Business
Vanuatu Puts its Money on the Internet Gambling Business
Four licences issued already
The range of revenue drawn on by the Vanuatu Government isn¹t wide. It doesn¹t include income tax because there isn¹t one. Last year¹s collection of 6996 million vatu (about US$48 million), 1998 million vatu (about US$13.7 million) less than spending, came mainly from import tax, Value Added Tax, fees and spin-off from such sources as Vanuatu¹s tax haven business and international shipping registry.
By the end of this year licence fees and a cut of the gross profit from Internet gambling business it is licensing should boost revenue by what could eventually become a handy annual sum.
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One locally owned business is already running under legislation approved by parliament in March last year. At least one major Australian gambling business is preparing to set up in Port Vila, the capital. Another, IDPL, which formerly traded as Casino Australasia, has been bought by Southern Equities Holdings Ltd, owned by the Australian Waterhouse family gambling business.
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"That is a pretty good coup for Vanuatu," says Geoff Sheehan, of Interactive Gaming Consultants Ltd, a company contracted by the government to supervise business for it.
He says that the ultimate authorities, the finance minister and director of Customs and Inland Revenue, have so far issued four licences.
Two have traded successfully over the Internet, one of which is not currently trading, Sheehan says.
"One is doing quite well. The other three are in the process of purchasing systems and having them audited prior to getting approval for taking bets for money. They should all be up and running by the end of the year."
An application by a sports betting business that had wanted a casino licence had been rejected. The future? How long is a piece of string? "We are currently working with 10 or 12 serious companies and they are either concluding due diligence on us as a jurisdiction or are preparing licence applications. "There are another 15 companies who could be considering the due diligence process. They are also looking at some Australian states and territories like Norfolk, and the Isle of Mann, Antigua, Dominican Republic, Ontario and other places."
The issue, he says, is that operators will pick the jurisdiction that gives them the greatest legal protection and cheapest cost.
Vanuatu charges a US$75,000 licence application fee, a US$50,000 annual fee and 2.5 percent of the operator¹s gross profit.
How competitive is that? "Tasmania is cutting four percent, Antigua three percent, Dominica - it is so hard to work out. There are fees as well, which are lower in some areas and higher than others. But we are serving in the top two of fully licensed regulated jurisdictions." What could Internet gambling be worth to Vanuatu? "Potentially not a windfall. But it could be a solid contributor. There is no quantum to it. How can we forecast what investors are going to decide?"
A licence holder must have a physical operating presence in Vanuatu. A small business might need six staff, a larger one as many as 25, Sheehan says. Internet gambling worldwide began about four years ago. Currently, there are 1400 to 1500 Internet gambling sites. Since many are unregulated, it is another gamble to play on one that is not regulated.
Vanuatu's interactive gaming laws are a guarantee that operators licensed by them play fair and square, Sheehan says. "The government decided in 1999 on a legislation for interactive gaming as opposed to just selling licences for a variety of reasons. The reason they did it that way was to ensure that they did not get caught up in money laundering."
Vanuatu's attractions were "the financial investment status of the country. It is a fully licensed and regulated jurisdiction. The telecommunications infrastructure here is more than capable of meeting the needs of the industry. The manner in which the regulation is managed considers the operators" cost to market and time-to-market issues as well as the regulatory issues. In other words we work fleet of foot. We are using a three-value statement: Safe, secure and responsible."
Vanuatu¹s decision to licence Internet gambling was followed by numerous business jet flights to Port Vila carrying Australian operators anxious to check out the scene, a Port Vila resident told Pacific Magazine. Until mid-2000 Australia led the establishment of interactive gambling.
Then the government, under pressure from the anti-gambling lobby, announced a 12-month moratorium. Since they were uncertain of Australian government policy, gambling businesses couldn't decide whether to choose Australia or such other jurisdictions as Vanuatu to invest in. An executive of the Packer family¹s Publishing & Broadcasting Limited was reported in May as saying its Internet gambling team had been looking at Vanuatu for some time because of Australian Federal curbs on Internet gambling. It was "certainly the most likely destination."
A Sydney Morning Herald report said the $US75,000 licence could bring Publishing & Broadcasting Limited A$50 million to a Packer-owned Internet casino in its first year of operation. Sheehan told Pacific Magazine that for Internet gambling "you go to a website on a PC and dial up to gamble on absolutely anything. "You can pay your money into a gambling site but no credit betting is allowed; cheque, cash credit cards or debit cards. With cheques or cash there are requirements in Vanuatu to check for primary and secondary accounts, particularly if cash is being used. Once money is in a player¹s account they can gamble. There is a trust account held by the licensees in favour of the player.
"I am not talking about unlicensed, unregulated; it is required to be done in Vanuatu. You must have your computer systems in Vanuatu to control interactive gambling and people to service them. The number of people depends on how big your operation is. "There has to be a production system and a backup and archive system in case the production system goes down. "There must be a test system for all the computers and the network. All these systems, the hardware and the applications they use, are audited and must be approved before they can be turned on for money."
Sheehan said that an operator would need US$42 million for the first six months of trading. Facts and figures were "hard to work out".
For someone prepared to take bets from Americans, at the end of 12 months with a reasonable advertising and market strategy, should be turning over US$30 million a month for a gross profit somewhere between 3.5 and 3.6 percent. "That¹s if all things are equal."
Advertising and promotion to capture a worldwide markets would probably cost US$3 million a month. Sheehan has a 12-year association with Vanuatu.
As a management consultant in Queensland he was hired by the Golden Casket organisation to buy an interactive gambling system and implement it.
