How the Casino will influence the Cypriot economy
Chapter 1
Introduction
Melco International announced in January 2018 an opening of the resort in the Republic of Cyprus by early 2021. The resort will have a casino that will work temporarily in the selected location of Limassol, a Southern Coastal city in the Mediterranean Island. Later, the casino will be shifted to Melco International and the partners’ projected permanent property that will be named as “City of Dreams Mediterranean”. The consortium has a partnership of 75 and 25, with Melco International as leading firm headed by Lawrence Ho Yau Lung, a casino investor. The other partner in the consortium is Zakaki i.e Cyprus Phasouri Ltd. a conglomerate based in Cyprus. Initially, there was an American casino investor company, Hard Rock International Incorporation involved in the consortium when it obtained casino license valid for 30 years from the government of The Republic of Cyprus in June 2017.
The winner of the license is exclusively accredited and will enjoy the monopoly for fifteen years after that the other companies will be allowed to obtain licenses to compete for the consortium in Cyprus casino industry. The exclusivity of the license allows the winner to have a satellite casino in the country along with three slot parlours. The partners’ joint press release announced that the consortium will have a number of four satellite casino operating in Cyprus locations of Larnaca, Nicosia, free Paphos and Famagusta by 2018. Ministry of Tourism and Industry, commerce and Country Energy’ s organized event presented the finalized plan of Limassol casino resort by Melco International and partner Phasouri Cyprus respectively. The press release included “nation’s first – the casino resort, is the biggest program for the development of tourism industry in the country of Cyprus involving an investment of total EUR 550 million” stated by the consortium partners. The casino resort which will be a joint property of consortium partners is documented, labelled as “Europe’s biggest integrated casino resort”.
The features of the casino in the design also were also revealed in the press release. The promoters told that the resort will incorporate one hundred and thirty-six tables and twelve hundred gaming devices, a motel comprised of villas and five hundred hotel rooms, eleven restaurants and cafes. One sports centre, one health centre, retail store, swimming pools. A space of ninety-six hundred square meters will be allocated to convention and meeting settings and halls.
Head of Melco’ International said that they will like their projects in Philippines and Macau, invest with the local industries for the interiors and designs of the resort and top class infrastructure to come up with most sophisticated entertainment facilities embedded with state of the art technological applications in every business operation at the resort.
The consortium projected the resort attracting an estimated additional 300,000 tourist to the country per annum. The documented estimations told that effect of the casino on the local economy will be an approximate yearly Euro 700 million that by the end of the second year of the casino’ s business operations would be equivalent to four percent of the current gross domestic product generated by Cyprus. As far as the employment opportunities expected to be generated by the install of a casino in the country is projected as 4,000 job vacancies in the construction period and 2500 at the time of full operational phase of the casino.
Melco International acquired all of the share of Hard Rock Incorporation in the project and resultantly is leading the consortium with an approximate 75 percent shareholding. The acquisition took place after the approval of the government of The Republic of Cyprus. Melco International claims to be the biggest economy contributor to the local economy in the near future of the country by complying the aspirations of the government for a world-class casino in the country.
Melco International
Melco International Development Limited was established in 1910 and became public in 1927 by listing on Hong Kong Stock Exchange in 1927 with an EX code 200. The company was among the one hundred companies that first started business operations in Hong Kong. Today Melco International is a world-class firm functioning under the control of Lawrence Ho in leisure and entertainment industry with a leadership position in China, Russia and Philippines. In Asia, the company has a leadership position for developing, establishing and operating casino business with resort facilities having a major stake in Melco Resort & entertainment Limited listed on NASDAQ as MLCO.
Being the first to secure Cypriot license for establishing one of the biggest casino resorts in Europe Melco International will be entering the European market with a credible and worthwhile image. The exclusivity of license for fifteen years will allow the company to earn long-term monopolistic advantage of operations in the country that will contribute a huge amount to the revenue. Melco has won the “Corporate Governance Asia Annual Recognition Award” in 2016 awarded by Corporate Governance Magazine and also the ” Hong Kong Corporate Governance Excellence Award” by Hong Kong Baptist University’ s Centre for Corporate Governance and Financial Policy and Chamber of Hong Kong Listed Companies.
