In 2006, Russian President Vladimir Putin submitted a plan to the Russian Parliament that would limit the $6 billion gambling industry in Russia to just four special locations or “zones”. This plan in concept was passed in April 2008 and calls for all of the casinos in the country to relocate to one of the four zones before June 2009. Once passed into law the new measures will prohibit any new casinos to be opened after the new year as well as doing away with any gaming facility that is worth less than $23 million. This would eradicate the smaller gaming institutions from operating completely and allowing only the more established and profitable facilities to remain operating.
The zones, located in and around the Primorie District around Vladivostok, the Baltic commune of Kaliningrad, the Rostov and Krasnodar regions on the Black Sea coast bordering the Ukraine and the Altai Republic bordering Kazakhstan and Mongolia, would be the only areas where gambling of any sort would be legal.
Recent reports being received from various world media agencies say the plan to move the casinos appears to be temporarily on hold, thus giving the Russian casinos more time to plan and move their current casino operations. Since the plans passing, the Russian Casino industry has intensively lobbied the Parliament to extend the 2009 deadline because of the costs and time involved to tackle such a huge undertaking. Although no “official” substantiation in the granting of this extension has been given. The new deadline would give the casinos five additional years, until 2014, in which to move their facilities and operations into the four zones.
Many reasons have been giving for the restructuring of the gambling industry into the four zones. One of the reasons given for this massive redistribution of the industry is to entice gambling related tourism by centralizing and focusing the industry into smaller and more concentrated areas. By having the casinos limited to these zones instead of just having gaming institutions haphazardly spread over the country, it will be easier to advertise and promote casino industry and hopefully increase tourism from within and outside of the country. The current distribution scheme or lack thereof, worries politicians and residents alike as there are currently no laws in place to determine where the gambling facilities may or may not be constructed.
The restrictions are also seen as a way to control where gambling establishments are established as currently they continue to “pop-up” throughout the country. Some of these gaming locations, while consisting of only slot machines, have sprouted up next to local area schools. This has caused some concern in the Parliament and among the parents in these areas. The deputy chairman of the parliament committee, Vladimir Medinsky, responsible for drafting the law states “This is a business based on vice. It brings no good.” He continued to tell the Associated Press that “It hasn’t been banned altogether, because it is a natural vice and should therefore be controlled.”
The gaming organizations believe that there do need to be some restrictions in how the industry is managed but they see the new legislation as more of a prohibition than a management effort and are pressing lawmakers to postpone the enforcement of or redesign the law to allow casinos to be allowed through Russia instead of confined within zones. Yevgeny Kovtun, the vice president for the Association of Gambling Businesses within Russia says “In the U.S. people know about Las Vegas from childhood, but in Russia gambling tourism doesn’t exist. Before, a person would pop into a casino or slot-machine hall between the metro and his house. Now … the gaming companies will have to entice him to the Pacific coast.” The Association believes that the government is assuming that any Russian who wants to gamble would be more than willing to buy a plane ticket to fly to the remote areas where the casinos would be located. Mr. Kovtun believes just the opposite that by restricting the gambling to the four zones that the gaming business would suffer catastrophic losses and it could quite possibly never recover from.
Another concern is the sheer cost of the property development and subsequent move of casinos into the four zones. The estimated cost of the establishment of these zones is estimated to exceed 727 billion rubles or roughly $31.2 billion. This staggering amount is roughly two times as much as Russia will be paying getting ready for the 2014 Olympics on Sochi. The four regions are anxiously awaiting optimistic investors to come up with approximately 580 billion rubles (80 percent of the total funds needed) while the remaining amounts would be appropriated through the Finance Ministry. If the Ministry denies the funding then the 1 January, 2009 deadline could be delayed.
Several feasibility studies suggest that the revenue generated by the four zones would exceed $17.5 billion through the attendance of and estimated crowds of over 9.4 million. According to the studies the Azov-City zone would be the highest contributor in attendance as well as financially with approximately 6.7 million persons and $11.2 billion respectively.
These results of these studies astounded the financial market as their previous estimates show that an expected 2 percent of the 3.5 million gamblers would travel to one of the zones to wager. This would indicate that only 70,000 people would be in attendance which is a vast difference in the studies’ 9.45 million. Also the financial numbers don’t add up as Russia’s best years of gambling only produced about $6. It is not clear if the forecasts expected a high influx of foreign gamblers to attain the speculated numbers.
It is clear that some management actions need to be taken with regard to the gaming industry in Russia. The industry itself agrees in principle but believes the current plan is overly restrictive and is designed to eliminate gambling more than control it. More planning and thought needs to be put into any law or policies to monitor and regulate the gambling in Russia. Before this complex nut can be cracked, a decisive plan that has the support of the government and the industry needs to be developed with all parties working together in order to achieve this common goal.