In Cimei Township on the southernmost island in the Penghu archipelago, bathed in sunshine and ringed by white sandy beaches and warm tropical waters, a beaming crowd of elderly residents listens as Hung Tung-lin, director of the Penghu County Government's Tourism Bureau, addresses them from the podium.

The Penghu native is busily persuading the gathering regarding the future benefits of the "Penghu International Resort and Casino complex," which, Hung says, will result in five million tourist visits annually (the current figure is just 500,000), create 10,000 job opportunities and boost local tax revenues by NT$2.25 billion. And he says all Penghu residents over the age of 65 will receive an annual stipend of NT$20,000.

The weathered old islanders all crack broad smiles.

On January 12 of this year, the speaker of the Legislative Yuan brought the gavel down on passage of the third reading of revisions to the "Statute for Offshore Island Development," establishing the legal framework for the construction of gambling casinos on Taiwan's outlying islands. Suddenly, Penghu was in the spotlight.

According to the language of the amendment, regardless of voter turnout, a simple majority is all that is required to effect passage. Local groups in Penghu sprang into action circulating petitions, and expect to have the required number of signatures to initiate a referendum in another month. They hope to hold the referendum some time in June.

Critics and supporters alike predict the referendum's passage. Aside from the referendum's extremely low threshold for passage, the fact that many Penghu residents live on the edge of poverty amidst a bleak job market bodes well for its passage.

The decline of local industry has led to a gradual annual decrease in disposable income for islanders, and flights into and out of Makung Airport have been cut dramatically. Local fishermen can't even make any money fishing any more, and local boats are commonly seen setting out to sea to meet up with mainland Chinese fishing boats and barter for their catch in exchange for other goods. The few construction projects started by outside investors lie abandoned and overrun with weeds.

Penghu residents are banking that gambling tourism will help vault their beautiful islands into the international arena.

Will International Investors Really Come?

But this dream will require two sources of locomotion if it is to come to fruition. The first is to attract bona fide specialist international investors; the second is the ability of central and local government officials to regulate efficiently.

For the time being, it matters little, with worldwide casino revenues down 50 percent due to the global financial meltdown. But as economies begin to recover, will Penghu really be able to attract international investors?

The international market has demonstrated that casino investors, lured by high return rates on investments, are quite willing to pour large sums of money into basic infrastructure in the localities that host casinos, but Penghu's inherent environmental limitations and the inadequacy of pre-existing planning are almost certain to make investors shy.

Particularly important is the factor of transportation, says Yen Tzu-chieh, a first-year graduate student at National Taiwan University's Institute of Political Science and youth representative of the Penghu Association of Taipei. More than 20 million tourists visit Macau every year, 90 percent of them coming from Hong Kong and China by means other than air travel. International visitors to Penghu will only be able to arrive by air or sea, dramatically undercutting the willingness of international travelers to visit, Yen suggests.

Although he supports the casino initiative, Penghu Association of Taipei chairman Gao Jian-wen also believes central and local government officials have done little in the way of preparation, failing to produce a "comprehensive proposal" including such fundamental issues as how to improve power, water and transport infrastructure, management of environmentally sensitive areas, division of labor between central and local governments, and financing.

With its geographical limitations and inadequate planning, the bigger challenge for Penghu in its quest to become a gaming paradise will be whether it can successfully bring international investors onboard.

Internationalization in Macau runs deep, and even the older ladies sweeping the floors at the Venetian Macau can speak English. It's hard to imagine Penghu following that act.

Although a county government memorandum spells out in black and white that only the most qualified international candidates will be selected for resort development and operation through an international bidding process or the whole thing will be scrapped, Tourism Bureau director Hung gravely notes that the commercial screening and selection process is the key to success or failure, with only two operating licenses currently approved.

But given an insufficient degree of internationalization and the eagerness of Taiwanese, overseas Chinese and mainland Chinese investors to get involved, many doubt that Penghu will actually proceed with an international developer and eschew phony foreign capital or bid-rigging by local interest groups.

There is another key to the success of gaming in Penghu, and that is whether the governments involved approach the casinos with the appropriate regulatory vision and some imagination. For Penghu to get on the right track with tourist gaming, it must invariably move toward the Las Vegas model of a comprehensive resort development including hotels, conference space and live entertainment.

The Macau Model – Tough to Change Human Nature

As Gao Jian-wen sees it, the difference between Las Vegas casinos and Macau casinos is the difference between "gaming" and "gambling." Just 45 percent of tourist spending in Las Vegas goes to the casinos, the remainder being spent on food and beverages, accommodations and shopping. In Macau, the casinos account for up to 85 percent of tourist spending, and because visitors keep glued to the gaming tables, the average stay in Macau is just 1.1 days (in Las Vegas it is five days). In many cases, guests never even bothering to turn down their beds, because they don't even sleep, and hotels don't even need to do the housekeeping.

Additionally, Macau casinos employ a system of multi-level agency marketing and promotion, seeking out agents in each province of China, and district agencies further down the food chain. Agents at each level attract customers with pawn brokering services or loans, at either ordinary or usurious rates, and this leads to a rather uneven quality of clientele.

When gaming is brought to Penghu, everything from sources of visitors to the rules for casino games must be meticulously planned. National Taiwan University of Science and Technology lecturer Hwa Yueh-Jiuan, who has researched gambling psychology and teaches a graduate class in casino gaming theory, notes that with six percent of the ethnic Chinese population suffering from a pathological addiction to gambling – a rate three times that of the United States – and given the lack of diversity in ethnic Chinese recreation and leisure habits, as well as the inherent risk-taking nature of coastal dwellers, the tendency toward gambling is quite strong in Taiwanese society.

Hwa seeks to highlight the enormous social costs of pathological gambling and cautions that the designs of table games and slot machines should seek to avoid compounding problems.

Under Singapore regulations, the spouse of a problem gambler has the right to demand that casinos refuse entry to their spouse. In Montreal, Quebec, Canada, casinos provide psychological counseling to deal with gamblers' emotions.

This will be Penghu's first experience in handling such complex elements of human nature, and it will be Taiwan's first as well.

If this one shot at it fails, well, the warm, welcoming Penghu Bay of "sunshine, sandy beaches, surf and cactus" of which Pan An Pang sang softly in his ballad "Grandma's Penghu Bay" might be left a shambles.

If this ticket to the big time for Penghu islanders fails to pan out, it won't be for lack of willingness on their part; it's all in the hands of the government and potential investors.

Translated from the Chinese by Brian Kennedy

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Chinese Version:  澎湖賭上自己的未來