Pushed by low-cost China, Singapore gambles on casinos

Yoolim Lee

Tuesday, March 22, 2005 | 11:07 a.m.

Singapore, which fines chewing-gum importers as much as $122,740 and bans Playboy magazine, is relaxing its opposition to another vice: gambling.

The island-state plans to build its first casino, reversing a four-decade ban, as it seeks new industries to replace manufacturers that are moving to lower-cost China and India. Las Vegas casino operators Harrah's Entertainment Inc., MGM Mirage and Wynn Resorts Ltd. were among the companies that submitted bids for the project on Feb. 28.

Singapore, with an aging population of 4.2 million, has no choice but to loosen regulations and broaden its economy, says Andy Xie, chief Asia economist at Morgan Stanley in Hong Kong. Prime Minister Lee Hsien Loong, 53, says the casino project is part of Singapore's plan to stay competitive.

"It will make Singapore different, and it's one of the things which we must do as we make Singapore develop and grow," Lee said in an interview. "We have to be prepared to look at a different world, see a landscape that's changing and ask what we need to do to keep up."

Building casinos may not be enough to fuel growth in a nation where tourism-related businesses account for just 6 percent of the economy. Singapore's efforts to lure more visitors also face competition from Macau, which has gained an early lead as Asia's gambling hub.

Las Vegas Sands Corp. opened the $265 million Sands Macau, Asia's first Las Vegas-style casino, in 2004. Tourist arrivals to Macau, the only part of China where casinos are legal, surged 40 percent last year to 16.7 million, about double Singapore's 8.3 million.

'Too sterile'

"Singapore is too stiff and too sterile," says Billy Sloan, a 59-year-old Briton who moved to Sydney in February with his partner after 14 years working as a pottery teacher in Singapore. "It needs casinos, more buzz and excitement, if it wants to thrive."

The casino plan has drawn opposition from a group called Families Against the Casino Threat in Singapore, which is sponsoring a petition drive to block it. Singapore's ban on casinos was imposed by former Prime Minister Lee Kuan Yew, who ruled from 1959 to 1990.

"There are moralists who strongly oppose it, and there are pragmatists who say, 'Look, the world is changing. Can we stay as we were?' " Lee, 81, told students at the National University of Singapore on Jan. 31. "The world has moved on, and we are part of this world." Lee, the current prime minister's father, is now Minister Mentor of Singapore.

Slowing growth

Singapore's law banning casinos hasn't yet been formally abolished. The government will announce a decision on the ban on April 18, Vivian Balakrishnan, senior minister of state for trade and industry, said in parliament this month.

Singapore's economic growth may slow to as little as 3 percent in 2005 from last year's 8.4 percent as a slowing global economy curbs exports, the government forecasts. Xie says the rate may fall to an average 2 percent in a decade as manufacturing, which accounts for a quarter of gross domestic product, contributes less.

"I seriously doubt that Singapore will have much manufacturing in 10 years because it cannot compete on costs," Xie says.

Factory wages in Singapore, a former British colony at the tip of the Malay peninsula, are more than 10 times China's. Singaporean electronics-factory workers earned an average $1,277 a month in 2003, compared with $110 for their Chinese counterparts in 2002, according to the Geneva-based International Labor Organization.

Maxtor's move

That's driving away companies such as Maxtor Corp., the world's second-largest maker of computer disk drives. Milpitas, California-based Maxtor plans to eliminate 5,500 jobs in Singapore as it closes a factory and shifts some production to Suzhou, China, to cut labor costs.

Maxtor will close the Singapore plant by early 2006, company spokeswoman Jenifer Kirtland says.

Electronics makers such as Hewlett-Packard Co., Seagate Technology Inc. and Venture Corp. account for almost a third of Singapore's industrial production.

Rising exports have helped Singapore grow in the 40 years since its independence from a sleepy fishing village into an economic powerhouse.

The island-state was the world's 15th-largest trading nation and Asia's biggest buyer of foreign assets last year. Per-capita income surged more than 50-fold between 1960 and 2004 to $24,560 -- about the same as Canada's -- as the government promoted free trade and drew international investment.

'Fierce' competition

Singapore's dependence on exports -- their $82 billion value last year, excluding oil, was equal to 90 percent of GDP -- leaves the nation vulnerable to economic slowdowns in the U.S., its No. 1 market.

At the same time, buyers in the world's biggest economy are turning increasingly to Chinese suppliers. U.S. imports from Singapore rose 1.1 percent last year to $15.3 billion, while its imports from China surged 29 percent to $196.7 billion, according to U.S. Commerce Department figures.

