Mongolia has rolled the dice before on establishing casinos but without much luck. A renewed attempt to open the country’s first casino in more than two decades is now underway as Mongolia looks for new avenues of economic growth.
A bill to legalise casinos, betting, lotteries and horse racing was submitted to Parliament in December and is making its way through various Parliamentary committees, according to the State Great Khural website.
The hope is that foreign visitors can be encouraged to make bets on slot machines and at poker tables after visits to the open steppes of the Mongolian countryside. Largely dependent on mining, Mongolia is looking for ways to diversify its economy and boost growth as it faces headwinds. Its currency has lost 22% of its value over the past 12 months and GDP has fallen to 2.5% after being in double digits a decade ago.
The casino concept is being pushed by the government after it declared the years 2023-2025 as the “years to visit” Mongolia. The bill in Parliament also provisions building horse racetracks and legalising lotteries.
Casinos have been opening across Asia over the past two decades, mainly catering to Chinese holidaymakers. The Philippines, Singapore, Cambodia and Malaysia are a few of the countries that have made a bet on casinos to boost revenue.
But as Mongolia heads down the path of casinos, some remain wary of gambling. In 2019 authorities banned civil servants from gambling in casinos in other countries amid reports that officials were spending an inordinate amount of time in casinos whilst on official trips abroad.
One quirk in the bill submitted to the Great Khural states that Mongolian citizens won’t actually be allowed to gamble in the casinos on their own soil.
While banning citizens from entering casinos in their own country is unusual, Mongolia would not be the first to enforce such a law. A similar restriction also exists in Monaco. South Korea also bans its citizens from all but one of its 23 casinos. This provision could prove controversial if lawmakers consider it not to be in line with the country’s democratic values, said Bolortuya Ulziibat, managing partner at Ulaanbaatar-based Tsogt & Nandin law firm.
“The government asserts that such a restriction does not violate human rights and only aims to prevent negative impacts on locals, such as gambling addiction,” said Bolortuya. “I personally can’t agree, because there may be some legal issues such as a conflict with the constitution and discrimination.” But such a provision may not be too controversial among Mongolians, said Bolortuya.
“Casinos are still a very sensitive and negative subject in Mongolia, almost like guns or drugs,” she said. “So if the government makes casinos open to Mongolians then people might protest against such a draft law. Personally, I think most Mongolians may like such a legal restriction.” Casinos have had a poor reputation in Mongolia since the late 1990s, when a casino located in the basement of the Chinggis Khaan Hotel was shut down after two years in business amid allegations of corruption and money laundering.
Some speculated that the casino was connected to the murder of prominent politician Zorig Sanjaasuren, who was assassinated in October 1998. Zorig, infrastructure minister at the time of his death and in line to succeed an outgoing prime minister, was reportedly against the business.
Later administrations attempted several times without success to re-establish a casino business, all of them withering in the face of public scepticism over legalised gambling.
If passed, the new law would permit authorities to issue casino operating licences valid for 30 years. Upon expiry of the licence, half the casino shares must be transferred to the government. The operator’s licence can then be extended an additional 10 years. Another provision would prohibit the transfer of a casino licence to another company after it has been issued.
The minimum investment required by the government is $300mn. The last time Mongolia saw an investment in tourism on that scale occurred in 2015, when Shangri-La opened up a $500mn hotel, office and shopping complex in Ulaanbaatar.
As for Mongolia’s take, a tax rate of 40% on profits would apply, equal to what is currently required of casinos in Macau. A portion of the revenues would go back into tourism development. The legislation would also require the operator to make all transactions through local banks.
"The aim was to create a real investment that would be adapted to the specifics of our country,” Nyambaatar Khishgee, Mongolia’s Minister for Justice, said during a briefing to Parliament members last month. “Three hundred million is the threshold needed to make a real investment from scratch, not just to rent a ready-made building and start operations.” Casinos would be permitted within a 1,000-hectare free trade zone in Khushigt Valley, near the New Ulaanbaatar International Airport. The zone, set up last year and approved by Parliament, is located 50 km south of the capital. The law protects whoever jumps in first, allowing that operator a five-year monopoly before licences would be made available to companies.
A majority of members in the Standing Committee that heard the first reading supported the motion to continue discussions of the law in Parliament.
Zolbayar Enkhbaatar, editor-in-chief of the financial newsletter Inside Mongolia, says casinos could help boost the economy and previous failures to pass a casino law shouldn’t deter legislators.
“It's a good step that we're even discussing this topic, because casinos used to be kind of a banned topic in Mongolia,” said Zolbayar.
But Zolbayar sees the rule that bans Mongolian citizens, along with the high entry cost for investors, as major impediments to development. “Because of those reasons, very few investors might be interested, if any,” he said.
While there are no currently no physical casinos in Mongolia, a number of online gaming platforms have emerged, although most of them are unauthorised. Several have been blocked in recent weeks by the Communications Regulatory Commission of Mongolia, according to News.mn, a local news portal.
While gambling in casinos would be outlawed under the law under review, the law would not ban gambling at short-track horse-racing events. Mongolia already has a culture of horse racing but those events are long-distance riding, and until now betting has been informal and usually between friends.
“The adoption of these laws has the potential to open space for new kinds of businesses, including horse stable facilities, betting software and rider training,” said Zolbayar.
One change from the norm is that the new law would require that jockeys are certified professional riders. This rule would prevent children – who serve as jockeys during summer festival races – from entering professional races.
Michael Kohn has covered Mongolia since 1998, reporting on social, political and economic changes in the country during its transition and growth. He has written travel guidebooks on Mongolia and two books: Dateline Mongolia and Lama of the Gobi.