Asian I-Gaming Growth Hopskotches Region to Region

13 September 2007

Asia may never be a fully regulated I-gaming jurisdiction, as most Asian governments seem to view Internet gambling as a social problem. But little by little, Asia is shaping up to be a budding region for hosting at least some types of online gambling.

Most Asian countries prohibit Internet gambling, including Philippine regions outside of Cagayan Freeport, Macau, Singapore and Hong Kong.

In China, Internet gaming has been somewhat of a regulatory gray area, as laws banning gambling were framed before the Internet existed.

Article 303 of China's Criminal Law stipulates that anyone who "for the purpose of reaping profits, assembles a crowd to engage in gambling, opens a gambling house or makes an occupation of gambling is to be sentenced to not more than three years of fixed-term imprisonment, criminal detention or control, in addition to a fine."

In 2005, judicial interpretations of the law extended the section to include online gambling. China's police busted a total of 347,000 gambling cases involving 1.099 million people in 2006 and seized 3.56 billion yuan ($445 million), up from 2005, according to official statistics. And in February 2007, the country launched a three-month crackdown in Internet gambling and so far this year, the region has seen two major Internet gambling busts, involving at least 60 people.

The only legal gambling permitted in China are the state-run lotteries, which several companies, such as Ladbrokes and PacificNet, have taken advantage of.

Risks and Challenges Associated with Entering Asia

Besides the obvious legal drawbacks, operators face multiple challenges upon entering the Asian market.

Lorien Pilling, a freelance writer that covers the Asian region, said operators should be familiar with the likes and dislikes of the region they are getting into, as Asia is not one single market, but several small ones, and should not be treated en masse. Asian bettors, according to Pilling, like fast betting results and knowing immediately the results of a betting event, but dislike random number generators.

Other challenges include payments issues. Besides the fact that online gambling is largely illegal in Asia, there is a general mistrust of paying for things online (although attitudes are changing fast as amount spent online is growing rapidly), Pilling said.

Growth Despite the Challenges

Several companies this year have announced plans to expand their businesses into the Asian region through partnerships.

PacificNet this month announced that its China-based subsidiaries have agreed to acquire a 51 percent stake in e-lottery services provider Guangdong Poly Blue Express Communications.

And in August, Ladbrokes said further plans for Asian expansion would focus on sports betting in Macau.

Also in August, CryptoLogic acquired a financial interest in China-focused casual games distributor 568 Network. Crypto has also put in bids to run sports lotteries in Taiwan and Vietnam.

In January, U.K.-based operator Ladbrokes announced a partnership with Hong Kong-based technology company MegaInfo Holdings to form a joint venture called Asia Gaming Technologies (AGT). The venture targets China's $10.2 billion lotteries market by launching Ladbrokes' video betting terminals, which allow fixed-odds wagering on sports matches and other games. Ladbrokes recently said it is moving ahead with plans to open its own betting shops in the country.

Demand for I-Gaming in Asia

The idea of regulation is moot if the demand is not there, and Pilling said that evident demand from Asian consumers seems to be satisfied currently by illegal gambling and state-run operators.

"Generally, Western companies are excited by Asia because of the large populations in many of the countries," Pilling said. "But several Asian countries (or parts of countries) could still be defined as 'developing,' economically speaking, with large swaths of the population currently having limited purchasing power.

"But in China especially, there is certainly a fast-growing middle-class that has disposable income," Pilling continued. "The potential market is undoubtedly big, but not as big as a superficial glance at the numbers would suggest."

But that does not mean that consumers in Asia would respond negatively to more choices if the region were regulated.

Regulated Regions

Cagayan Freeport, a 12-year-old special economic zone in the Philippines that includes Santa Ana, is the first and only region in Asia to license and regulate online gambling. Through the 2003 formation of First Cagayan Leisure, the country began offering seven-year online casino licenses to operators and restrictive sports betting licenses, which enable operators to offer bets only on basketball and soccer, and up to two additional sports. First Cagayan currently licenses 27 operators.

Cagayan Freeport in July began offering proxy betting to gamblers in China.

PacificNet announced in July that its PacificGames subsidiary had been granted an Internet gaming license by the First Cagayan and Cagayan Economic Zone Authority of the Philippines.

In February, Macau Gaming Control Board's Jorge Costa Oliveira announced at the Pacific Congress on I-gaming that he was 100 percent behind the passage of I-gaming regulations and that it could happen within the next year or two.

On the other hand, some have reasoned that Macau's regulation is unlikely due to the region's proximity to mainland China.

But Pilling said that Macau's geographic relation to mainland China is unlikely to be a factor in determining whether it regulates or not because certain online gambling activities, sports betting for instance, already exist in Macau through a state monopoly and their Web sites are accessible in Mainland China.

On the other hand, Macau does not seem to be offering operators any guarantees of access to the mainland Chinese market, should it regulate, Pilling added.

"Even if Macau did fully regulate online gambling against mainland China's wishes, the Chinese government is more than capable of blocking access to Macau-regulated Web sites, should it wish to do so," Pilling said.

Promising Regions

Pilling said based on current legislation and market conditions, no region other than the Philippines stands out as having a chance at regulation in the near future.

On the other hand, the most promising regions in Asia for online gambling regulation include Taiwan, which has recently expanded its sports lottery, Vietnam, which is moving toward sports betting legalization, and India, Pilling said. As for Macau, given that it was the Macau Gaming Commission itself which announced plans for I-gaming regulation, the proposals must be afforded some credibility, he added.

Emily Swoboda is the senior staff writer at IGamingNews. She lives in St. Louis, Mo.