The company is operating in two major areas of business around the world principally, Leisure and entertainment gaming industry and services provision for leisure and entertainment and lottery schemes alongside manufacturing business of electronic gaming machines and their distribution especially plaques and chips. Besides Melco International operates I property investment and sales business too. The company is expected to enter the travel and tourism business in the future.
The Republic of Cyprus
The Republic of Cyprus presently is populated with 725,000 people out of whom Greek Cypriot population counts to 580,500 and Turkish community contributes 13,800 as in 81.6% and 18.4% respectively. Greek community speaks Greek language and follows commonly Orthodox Church of Cyprus. The 1960’s constitution reveals that the Armenian, Latin and Maronites willingly opted to belong to the Greek Cyprus Community. However, the Turkish community adheres to the religion, Islam and speaks Turkish.
Historical view
Just off the Limassol-Nicosia road, the remains of an ancient human settlement in Cypriote regions of Southern and Northern coasts are dated back to 5000 B.C. The history of Cyprus is divided into different periods of time according to realms of reigns and civilizations. 3900-2500 B.C era is named as the Chalcolithic period after the earliest civilizations in the region when the Island is thought to be first explored. The era of 2500-1050 B.C is known as Bronze Age when the natural wealth of Cypriote region was exploited and made pottery and items with and traded to Egypt, east and Aegean.
1050-750 B.C. era is called the Geometric Age when Phoenicians first built kingdom at Kition. That period is renowned for major developments and prosperity in the region. 750-325 B.C Archaic/classical period when the foreigners invaded the kingdom that was conquered by Egypt, Persia and Assyria. 333-332 B.C. Alexander’s era when he defeated Persia and took the region into control. Hellenistic era, 325-58 B.C. during which Egypt’s Hellenistic state defeated Alexander’ s generals and took over the rein. 8 B.C. 330 AD is called Roman Era, 330-1191 AD BYZANTINE period named after the Eastern Roman Empire.
Afterwards, the Cyprus region went through many geographical and political phases during Frankish, Venetian, Ottoman period and British colonialism period.
On 16th August 1960, Cyprus became an independent state named The Republic of Cyprus after the event of Zurich-London Treaty. Currently, she is a member of The United Nations, Commonwealth and the Council of Europe and Non-Aligned Movement. The British have two independent bases in the Cypriote region Akroti-Episkopi and Dhekelia.
Constitution
The constitution passed in 1960 was found to be non- functioning in many provisions and was amended in 1963 upon the recommendations proposed by the President of the Republic in order to make the law more functioning for the state affairs and public regulations. The amendments were opposed by the Turkish community and Turkish Ministers in the cabinet by walking out of the house. Since 1974, after the severe opposition of Turkish community the Cypriot region was divided into two parts, one under the Turkish government and the other under the Greek command.
Presently, Cyprus has an advantage of being associated with European Union under the third countries rule. The negotiations with the European community started in 1971 after the encouragement from the United Kingdom and signed an Association Agreement enforcing the completion of ten years and two stages. Due to conflict with Turkish community the economic progress of Cyprus reduced and delayed, however, after the completion of the first stage though, with consecutive extensions, the Association Agreement was signed for the second stage in 1987 that paved the way for Cypriote economic progression. The Customs Union between European Union and Cyprus requires the elimination of all the quantitative restrictions and tariffs on the agricultural and manufactured products. Simultaneously, The Republic of Cyprus will enable itself to align its tariffs with European Union by progressively adopting the external CET tariff.
Three financial protocols have been signed between Cyprus and European Economic Community since 1977 that allows the financial aid to Cyprus of 136 million by European Union including special financial loans, grants, and general category loans.
Economy
The post-independence era of Cypriote economy has depicted a rapid growth performing successfully with full employment rate and stability in progression. The economy suppressed and underdeveloped before 1960 transformed into a progressive and growing modern economy by development in each sector whether industrial or agricultural with dynamic services advents in technological and physical infrastructure. The country is considered in the upper-middle class of income economies. The progression is even striking considering the downfall caused by the conflict with Turkish community and partition.
The Cypriote community is found to be entrepreneurial and dynamic that has resulted in the economic success of the country, besides, there is a well-educated workforce working for the businesses and an economic system with a characteristic of strong market- orientation and solid official eco-political policies and regulatory reforms.
