In 2013, Macao gambling magnate Lawrence Ho announced plans to finance the construction of a $130 million casino resort in the Muraviynaya Bay near Vladivostok, located in Russia’s Primorye integrated entertainment zone. The first phase of the project was to be a 120-room hotel and casino that would include 65 gambling tables and over 800 gaming machines and the keystone in a campaign to lure tourists to this struggling region. With this and other plans underway, Russia hopes to eventually be able to attract between 10 and 12 million tourists per year to this struggling region.
But Ho is not the only major investor Putin has managed to lure to the region. The new casino is just the first step in Vladimir Putin’s ongoing campaign to develop Russia’s far east. A region that is rich in natural resources such as forestry and fish stocks but poor in people, Putin hopes to boost revenues from the region by making it a premiere tourist destination. The Primorye region is a vast expanse of land which stretches from Mongolia’s northern border all the way to the Bering Strait. But with so few people, it has one of the worst infrastructures in a country known for its poor infrastructure, which interferes with its ability to generate revenue from its abundant resources.
But the new casino is just the first step in landing dozens of investment projects that Moscow hopes will change that. In order to lure investors, the government is offering them a host of perks such as visa exemptions, streamlined approval procedures and generous tax benefits. Putin made early promises to provide investors with the best conditions possible in which to do business so that the Far East of Russia could compete successfully in terms of efficiency and return on capital with leading businesses.
And apparently what he offered is working, as Lawrence Ho’s investment holding, Summit Ascent, has invested $500 million in the first phase, and will eventually shell out a whopping $900 million investment in the project. In addition, Rosneft, Russia’s largest oil firm, is slated to invest 1.3 trillion rubles or approximately $20 billion in other projects in the region. Putin has also promised more state money for the region and believes that the vast resource base of Russia can support the rapid growth acceleration he hopes for in the region.
Now, that vision has taken its first step to becoming a full reality. In less than a month, the $172 million Tigre de Cristal, the first casino in the massive new gambling complex, will open its doors to receive its first visitors. Since 2009, casinos and other gaming establishments have only been allowed to operate in four remote areas, including south Siberia’s Altai Territory, the Baltic exclave of Kaliningrad, southern Russia near the Sea of Azov, and Primorye in the Far East. Advanced registration conducted by the company showed a high demand for casinos by Russian gamblers, but Ho hopes to increase demand from neighboring countries as well. Strategically located less than 200 kilometers from the North Korean border, Ho hopes to lure in gamblers not just from Russia, but also from China, Japan and South Korea as well.
While the location may seem like the end of the world to Europeans, it is an incredibly lucrative one from the perspective of the gambling industry. With more than 300 million people living in less than a three-hour flight radius, they expect Russians to account for 80 per cent of the bodies their business brings in, but expect the Chinese to account for 80 percent of the money coming in. But China is not the only place they are looking to provide a high amount of revenue.
With only one casino in South Korea open to locals, there is a high demand for casinos that can serve South Korean clientele. Particularly considering competition from casinos in South Korea for the Chinese North Eastern market. The company believes that not only will the Russian project fulfill South Korea’s high demand for casinos, but that the high demand in the area will quickly offset its $172 million price tag. Particularly since the one casino in South Korea open to locals boasts gaming revenues that are higher than the aggregate gaming revenues generated by all the casinos open to foreigners combined. This is further evidence that the potential demand for casinos in Korea is very high and will thus provide a gold mine in revenues for Ho and for the Russians.
Another bonus for the company is that Japanese authorities have not yet legalized gaming in Japan, which means that Ho’s Summit Ascent Holdings ltd will have the unique advantage of potentially having a lock on Northeast Asian gaming for some time.
But Putin is hoping that the new gambling and entertainment complex will do more than just simply generate revenue for his country. He is also hoping that it will help Russia strengthen relations with countries that are of strategic importance to the region. Putin believes that the Asia-Pacific region as a whole is interested in a strong and successful Russia that is open for cooperation and promotes a constructive agenda. He hopes that bringing in outside investors will also help strengthen the relationships between Russia and their Asian neighbors.
The next phase of the Primorye project will expand the goals and reach of the first phase by 70 per cent, which will also require an estimated investment of $500 million. It will include both a 4-star and a 5-star hotel, and offer approximately 500 slot machines and 170 gaming tables. Strange as it may seem, Vladivostok, Russia may be primed to join the elite ranks of great gaming cities such as Las Vegas, Monte Carlo and Macau.