The debate surrounding casinos is intensifying. The tourism industry is pushing back against the government's proposal to increase the burden rate of the tourism development fund and introduce a five-year renewal permit system, arguing that these measures will stifle investment and undermine the industry's competitiveness. The Ministry of Culture, Sports and Tourism contends that many of the industry's claims are inaccurate.
Following a National Assembly forum last month, a policy meeting was held on August 4, where industry and academic representatives discussed directions for regulatory improvement.
The crux of the debate is not merely about the intensity of regulation. The key issue is how to create a system that maintains the public nature of the casino industry while not compromising investment and competitiveness.
There is likely broad agreement on the need to revise casino regulations. The foreigner-only casino market has seen the emergence of large-scale integrated resorts, with business sizes and investment amounts that are difficult to compare with the past. However, the system for regularly verifying whether casino operators continue to meet licensing requirements has been insufficient. The payment system for the tourism development fund has also remained unchanged since its introduction in 1995, maintaining a basic framework that imposes a maximum of 10% based on revenue brackets.
The government's rationale for regulatory reform is understandable. Unlike general tourism businesses, the casino industry is one that the state permits only under limited circumstances. There is a need for mechanisms to continuously assess operators' qualifications, financial soundness, and management transparency. The argument that as the industry grows, its social responsibilities and public contributions should be adjusted to reflect reality is also valid.
The Ministry explains that even if the fund burden rate is raised to a maximum of 15%, it will not apply uniformly to all revenues. They are considering a progressive system that would create new high-revenue brackets, applying the 15% rate only to amounts exceeding those thresholds. They noted that revenue-based assessments for fund contributions are also used in major casino-operating countries like the U.S., Singapore, and Macau.
Similarly, the five-year renewal permit system is described not as a complete re-selection of operators but as a mid-term evaluation to check whether they continue to meet licensing requirements. According to the government, this reform is more about refining a long-standing management system than erecting new barriers.
However, it is problematic to dismiss the industry's concerns as mere self-interest. Integrated resorts are long-term investment projects that develop not only hotels and casinos but also performance venues, exhibition and conference facilities, and shopping and dining options. These projects can require investments of trillions of won, and even after opening, ongoing funding is needed for facility expansion and content development. The structure relies on loans from financial institutions and external investments to recover capital over an extended period.
In such ventures, the stability of permits is directly linked to investment decisions. Even if the government describes the renewal permit system as a mid-term evaluation, it cannot be assumed that financial institutions and investors will interpret it the same way. Increased uncertainty about business continuity could lead to more conservative lending assessments and investment decisions.
Concerns about this were specifically raised during the August 4 meeting. Lotte Tour Development reported that amid ongoing discussions about regulatory changes, its major lenders expressed negative reactions regarding loan extensions, and it received early repayment requests from convertible bond investors.
However, early repayment of convertible bonds is a right that investors can exercise under the terms of their contracts. It cannot be definitively concluded that the discussions about regulatory changes were the direct cause. Nevertheless, the government should consider how its policies may be perceived by financial markets and investors.
The issue of increasing the tourism development fund is similar. The industry argues that casinos pay the fund based on revenue rather than profit, which imposes a burden even on operators that are operating at a loss.
Lee Jang-seong, the financial officer at Lotte Tour Development, stated that despite generating over 470 billion won in casino revenue last year and contributing 51.5 billion won to the fund, the company recorded a pre-tax loss of 4.5 billion won. He argued that if the burden increases by hundreds of billions more, it could severely impact management.
Inspire also noted that if the fund burden increases, it could reduce the capacity for follow-up investments in cultural and tourism facilities, including the arena, where casino profits are reinvested.
The Ministry's explanation should not be taken lightly. The tourism development fund is used for attracting tourists, expanding tourism facilities, providing loans to tourism businesses, and training personnel across the tourism industry. Given that the casino industry has grown based on tourism infrastructure, it is difficult to overlook the intent to share its successes with the entire industry.
The government must clearly disclose the actual burdens resulting from the regulatory changes. It should specify how much fund contributions will increase based on revenue brackets for each business and clarify what will be evaluated during renewal assessments and under what circumstances permits may be revoked. The timing of implementation and transitional measures should also be thoroughly discussed. If the criteria are unclear, market anxiety will inevitably grow.
The industry should not simply reject the changes to the regulations. It must strengthen management transparency and internal controls and present practical measures for responsible gambling and user protection. To argue the impact on employment and investment, it should also provide objective data. It will be difficult to persuade public opinion by prioritizing investment and competitiveness while avoiding social responsibility.
Time is also of the essence. In Osaka, Japan, a project is underway to open the Yumeshima integrated resort around the fall of 2030. Once a large-scale resort with global casino operators and significant capital opens, competition for attracting foreign tourists in Northeast Asia will become even more intense.
While South Korea is mired in internal regulatory debates, its competitors are enhancing their facilities, content, and marketing capabilities. However, this does not justify loosening management and oversight or demanding special privileges in the name of international competitiveness.
What is needed is a framework that allows investors to predict the future of their businesses and for the public to trust the casino industry. It is the government's responsibility to create and uphold that framework. Regulations should exist for the benefit of the industry, and the industry can only grow on the foundation of public trust.
* This article has been translated by AI.
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