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As widely expected, it was announced in December 2006 that Genting International had won the bid to build a casino on Sentosa Island. The S$5.2 billion (US$3.4 billion) Resorts World will complement the US$3.68 billion Sands Marina Bay Casino (to be built by a Las Vegas-led consortium in downtown Singapore). Genting had the backing of Universal Studios, including Steven Spielberg. The two casinos are expected to generate at least 60,000 jobs and may add up to 3 per cent to Singapore's annual gross domestic product by 2015.
On the surface, Singapore's decision two years ago to build two casinos was a no-brainer, given that Macau was built on gambling money and, as they say, Chinese (or Asians) are born gamblers. Yet the decision to go ahead was rocky politically, with the community split over the plan. For the first time in living memory senior members of the establishment came out openly against the casino project. Many were worried that there would be significant social costs. The government promised that it will make it very expensive for Singaporeans to gamble and help will be readily available for problem gamblers. In the end, the economic benefits of having a casino outweighed any objections on non-economic grounds. Singapore's lifeline lies in her economy and without the casinos, Singapore would lose a major tourist attraction.
What is not widely reported is coffee-shop talk across the causeway in Malaysia. Genting is not only Malaysia's only legal casino operator, but together with affiliated companies such as Resorts World are some of the biggest movers and shakers on the Kuala Lumpur Stock Exchange (Bursa Malaysia). Genting stocks are held by most international fund managers who invest in Malaysia.
Questions are being asked in Malaysia because just three months ago, Malaysian Prime Minister Abdullah Badawi, launched a multi-billion ringgit Iskandar Development Region (IDR) in the southern state of Johor, just across from Singapore. IDR will include a special 'international' zone whereby foreigners/Singaporeans can live without going through Malaysian passport control. In other words, Singaporean and international companies can operate in these special zones without worrying about border control at the causeway. One of the initial plans for the IDR was for a Disneyland-like theme park. Many on the Malaysian side had expected that (with or without foundation) Genting to be the developer of the theme park. Now that Genting has formally signed on the Sentosa deal, Malaysians are asking if it is a sign of no confidence in the IDR, and the Malaysian economy generally. The Malaysian side was also not too happy that Singapore Prime Minister Lee Hsien Loong remarked that Johor was sending 'mixed signals' on investments from the Republic. Several senior UMNO officials from Johor have already gone public warning the federal government that IDR must chiefly benefit Johor and not Singapore.
The fact that Genting is controlled by ethnic Chinese Malaysians also added another dimension as it gives the impression that Chinese Malaysians are investing out of Malaysia. Genting is such as iconic name in corporate Malaysia that its huge investment in Singapore will have political repercussions. There has always been a segment of the Malay ruling elite in Malaysia who cannot accept Singapore's economic success. Singapore has always benefited from immigration by the brightest ethnic Malaysian Chinese who feel they have no future under a Malay affirmative policy. Since the 1970s, thousands of Chinese Malaysians go to Singapore to work and to study. The bulk of them have ended up with Singaporean citizenship or permanent residency.
WATCHPOINT: The two Casino projects will add billions to the Singapore economy and reinforce Singapore's economic position. But such a high profile from an ethnic Malaysian Chinese conglomerate will add to the ongoing debate in Malaysian political circles about the flight of Chinese capital from Malaysia.
About our company:
AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.
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