GGRAsia – S. Korea cruise ships idea facing headwinds: report

S. Korea cruise ships idea facing headwinds: report

May 22, 2015 Newsdesk Latest News, Rest of Asia, Top of the deck

A South Korean government ministry is facing resistance from vested interests inside the country and a lukewarm response from another department in its bid to enable local citizens to gamble aboard cruise ships flying the national flag, reports Yonhap News Agency.

Critics say the proposal amounts in effect to backsliding on a near-nationwide ban on locals gambling. That policy applies specifically to land-based casinos. The ministry promoting the local casino cruise ships idea says there would be tough rules to protect citizens from harm and that South Korean citizens are already using foreign cruise ships for such activities.

According to Yonhap, Maritime Minister Yoo Ki-june, from the Ministry of Oceans and Fisheries, said locals using such South Korean cruise ships would only be allowed to gamble for five to six hours at most per day while the ships are sailing in international waters. The maximum betting amount for individuals would be below US$100 for a five-day trip, the report added.

Kangwon Land Inc, operator of the only one among South Korea’s 17 casinos allowed to admit locals as patrons – a venue located more than three hours from the capital Seoul by road – is said to be one of the strongest opponents to the plan.

Yonhap additionally reports that residents in Jeongseon, where Kangwon Land is located, plan a protest rally if the government goes ahead with the cruise industry expansion idea.

“The government established the casino that serves locals in the abandoned mining town [Jeongseon] for the special purpose of helping former miners and boosting the local economy,” Kangwon Land’s chief executive Hahm Seung-heui said in a television interview on Wednesday. “If [gambling] is banned on land, it should be banned at sea… If the government expands casinos to foster a certain industry, even hundreds of casinos will be not enough in this country,” he added, according to Yonhap.

Kangwon Land reported net profit for the first quarter of 2015 of KRW132.3 billion (US$121.4 million), up by 24.9 percent from a year earlier. The growth was supported by a 14.8-percent year-on-year increase in gaming revenue to KRW395.7 billion, the firm said in a filing.

Maritime minister Mr Yoo told Yonhap it was necessary to allow locals to have access to casino cruises.

“I think locals need to be allowed to gamble on Korean cruise ships to let them fairly compete with foreign cruises that sail here,” the minister stated.

“Cruise ships can boost the domestic economy and create jobs, and with casinos, they can raise more profits,” the official added.

Mr Yoo said the government is currently consulting with four companies. They could launch national cruise ships connecting major ports in China, Russia, Japan and Southeast Asia before the end of this year, reported Yonhap.

The agency – citing sources it didn’t name – said Grand Leisure Korea Ltd (GKL), an operator of land-based casinos in the country, and South Korean bulk carrier operator Pan Ocean Co, have shown interest in the business. Two other cruise operators are said to be looking at partnerships with foreign investors. GKL is majority owned by the state-operated Korea Tourism Organization.

“Challenges lie ahead for cruise casinos due to a lukewarm response from the culture ministry and strong opposition from residents in Gangwon Province,” said Lee Seon-ae, a leisure industry analyst at IBK Investment and Securities, quoted by Yonhap and referring to the Ministry of Culture, Sports and Tourism.

“We will consult the culture ministry on the matter as there are concerns over gambling addiction. The plan cannot go ahead when there are many opposing voices,” Mr Yoo said. The proposal by the Oceans and Fisheries Ministry had been reported by the Korea Joongang Daily newspaper in early May.

Legal framework

Yonhap additionally reported that South Korea enacted a law in January to allow the establishment and operation of casinos in national flag-carrying cruise ships to foster one of the fastest-rising segments in the tourism industry.

The number of cruise tourists globally is expected to grow to 37 million by 2020, 43 percent more than the 20.98 million recorded in 2013, according to a report by the maritime ministry. South Korean cruise operators are already facing strong competition from foreign ones, suggested Yonhap, citing a trade association.

Some major overseas cruise companies – such as Genting Hong Kong Ltd’s Star Cruises serving markets such as Singapore and Taiwan – operate shipboard casinos that only open once the vessel is in international waters.

According to a Daewoo Securities Co Ltd report in February 2014, Kangwon Land’s exclusive right to serve local gamblers in the land-based casino market is guaranteed until 2025 under a law called the Special Act on the Assistance to the Development of Abandoned Mine Areas. According to the Korea Tourism Organization, the law was passed in 1995.