In a couple of decades passed the Cypriote economy has become more European- oriented. Since the Customs Union Agreement came into effect in the year 1988, the biggest trade partner of Cyprus is European Union now. After the country became a member of the European Union in full, the market, social institutions, trade policies and economic regulations have clearly shown an adoption of European- oriented harmonization.
Limassol Casino Resort
“I am proud that the Cypriot government has entrusted Melco and CNS to build Cyprus’s first Integrated Resort which will place Cyprus on the world tourism map and attract visitors, not just from the surrounding region but also from the whole of Europe and around the world. In the same way, as we delivered in Macau and the Philippines, we build with local partners, invest in extraordinary world-first architecture and design, create sophisticated entertainment experiences, and embed state-of-the-art technology into everything we do.”
Melco and Phassouri
Gambling in Cyprus
Chapter 2
Literature Review
A substantial body of research exists on Casinos and their impacts on society with different perspectives. The researchers have tried to assess the gambling’s effects on the society, lawmaking, economy and gamblers’ lives. A large proportion of the research is found in 1990s era, though it might be thought as outdated literature as modern studies have investigated casinos from various new perspectives, however, these studies have delivered some of the major findings of casinos and their impact on local communities. While reviewing the literature for the present study, the researcher has tried to include the most relevant and current studies and older studies are included only in case they were definitive and could help demonstrate how the research results of studies on casino have changed over the years. The researcher also found older the literature full of optimism dismissing the research on negative aspects and with defensive sceptic approach on issues of the social cost charged by the casino industry. The current contemporary literature is found to be more critical and addressing the earlier rosy nature of research reports. Some of the investigators tried to cater the social cost of casinos more vibrantly and rigorously and criticized the previous studies for not calculating the costs accurately. Different results and findings have been found in the literature that are included in this chapter to give a background knowledge support to the study.
Information on casino
A casino is a venue for gambling with a complex nature of business involving specialized and skilled employees including managers, financial executives, dealers, security personnel, supervisors and marketing staff. Casinos operate illegally also that will require them to hire extra personnel like debt-collectors and guys to watch out corps raids and cappers, ropers to bring the people in encouraging them to make bets (Asbury, 1938, pp. 182-184)
As a matter of fact, illegal casinos are often in need of more personnel and organization levels as they depend mostly on organized crime for protection, finance and debt-collection (Champlain, 2004). Gambling has a historical link with organized crime (Asbury et al., 1995).
Casinos are legalized in many forms and understanding of gambling and gambling venues operating in the market is becoming very important to formulate the policies and this asks for a greater scientific research. A number of four research journals are publishing studies conducted on the topic of gambling and associated problems, these journals are International Gambling Studies, Journal of Gambling Issues, Journal of Gambling Issues and Gambling Research.
Rorabaugh in 1979 characterized the American nation obsessed with salvation and money. Gambling historically has a crucial space in the subjects of crime, sin and spirit which is because of money infatuated cultural influence (Binde, 2001). Chance taking games were perceived as sin (Winship, 1939, pp. 10-11). Conventionally, people involved in gambling from the areas Mississippi, California and Eastern seaboard and were known as cheaters in the society who in myriad ways tried to con their gambling customers. The gambling theme became popular in novels and stories in the late 19th century (Oriad, 1991). According to Asbury the trend of writing novels on gambling themes was popular till early 20th century (Coates, 1930). The relationship between crime and gambling has also been demonstrated exaggeratedly in the movies showing the bad people in charge of gambling venues such as Casinos (Asbury et. Al., 1995).
Financial costs
A compilation of review of the literature presented in 1998 by Adam Rose. The researcher conducted a library research by studying thirty-six major studies on the topic of gambling and effects of Casinos on the economy. He proposed twelve research propositions based on the results and findings of the studies. If the Casino serves as an external market or no and if it functions like a factory that brings the money from external market to local economy? Rose draw a conclusion about the casino’s impact on the local economy by positing that “a new casino, or even limited attractiveness and placed in the market that is not saturated, will yield positive economic benefits on net to its host economy.” Such conclusion does not cater the issue of financial cost of that a casino puts on the society and economy. Rose further studies the investigations on the negative impact of casinos on the net economy and found that multidimensional and substitutive effects were caused by casino businesses operating in an economy. It was found that the casinos did not have multiplying effects on the economies of medium to large scaled cities. (Rose, 1998).