Prime Minister Lee says that Singapore's export-driven growth is at risk.

"The competition is very fierce," Lee says. "If you look at the Chinese, Indians and what's happening around us, unless we move very fast and very resolutely, we are going to be left behind."

An aging population may also slow Singapore's growth in coming years. By 2030, one in five Singaporeans will be 65 or older, up from one in 13 last year, Trade and Industry Minister Lim Hng Kiang forecast in July.

Remaking Singapore

Singapore's planned casino would be part of a larger resort that may also include a hotel, concert hall and convention center, according to Balakrishnan. He also chairs the government's Remaking Singapore Committee, formed of government and business members in 2002 to identify new sources of growth.

The government is considering two sites: Sentosa Island, a man-made beach resort south of the city, and Marina Bayfront, near the main commercial district, according to the Ministry of Trade and Industry. There may be more than one casino, the ministry says.

The planned casino faces opposition in a socially conservative nation where films are censored for indecent material and bartop dancing was illegal until 2003.

Families Against the Casino Threat in Singapore had received 29,013 signatures for its online petition against the project as of yesterday, according to its Web site. The government plans to deter locals from gambling by imposing a daily S$100 levy on Singapore citizens entering the casino.

'Right entry point'

Las Vegas-based Harrah's, which is buying Caesars Entertainment Ltd. to become the No. 1 U.S. casino company, wants to build its first Asian casino in Singapore. Harrah's doesn't have a casino license in Macau, which ended local tycoon Stanley Ho's gaming monopoly in 2002.

"Our growth is going to come from international expansion and the really hot market now is Asia," says Richard Mirman, 38, Harrah's Las Vegas-based senior vice president for business development. "Singapore represents the right entry point for us."

Asia will generate $24 billion in legal gross gaming revenue by 2006, up from $13 billion in 2004, according to estimates from Jonathan Galaviz, a partner at Las Vegas-based Galaviz Ong & Co., which tracks the gaming industry.

Harrah's submitted joint proposals for both Singapore sites to the government with Keppel Land Ltd., Singapore's third- largest developer by assets, according to Keppel Land spokeswoman Teri Liew.

MGM Mirage, Wynn

Las Vegas-based MGM Mirage, which will become the No. 2 U.S. casino operator after its planned purchase of Mandalay Resort Group, submitted a joint bid with Singapore's CapitaLand Ltd. for a resort-and-casino complex at Marina Bayfront, says MGM Mirage spokesman Alan Feldman.

Las Vegas-based Wynn Resorts is offering to spend as much as $1.5 billion on the Singapore project, Wynn President Ronald Kramer says.

The government received 16 other proposals from bidders such as Melbourne-based Tabcorp Holdings Ltd., Australia's biggest gaming company; Hong Kong-based Melco International Development Ltd., controlled by Ho; and Genting International Plc and Star Cruises Ltd., units of Kuala Lumpur-based Genting Group.

Macau's emergence as a gambling and convention destination threatens Singapore's ambitions to draw visitors, Galaviz says. Last week, resort operators including InterContinental Hotels Group Plc and Four Seasons Hotels Inc. said they plan to join Sands in developing a $12 billion Vegas-themed gambling strip on the Chinese island.

Stealing traffic

"With $10 billion to $20 billion of new investment going into Macau for the next decade, you can have a situation where operators in Macau begin stealing convention center traffic away from Singapore," Galaviz says.

Singapore's planned casino is part of a broader easing of regulations. Under a free-trade agreement with the U.S., Singapore last year allowed the sale of sugarless and tooth- whitening chewing gum -- with a doctor's prescription. Singapore had banned gum sales since 1992 to keep public areas clean.

In 2003, the government lifted a ban on gays in the civil service and ended its prohibition on bartop dancing.

Singapore's tourism board aims to double annual arrivals to 17 million and triple tourism revenue to S$30 billion in the next decade. Singapore has earmarked S$2 billion to revamp attractions, train tourism professionals and attract international events.

Artificial beaches

That's after the island-state's share of tourism receipts in the Asia-Pacific region fell to 6 percent in 2004 from 8.2 percent in 1998, according to figures from the Singapore Tourism Board and the World Tourism Organization, a Madrid-based United Nations agency.

Singapore needs to shake its reputation as an unexciting place to visit, says Tan Soo Khoon, a member of parliament.

"How can we expect to draw visitors to artificial beaches and one aging musical fountain?" Tan, 55, said in a March 1 parliamentary debate. "We definitely have to work harder to bring in the visitors if we are not to be left behind."