NagaCorp Announces $12 Billion Primorye-Mudanjiang Railway
Cambodian casino group NagaCorp announced it would build a $12 billion railway link between Primorye in the Russian Far East and the northeastern Chinese city of Mudanjiang. The idea is to connect northeastern China to the NagaCorp’s upcoming casino, Naga Vladivostok.
Vladivostok is the administrative center of Primorye Krai, a federal district of the Russian Federation. Vladivostok is Russia’s biggest port on the Pacific Ocean and a city of 600,000+ people. Primorye Krai has a population over 1.9 million.
The Russian Federation made Primorye Krai one of four special gaming enclaves, which are placed away from the European population centers of Russia. Such gaming enclaves are designed to cater to Russian high rollers and foreign tourists.
The Vladivostok-area casinos are intended to lure Chinese tourists from northeastern China. While Chinese gamblers can go to Macau, the distance betweeen Beijing and Macau is nearly 1,300 miles. The railway line will be 235 miles, so Chinese gamblers can take a train ride instead of a plane ride to the casinos in Primorye Krai.
NagaCorp and Dongfang Group Partnerhip
The Russian media service RBC announced a partnership between NagaCorp and Dongfang Group, a Chinese rail company. The RBC report noted, “NagaCorp has helped to bring in China Railway Dongfang Group because it needs to attract a massive tourist flow, primarily from China, to successfully develop its business. And it encouraged the Chinese investor to carry out this project.”
The two signed a contract in April, but few details have been released. NagaCorp said it would not reveal specifics “until an active phase of the work in this direction starts”. The casino company did note that a feasibility study is underway.
One detail yet released is whether the Russian government or outside investors have joined the project. $12 billion seems like a large expense for a casino company, so one has to expect large outside investments in the railway project.
Russia Authorized 8 Primorye Casinos
Russia has authorized the development of up to 8 land-based casinos in the Vladivostok region. At present, Tigre de Cristal is the only operating casino in the area. Lawrence Ho, the Chinese businessman who built Tigre de Cristal, sold his shares in the company in December 2017, due to disappointing revenue figures and a desire to get out of the Russia casino industry. Ho’s stated intention was to focus on a Japanese casino.
Whether eight casino companies will invest in Primorye Krai is another matter. The Russian Federation announced last year it would increase taxes on gambling revenues in a prohibitive fashion. If taxes are doubled or tripled on the Primorye casinos, it is hard to see many operators choosing to build in the region.
The government is frustrated with the slow development of the Primorye Krai region, which was given special tax breaks to encourage investment. The fact Vladivostok is within driving distance of northeastern China and within a ferry ride from Japan was expected to be a big draw.
Catering to Japanese and Chinese Gamblers
Lawrence Ho’s sale to a Taiwanese real estate company showed a lack of faith in the region. Of course, China’s government has indicated it might allow casino development on Hainan Island in the South China Sea. Many Chinese tourists might prefer gambling at a seaside resort to a Siberian casino.
Japan soon will license casinos, so many Japanese gamblers will be able to visit resorts in their home country. Even if the $56 fee to enter a Japanese casino might turn some gamblers away, it is still much cheaper than an overseas trip to Vladivostok.
Northeast China’s Mass Market Gamblers
The NagaCorp rail link is therefore the best chance Primorye Krai casinos have to remain viable. A steady flow of Chinese mass market gamblers from Manchuria and northeast China would swell the Vladivostok-area casinos, if the trip was practical and financially viable.
About NagaCorp and NagaWorld
A recent multi-billion dollar renovation of NagaWorld is designed to turn it into a world-class integrated casino resort. The casino is located on two sides of a major thoroughfare in Phnom Penh, with a large tunnel going underneath the street to connect the two halves. NagaWorld also contains a shopping mall.