Legalised gambling in Thailand?
The pros and the cons
By Jon Fernquest |
Bangkok Post's op-ed section ran an analysis of the pros and cons of legalised gambling by Chulalongkorn professor of economics Pasuk Phongpaichit on Monday.
Professor Pasuk was a co-author of Utsahakam Kan Phanan (The Gambling Industry), published by Silkworm Books in February 2000, which she describes as follows:
"In this study, we looked at the legalised gambling industries in the UK, US, Australia and Malaysia. We visited these countries, looked at the casinos, and talked to owners, regulators, gamblers, and other interested parties. Here we summarise some key issues."
The op-ed piece below by professor Pasuk summarises the findings of this study, reporting in detail the problems that legalised gambling has led to in Australia.
As much as 70% of the adults in Thailand gamble regularly -- which is about the same as other countries:
"...it is not true that Thais are excessive gamblers compared to other countries. The proportion of people who gamble, and the amount as a per cent of GDP, are about the same in Thailand as in Australia and other countries."
With a combined total value of over 200 billion baht involved in the gambling economy, legalising gambling is yet another potentially divisive issue on Thailand's political horizon.
Below is professor Pasuk's article in full:
[Update: Just as I was finishing this article, Pali scholar John Kelly over at the Pali Collective, by pure coincidence, was publishing an interesting translation of what the Buddhist Digha Nikaya has to say about the compulsive gambling discussed in professor Pasuk's article:
"These are the six dangers inherent in compulsive gambling: winning breeds resentment; the loser mourns lost property; savings are lost; one's word carries no weight in a public forum; friends and colleagues display their contempt; and one is not sought after for marriage, since a gambler cannot adequately support a family." (Source: The Pali Collective)]
Is gambling's lure a fatal attraction?
GAMBLING IN THAILANDPASUK PHONGPAICHIT
(Monday March 10, 2008)
The question whether Thailand should have legal casinos or legalise certain gambling activities has been around for decades. The writer of this article was a co-author of Utsahakam Kan Phanan (The Gambling Industry), published by Silkworm Books in February 2000. The book is one of the most thoroughly researched books to date on gambling and its role in Thai society.
There is a lot of gambling in Thailand. An estimated 70% of adults gamble regularly, and the total value added involved is huge - possibly more than 200 billion baht a year. With some small exceptions, all of this gambling activity is illegal.
Should gambling be legalised? Some people think so. Some people strongly oppose the idea. It is a subject which excites strong opinions.
In Utsahakam Kan Phanan (The Gambling Industry), we did not support legalisation, and we did not oppose it. Rather, we think it is up to people - whether academics, politicians, businessmen or the Thai public as a whole - to decide.
And it is a very complex issue. It involves questions of principle, and also of practicality. We take the view that the issues of principle are up to each individual, and we do not address these questions in this book. But the issues of practicality deserve to be explained, so that people can understand them better.
From our study, we believe the issue of practicality has two main parts. First, whether legal or illegal, gambling has a social and economic impact. From the experience of other countries, what difference does legalisation make to this social and economic impact?
Second, there are many different ways in which a country can manage legalised gambling. We look at the legal structures and management frameworks in some of the major countries with legalised gambling. If the Thai people do decide they want legalised gambling, this information can act as a guide.
In our study of the size of Thailand's illegal economy in 1994-95, we included three major forms of gambling. We came up with the following estimates: (see graph to the right)
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In addition to those we studied, there are other forms of gambling including horse-racing, the stock-market lottery, and betting on boxing, cock-fighting and similar events. Only horse-race gambling is legal, and even then most of the betting takes place outside legal channels. As a rough estimate, we expect the total gambling industry is 20-30% larger than the total of the three segments we studied.
These figures are large. But it is not true that Thais are excessive gamblers compared to other countries. The proportion of people who gamble, and the amount as a per cent of GDP, are about the same in Thailand as in Australia and other countries.
In recent years, several governments around the world have legalised gambling to raise revenue. In Thailand, there are certain people who would like to do the same. In particular, they would like to legalise casinos.
In fact, we already have a semi-legal form of casinos. There are now at least several casinos located just beyond Thailand's borders, but easily accessible by Thai nationals: at Victoria Point in Burma, accessible by shuttle boat from Ranong; at the Ko Kong border crossing and at Phratabong in Cambodia; across the Burmese border in Chiang Saen; and several places in Laos. (See photo of casino at the golden trianble near Chiang Saen, Chiang Rai below)
The pro-legalisers contend that arguments from principle are irrelevant because the state simply does not have the will or power to suppress gambling. The anti-legalisers ignore the practical aspects on grounds that principle comes before everything.
