jeongseon’s flourishing local economy, today it is nothing more than a symbol of the city’s rise and fall. The coal mine, opened shortly after the Korean War in the South Korean province of Gangwon, saw its heyday in the 1970s when it fueled the country’s economic miracle. Jeongseon’s population reached 100,000 people and the region was doing so well, people say, that even the stray dogs were fat.

The decline of the coal mine began in the 1980s and by 2000 it had closed down for good. Jeongseon’s population collapsed to one-fifth of its peak. “The local people begged us to do something – anything – to secure the survival of the city,” says Kim Su Bog, the region’s chief for culture and tourism. “We were so desperate, we even considered applying to host a nuclear-waste disposal site.”

But a different solution was found for Jeongseon, and its glittering tower of glass and steel rises over the huge dump behind the mine. Next to it stands a building that faintly resembles a castle from a Disney movie. The strange-looking complex is Kangwon Land, South Korea’s only casino that is open to its own citizens.

 

“Can you lend me one million won?”

I hear one gambler asking another

in the men’s room.


On an average Monday afternoon the casino is busy. Most of the 200 tables for blackjack, baccarat and roulette are open for gamblers to place their bets. The 1,000 slot machines are well attended too. Some 7,000 gamblers can try their luck at any one time, and the casino’s representatives say that on weekends the number of visitors often rises to 10,000, meaning a reservation is required for a seat at the tables. The casino will stay open until 6 a.m., but even at this early hour someone already seems to have used up his daily budget. “Can you lend me one million won?” I hear one gambler asking another in the men’s room.

Jeongseon seems to have hit the jackpot: The casino resort has added 3,000 jobs, and another 2,000 are said to have been created at local businesses and suppliers. The municipality receives the equivalent of ¥1.5 billion per year, and a social fund of the casino distributes another ¥600 million per year – some, for example, to former miners suffering from silicosis. Furthermore, casino guests spent ¥1.8 billion at local hotels and restaurants. The local population is now stable at around 15,000 people, and almost every family has some sort of economic link to the casino.

In Japan, as well, economic considerations are one of the main driving forces for legalizing casino gambling. Experts estimate the market’s potential for the country at ¥4 trillion. (For comparison, the Pachinko industry had a turnover of ¥19 trillion in 2012.) Prime Minister Shinzo Abe intends to draw on Singapore’s experience in bolstering tourism with integrated casino resorts, Japanese media reported after he visited two casinos during his visit there in May.

 

He pulls some wrinkled photos

from his shirt’s pocket. One shows a man in a car,

his head twisted strangely backwards.


By 2020, when the Tokyo Olympics take place, Japan wants to reach its goal of attracting 20 million foreign visitors per year, compared with 10 million in 2013, and such Singapore-style integrated casino resorts – including hotels, conference centers and shopping malls – are seen as a substantial contribution to that goal. Proponents of the plan hope to get relevant legislation passed in the fall Diet session. Among with lawmakers from other parties, Abe’s LDP is behind the plan. But the party’s coalition partner New Komeito is hesitant, voicing concerns about side effects such as gambling addiction.

Back at South Korea’s Kangwon Land, the casino’s representatives insist that the negative effects are well controlled. The casino’s own Addiction Care Center is tasked to take care of those who have trouble controlling their gaming habit. “We have a responsibility to our citizens”, says Kang Sung Gunr, the center’s head. Each year, 3,000 visitors are banned from entering the casino, either because they ask for it themselves or because family members approach the casino. In extreme cases, Kang says, the center also covers rehabilitation therapy at a hospital. In order to ensure that the local residents do not become addicted, they are allowed to visit the casino only on a single, pre-determined day each month.

Nothing but lies!” fumes Bang Eun Geun. He pulls some wrinkled photos from his shirt’s pocket. One shows a man in a car, his head strangely twisted backwards. “He killed himself on the casino’s parking lot,” says Bang in an accusing tone. The priest has devoted his life to working with addicts. At least once a week someone takes his life, Bang says, “because they don’t see another way out of gambling debts.”

Officially there were 42 suicides in the area in 2013. Kang considers this figure far too low. In his eyes the preventative measures the casino takes are a joke: “All they want is to get the people back to the casino again as soon as possible.” Many of the addicts are from the local population, he says; those who want to gamble, simply change their official residence, an easy move in South Korea. The priest talks himself into a frenzy, pointing with his index finger and thundering with a powerful voice as if preaching from the pulpit: “Casinos are a total disaster for Korea.”

National statistics support the priest’s view. Over 7 percent of the nation’s adult population, or almost 2.7 million people, show signs of gambling addiction, says Seo Yong Seok, expert advisor at the National Gambling Control Commission. This percentage is two to three times higher than in other countries that publish similar statistics. One possible explanation, Seo says, is the extremely competitive nature of Korean society. The addiction figures cover all legal forms of gambling in Korea, including horse, bicycle and motorboat racing, lottery, sports toto and bullfights. The casinos generate one third of the industry’s yearly turnover of 19.5 trillion won (nearly ¥2 trillion). The Korean players at Kangwon Land alone bet as much money as visitors to all of the other 16 casinos together, which are open to foreigners only.