Around thirteen employment opportunities were created on every one million dollars of revenue in a casino. Anderson in 1996 conducted a secondary data research on impacts of casinos and concluded that gambling businesses indicate a larger multiplier of an economy. Rose, however, in 1998 assesses Anderson’s analysis of casinos having the largest income generation and output than any study (Rose, 1998).
In 2003 the University of Illinois assesses the effects of casino business on the economy of Illinois based on the data of the fiscal year of 2000-2001. The research indicated that a number of eleven thousand people got jobs in the casino that subsequently created another forty-five thousand direct opportunities and brought eighty-seven thousand induced vacancies. The researchers found that major economic impact of a casino on the economy was caused by the taxation to the government, however, locally the effects were smaller due to limited expenses incurred by casinos for vendors and leakage (REAL). Dollars 184.8 million were the total expenses incurred by casino industry that generated dollars 521 million additionally as output overall in the economy of Illinois state majorly in the industries of durables and services. That impact was in the Illinois state not necessarily such a multiplier to Allen County (REAL).
A research report presented by Connecticut Economic Resource Center concluded that Casino multiplier created 1.3x jobs in the economy of Wichita State and earning by 1.57x (CERC).
Casinos work as engines for growth of the economies or not is a question, researchers have been seeking an answer to. By economic growth researchers mean the employment opportunities, economic development, and promotion of tourism industry and more tax revenue to the government that can be spent on the health and education of people in the society. La Porte County could not grow in employment as though there was casino operating successfully in the city, the same case was reported for Detroit. The difference before and after the built of casino needs to be investigated before inferring the factors (Morse and Goss, 2007).
The wage rate in the casino is lower in comparison with the overall wage rate average in the economy. Another question was probed by the researchers that if the casinos work as cannabis for the hospitality and other entertainment industries with a substitution effect (Morse and Goss, 2007).
An investigative study in 2005 conducted by Crowe analyzed the effect of casinos on the hospitality business in the economy. The researcher assumed twenty percent rooms in hotels as complimentary reservations and fifty percent for the business tourists whereas rest thirty percent was assumed to cater the travellers in the town who came to visit the casinos. The report suggested that there was eighty-five percent occupancy per annum but the breakdown was not discussed 9 (Crowe, 2005).
Grinols, in 2004 in his investigation “Gambling in America” describes the effect of cannibalization caused by taxation charges paid by casinos in Illinois based on the tax receipt data. The researcher divided the tax receipts into ten categories. A total 21 data quarters was gathered and proximity of the tax receipts with the casinos business was determined. It was concluded based on the study results that tax receipts’ distance from casinos business that an additional revenue generated from the business influenced on many industries. An overall 170 dollars were contributed to the economy on every one thousand earnings of casinos. The researcher also found that on industries the casino revenue was ten to thirty miles away and he suggested further research along these lines of gambling effect (Grinols, 2004).
The literature has shown that the casino businesses have clear economic effects, however, a large research body has investigated the social cost caused by the casinos in the society. The next section of literature review will be compiling the findings of typical and modern research on the social cost of casino industry present in the economy.
References
Crow, V.T., 1936. Money receptacle. U.S. Patent 2,051,131.
Goss, E.P. and Morse, E.A., 2009. Governing Fortune: Casino gambling in America. University of Michigan Press.
Nichols, M.W. and Tosun, M.S., 2008. The Income Elasticity of Gross Casino Revenues: Short—Run and Long—Run Estimates. National Tax Journal, pp.635-652.
Rose, A.Z., 2001. The regional economic impacts of casino gambling. CONTRIBUTIONS TO ECONOMIC ANALYSIS, 249, pp.345-378.
Marshall, D., 2009. Gambling and organized crime–A review of the literature. Journal of Gambling Issues, (23).
Binder, P., 2009. Exploring the impact of gambling advertising: An interview study of problem gamblers. International journal of mental health and addiction, 7(4), p.541.
Humphreys, A., 2010. Semiotic structure and the legitimation of consumption practices: The case of casino gambling. Journal of Consumer Research, 37(3), pp.490-510.
