Public Policy and Casino Gambling in Japan

1
Public Policy and Casino Gambling in Japan

• Professor Peter Collins
• Director, Salford University Centre for the Study
  of Gambling and Executive Director of the South
  African Responsible Gambling Programme
• Tokyo, Sept 2008

2
Three Questions

• Do casinos bring greater benefits than costs?
  Sometimes yes, and sometimes, no.
• Can Japan have a casino industry which brings
  significant economic benefits AND reduces
  negative impacts like crime and addiction? Yes,
  in about two years.
• How? With strong and intelligent political
  leadership.

3
Overview

• Who decides?
• General Policy Background
• Managing Public Opinion in Advance
• Democratic Consensus and a Public- Private
  Partnership
• Minimising the potential negatives, especially
  Problem Gambling
• Gambling Policy and Problem Gambling
• Maximising Economic Benefits
• Thinking about Japan

4
So who should decide (Casino) Gambling Policy?

• Local Public Opinion
• Not me and not any other expert whether
  pro-choice or anti-gambling
• My own commitments commitment to, individual
  freedom honest research sceptical about
  puritanism in relation to all pleasures but
  neutral about gambling as entertainment option,
  provided it is not undertaken engaged in
  addictively or excessively personally find
  gambling much more interesting to study than to
  do
• Democracy means that government must do not what
  I want but must conform its behaviour to public
  opinion, i.e. what most people think should
  happen
• But public opinion, especially about gambling, is
  always the amalgam of many different and often
  ambivalent individual opinions

5
General Background

• In Japan, as elsewhere, consideration of whether
  to legalise large casino projects takes place
  against a background where traditionally gambling
  has been prohibited or severely restricted
• But has flourished illegally or semi-legally (cp
  UK in 1960s)
• Regulation comes to be seen as better than
  prohibition
• Also may be a good way of raising comparatively
  unresented taxes and securing investment in
  tourism-enhancing projects and popular local
  amenities
• Casino may deliver exceptional economic benefits
  in relation to tourism and regeneration
• People think governments should not interfere
  with individuals private choices providing others
  are not harmed
• But they may think the negative social impacts
  will outweigh any benefits
• Thus, especially, big casinos always generate the
  most passion both for and against precisely
  because they are very big and highly visible and
  it is thought (rightly) that, depending on how
  well or badly they are introduced, licensed,
  taxed and regulated, their positive and negative
  impacts will both be correspondingly large and
  visible.

6
How is Public Opinion Composed?

• Most people wont have strong views either way
  (more important things to worry about)
• Two groups will have strong opinions against
  those with moral objections to all legal gambling
  and those would face commercial competition from
  new casinos
• Two groups will have strong opinions pro those
  who want to build and operate casinos and the
  local communities who will most benefit from the
  economic development benefits
• Whatever government decides it must
• - expect controversy
• - master the relevant evidence and argument on
  both sides
• - secure public approval in advance (cp
  Singapore and contrast UK)

7
A Typical Democratic Consensus

• Some casino gambling but not too much
• No prohibition but no free market either
• High prize machines in casinos only
• Small number of large rather than large number of
  small casinos
• Eliminate or minimise all negative impacts,
  including crime, sleaze, addiction and unfair
  displacement
• Attractive amenities
• Economic benefits to non-gamblers/communities as
  wholes

8
Public-Private Partnership

• Common interest by government and industry in
• Stable and profitable industry (bulk of revenues
  typically go to governments rather than
  share-holders
• Regarded by public as providing harmless
  entertainment responsibly and funding good causes
  not exploiting human frailty to maximise
  profits and taxes
• NB profits and taxes depend on public opinion and
  public opinion is most shaped by perceptions of
  the problem gambling issue

9
CRIME

• Crime is not a a problem
• Prohibition brings crime
• Casinos are extra safe because casino operators
  protect patrons
• Casinos do not launder or promote sale of drugs
  because their license is too valuable

10
Problem Gambling Policy

• Most people (95) gamble harmlessly less than 1
  are addicted a further 4 periodically get into
  some level of trouble
• Gambling is risky in proportion as the action is
  continuous the price of playing time high
  gambling is unplanned gamblers play is driven
  by false beliefs
• People who set sensible limits and stick to them
  do not get into trouble
• All this (and more) can be achieved by smart
  cards which allow for monitoring of wins and
  losses and setting limits to both

11
A National Responsible Gambling Programme

• A National Responsible Gambling Programme should
  be instituted, funded by industry, independently
  supervised, accountable to government
• It should fund
• - free, confidential and expert treatment by
  phone, internet and face-to-face
• - public awareness campaigns about the dangers
  of gambling and how to avoid them
• - research which will improve the work of
  prevention, treatment and regulation regarding
  problem gambling.

12
Economic Benefits

• Consumer surplus
• Unresented taxation
• Attracting gambling tourists
• Enhancing tourism product through funding of
  non-gambling infrastructure and attractions from
  gambling profits
• Preventing gambling spend by locals from going
  abroad
• Funding non-gambling amenities for locals
• Redistributing from richer to poorer

13
Capturing Abnormal Profits

• Restriction of supply consumers willingness to
  pay more than total cost of supply abnormal
  profits (economic rents, monopoly or
  oligopoly profits)
• Can be captured for the public good by
• - gambling privilege taxes (Europe)
• - auctioning the licence (Australia)
• - competitive tendering (Singapore)
• - combination of above (South Africa)
• Harnessing the Creativity of the Private Sector

14
Calculating the Value of the Licence

• Estimate Gross Gambling Revenues (money staked
  less money paid out in prizes) over a given
  period (say, ten years)
• Deduct tax
• Deduct required return on investment (cost of
  capital) higher for casinos because of higher
  (mainly political) risks
• Calculate total capex which can be supported by
  these revenues
• Deduct cost of generating revenues
• Remainder money available to secure licence

15
What are costs of generating gambling revenues

• Land best on publicly owned sites
• Building core casino parking minimum food
  and beverage
• Furnishings and furbishings
• Equipment, including gambling and surveillance
  equipment
• Pre-opening costs bid costs, advertising etc
• Usually these total about half of one years
  anticipated GGR

16
The Competitive Tendering Process

• Avoid litigation and corruption by establishing a
  process which is
• Transparent advance knowledge of procedures and
  criteria
• Fair all bidders treated impartially and equally
• Rational Cogent reasons can be given for all
  actions and decisions
• Demonstrably in the public interest

17
Criteria

• Qualified in terms of probity, competence and
  resources
• Overall attractiveness of buildings
• Genuineness of Concern for Social responsibility
  (not lip service)
• Value of bid in relation to anticipated
  revenues
• Value of Commercial Add-ons (e.g. hotel)
• Value of subsidised add-ons (e.g. conference
  centre, must-see attraction, transport upgrade
  etc)

18
Specific Considerations Concerning Japan

• Crucial importance of developments in China
• Options for policy on Pachinko and other
  convenience gambling opportunities protect
  restrict or prohibit expose to market forces
• Be clear about objectives tourism, regeneration,
  other

19
Thank You

• Contact Details
• p.collins_at_salford.ac.uk