DO WE REALLY NEED LAW ON CASINO?

Although once we enacted “Law on Casino” back in 1997, in order to regulate casino activities, it ended up with imprisonment of high profile politicians regarding corruption charges and unconditional enactment of Law on prohibiting Casino activities within Mongolian territory as a result of social, economic and political situation of that time.

In addition, because of absence of detailed legislation, the “Law on Zamyn-Uud free trade zone” which enacted in 2003, allowing operation of casino within the zone didn’t solve regulatory uncertainty surrounding casino. In 2006, Ministry of Justice and Home Affairs initiated drafting of Law on Gaming, in order to regulate the casino and gaming activity, which was arising social problems by that time. However, the draft did not get support from the Cabinet and rejected. Following failure of this draft, several more attempts were made with initiative from MP’s, including “Law on Limited Casino” in 2007, but ended up with same result as if others had.

So the main question is what lies ahead for the “one” that is being initiated recently? Is it same or not?

To answer such question, we need to determine whether there is solid political and economic needs for this draft and more importantly, can this draft really regulate casino activities effectively and make everything clear?

One: Is there a solid political and economic need for enactment of this draft?

In recent years, the number of players who enjoys casino table games including poker, blackjack, roulette increased, resulting out-flow of  currency from Mongolia into Casino legalized countries / such as South Korea, Macau/. It’s also affecting increase in numbers of underground betting and wagering within territory of Mongolia.

Hence, it could be viewed as real social need for casino in Mongolia.  To be clear, due to poor effectiveness and implementation of Law on prohibiting casino activities within territory of Mongolia, it could be time to change policy approach from restriction to regulation. But in making such decision, we must consider consequences, social costs /spread of psychology for easy enrichment among population, alcoholism, unemployment, prostitution, divorce, suicide and moral issues/ very carefully.

One of the main economic need for enactment of this draft is geographical location of Mongolia, which left us no other choice but to neighbor People`s Republic of China, residing highest number of gamblers. One of the proof is the gaming industry revenue of Macau, which far exceeded the one from ever famous Las Vegas, in 2009. We believe that it’s the reason why the countries situated within the region are successfully developing its gaming industry such as North and South Korea, Cambodia, Philippines, Thailand and Malaysia, even the most tightly regulated Singapore has set up the legal framework to establish Casino in its soil.

If Mongolia is to exclude itself from this race voluntarily, it will be act of incense of economics. Allowing casino activity in Mongolia will contribute a lot in time of great demand for overcoming budget deficiency and will help in attracting foreign investment and tourism in Mongolia.

Two. Can this draft really regulate casino activities effectively and make everything clear?

The proposed draft law consists of 8 chapters and 38 articles, and is intended to regulate relations regarding issuing casino license, registering and revoking license and oversight of casino activities in Mongolia. Although the draft law covered many crucial aspects in detail, followings should be reconsidered by the initiators:

• the provisions of the draft law, such as on issuance of casino license by the Committee established by the Cabinet; absence of competitive bidding for issuing casino license and grounds for refusal of issuing such license; empowerment of the Committee to request any other documents or materials from the applicant arises inconsistency with transparency principal for state organizations. It may further lead to suspicions of corruption and will end up with same result as previous attempts faced;
• the draft law also includes provision, securing state ownership for at least 34 percent of total shares of license holder. But it’s unclear whether it obliges state to invest needed contribution and bear risks per number of shares holding or is guaranteeing state right to veto on fundamental decisions to be made by the license holder. By allowing such state involvement, it will create conflict of interest, especially when inspecting, suspending and revoking license;
• it violates equality of Mongolian investors by restricting number of shares to be owned by Monglians;
• in addition rationales are not clear for stating minimum term of license /18.1/, permission of the Committee for transferring license holders asset exceeding 5 percent of its total asset /21.1/ and restriction on Mongolians to play in casino except those having right to inspect.