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Members of civic groups opposed to gambling hold a press conference in front of the National Gambling Control Commission offices in Seoul’s Jongno district condemning plans to open a casino on Yeongjong Island

By Kim Young-hwan, Incheon correspondent and Surh Jung-min, staff reporter

The neighborhood of Unseo in Incheon’s Central District is administratively part of Yeongjong Island. Called Jayeon Island (“purple swallow island”) in the 13th century “Illustrated Account of Goryeo” for its many swallows, the island has lain deserted for more than a decade even after nearby Incheon International Airport was built on reclaimed land in 2001 and a 982.4 square kilometer swath covering its surface was designated in 2003 as a Free Economic Zone (FEZ).

The post-financial crisis years after 2008 saw a spate of failed investment projects - Design City, 8 City, Yeongjong Broadway. Finally, in 2012, the focus shifted to casinos. Less than two years after the discussion began, Yeongjong Island is poised to host South Korea’s first casino developed by a foreign company. Approval was granted to a business that already failed one suitability test, thanks to a prior review system that amounts to a preferential program for foreign casinos.

The Ministry of Culture, Sports and Tourism announced on Mar. 18 that it had approved a review for a foreigners-only casino in the FEZ on Yeongjong Island. The request came from LOCZ Korea, a joint China-US consortium linking the Lippo Group and Caesars. After previously being judged unsuitable in its first review in June 2013, LOCZ Korea passed the second time with stronger credentials, including an improved credit rating and larger first-phase investment.

The prior review system, instituted in Sept. 2012, offers exemptions to foreign investors that are not available to domestic ones. Foreign investors are allowed to request a review for a casino permit if they pledge investment of over US$500 million and make a payment of just US$50 million of it - without the government bidding process required for South Korean investors.

“[LOCZ Korea] met the criteria for a request, with the size of investment, funding characteristics, credit situation, reasons for disqualification, and payment of a foreign investment, and the investment plan received more than 800 points, which is the standard for suitability,” said Kim Gi-hong, director of the ministry’s tourism bureau. “That’s why the review committee voted to approve.”

According to a report submitted by LOCZ Korea, the first phase, which continues to 2018, will include the building of a foreigners-only casino, hotel, shopping mall, and convention center in Midan City, a 2.7 million m2 zone at the north end of Yeongjong Island, with an investment of 743.7 billion won (US$695.4 million). An integrated resort (IR) is to be built at a total construction cost of 2.3 trillion won (US$2.15 billion), scheduled to be completed in 2023. LOCZ Korea projected effects of 890 billion won (US$832 million) in tourism revenues by 2020, the creation of around 8,000 jobs during the 2014-18 construction period, indirect employment of around 2,100 people during operation, and 127 billion won (US$118.7 million) in direct revenues, based on predicted sales of 680 billion won (US$635.8 million) for its tenth year of operation.

The permit decision is now raising concerns that Yeongjong Island is set to become a battleground for casino investors. On Mar. 18, a government source said ideas for “opening the way for South Korean investors to participate through additional bidding” were also being considered. Three or four other interested foreign companies, including Universal Entertainment and Las Vegas Sands, are also reportedly weighing a move. The Paradise Group, South Korea’s largest casino conglomerate, is working on a 2 trillion won (US$1.87 billion) casino and resort on Yeongjong Island for 2017, while Grand Korea Leisure (GKR) is examining its options for going onto the island.

Mar. 18. The members criticized that fact that while at present the casino will only be for foreigners

But questions are already being raised about whether the investment will proceed as planned, or how much employment can actually be expected. The domestic hiring numbers in the government’s announcement on Mar. 18 were recommendations, rather than requirements. Some are suggesting that the casino plan could end up an “eat and run” situation, where foreign speculators move in indiscriminately, collect short-term profits, and take off.

The MCST has said it plans to manage the companies by putting a three-year term on casino approvals, requiring their regular renewal, while mandating the Minister’s approval for any project right transfers between companies.

The biggest concern is the decision to allow an inherently speculative industry like casinos in without any social debate, all in the name of massive foreign investment.

“It may help in the short term to stanch liquidity for the Incheon Development & Tourism Corporation,” agreed Choi Hye-ja, secretary-general for the Incheon chapter of the Citizens’ Coalition for Economic Justice. “But in the long run, an industry like casinos could be toxic, with all the huge social costs associated with underground finance, the sex industry, drugs, and gambling.”

The government, which has cited tourism as an example of a “creative economy,” aims to turn Yeongjong Island into South Korea’s version of Las Vegas. But the debate over the social costs has yet to even begin.

Please direct questions or comments to [english@hani.co.kr]