South Korea Revises Tourism Fund Guidelines to Allow Casino Operators Loans for Construction and Expansion

South Korea’s Ministry of Culture, Sports and Tourism has revised its guidelines for tourism fund loan support. Casino operators can now borrow from the Tourism Promotion and Development Fund for new construction or expansion projects for the first time.

Applications for the fourth quarter loan round began accepting submissions on 31 August. Casinos were added to the list of eligible businesses for facility loans, the first inclusion since the program began in 1998. The change comes amid plans to raise the maximum annual contribution rate paid by casinos to the fund from 10% to 15% of GGR.

Revised Loan Limits for Casino Operators

Operators had previously been restricted to working capital loans. Those were capped at 50% of operating expenses over the previous year to a maximum of KRW3 billion. The updated guidelines permit borrowing up to KRW15 billion for new construction or expansion and up to KRW8 billion for renovations on top of the working capital allowance, according to reporting by Inside Asian Gaming.

Industry Reactions and Concerns

At the recent IAG Academy Summit, Chen Si – the COO of Singapore’s Resorts World Sentosa and former CEO of Korea’s INSPIRE Entertainment Resort in Incheon – warned that the increased levy would have an operational impact and could affect operators’ ability to refinance. “This is such a big variable in the model that it will have some material impact on financing,” Chen said.

This is puzzling because Korea is about a US$2 billion market, so 5% of that is US$100 million. It raises the question of whether the Korean government really needs US$100 million. It’s not material to them like it is to the industry, so the intention behind it remains unclear.

An industry official was quoted as saying: “Extending the scope of loans to facility funds is a positive but the discussions on raising the contribution rate and introducing license renewals are moving forward at the same time, so we are concerned that the expanded support may be a carrot for tighter regulation.” Operators now face the task of determining whether improved access to capital will counterbalance the higher mandatory contributions.

Reporting: Inside Asian Gaming

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