Estimates advanced by the Global Betting and Gaming Consultants suggest that gambling, in general, generates approximately US$1.4 trillion worldwide with Japan and the United States emerging as the two largest industry players, accounting for US$488 billion and US$439 billion respectively. Within a global context, land-casino gaming represents the largest component of commercial gambling, growing at an annual rate of 7.8 per cent per annum, with the US and Europe generating some 80 per cent (US$91 billion) of all activities emanating from the industry. By 2010 projected casino revenue in the US is expected to be in excess of US$60 billion.

Casino gaming has been legal from the 1930s in Nevada where gross gaming revenue - the net amount of money won by casinos from all customers - was US$540 million in 1970 but, by 2006, had grown to more than US$25 billion. The economic success of casino gambling is reflected in the rapid growth of Nevada, which was among the three fastest growing states in the US for each of the last four decades of the 20th century. This is reflective of an activity that is growing in popularity but has long been condemned or, at least, frowned upon as being a waste of time and resources, or a potential cancer on the social fabric of society.

Currently, the Jamaican government is planning to introduce casino gaming through a proposed investment of US$6.8 billion in two gaming hotels, Harmony Cove and Celebration Jamaica. The primary focus of this study is twofold. First, it will seek to determine the potential employment impact of the two hotel projects and, secondly, to examine, through the use of a 12/12 input-output model, the potential economic impact of casino gaming on sectoral wages, sectoral output and exports within the Jamaican economy.

Regulatory regimes

Generally, in the US a wide range of regulatory regimes has been used in granting casino licences. In other countries such as Canada, Holland, Austria and the Philippines, outright state ownership of casino operations is the preferred option. This mode of ownership is often influenced by political considerations, and the entity is subjected to the same inefficiencies that are normally associated with state-run enterprises. In contrast, the governments of Malaysia and Macao granted exclusive monopoly casino franchises to private operators without going through a bidding or legislative process.

Within the Caribbean, Antigua and Barbuda was one of the first jurisdictions to grant licences for the operations of interactive gaming and wagering institutions, which are subjected to the Anti-Money Laundering Act. The licensing and regulation of these companies are supervised by the Financial Services Regulatory Commission's Division of Gaming. Costa Rica, because of its dependable infrastructure, paucity of online gaming and Internet regulations, is viewed as the leader in online casinos and poker rooms. Companies incorporated under the laws of Costa Rica can operate an online gaming business under a data processing licence. It is important to note, however, that currently there are laws that control land-based gambling. Casinos operating in the Bahamas are subjected to a compre-hensive set of laws and regulations, ranging from the Lotteries and Gaming Act to the Suspicious Transactions and Anti-money Laundering Guidelines for Licensed Casino Operators. Interested casino operators are required to obtain a letter of consent from the Hotel Corporation of The Bahamas and then submit a request to the Gaming Board for a gaming licence.

Studies oncasino gambling

There are few studies that speak to the economic impact of casino gambling, but most rely on an oral or philosophical argument about the economic effects of casinos. Those studies that attempted to quantify the economic impact focused primarily on the estimation of employment, and the generation of gaming and fiscal revenues. Those in the latter group relied on the use of either an input-output model or an econometric-modelling approach to estimate the impact of gaming activities. Both approaches attempted to determine the economic effects by assuming that casinos create new income, that is, they constitute an export activity that has a multiplier effect within the economy. The critics of casino gambling argued that unless it is an export activity, casinos will crowd out other businesses. The underlying assumption that casino activity must be export-oriented is important because the participation of locals, the critics argue, does not result in the injection of new money into the economy but represents the transfer of money that would have been spent by residents in other local businesses. The central idea is that unless gaming represents a source of new income, it will not deliver the anticipated development impact because it's operation will eventually cannibalise other businesses in the area.

Other researchers disagreed with this position as, they argued, an economy can grow from gaming without being export oriented. To support his stance, one researcher cited, as examples, professional sports which do not produce a tangible export but do produce positive economic impact. Others suggested that positive impact can be achieved through internal trade and its attendant demand.

Estimating the economic impact

Currently, the Jamaican govern-ment is planning to introduce casino gaming through a proposed investment of US$6.8 billion in two gaming hotels, Harmony Cove and Celebration Jamaica. A recent study was undertaken to estimate some of the potential impact that gaming activity would have on the Jamaica economy. Some of the results are listed below:

The casino projects are expected to generate, in total, some 33,332 jobs (8,333 direct jobs and 24,999 indirect).

Casinos have a wage component of JA$0.30. That is, from every dollar of revenue earned, 30 cents is expected to be paid out as wages across all sectors of the economy.

Of the total wage bill generated by its activities, directly and indirectly, the gaming sub-sector will be directly responsible for some 40 per cent of all wages.

'Manufacturing', 'Agriculture and Meat', will experience higher wage expenditure because of their links with tourism.

For every $1 of expenditure on casino gaming, some $2.05 in output, directly and indirectly, will be generated throughout the economy.

Apart from tourism, the main beneficiaries of casino gaming will be 'Manufacturing', 'Agriculture and Meats', 'Distribution', and 'Trans-port, Storage and Communication'.

Gaming is expected to account for 51.23 per cent of the increase in competitive imports (external purchase of goods and service that are produced locally).

The gaming sub-sector is expected to account for 32.29 per cent of the increase in non-competitive imports.

For every one dollar (J$1) spent within the casino sector, 34 cents (J$0.34) will be leaked as a result of the importation of goods and services. Of this amount, 0.25 and 0.09 cents of every dollar will go towards the importation of competitive and non-competitive goods and services, respectively.

Recommendations

Tourism and in particular the gaming sub-sector can make an important contribution to the Jamaican economy. With income derived from tourist-oriented gaming activities being distributed across many economic sectors, it is important that strategies be developed, to ensure that import leakages are reduced, especially with respect to competitive imports.

To the extent that competitive imports impede economic growth and development, and since there is no reason to expect the reversal of trade liberalisation, it is imperative that the relevant authority seek an internal solution to this problem. Emphasis, therefore, needs to be placed on the laws that seek to deter anti-competitive and anti-dumping behaviours. At the same time, tourism linkages must be reinforced with the other economic sectors. The study highlighted that 17.02 per cent of total competitive imports is sourced by the manufacturing sector. It is, therefore, important that policies be developed to strengthen linkages with those of other sectors, as this would increase the demand for locally produced goods and services. On the other hand, where imported goods are not being produced by the manufacturing sector, but production possibility exists within the economy, policies should be implemented with the aim of activating or fostering entrepreneurial responses, by both domestic and foreign investors, so as to encourage production of such goods. The study highlighted that 31.5 per cent of the inputs used in the 'Manufacturing' sector are not locally produced. There is, therefore, an opportunity to spur domestic/foreign entrepreneurial responses and consequently create much needed employment.

To achieve these goals, however, Government is required to put in place a policy framework that would remove the current investment barriers, create domestic advantages that would allow investors to compete successfully, both in the domestic and international markets, and actively promote the inflow of manufacturing-oriented investment into the economy. The ultimate objective here is to help the economy to increase the breath and depth of linkages so that more of the value-added generated locally is retained through the offering of a wider range of domestically produced goods and services. Furthermore, the development of domestic-supply capabilities would also aid in the transfer of knowledge and much needed technology.

Abridged version of Messrs Diaram Ramjee Singh and Allan Wright's presentation at the UWI Mona Policy Forum on Casino Gambling April 2009.

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