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This is a stalemate. The short-term result is that gambling will continue to flourish, but increasingly beyond the reach and control of the authorities. Influential people will continue to benefit from protection. The damage to society and the economy is certainly greater than would occur if gambling were better controlled.
The present policy of making gambling illegal may benefit society to some extent in that it makes some gambling games less accessible. But it does not mean that such a policy entails no social cost.
One of the major costs is the corrosive effect on the police. There are many honest and good policemen who are not involved in protection of gambling. But they can be disheartened and discouraged by the behaviour of some colleagues. Good policemen may not receive due promotion on account of their work performance and integrity alone.
Another cost lies in the connections between gambling and organised crime syndicates which have links with some important policemen and generals. These syndicates also extend their protection rackets to other businesses.
There is clearly no easy answer to the legalisation issue. Any way ahead must win the support of a significant majority in Thai society. That way ahead can only be found by bringing the issues into the realm of public debate.
Legalising gambling looks like an easy way for government to make extra revenue and increase foreign exchange inflow. The money our big-shot gamblers take overseas will stay here. Foreign gamblers and tourists will be attracted here. Government can make more revenue with little investment.
But it is not quite so easy. It is not easy to manage. It is not a trouble-free pot of gold for the tax-gatherer.
In this study, we looked at the legalised gambling industries in the UK, US, Australia and Malaysia. We visited these countries, looked at the casinos, and talked to owners, regulators, gamblers, and other interested parties. Here we summarise some key issues.
Gambling is globalised.
This has two important consequences.
First, most of the profits go to international operators who have the technology and experience. The casino at Ko Son (Victoria Point) in Burma may be owned by Thais and patronised by Thais, but it is operated by an Australian company and staffed by Filipinos.
Second, the market is global. High-rollers travel to the most attractive locations. If Thailand is to succeed in this business, it must have some special advantage to attract this mobile market. At present, on a global scale, the market is over-supplied. Many countries have launched into the casino business in recent years because it looked like easy money. And most now are not doing well because the world-wide supply of casinos exceeds demand.
Legalising casinos increases the amount people spend on gambling, and reduces the amount saved.
Many studies show that open legal casinos attract people who have never gambled before, increase the amount of compulsive gambling, and raise total spending on gambling, particularly among lower-income groups. In Melbourne, the rate of saving by households dropped from 10% to 3% after a legal casino opened.
Lower-income groups are the most vulnerable.
Supporters of casinos always talk about the easy profits from high-rollers who have enough money to lose. But experience shows this is a small part of the business. The big profits come from developing a mass market for low-stakes gambling and slot machines. Casino operators know this, and they use high-pressure techniques to develop this market. They provide free transport for bored housewives and old people, and offer incentives (free drinks, meals) to increase spending levels.
Governments get hooked on gambling even more than the players.
Once a government earns revenue from gambling, it has a vested interest in increasing that revenue. Gambling operators know this, and know how to put on pressure, especially when the revenue falls because of recession or market competition.
In Australia, authorities started out with a commitment to limit the number of slot machines because these machines attract lower-income customers and lead to compulsive behaviour.
But later the authorities found these machines very attractive. The return is high. Control is easy because it can be managed electronically. So the authorities let the operators lobby them to increase the number. Victoria now has 27,500 machines and New South Wales has 80,000. The result is a very regressive form of tax because slot machine players are mostly low-income earners.
Financial control is far from easy.
The casino industry is all about money, and government has to be very careful if it wants to get its allotted share. All governments which allow legal casinos have large official monitoring bodies.
In Las Vegas, the Gaming Control Board has a large staff for investigation, enforcement and auditing. In Melbourne, the police has units stationed permanently inside the casinos. In all states in Australia, officials and casino staff sit every day in a room surveyed by video cameras to count the takings. The government has invested in mammoth computer systems to hook up all the tens of thousands of slot machines scattered around the state.
Anyone supplying the casino, even for something as simple as food and drink, has to go through rigorous security and probity checks. Police and officials patrol the casinos 24 hours a day. Video cameras scan every inch of the premises. Employees have their identity cards checked at random.
