analysis   Casinos' turn to fold     RUDRA PANGENI KATHMANDU, April 24: After about five decades  of operations, the curtains fell on the gambling and entertainment business this month after the government declared casinos illegal on April 20 for not complying with the law and not paying their dues even after repeated warnings and an extended nine-month deadline. The government endorsed the Casino Rules 2013 to regulate and bring the gambling business into the ambit of law and administration and operate gaming in a systematic way. But none of 10 casinos applied for new licenses even when the deadline was extended by nine-months. In an interview with Republica, Tourism Minister Bhim Acharya said that there was no reason now to allow casinos to keep operating as their objectives, particularly that of collecting revenue, could not be achieved. Besides revenue, the government allowed casinos to run as they provided jobs and brought in foreign tourists. “They were also not paying their bills to hotels, suppliers and even employees, therefore we had to take the most stringent of actions and ban them,” said Acharya, adding that casino operators attempted to influence political parties and bureaucrats instead of clearing their dues and royalty even when more than ample time was given to them.  Dinesh Gole/Republica According to the tourism ministry, eight casinos have to pay a total of Rs 654 million in revenue, accumulated over the last seven years. Officials of the Hotel Association of Nepal (HAN) also confirmed that the casinos owe hotels a significant amount but did not provide further details. Kishor Silwal, the president of the Casino Association of Nepal said, “Feud among the casino operators, the government frequent raids on casinos, and casinos top clientele -- visitors from India -- diverting to Goa, India, caused a slowdown in the gaming businesses.” Goa only emerged as a new casino hub recently. Silwal also accepted that casinos were yet to pay dues to hotels, suppliers and even pay out to their employee’s welfare funds. He said the business had been suffering from a slowdown over the last few years. Silwal further said, “To make things worse, the government’s doubled the annual royalty by issuing new rules. This has made our businesses almost unviable.” Operators say the casino business is at a ‘sick status.’ Some also acknowledged that they were compelled to allow Nepalis illegally into the casino to maintain business as newly established casinos in Goa and Sikkim, and many other destinations in South Asia had taken away their visitors. Nepal’s casino business has faced problems one after another. To make it worse, Silwal says newly emerging ‘sports betting’ has sapped businesses when important sports events are happening around the world. Such games have become more frequent in recent years, he says. Cricket and football matches in India and the South Asian region, happening more these days according to Silwal, are diverting prospective customers. Moreover, casino operators also say that they are facing overstaffing and undisciplined staffs. Bulk entry of Maoists cadres in 2006 and 2007 badly affected their balance sheet and the workers started becoming undisciplined, say casino operators. WHAT DO CASINO RULES-2013 SAY New rules were endorsed for the first time to regulate casinos, which were governed and managed by the Gambling Act of 1963. The rules have provisions to not only keep tabs on all activities of casinos by keeping records, including every financial details, but also CCTV surveillance in casino activities. The new rules have defined every income of casinos as ‘windfall gain’ and casinos are to collect 25 percent tax on earnings and submit it to the tax offices duly. Likewise, the rules also state that mini-casinos in the Tarai can only operate in four-star hotels. But mini casino operators say there are no such hotels and complained the new rules are meant to ruin them. Other rules include casinos having to spend two percent of their income on social activities like education and health, among others. Prabin Pandey, an executive member of HAN, said that gradual increment of royalty would have made more ‘business sense’ than doubling royalty which has pushed them to shut down. The royalty amount doubled from Rs 20 million per annum to Rs 40 million annum. Pandey owns Shangri-La Hotel, which has Cashino Shangri-La operating in its premises by a Malaysian company. Pandey also said that the company walked out saying that there is no business sense after the new regulations, heavy increment in royalty, and labor problems. According to the new law, interested party has to have Rs 250 million in paid-up capital and deposit Rs 40 million. One of the casino operators said owners were actually relieved by the government’s decision to close them as they would have faced major protests from employees had they themselves taken the decision to shut down. TOURISM SECTOR HIT HARD  Estimates say that 200,000 visitors come to Nepal for its casinos only. Casino operators claim that about 15 to 20 percent of the room occupancy of five-star hotels are with casino visitors, therefore Nepal’s tourism sector is likely to be hit hard by the shut down. Pandey, the executive member of HAN, says that the casino is an important tourism product but is now just the latest of the vanishing products, after trekking routes, jungle safari, and shopping, among others. According to Pandey, nearly half of all Indian tourists, or 150,000 Indian tourists alone, are the visitors to casinos in Nepal. Hotels, in general, used to sell off-season packages to Indian tourists who traveled to casinos in Nepal, but by shutting down the casinos they have nothing to sell. Pandey said effects would be significant in the upcoming off-season. Tourism entrepreneurs also say that even tourists from Malaysia, China and Macau had started visiting the country for casinos, besides a section of westerners. Silwal also said that the casino visitors occupied 5,000 room nights per year in five-star hotels alone. OVER 10,000 JOBLESS  Over 10,000 people have been left jobless after the shut down. Trade unions say that they are preparing to announce protests, demanding their jobs back. Nepal Entrepreneur Hotel Workers Union President Laxman Tiwari said that some employees in their late forties would find it hard to imagine starting out in any other profession. Prakash Shrestha, a trade union leader affiliated to the UCPN (Maoist), said that Minister Acharya has assured them that they will not remain jobless for long. However he complained about the uncertainty about opening new casinos, leaving the employees stranded out of job. WHO WILL OPERATE CASINOS? Minister Acharya said those operators would be given priority but they have to pay revenue first and clear bills of hotel and employees’ payment and fulfill new criteria. Asked about the reasons behind the rise in royalty and large amount of paid-up capital, Acharya said the government was positive about addressing genuine concerns of casino operators, but they should first clear their dues. “We will give priority to them first,” added Acharya. He also indicated that foreigners have shown interest in establishing casinos in Nepal but he did not specify who they are. “Casinos were operated by foreigners in the past and foreigners have invested in casinos indirectly. We will not ask them from where they brought the investment,” added Acharya. Though the Casino Rules 2013 states that foreigners can invest in casinos in Nepal, the government has not defined ‘casinos’ as an industry, which is the basis for getting foreign direct investment permission from the Department of Industry. However, it is obvious that casinos were started by foreigners and some casinos have received foreign investment too. HOW CASINO STARTED IN NEPAL  The first casino was opened by RD Tuttle, an American national, by a Royal decree in the late 1960s. Some say it was established for gambling for the royal family. Tuttle expanded it to eight casinos in joint-investment with his employee Rakesh Wadhwa by early 2000s. They were operated under Nepal Recreation Centre Company. However, the casino business saw tumultuous days after the People’s Movement II of 2006, as Wadhwa took over all the casino businesses by arbitrarily removing Tuttle. Many casino operators today credit Tuttle ‘ as the pioneer of casino business in Nepal.’ Tourism entrepreneurs admire Tuttle for his contribution to increasing the number of Indian visitors to Nepal. He also had published four travel magazines. Others say the downfall of casino business started when Tuttle was pushed out. In 2010, the government issued an arrest warrant against Wadhwa for not paying taxes, after repeated warnings. But he managed to abscond to India, leaving all the casino businesses in limbo. The employees recount the confusion and uncertainty in the business about who would run the decades-old business after the owner fled. Employees operated the businesses themselves by making their own committees and later some employees formed companies and owned the casinos by also accepting all the liabilities of casinos including outstanding dues. Silwal who operated three casinos, including Star Venus and Pokhara Grand, said that they accepted accumulated dues also though the businesses faced downward trend.