By: Jeff Caviston
Capitalism and Foreign Investment Thriving in Vietnam
Over the forty-plus years since the Vietnam War ended, the Socialist Republic of Vietnam (“Vietnam”) has grown to embrace—if not officially, then effectively—capitalism. This support of the free-market (or freer-market) is piquing the interest of foreign investors, with the result that billions of dollars have been flowing into Vietnam in recent years years. Accordingly, the Vietnamese government is actively reforming the country’s laws and regulations to embrace these foreign investors and encourage further economic growth.
One area of Vietnamese law that is currently experiencing reform involves the casino industry. For years Vietnamese officials have resisted fully embracing the gambling industry. While the country’s laws permit casinos—eight casinos currently operate in Vietnam—they have nonetheless prohibited residents of Vietnam from gambling at those casinos. Without local patronage—Vietnamese annually spend about $800 million gambling outside of their country—casino companies have been reluctant to invest in Vietnam, believing that their casinos would be unsustainable based solely on foreign gamblers. The few businesses that have invested are hedging their bets by making their casinos a small part of larger luxury resorts, opting to capitalize instead on Vietnam’s attractiveness as a tourist destination.
However, due in part to budget deficits and the realization that billions of dollars have been leaving Vietnam for other nearby, more casino-friendly countries, the government is beginning to see the potential benefits that casinos can have. Additionally, large-scale investors from across the globe have spent years lobbying Vietnamese officials and educating them on how to regulate casinos. Thus, Vietnamese officials announced in late December of 2016—in an apparent reversal of a decision from earlier that year—plans to institute a pilot program that will permit the construction of additional casinos in Vietnam and allow qualified Vietnamese residents to gamble.
New Laws Set Formula for New Casinos and Permit Local Gamblers
In January of 2017, the general framework of the program was approved under Decree No. 03/2017/ND-CP of the Government on Casino Business Activities (“Decree 3”). A second law, Decree No. 06/2017/ND-CP was enacted four days after Decree 3 and permits Vietnamese to gamble on some sporting events.
Decree 3 has two main components. First, Vietnamese citizens earning more than approximately $440 annually and who are at least 21 years old may gamble at a casino upon purchase of an entrance ticket. Instituted as a temporary program, this component of Decree 3 apparently applies to two casinos that are currently under construction and will last for three years once the first of those casinos open and is officially approved.
Second, to construct and operate a casino, the casino must meet certain criteria. Foremost, the casino must be part of some other type of business, e.g. a hotel. The casino must also obtain licenses by proving to the Vietnamese government that at least $2 billion is being invested into the casino and that the licensee has already invested half of that money. The number of slots and table games is tied directly to the amount of money invested—ten slots and one table game per $10 million.
Risks and Uncertainly Still Remain
Despite Decree 3 coming into force in March, as of August 2017 the government has not promulgated corresponding regulations for the law’s implementation. Thus, there is some concern with regard to how the new law will operate in the future. Moreover, Vietnamese officials have suggested similar reforms several times over the past decade without following through, leaving some investors in arrested development. Further delay this time may mean the end of several billion-dollar projects currently in the works and could further tarnish Vietnam’s recently-battered reputation among international investors.
Another wrinkle in the situation surrounding the new law is corruption in Vietnam. A recent report pegs the Vietnamese government as the second most corrupt in Asia, despite an on-going anti-corruption campaign—though some suggest these anti-corruption efforts are little more than pretense. This is even more alarming considering Vietnam’s history of corruption specifically related to gambling activities. Moreover, the legalization of gambling has generally tended to increase the incidents of corruption in government. Beyond the obvious risks of attempting to conduct business with corrupt governments, foreign investors could run afoul of their own national laws that prohibit engaging in corrupt transactions with foreign officials. Moreover, with the limited number of licenses available to casinos under Decree 3, casinos with “closer government ties” are likely to obtain approval while others could be stuck waiting indefinitely.
There are further issues as well. Vietnam’s neighbors—countries with similar prohibitions on local gambling—have begun to reconsider their attitudes toward the casino industry. Thus, while Vietnam casinos may see more local gamblers, they may also experience a decline in foreign gamblers. Additionally, there are the lingering public policy concerns over the consequences of allowing Vietnamese—who on average make the equivalent of about $6,400 per year—to gamble. Such concerns have been cited by government officials in the past to derail reform efforts.
Nevertheless, with the apparent financial incentives and the government’s willingness to ease restrictions on Vietnam’s markets, it seems only a matter of time before Vietnam fully embraces gambling. However, the slow, sporadic, uncertain progress of reforms, governmental corruption, and the availability of alternative gambling opportunities in neighboring countries may mean that Vietnam will liberalize its gambling laws only to miss out on the expected returns. But regardless of whether the anticipated benefits of legalized gambling are realized, it is evident that Vietnam is continuing to take steps to become a more-friendly place for western investors.
 Patrick Winn, Communist Vietnam Loves Capitalism, USA Today (Mar. 13, 2015), https://www.usatoday.com/story/news/world/2015/03/13/vietnam-capitalism-global-post/70261770/.
 Nguyen Dieu Tu Uyen, Vietnam Forecasts Record 2016 $15 Billion Foreign Investment, Bloomberg (Dec. 9, 2016), https://www.bloomberg.com/news/articles/2016-12-09/vietnam-forecasts-record-15-billion-foreign-investment-in-2016.
 Muhammad Cohen, How Vietnam is Changing Its Gambling Rules to Win Foreign Investment, Forbes (Feb. 9, 2017), https://www.forbes.com/sites/muhammadcohen/2017/02/09/how-vietnam-is-changing-its-gambling-rules-to-win-foreign-investment/#168c6e1430e7.
