Debate Over Casino Regulation Reform Amid Financial Crisis

Discussions aimed at reforming South Korea's nearly 30-year-old casino regulations are intensifying. The government and academia are at odds with the casino industry over the introduction of a license renewal system and an increase in the burden rate for the Tourism Development Fund. While the government and scholars argue for reforms to enhance the public nature and transparency of the casino industry, the industry calls for a cautious approach, stating that the proposed regulations may not adequately reflect the operational realities of foreigner-only casinos.

 

A forum titled 'Direction for Advancing Casino Regulations in the Era of Tourism Power' was held on July 23 at the National Assembly in Yeouido, Seoul, co-hosted by the office of Democratic Party lawmaker Jo Gye-won and the Korea Tourism Society, with support from the Ministry of Culture, Sports and Tourism and Grand Korea Leisure (GKL).

 

Attendees included lawmaker Jo Gye-won, Korea Tourism Society President Seo Won-seok (a professor at Kyung Hee University), and Kang Jeong-won, head of the tourism policy division at the Ministry of Culture, Sports and Tourism, along with representatives from academia, research institutions, local governments, and the casino industry. Seo chaired the session, which featured a presentation by Professor Lee Jae-seok from Kangwon National University, followed by extensive discussions and a Q&A session.

 

The key issues discussed included the introduction of a five-year license renewal system, prior approval for changes in controlling shareholders and transfers, and adjustments to the burden rate for the Tourism Development Fund, including the establishment of a new maximum progressive rate of 15%.

 

 

Lawmaker Jo Gye-won emphasized, "The goal is not to stifle the casino industry but to establish a regulatory framework for healthy and transparent growth. We must create a structure where the tourism and casino industries can grow together." He added that the Tourism Development Fund should secure sustainable resources to effectively contribute to the development of the tourism industry.

 

In his presentation, Professor Lee Jae-seok highlighted examples from Nevada, Macau, Singapore, and Japan, stating, "Major casino-operating countries abroad secure both industry competitiveness and public nature through strict ownership management and specialized supervisory bodies during license renewals." He noted that while foreigner-only casino revenues have increased 10.3 times since being included in the Tourism Promotion Act in 1995, the regulations remain based on standards from 30 years ago, indicating a need for updates to the licensing system, governance management, and fund regulations.

 

Former Ministry of Culture, Sports and Tourism Planning and Coordination Director Kwon Kyung-sang remarked, "There were various adverse effects during the previous operation of the license renewal system. If reintroduced, it is essential to establish sufficient transitional provisions and clear criteria." He suggested that domestic and foreigner-only casinos should be approached differently in the regulations, and the burden rate should be designed considering the operators' capacity to avoid unnecessary disputes, such as investor-state disputes (ISD). He also proposed the establishment of a separate 'Casino Industry Act' to distinguish casinos from the Tourism Promotion Act and the creation of a specialized management committee.

 

Lee Myung-jin, head of the casino industry policy team at the Ministry of Culture, Sports and Tourism, stated, "Major casino-operating countries regularly check whether operators continue to meet licensing requirements. The license renewal system aims to update an outdated system to meet international standards."

 

Kim Na-na, head of the convergence tourism division at the Ministry, emphasized that adjustments to the burden rate for the Tourism Development Fund would be pursued in consultation with the industry, taking into account the unique circumstances and management conditions of the sector.

 

 

Experts expressed agreement on the need for regulatory improvements but stressed the importance of detailed design and realistic measures. Professor Choi Young-bae from Gachon University noted, "While the license renewal and prior approval systems are necessary considering the public nature of limited business rights, the burden on the fund should be determined after closely examining the actual profitability and capacity of foreigner-only casinos." He suggested establishing a structure where generated resources are reinvested in the casino industry and expanding specialized organizations and personnel for ongoing management.

 

Professor Kim Jae-ho from Inha Technical College emphasized that policies to improve social perceptions of the casino industry and create a favorable investment environment should be pursued simultaneously, advocating for a balance between regulation and support.

 

Professor Bang Geuk-bong from Yonsei University stated, "Given that casinos are a patented business, the introduction of a license renewal system and prior approval system to periodically assess eligibility is worth considering and is legally sound."

 

Han Deok-hwan, head of the tourism industry division in Jeju Province, mentioned that Jeju has strengthened its management and supervision system through ordinance enactment and the operation of specialized organizations, adding that if the burden on the fund is increased, support measures for enhancing industry competitiveness and improving working conditions should also be established.

 

Researcher Jeong Gwang-min from the Korea Culture and Tourism Institute pointed out that the current progressive fund system, established 30 years ago, fails to reflect the high growth rate of the industry. He stressed the need to rationally redesign the fund system to create a virtuous cycle leading to the development of the casino industry, especially as competition in Northeast Asia intensifies with the opening of integrated resorts in Osaka, Japan, in the 2030s.

 

 

Conversely, the industry expressed concerns that regulatory changes not considering the operational environment of foreigner-only casinos could burden investment and employment.

 

Choi Seung-wook, president of the Korea Casino Industry Association, stated, "Foreigner-only casinos are still facing significant financial burdens and initial investment costs during the recovery process from COVID-19. Comparing them to domestic casinos that allow local residents is not appropriate."

 

A representative from Inspire Integrated Resort noted, "We have invested over 1.93 trillion won according to government bidding conditions and plan further investments. Our annual financial costs amount to 120 billion won, and with ongoing large-scale deficits, an increase in fund burdens could impact additional investments and job retention."