Mar 1, 2017 | Nguyen Dieu Tu Uyen Luu Van Dat

(Bloomberg) — Vietnam’s revolutionary founder Ho Chi Minh relied on lottery ticket sales to raise money for schools and hospitals during the war years. Now Hanoi’s Communist leaders are looking to casinos, horse betting and modern lottery-ticket machines to do the same.

So far this year, Prime Minister Nguyen Xuan Phuc has issued two decrees aimed at upping Vietnam’s game in the regional competition for gambling revenue while reducing the country’s growing budget deficit. A pilot plan to take effect in March will allow Vietnamese to gamble in the country’s casinos for the first time—currently only foreigners can. Another will allow bets nationwide on horse and dog races, as well as international soccer matches. This follows what officials call an “American-style” lottery started last year by the finance ministry in partnership with Malaysia’s Berjaya Corp.
A motorcyclist stops to buy lottery tickets.

“They need tax revenues,” said Alexandre Legendre, a Hanoi-based partner at Leadco Legal Counsel, which has advised foreign investors on the country’s gambling opportunities. “The fiscal situation of the country is under pressure.”

Vietnamese going abroad to such gambling locales as Macau, Singapore—and just across the border in Cambodia—spend an estimated $800 million on gambling every year, according to Augustine Ha Ton Vinh, an adviser to the Van Don Special Economic Zone where a casino funded by local investor Sun Group is planned about 175 kilometers (110 miles) northeast of Hanoi.

Now the government will aim to keep that money at home.
Customers purchase lottery tickets at a Vietlott store.

New legal outlets for gambling would be greeted enthusiastically by Vietnamese, who spent about $13 billion on lottery tickets from 2011 through 2015, with revenue growing an average of 12 percent annually, according to the finance ministry. The Southern Lottery Council, which comprises lottery companies in 21 provinces, pulled in almost $3 billion last year—up more than 200 percent from 2007, according to the organization.

Gaming industry investments will also boost the economy. An additional foreign investment of $3 billion into Vietnam’s casino businesses could increase gross domestic product by 0.58 percent in the first year, according the Institute for Regional Sustainable Development in Hanoi.

The new computerized Berjaya joint venture, Vietlott, supplements and even competes with Vietnam’s provincially operated lotteries. The local, five-decades-old operations provide a form of social welfare for elderly, poor and disabled ticket sellers who wander in and out of street cafes selling paper tickets. Vietlott reported revenue of more than $70 million last year after rolling out operations in about 20 percent of the country’s provinces starting last July.

Nguyen Van Thanh, who at age 55 left his comfortable administrative job at a state-owned insurance company, stands all day selling Vietlott tickets for 10,000 dong, or about 45 cents, in the garage of a Soviet-style apartment complex across the street from the State Bank of Vietnam in Hanoi. He sells as much as $1,300 in lottery tickets a day.

“Vietnamese people like to gamble,” he said. “We like being lucky.”

For years, the government has been ambivalent about gambling. Allowing Vietnamese to enter casinos built for foreigners is an experiment that will last for three years while the program is assessed.

Ho Chi Minh personally approved of the first lottery in late 1961 to raise money for the construction of schools and hospitals in Hanoi, according to Duong Trung Quoc, a parliamentarian and secretary general of the Vietnam Association of Historical Sciences.

While lottery revenue has funded education and social welfare for decades, the government nonetheless fears unrest from what officials call “social evils” associated with gambling, such as prostitution, drunkenness, and heavy indebtedness.
A propaganda poster featuring the struggle against “social evils” including drug addiction and prostitution in Ho Chi Minh City in 2011.

Until the latest decrees, Vietnamese have only been allowed to legally play state-run lotteries and place bets at a highly regulated dog-racing operation in the southern province of Ba Ria-Vung Tau.

The first casinos open to locals most likely will be far from urban areas, said Ben Lee, managing partner at Asian gaming consultancy IGamiX. An earlier decree written by politburo members—and later revised by the prime minister to exclude specific projects—awarded the first licenses to Vingroup JSC to build on the southern island of Phu Quoc and Sun Group’s Van Don in the north. After the new decree, the politburo will still decide which of the country’s eight casinos and proposed new projects get licenses.

“Local gaming near an urban center encourages what they are trying to avoid—problem gambling among the people who can least afford it,” Lee said.

Guidelines requiring Vietnamese to be age 21 and prove a stable monthly income are aimed at people like Ho Chi Minh City electrician Vu Anh Tuan, 35, whose monthly earnings of $263 can’t pay off his $13,000 gambling debt. Tuan, who has a 2-year-old daughter, sold his motorbike and said he’s pressuring his mother to sell their house. He has friends whose debts are higher and one who is now homeless.

“My wife and I argue all the time over the debt from football betting,” Tuan said.

Vietnam’s economy grew slower than the government expected last year, and its budget deficit is widening due to declining revenue from state-owned oil companies and an agricultural sector hit by drought. The country’s 2016 debt is estimated at 64 percent of gross domestic product compared with 41 percent in Thailand and 56 percent in Malaysia, according to the World Bank.

Vietnam is following the lead of other Asian governments that are endorsing legal gambling in a region that embraces games of chance. Japan’s parliament passed a bill legalizing casinos in December, while Universal Entertainment Corp. is preparing to open a $2.4 billion casino in Manila.

“Vietnamese people like to gamble. We like being lucky.”

Overseas gaming companies have long eyed Vietnam for expansion. Las Vegas Sands Corp. has for years considered a resort in Ho Chi Minh City and Hanoi, George Tanasijevich, the company’s managing director for global development, said in a statement. The company is “eager to proceed” with a project depending on future casino regulations, he said, adding that the three-year pilot program presents uncertainty and risks.

Hong Kong’s Chow Tai Fook Enterprises Ltd. and VinaCapital Investment Management Ltd. are investing in a $4 billion project in the prime minister’s home province of Quang Nam along the central coast. In January, former hedge-fund manager Phil Falcone, the largest investor in the Grand Ho Tram Strip casino resort a two-hour drive from Ho Chi Minh City, met with the prime minister in Hanoi.

Longstanding provincial lottery sellers fear all this new competition—and for good reason. Confined to a wheelchair, Nguyen Thi Tien, 70, sets up a wooden table every afternoon to sell lottery tickets on a sun-washed street clogged with motorbikes and lined with clothing shops, restaurants and other lottery sellers in Ho Chi Minh City’s Chinatown.

Since Vietlott began operating last summer, she has experienced a 50 percent drop in ticket sales, reducing her daily income to less than $3 a day.

“In the future, there will be other kinds of gambling, and I am afraid that there will be fewer people buying traditional tickets, which are essential to people like me,” said Tien, an umbrella at her side and a jar of iced lemon juice on the table.
Customers check lottery results next to a barbershop.