 See id.; see also Nguyen Dieu Tu Uyen & Luu Van Dat, Vietnam Wants Its Gamblers Staking Their $800 Million at Home, Bloomberg (Feb. 27, 2017), https://www.bloomberg.com/news/articles/2017-02-27/vietnam-wants-its-gamblers-staking-their-800-million-at-home.
 See, e.g., Muhammed Cohen, New Vietnam Casino Proposal a $4 Billion Gamble, Forbes (June 19, 2016), https://www.forbes.com/sites/muhammadcohen/2016/06/19/flashy-vietnam-proposal-looks-like-a-casino-while-real-deal-moves-ahead/#49c8c49839b0 (noting that “the resort side” of a currently-operating casino “has proven successful.”).
 See Giang Nguyen, Billionaire Developer Rides Vietnam Gambling Trend with Casino, Bloomberg (Mar. 21, 2017), https://www.bloomberg.com/news/articles/2017-03-21/billionaire-developer-rides-vietnam-gambling-trend-with-casino.
 See Matthew Campbell, Phil Falcone Bets on a Casino (Where Gambling is Illegal), Bloomberg (June 14, 2017), https://www.bloomberg.com/news/features/2017-06-15/phil-falcone-bets-on-a-casino-where-gambling-is-illegal.
 Steven Stradbrooke, Vietnam PM Confirms Locals in Casinos Trial Will Proceed, CalvinAyre.com (Dec. 28, 2016), https://calvinayre.com/2016/12/28/casino/vietnam-pm-locals-casinos-trial-proceed/.
 New Decree Providing the Legal Framework for Casino Business Activities in Vietnam, Baker McKenzie (Feb. 16, 2017), http://www.bakermckenzie.com/en/insight/publications/2017/02/new-decree-casino-business-vietnam/.
 Gaming and Casino Laws – Where Does Vietnam Stand Now? Duane Morris LLP Blog (July 25, 2017), https://blogs.duanemorris.com/vietnam/2017/07/25/vietnam-gaming-and-casino-laws-where-does-vietnam-stand-now/.
 New Decree, supra note 11.
 Saigon Securities Optimistic About Casino Industry in Vietnam, VietNamNet Bridge (Aug. 7, 2017), http://english.vietnamnet.vn/fms/business/183344/saigon-securities-optimistic-about-casino-industry-in-vietnam.html.
 See Nguyen Dieu Tu Uyen & Luu Van Dat, supra note 6 (stating that the new law and potential subsequent regulations “presents uncertainty and risks.”).
 See Nyshka Chandran, Vietnam Refuses to Lift Casino Ban on Locals, Dashing Foreign Investors’ Hopes, CNBC (Sept. 6, 2016), https://www.cnbc.com/2016/09/06/vietnam-refuses-to-lift-casino-ban-on-locals-dashing-foreign-investors-hopes.html.
 See, e.g., Campbell, supra note 9 (quoting a former manager of the Grand Ho Tram Strip resort that it would be “terminal” if locals are not permitted to gamble at the resort).
 See Michael Peel & Demetri Sevastopulo, Vietnam Government’s Role Under Scrutiny as Factories Face Rebuilding Task, Financial Times (May 16, 2014), https://www.ft.com/content/d3865852-dd06-11e3-b73c-00144feabdc0 (stating that riots in 2014 “dented Vietnam’s business reputation and raised questions over the behaviour [sic] of a government historically hungry for foreign investment.”); see also Chandran, supra note 20.
 Tanvi Gupta, Asia’s Five Most Corrupt Countries, Forbes (Mar. 13, 2017), https://www.forbes.com/sites/tanvigupta/2017/03/13/asias-five-most-corrupt-countries/#263ecee16a98.
 See Politicized Enforcement in Vietnam: Anti-Corruption Campaign Under CPV General Secretary Trong, Forbes (Aug. 2, 2017), https://www.forbes.com/sites/riskmap/2017/08/02/politicized-enforcement-in-vietnam-anti-corruption-campaign-under-cpv-general-secretary-trong/#2daed8c91b14.
 Kate McGeown, Gambling and Graft in Vietnam, BBC (Feb. 13, 2006), http://news.bbc.co.uk/1/hi/world/asia-pacific/4699904.stm.
 Rich Morin, For States, Gambling on Casinos May Be a Bad Bet, Pew Research Ctr. (July 2, 2013), http://www.pewresearch.org/fact-tank/2013/07/02/for-states-gambling-on-casinos-may-be-a-bad-bet/.
 See, e.g., Foreign Corrupt Practices Act of 1977, 15 U.S.C. §§ 78dd-1, et seq.
 See Campbell, supra note 9.
 See Nguyen Dieu Tu Uyen & Luu Van Dat, supra note 6.
 See Jasmine Solana, Beyond Macau: Asian Neighbors Punt on a Slice of Gaming Pie, CalvinAyre.com (May 25, 2017), https://calvinayre.com/2017/05/25/casino/beyond-macau-asian-neighbors-punt-slice-gaming-pie/.
 Central Intelligence Agency, The World Factbook: Vietnam, https://www.cia.gov/library/publications/the-world-factbook/geos/vm.html.
 See Nguyen Dieu Tu Uyen & Luu Van Dat, supra note 19 (noting that Vietnamese officials fear gambling will lead to “prostitution, drunkenness, and heavy indebtedness.”).
 See Chandran, supra note 20.
 See Cohen, supra note 4 (stating that the new law “is likely to succeed because Vietnam’s government wants it to.”).
 See supra notes 18-33 and accompanying text.
 See supra notes 3, 8 and accompanying text.