Korea takes a punt on new casino

Business Asia, August 2, 1999

After years of thinking casinos were a social ill, the South Korean government has finally changed its tune.

The government, overcoming its traditional aversion to roulette wheels and blackjack, has offered investors a stake in a new US$1 billion resort which allows Koreans and foreigners to bet shoulder to shoulder - a first in a nation where the 13 existing casinos cater exclusively to a foreign clientele.

The Kangwon Province resort, set in a depressed coal mining region a bumpy four-hide ride from Seoul, hopes to bring economic prosperity back to the region, which was blighted by Korea's shift from coal to cheaper energy sources such as gas.

"We're committed to turning this region into the Las Vegas of Asia," said Song Kyu Hwan, a manager in the coal industry division of the government's energy ministry.

Kangwon Land, the state company in charge of the project, will be Korea's first casino stock.

The government plans to list it on the Korea Stock Exchange in 2002.

Sceptics say that despite the pent-up demand - Koreans take gambling tours abroad to beat the government ban - the resort's success won't come quickly or cheaply.

One problem is that between now and the full opening in 2002, the government must figure out how to improve transportation between Seoul and the remote province.

What's more, of the 13 foreigner-only casinos in Korea, only three posted profits last year.

The biggest, Seoul's Sheraton Walker Hill casino, owned by the SK Group, reported sales of 27 billion won last year, up 20.6 per cent from 1997.

That helps explain why the Kangwon resort won't entirely be a shrine to gambling.

The plans for the 2,835-acre site also call for an 882-room hotel, a condominium-style residential development, 16 ski slopes, amusement parks and hot springs. The project should benefit builders, hotel and restaurant companies, and slot-machine makers.

Daewoo Corp has already been tapped to build a "mini-casino" of 500 slot machines and 30 tables scheduled to be open in July 2000.

Hotel Shilla, a chain owned by the Samsung Group, is advising the government on the lodging side of the project.

Benefits are already flowing to the country's "black chip" coal mining companies - so called because their shares tended to rally on any serious talk about the resort in Kangwon, where they have big land holdings.

Dongwon Industries, for example, is up 271 per cent this year and Young Poong Mining gained 100 per cent.

Samsung Securities predicts Kangwon Land shares will be worth 43,000 won each on the over-the-counter market by the end of the year.

Kangwon Land expects to generate 18,000 jobs by 2002 and 34,000 by 2006 in the mountainous region, where the decline of coal has created virtual ghost towns.

- Bloomberg