Posted by: Frederik Balfour on April 22, 2009
Mao Zedong always described China and Vietnam as being as close as “lips and teeth”, so it’s no surprise that Vietnamese Prime Minister Nguyen Tan Dung put in an appearance over the weekend at the Boao Forum on Hainan Island. I’m not sure how much was actually accomplished at the meeting, which is China’s answer to the World Economic Forum held at Davos each year, though you can read what my colleague Dexter Roberts has to say about it in his blog. But at least the leaders didn’t have to be evacuated by helicopter the way they were at the ASEAN summit in Phuket, Thailand where protestors shut the meeting down a week earlier.
But what many readers may find puzzling is why the PM chose to make a pit stop in Macao, hardly a big player on the global stage. According to the official Vietnam News Agency, Dung “pledged to work to promote friendship and cooperation between both parties in the future,” which is what Vietnamese leaders always say during state visits, especially when nothing substantive is achieved. No matter how you slice it, the economic relationship between Vietnam and Macao is negligible—just $35 million in two-way trade, mostly tourism. My bet is that it was mostly one-way traffic by gimlet-eyed Vietnamese gamblers to Macao.
But you can bet the Prime Minister must have marveled at all of Macao’s spanking new casinos, even if he didn’t get a chance to visit one. In fact, Vietnam has gaming ambitions of its own. At a Vietnam Investor Conference in Hong Kong the day before Dung’s visit to Macao on Tuesday I ran into a Vietnamese businessman from a company called Sovico, who was carrying around a map of Phu Quoc Island. This sleepy isle located off the western coast of Vietnam is a one-hour turbo prop plane ride from Ho Chi Minh City, and is famous for its pungent fish sauce called nuoc mam. He was rattling the cup in hopes of raising $4 billion [the minimum investment required to get a gaming license in Vietnam] for a resort on the sleepy island. He was also meeting up with executives of MGM Mirage in Macao the next day. He seemed undaunted by the enormous financial challenges facing debt-saddled MGM, noting he was only seeking a management deal with them.
I doubt the Phu Quoc casino will ever see the light of day. Four billion is a huge price tag, larger than the single biggest investment in Vietnam to date, [in computer chips, not casino chips] $1 billion being spent by Intel to build a semiconductor test and assembly plant. It’s also a couple of billion more than Sheldon Adelson has spent in Macao so far, where he seems to have overextended himself to a precarious level. There’s the problem of access. Phu Quoc doesn’t have an international airport yet, though it should have one by 2010. But total visitors to Vietnam are about 4.5 million per year. Assuming 10% make it to Phu Quoc, that’s only 450,000 people a year, hardly enough to sustain anything but the humblest of betting joints. Although Vietnam does have three casinos already including one belonging to Stanley Ho of Macao, these modest centers are off-limits to locals and only see a handful of gamblers each night.
But hey, the Phu Quoc businessman isn’t the only one living in la-la land. According to Canadian newspaper the Globe and Mail, former Canadian Prime Minister Jean Chrétien is backing a competing casino project in Vietnam called Ho Tram. But the way things are going for casino operators in Macao and Vegas these days, it looks like the chips are heavily stacked against both schemes in Vietnam.