Why this care and expense? Obviously because a business with so much money sloshing around is prone to crime and cheating. These countries have bureaucracies and police forces which are relatively free of corruption. How would we apply similar levels of control in Thailand? Would it work? What would it cost?
Organised crime targets the casino business.
International mafia groups have a lot of experience with casino operation and are keen to get involved. The authorities in both the US and Australia impose stringent conditions on licensees, and use rigorous security checks and public hearings to screen out gangsters.
Still they are not always effective. In the US recently, mafia groups came in the back door by first taking sub-contracts to supply food and drink to the casinos, and then gradually controlled the licensees through influence and blackmail.
Elsewhere, organised crime simply uses casinos as useful places to launder money. Casino operators refuse to acknowledge this for fear of losing wealthy clients. Authorities turn a blind eye unless violent crime breaks out. Anti-money laundering laws provide some constraints but are not 100% effective.
Casinos attract other forms of organised crime, especially loan-sharking.
In Australia, organised gangs provide loans with extremely high interest rates to addicted gamblers. Recently there has been a series of high-profile murder cases resulting from these loan-shark operations; and cases of women forced into prostitution by the loan sharks.
Political interests are attracted by gambling.
Governments in the US, UK, Australia and other countries have strict laws to bar companies which have any political associations from operating casinos.
But this also is very difficult to manage. Despite these laws, in one Australian state the treasurer of the ruling party and another friend of the premier have major stakes in the casino company. In the UK, the award of the contract for the national lottery was very controversial, and an executive of the winning company has since been convicted of attempted bribery. Again, how would we manage this in Thailand?
Promoting gambling can promote crime.
Because of the global over-supply in the casino business, casino operators compete to attract wealthy players. So-called "junket operators" are paid to fly in tour groups of high-rollers. The authorities and junket operators are supposed to screen out undesirable players. But many of these high-rollers are drug dealers and the like. A police consultant in Sydney described to us how he had identified major drug dealers from Thailand, Taiwan and elsewhere on the junket tours.
(Source: Bangkok Post, op-ed section, 10-03-08, Pasuk Phongpaichit, temp-link)
Vocabulary:
Gambling
cock-fighting - a fight between two birds (cocks) often to the death or at least until severe injury (See Wikipedia)
slot machines - coi operated gambling machines with wheels that spin around, winning coins if the right combination appears (See Wikipedia)
high-rollers - people who gamble with large amounts of money
compulsive - cannot control oneself
compulsive gambling - a gambling habit that cannot be controlled
gambling stakes - the amount of money that someone gambles and can lose
low-stakes gambling - gambling with and possibly losing small amounts of money
get addicted to Y - cannot stop doing Y, have strong need and desire to do Y (for example, a drug addict, a sex addict, an addictive personality, etc)
get hooked on Y - get addicted to Y
get hooked on gambling - cannot stop gambling, have a strong need to gamble all the time
Organised Crime
organised crime syndicates - an association of criminals and criminal organisations for criminal purposes
a racket - an illegal activity used to make money (See Wikipedia)
protection rackets - when criminals with power in an area force force businesses to pay them "protection money" to guarantee that they won't be made the target of crimes (See Wikipedia)
blackmail - threatening to reveal true information about a person to the public or family unless the person pays money (See Wikipedia)
launder money - engaging in financial transactions in order to conceal the identity, source, and/or destination of money, a main operation of the underground economy (See Wikipedia on money laundering)
loan-sharking - people offering illegal loans at high interest rates, collection of money due often backed by blackmail or threats of violence (See Wikipedia on loan sharks)
General
a collective - a group of people who meet and work together on something (for example, an art collective, a writers' collective)
by coincidence - when two similar or related events happen at the same time without planning, by chance
X inherent in Y - X are natural and necessary parts of Y
breeds resentment - creates bitter anger about something
one's word carries no weight - no one listens to you or believes what you say
displays contempt - looks down upon someone, does not respect
the pros and cons of Y - the ways that Y is good (the pros) and the ways that Y is bad (the cons)
a divisive issue - an issue that people argue and disagree about, that divides people into two conflicting groups
on the horizon - may occur in the near future
the lure of X - X attracts people to something they should avoid
gambling's lure - people are attracted to gambling (and may be harmed as a result)
a fatal attraction to Y - fall in love with Y and die
it's up to Y - Y will make the decision
it's up to people to decide - people will or should have to make the decision themselves (not rely on someone to tell them what to do, like their daddy)
questions of principle - asking before doing, whether it is moral or not
