South Korea lifts hurdle for opening casinos

Previously, foreign investors needed to make an outlay of at least us$ 300 million up front before applying for a permit to open a foreigners-only casino. However, foreign investors have been reluctant to invest for fear that they could be rejected by the government in the process of getting the permit even after making a necessary investment.

The revision allows potential investors to apply for a permit from the Ministry of Culture, Sports and Tourism after investing only us$ 50 million instead of the previous us$ 300 million. The culture ministry then needs to notify the investors within 60 to 90 days of its decision on whether a permit would be granted.

However, there is one condition: the investors must invest a total of us$ 500 million, including the initial us$ 50 million, within four years from the approval date. If the condition is met, the investors will be entitled to a final permit for the operation of a casino. Another change to the rules eases financial requirements.

Previously, foreign investors eligible to apply for a casino license in Korea needed a credit rating equal to BBB or higher and equity capital covering at least ten percent of project cost. Investors' debt ratio needed to be less than 150 percent of the industry average or the investors should have recorded a net profit for at least two years in the last three years. After the revision, they still need to meet the first two conditions but must meet only one of the third and fourth conditions.

The revision came after President Lee Myung-bak ordered swift modification to boost foreign direct investment (FDI) in Korea during an economic policy meeting in Gumi, Gyeongsangbuk-do (North Gyeongsang Province) last month.

According to the Ministry of Knowledge Economy, an exemption to the free economic zone special laws was introduced in 2007 to allow foreign investors to open casinos, but due to high risks, no investment deals have been made so far. By attracting more investment in FEZs, the government hopes to lure more tourists from China and Japan.

The U.S.-based Caesars Entertainment and the Japan-based Okada Holdings expressed their interest in investing in Incheon Free Economic Zone (IFEZ). The two companies already have immediate plans to apply for a permit from the culture ministry.

There are 17 casinos in the country, 16 of which are open exclusively to foreigners, while Kangwon Land, in Jeongseon County, Gangwon-do (Gangwon Province) is the only exception allowing Koreans in.