Does Japan IR process invite misfortune?

Akimoto heading for rearrest in bribery scandal

Every nation that hosts casinos or IRs develops their own set of regulations to govern the industry, but did Japan just happen to throw together a jumble of elements into the mix that has actively invited misfortune?

Along these lines, a convincing opinion article from Daniel Cheng, who helped lead Hard Rock Japan’s efforts in its earliest stages, was published by AGB last week. It deserves to be interrogated for its rich insights about what has already gone wrong in the Japan IR campaign, and why.

Cheng argues that Japanese policymakers developed a “flawed process” for establishing IRs which itself has carried the seeds of both the withdrawal of such an international industry leader as Las Vegas Sands, as well as the bribery scandal that befell former Senior Vice-Minister of the Cabinet Office Tsukasa Akimoto.

Cheng takes aim at the Japanese plan to have local governments partner up with a single IR operator consortium and then have them jointly bid for one of the three available IR licenses. While such an approach was no doubt guided by the structure of the Japanese political system—principally the loose relationships between the central government with the prefectural and municipal governments—it was unique in the experience of international gaming companies, and not in a good way. As Cheng puts it, “This odd juxtaposition creates an unholy union crossing politics with private money and begs a surefire model for a graft funnel that’s too tempting to resist.”

The peculiar Japanese approach has also thrown tasks to the local governments that really ought to be in the hands of the central government. For example, background checks on specific operators and business consortiums are being left, at least in the early stages, to the limited resources and authority of non-specialized local bureaucrats in places like Wakayama and Nagasaki. Shouldn’t there be a national pre-qualification process to weed out the problem businesses right from the beginning? Does this crucial step really need to wait until after each local government has already committed itself to a particular consortium partner?

Cheng has been talking about these same questions for several years, even when he was still representing Hard Rock Japan’s campaign. As a Singaporean he watched his own government go through an IR development process that was by almost all accounts extremely orderly and successful.

But lessons of the past, as Cheng points out, have been ignored in the Japanese process. Cheng has long talked about the importance of having a consecutive, and not concurrent, IR bidding process. He has counseled allowing the best and most experienced IR operators to make a bid for the most attractive local Japanese jurisdiction and then, if they fail there, giving them time to prepare the next most attractive location on the list, and so on. This approach should ensure that all three operators ultimately selected are substantial companies.

Instead, the concurrent selection process has created “a free-for-all frenzy by each local government” which has witnessed, for example, all the major operators first line up at Osaka’s door, only to see all but MGM Resorts shift with undue haste to Yokohama as soon as Mayor Fumiko Hayashi threw her municipality’s hat into the ring.

And what if—as is quite plausible—Tokyo Governor Yuriko Koike decides to enter the race at a later stage? Will most or all of the marquee IR operators then flee Yokohama, beset by so many political problems, as quickly as they had come running last year?

Again, none of this chaos was inevitable. It was rather the product of the failures of design in Japan’s regulatory process. Put slightly differently, the contours of Japanese politics have not so far matched up very well with the needs of an intelligently regulated IR industry.

Cheng concludes that “it is imperative to get it done right or not do it at all.” This is the very same point that we have been banging on about throughout the crisis of the global pandemic.

IRs could very well be an asset to Japan, but that’s not the road currently being traveled. A serious rethink is badly needed—not to mention a credible national effort to address public worries about an increase in gambling addiction, organized crime, and other widespread concerns. There is a convincing case to be made for IR development, but the government has so far made little or no effort to put forward a public case, relying mainly on ruling party control of the levers of power to simply push it through. 

The future prosperity of Japan’s IR industry hangs in the balance. (AGB Nippon)

 

Related Articles

Akimoto granted bail in IR bribery case

Over the strong objections of prosecutors, the Tokyo District Court granted bail to former Senior Vice-Minister of the Cabinet Office Tsukasa Akimoto in the 500 .com IR bribery case.

500 .com completes acquisition of Loto Interactive

500.com, which has been transforming from a Chinese online lottery company into a cryptocurrency mining enterprise, says it has completed the acquisition of a stake in Loto Interactive for HK$105 million ($13.5 million).
Tsukasa-Akimoto, casino bribery trial

Tsukasa Akimoto casino bribery trial gets underway

Today begins the trial of former Senior Vice Minister of the Cabinet Office Tsukasa Akimoto on charges of receiving bribes from agents of 500 .com and attempting to induce witnesses to perjure themselves.

500 .com moving headquarters from Shenzhen to Singapore

500 .com, the troubled sports lottery company that is transforming into a bitcoin firm, announced its decision to relocate its headquarters from Shenzhen to Singapore.

500 .com completes bitcoin mining machine purchase

500 .com Limited, now describing itself as “a cryptocurrency mining enterprise in China,” has announced that it has completed its acquisition of bitcoin mining machines originally announced on January 11. The bitcoin mining machines acquired in this transaction (the "Bitcoin Mining Machines") include such models as the S17, T17, M20s and S9.

500 .com changes name to Bit Mining Ltd.

500.com, formerly a Chinese online lottery company, has approved a change of name to Bit Mining Ltd. to reflect the new focus of its business.

Trial of Tsukasa Akimoto over 500 .com bribes to begin on March 29

Former Senior Vice-Minister of the Cabinet Office Tsukasa Akimoto, charged with accepting bribes from 500 .com and other matters, is set to have his trial begin on March 29.

500 .com completes placement, receives bitcoins

500.com closed its previously announced private placement transaction with Good Luck Information Technology and has received 356.04342 Bitcoins and US$11.5 million in cash. The company has issued 85,572,963 newly issued Class A ordinary shares to Good Luck Information.
500.com

500 .com surges on bitcoin transformation

China sports lottery company 500.com has continued its transformation into the bitcoin space with the all-stock acquisition of bitcoin mining company BTC.com and investors appear to approve.

500 com full year losses at US$29.2 million

500 com has announced its fourth quarter and full year financial results. As for the full year 2020, net revenues were RMB21.8 million (US$3.3 million) and operating losses were RMB190.8 million (US$29.2 million).