questions of practicality - asking before doing, whether it is practical and doable or not (for example, Thailand does not have a large and expensive legal system to prevent corruption)
social and economic impact - the effect on the economy and society as a whole
a framework - a basic underlying structure or plan for an activity
management frameworks - a plan for managing some activity
legal channels - legal ways to do something
the will to X - a person's determination to do X, they won't stop doing it until it's done
does not have the will to X - does not have enough determination (energy, persistence, drive) to get X done
suppress Y - stop Y from happening
X on grounds that Y - do X for reason Y, because Y
a stalemate - when neither side in a dispute can win and no progress seems possible (See Wikipedia)
flourish - developing quickly and strongly, successful and active
continue to flourish - does not stop developing quickly and strongly
influential people - people who have influence [Thai: ithi-pon], people who have to power to make you do or believe what they want you to believe
makes Y less accessible - makes Y more difficult to do or get
X entails Y - X implies Y, if X then Y
the social cost of Y - costs of activity Y that everyone in society has to pay even if you don't do the activity (for example, if you breathe another person's cigarette smoke in a restaurant)
corrosive - gradually causes serious harm
corrosive effect on the police - gradually seriously harms the police force
disheartened - feel disappointed and less hope and confidence about something than you did before
discouraged - lost enthusiasm and motivation
colleagues - people you work with
promotion - given more important position or job in a company or government
X is due Y - Y should receive X (for example, if a policeman performs their job well and honestly they should be promoted but may not because they don't participate in illegal activities)
receive due promotion - given higher position or job in a company as a reward for good work
integrity - honesty, behaving according to moral principles, not being corrupt
the realm of Y - an area of activity or thought
bringing the issues into the realm of public debate - start debating about these issues in public (for example, in newspaper articles or blogs)
a big-shot - (negative) an important and powerful person
international operators - foreign companies that run businesses in other countries (either in a joint venture or on a contract basis)
high pressure sales tactics - techniques that sales people use to prevent you from leaving the store without buying something, and once you buy something, getting you to buy more and more (for example, would you like some shoes with those pants? would you like some socks with those shoes?...etc)
high-pressure techniques to develop this market -
offer incentives - offer rewards for doing something
has a vested interest in X -
a commitment to Z - accepting the responsibility of doing Z and promising to do Z (See glossary)
lobby X to do Y -
a very regressive tax, very regressive form of tax - (See Wikipedia on regressive tax)
X's allotted share - the part given to X, the share given to X
official monitoring bodies - agencies or committees that follow and check an activity to make sure it is following rules and not breaking the law
auditing - examining something to check for correctness
the takings - the earnings, the revenues from business
mammoth - very large
mammoth computer systems - very large computer systems
hook up - connect
rigorous - do very thoroughly and strictly
probity - a high standard of correct moral behaviour
rigorous security and probity checks - do very strict and thorough checks for moral behaviour
scan - look over quickly
the premises - the building and land belonging to a business or other organisation (e.g. a school)
at random - without a pattern
identity cards checked at random - check id cards of people without a pattern (probably too many to check all, so they check some to make people follow the rules)
sloshing - the sound of water moving around in all directions: slosh, slosh, slosh,...
so much money sloshing around - lots of money passing from hand to hand almost as if it was water...
X prone to Y - X has a tendency to Y
licensees - people who have been given official permission to do an acticity such as a business
stringent conditions - strictly controlled conditions, not just for show
impose stringent conditions on licensees - people who get official permission to do a business must follow the rules without exception
rigorous - very thorough and strict
rigorous security checks - check everything
public hearings - when authorities provide a time and a place when people can come and present their opinion directly to the authorities and hear the opinions of other people too
screen X - check X
screen out Y - check and get rid of Y
undesirables - people you don't want to have around for some reason (for example, they are a criminal or just smell bad)
screen out undesirable players - check for undesirable players, if undesirable then don't include them
screen out gangsters - check if they are gangster, if yes get rid of them
controlled the licensees through influence and blackmail -
turn a blind eye - pretend you don't see something bad that is happening (like a crime)
high-profile - very visible to the public
high-profile murder cases - the murder of a well-known person that is covered on TV and in the newspapers
bar companies from Y - prevent companies from doing Y, perhaps through a law or regulation
have major stakes in Y - own a lot of Y
a junket - a trip by an official or business person that is unnecessary, expensive, and paid for with public money
