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Russia gambles on casino to revive fortunes of far east

Casino in Moscow, Russia.
Sovfoto | UIG | Getty Images
Casino in Moscow, Russia.

Las Vegas, Macao, Monte Carlo, yes. But Vladivostok? In less than a month, the first casino opens in a massive new gambling complex on the far end of Siberia. On a hill overlooking the Ussuri Bay barely 200 kilometers from the North Korean border sits Tigre de Cristal, a complex with 759 slot machines, dozens of roulette tables and a hotel.

It is part of Russia's latest desperate attempt to develop the country's far east. A vast expanse of land stretching from Mongolia's northern border all the way to the Bering Strait, the region is rich in resources but poor in people, and with even worse infrastructure than elsewhere in Russia.

The new casino is one of dozens of investment projects Moscow hopes will change that. Here, as in other special zones, the government is offering investors streamlined approval procedures, visa exemptions and generous tax benefits.

One of the world's biggest gambling investors has already made his bet: Macao gambling tycoon Lawrence Ho is the main investor behind Tigre de Cristal. "We are the biggest corporate investor in Primorsky Krai," says Eric Landheer, director for corporate finance and strategy at Summit Ascent, Mr Ho's investment holding. "We are investing $500 million in the first phase, and our investment will eventually rise to $900 million."

Although the location may seem like the end of the world to Europeans, it is may be a lucrative one from a gambling industry perspective. "We have more than 300 million people living in a three-hour flight radius around here," says Craig Ballantyne, the jovial Scotsman who runs Tigre de Cristal. "We expect Russians to account for 80 per cent of our business in terms of bodies, but Chinese to make up 80 per cent of the business in money terms," he adds.

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As Beijing's crackdown on corruption has cut deeply into business in Macao, that could be a risky recipe. Gross gaming revenue from Chinese players in Macao dropped more than one-third in the first half of 2015 compared with the same period last year. Things could get worse with the Chinese economy slowing.

But Vladivostok is close not only to China but also to Japan and South Korea. Mr Ballantyne says he has already received numerous bookings from Korean travel agents. Moreover, being in the vicinity to two Chinese land border crossings means that many Chinese visitors can reach the new resort on tour buses — giving them a cheap option comparable to Reno or Atlantic City for Americans.

But success will depend on whether Moscow keeps its flowery promises to roll out the red carpet for investors in the Far East.

"Yes, Vladivostok could follow the example of Hong Kong. But we still feel that Russia looks west and Russians feel themselves more as Europeans," says Wang Mingfu, founder and chairman at Hejun Consulting, a Chinese group.

At a government-organised conference in Vladivostok this month to market its development plans to Asian companies, president Vladimir Putin dropped in for a quick speech and a handshake with aging US action star Steven Seagal, but failed to stay for a discussion with investors, something that is part of his routine at an annual economic forum in St Petersburg, his hometown and one of Russia's most European cities.

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Lu Hao, governor of the nearby Chinese province of Heilongjiang, complained bitterly at the conference that Russia's excessive red tape in customs and foot-dragging in finishing infrastructure projects was frustrating Chinese investors.

Similar troubles have plagued Tigre de Cristal. It had to reschedule its opening twice because permits failed to arrive and construction was delayed. A new road from the airport, promised for early this year, will now not be ready for the opening on October 8.

When a delegation of Russian government officials visited two weeks ago, Mr Landheer urged his guests: "You should have more liberal visa policies. You need to decrease bureaucracy and paperwork." There was not much of an answer from the visitors.