Nepal’s casino industry is recovering from a series of deadly earthquakes and a temporary border blockade with India last year, with international casino operators increasingly eyeing the market as a way to tap potential from neighboring India. Visitor numbers to the Himalayan nation by air jumped 12.77 percent in the first half of this year to 313,512, compared with about 277,992 visitors in the same period last year. In the first half of 2014, tourist arrivals had reached 412,461.
Nepal’s casino industry is forecast to bounce back in 2016 after a devastating earthquake last year and an unofficial border blockade imposed by India. According to Union Gaming Analytics, an industry consultant, the Indian market could have the potential for US$4 billion in gaming revenue and Nepal casino insiders say operators are perfectly positioned to attract those players.The industry in Nepal has faced a tumultuous few years, with the government shuttering all casinos in 2014 after failure to comply with new regulations and pay outstanding license fees. The casinos began reopening in 2015, with many under new management, only to be hit by an earthquake in April, followed up by an unofficial border blockade by India.
Nepal’s casino industry is showing signs of life after shutting down for nearly a year for failing to comply with new regulations, but the recent opening of two foreign-funded ventures may be masking continuing underlying problems.In early February, Hong Kong-based Silver Heritage Limited (SHL) opened The Millionaire’s Club & Casino at the five-star Hotel Shangri-La in Kathmandu, becoming the first casino to come under Nepal’s new gaming regulations, while India’s Mahjong Entertainment, which operates Casino Mahjong at the five-star Hotel Soaltee in Kathmandu followed suit, opening its doors to gamblers on February 6.However, local operators continue to lobby the government for further concessions on the new gaming law, while state officials remain adamant that they will give no further ground. They also fear the reopening of the casinos may prompt the government to backtrack on agreed amendments.“Since the two casinos reopened after complying with the new regulations, the issue of amendments has become uncertain because the government would cite the development in order to force us to come under the regulation,” said Amba Datta Bhatta, the executive director of Casino Association of Nepal (CAN).“At the moment, there’s confusion among operators. Some say they could push the government for amendments in the regulation while others have argued that it’s a lost cause,” he said.According to the new rules, which came into effect in July 2013, Nepal’s casinos were required to have paid-up capital of at least 250 million rupees ($2.6 million), with the minimum set at 150 million rupees for slot parlours, known here as mini-casinos. A new annual license fee, to be paid to the tourism ministry, was set at 20 million rupees for casinos and 10 million rupees for mini-casinos. Similarly, the annual royalty fee, paid to the inland revenue department, was doubled to 40 million rupees for casinos and set at 20 million rupees for mini-casinos and was made payable in advance rather than in arrears. Despite several extensions of a deadline for the casinos to come under the new regulatory regime, the operators failed to meet the requirements. After the dramatic shutdown in April last year, operators, unions and employees began to put pressure on the tourism ministry to revise the rules. As a result, in July, the new government slashed the annual royalties by 10 million rupees for both casinos and mini casinos. On January 5, a delegation comprising both casino operators and union members handed a memorandum to the Tourism Ministry, urging it to ensure that the employees receive their salary, allowances, gratuity, and provident funds, among others. “The new regulations failed to make guarantees on these issues. We request the government to ensure it before allowing the casinos to operate business,” the appeal noted.The delegation also demanded that the 25 percent windfall tax imposed on gamblers be removed. “No country has such provisions. And it will not help attract tourists and gamblers in Nepal. Therefore, we demand that the provision should be revoked,” the letter read.However, Tulasi Prasad Gautam, the director general of the Department of Tourism, told AGB further amendments to the regulation were unlikely.“The government is not going to amend the regulation. We have already made necessary amendments. The two casinos that applied for new license are a proof that it’s possible to comply with the new rules,” he said.“The remaining casinos owe huge amount of outstanding taxes and royalties to the government. If they really want to be part of the industry, they should have guts to raise the money to come under new rules,” he said.Gautam called the operators’ claim that the new rules were discouraging them from investing in the business as baseless.“Past experiences show that casino operators quit their business halfway, leaving their employees to fend for themselves. So the government has to take care of them. That’s why we hiked taxes and royalties,” he said.Kumar Shrestha, the operations manager at Casino Anna, agreed the industry was still dogged by numerous problems.“There are several mini casinos and one casino in Kathmandu (Casino Royale) that have started operations based on the Supreme Court stay order, which by nature is an interim measure. So this is nothing short of taking advantage of legal loopholes,” he told AGB.Shrestha cited the example of Casino Anna’s ownership, which is jointly held by Tapta Bahadur Bista and Kalpadeep Rai. “The operators haven’t paid tax for up to 10 years. How will new owners be interested in such a venture? And the license holders seem unable to revive it,” he said adding that as a last ditch attempt, the operators had filed a petition at the Supreme Court, requesting a stay order to open. “But the court declined to issue the order,” he said.The government’s controlling mechanism is very weak, Shrestha said adding: “I don’t think that our government is capable of sending manpower to check the business.”Shrestha said as the country now had an elected legislature, a new act should be approved by the parliament. “If we have an act, it will not have such loopholes and the legal basis would also be strong.Bhatta of CAN said the employees have begun to put pressure on the remaining casinos to open.“Unlike in Sri Lanka, where there’s pressure from the Buddhist clergy not to expand casinos, Nepal is well placed as there are no such resistance. Our history is also decades-long. But political instability and political interference has prevented us from making strides in this sector,” he told AGB.But government officials like Gautam argue for limiting the number of casinos, saying that 10 casinos were too many for Nepal. “The two that have resumed operations would cater to some of the clientele. I don’t think we need that many casinos. I think 4 or 5 casinos would be enough for a country like Nepal,” he said.India’s Delta Corp may also be interested in investing in Nepal and has registered with the Department of Industry, though hasn’t yet applied for a casino license. However, industry insiders have expressed doubt on how much foreign investor interest there is likely to be until the current problems are fully resolved. The Millionaire’s Club & Casino is part of the Silver Heritage group’s $100 million investment drive in Nepal via Happy World, its joint venture with a Nepali businessman, aimed at providing gaming services to the growing Indian and Chinese market. The casino has 22 live gaming tables and 40 electronic gaming machines.The gaming company is also investing in a five-star resort in the southern town of Bhairahawa, near the birthplace of Lord Buddha, a popular destination among tourists from China, Japan and Sri Lanka.Until its closure due to labour unrest in 2010, the casino at the five-star Hotel Shangri-La was operated by an affiliate of Widetech (Malaysia) Bhd.