Proposals put forward for license renewals in Japan are complicated and may make IR projects more expensive to fund, potentially reducing investment amounts, leading industry figures say.
Under the current proposals, the winning operators in Japan will have a 10-year project development concession, as well as a 3-year casino license. Renewal of the development contract is a two-step process that requires the approval of the provincial government as well as the federal government. Once the concession expires, it will need reapproval every five years.
Also, given the length of time needed to get the resort up and running, the contract will effectively be up for renewal about five years into the operation of the property.
“The banks will look at this as a five-year license and as it’s a shorter timeframe, the cost of funds will be higher and therefore investment levels potentially lower,” Ed Bowers, CEO of MGM Japan said at the Japan Gaming Congress in Tokyo.
“Getting private business to invest Y1 trillion in a project with a contract that needs to be renewed every five years and have a local assembly approval is complicated and risky,” he told a panel looking at the possible impact of licensing and regulations on the market.
With cautious optimism the IR Implementation Bill will be passed either in the current session, or during an extension, the attention is now turning to the finer points of the legislation. The license terms, the level to which operators will be required to invest profit into improving local infrastructure and the potential licensing regime are all beginning to come under scrutiny.
Fred Gushin, managing director of Spectrum Gaming, warned local governments against making unrealistic demands in this regard.
“They are not the goose that lays the golden egg,” he said, referring to gaming operators. “All the sites will have some level of infrastructure requirements and they expect to contribute, but what level those investments will be need to be worked out with the local government.”
Bowers said the relationships that are formed with the local administrations will be key to a successful project.
But he also urged the government to get stakeholders involved in the legislation process to ensure that there are no unintended consequences from the rules that are put into place.
“We do not shy away from strong regulation,” he said. “The notion we want loose regulation is not correct. We offer ourselves up to help create the best possible legislation.”