The shop owners do not like to talk because

it is technically illegal to lend money

to someone

if the lender knows that

it will be used for gambling.


Those who oppose opening casinos in Japan, warning of the dangers of gambling addiction, have reason to worry. According to recent figures published by the Ministry of Health, more than 5 million Japanese, roughly 5 percent of the adult population, are addicted to gambling. Among men the addiction rate is nearly 9 percent.

According to the Nikkei newspaper, the current plan is to allow foreign visitors to enter the casinos for free while charging Japanese citizens an entry fee of several thousand yen – a restriction meant to prevent gambling dependence among locals. It’s a two-tier system that is modeled after Singapore’s approach, where locals are charged 100 Singapore dollars, roughly ¥8,000. The Ministry of Health, in fact, is said to be opposed to allowing Japanese citizens to visit the casinos.

In Sabuk, the area of the city closest to Kangwon Land, another side effect is visible: pawn shops clustered around the central roundabout. “We lend money for gold, jewelry, cars,” the signs read. Business is not good, insiders say, since the government has tightened regulations. The shop owners do not like to talk because it is technically illegal to lend money to someone if the lender knows that it will be used for gambling.

One woman, however, who took over her shop not long ago, does not mince her words. “I was cheated,” she says angrily. “The former owner sold me the shop with false promises of easy profits.” To her, it is obvious what people do with the money they get: “They go straight to the casino.” People are crazy about money, she says, showing a golden Rolex someone left as collateral. “I have seen people who pawned their shoes and went to the casino in slippers.”

Jang Jae Sam also uses the word “crazy.” It is crazy, he says, how people in Sabuk have changed in the 15 years since the casino opened. Jang is the head of a local church, and remembers this as a very safe, almost naïve, community. “Now all you see is motels, pawn shops, massage parlors and girly bars,” he says. Unlike the critical Bang, the priest who works with the addicts, Jang has mixed feelings about the casino, and admits there has clearly been a positive effect on the local economy.


For Japan on the other hand,

it remains to be seen

how much of the international casino business

it can attract.

Despite the big economic rewards Jeongseon is enjoying currently, the town is worried about its future. It is possible that soon one will hear “rien ne va plus” at the casino. Kangwon Land’s license will expire in 2025, and locals fear that the license for accepting South Korean gamblers could go to a casino closer to the capital of Seoul – only a three-hour-drive away, and the present source of the majority of the casino’s gamblers.

To avoid getting caught in another downward spiral, Jeongseon is trying to diversify. Kangwon Land already includes a conference center and a ski resort, and a water park is under construction. Only four years from now the alpine disciplines of the Pyeongchang 2018 winter Olympics will be held in Jeongseon.

In fact, Kangwon Land’s model these days looks very similar to the Singaporean one that Japan is considering. Would the resort work without a casino? How many of the 3 million visitors would come back? Those are questions Jeongseon is worrying about.

For Japan on the other hand, it remains to be seen how much of the international casino business it can attract. Many casinos in East Asia aim for the same clientele that Japan will be eager to welcome, namely Chinese tourists. One reason for the creation of Kangwon Land was to make sure that Korean gamblers spend their money within Korea, rather than taking it abroad to gambling paradises like Macao or Las Vegas. More casinos in East Asia do not necessarily mean more gamblers. And competition is growing – Taiwan, for example, has legalized casinos on outlying islands in order to support their economy, even if development has been slow.

But the industry is upbeat about Japan. Big international casino operators are eagerly waiting to enter this new market, and major domestic Pachinko operators are also eyeing this business. According to latest reports, about 20 municipalities around the country are interested in hosting a casino resort. However, unlike South Korea’s Jeongseon, the Japanese frontrunner is anything but an economically destitute area: the city of Osaka, one of the major economic hubs of Japan, has staked its claim, and would like to build a casino on the man-made island of Yumeshima. Other leading candidates are Okinawa, following a strategy to become a major destination for foreign tourists, and Yokohama, where large cruise ships often make a stop.

If everything goes according to plan, the first casinos will open in time for the 2020 Tokyo Olympics. But before that, the necessary legal groundwork has to be laid. Legislators “must examine the various real-world problems and challenges related to casinos being encountered overseas,” the Yomiuri Shimbun wrote in an editorial in June. And it added that hasty enactment of the bill must be avoided. One will see if the Diet takes the time for these deliberations or if it will ram through the legislation as has happened with other legislation that was dear to Abe’s heart, such as the secrecy law.

Patrick Zoll is the East Asia Correspondent for the Swiss daily Neue Zürcher Zeitung. He covers Japan, the Korean peninsula and Taiwan.

 

 

Published in: September 2014

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