JAMAICA: PM GOLDING GAMBLES ON CASINOS AS PART

UNCLAS SECTION 01 OF 02 KINGSTON 000354

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/CAR (JTILGHMAN)(VDEPIRRO)
WHA/EPSC (LKUBISKE) (PMAIER)

SANTO DOMINGO FOR FCS AND FAS

TREASURY FOR SARA GRAY

E.O. 12958: N/A
TAGS: ENRG EINV EIND SENV ECON ETRD IBRD IADB JM XL
SUBJECT: JAMAICA: PM GOLDING GAMBLES ON CASINOS AS PART
OF IMPRESSIVE BUDGET PRESENTATION

REF: KINGSTON 279
KINGSTON 343
KINGSTON 342

SUMMARY
--------------


1. (SBU) Despite strong opposition from the powerful church lobby,
Jamaica's Prime Minister Bruce Golding has announced his
government's decision to issue two casino licenses. The conditional
licenses will be issued to real estate projects by Celebration
Jamaica (Palmyra Resort) and Tavistock Group (Harmony Cove) (see
reftel A). As part of the agreement, both groups will be required
to invest a minimum of USD 1.5 billion and build at least 1,000
rooms. Taxes generated from the industry will be used to fund the
country's enormous social deficit. Although casinos took center
stage, Golding used his first Parliamentary budget speech the
address the two biggest issues on the island: skyrocketing food
prices and energy security. Golding's speech appears to have been
well received, with most pundits suggesting he demonstrated an
excellent command of his new position. End Summary.

Vegas on the North Coast?
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2. (SBU) After years of robust opposition from Jamaica's influential
church lobby, Golding took the bold step of legalizing casinos. The
decision to revisit the introduction of casino gaming came out of
the review of a report prepared in consultation with
PriceWaterhouseCoopers in Canada, which concluded that casinos could
be a vibrant industry for Jamaica and result in significant new
employment opportunities. The Government of Jamaica (GOJ) has
established the following requirements in order to consider
applications for casino licenses:

A) minimum investment of USD 1.5 billion and the construction of not
less than 1,000 rooms;
B) casino component to be no more than 20 percent of the total
project;
C) operators of the casino to be subject to the approval of the
government after appropriate due diligence, including fit and proper
tests and evaluation of track record of success in the sector;
D) an appropriate regulatory framework with the necessary
legislation and enforcement mechanism in place.

While a firm decision has not been made, Golding intimated that tax
proceeds from the industry will be earmarked in the consolidated
fund to finance the country's enormous social deficit.

But, Gambling Is Not New
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3. (SBU) Although bringing full service casinos to the island has
always been a lightning rod issue, in reality, gambling has become
commonplace for many Jamaicans. There are horse racing events at
least twice per week, a national lottery, and numerous slot machine
establishments on the island. Golding highlighted this fact in his
speech, arguing that the country has tiptoed around the issue, not
wanting to be embroiled in the controversy. "We have sneaked up on
the issue while proclaiming our opposition to it", he continued. He
pointed out that in the 1990s the previous government had started
issuing licenses for the operation of slot machines, leading to
several gaming lounges and hundreds of slot machines in operation
throughout Jamaica. Golding noted that the only exception had been
that live gaming tables were not permitted; however, with improved
technology, many slot machines now carry games which, traditionally,
were exclusively table games. To make matters worse, in 2006, the
previous government had entered into an agreement with the private
equity group Tavistock for the development of the Harmony Cove
project which was subject to the issuance of a casino gaming
license.

Jobs, Jobs, and more Jobs...
--------------


4. (SBU) The decision to bringing major casinos to the island was
not surprising, given that then shadow Finance Minister Audley Shaw
told emboffs in August 2007 that casino gaming would be introduced
irrespective of which party was elected. Members of the Harmony
Cove board told emboffs casinos were "a done deal." Minister of
Tourism Edmund Bartlett has used the last four months promoting
gambling as a way to expand the tourism sector. The most important

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factor leading to the approval of casinos is that the Jamaican
Labour Party (JLP)-led government is coming under increasing
pressure to deliver on its promise to provide "jobs, jobs and more
jobs." In this regard, the government has approved proposals from
the developers of the Palmyra Resort and Spa, operating as
Celebration Jamaica Limited for a 2,080 room hotel at a cost of USD
1.8 billion. As part of its casino license, Tavistock also has
agreed to increase the size of its project from 4,500 rooms to 8,500
with an additional investment of USD 1 to 2 billion. With each
hotel room requiring two workers, these two investments are expected
to employ over 20,000 people.

Investment Climate
--------------


5. (SBU) Golding also spent much time addressing the perilous state
of the investment climate and the steps being taken to improve it.
"We are taking steps to improve the country's business friendliness.
We want to roll up the red tape and roll out the red carpet",
stated Golding. Chief among the measures being taken are tax and
labor market reforms, reduction in bureaucracy, and overhauling the
development approval process to create a one-stop agency to evaluate
land use and building projects with a 90-day period for approval or
rejection. By way of major investments, Golding announced that
7,000 new rooms are to be built over the next two years, with
expenditure of USD 157 million this year. This is to be
complemented by the development of a cruise ship terminal through a
collaborative effort between Carnival Cruise Lines and the Port
Authority of Jamaica. Additionally, projects such as the Vernam
field cargo transshipment airport, a new passenger airport, and a
major free trade zone complex are in the pipeline.

Energy and Food Crisis
--------------


6. (SBU) Since most Jamaicans are reeling from rising food and
energy prices, Golding spent most of his speech addressing both
concerns. He was particularly alarmed about the impact of soaring
food prices on the over 350,000 Jamaicans living below the poverty
line. The potential for social instability was not lost on Golding;
he pointed out that the world was facing the worst food crisis in
more than half a century, and noted that riots have broken out in 33
countries and that more rioting is likely to follow. To assist the
poorest of the poor, Golding outlined a series of relief measures
(Note: Septel will detail government response to rising food prices.
End note).


7. (SBU) Although food was the critical social issue, the cost of
energy was highlighted as the most immediate challenge facing the
oil dependent economy. Jamaica's oil bill is now equal to 70
percent of exports. To stem this tide, Golding announced that he
had instructed all government departments to target a 15 percent
reduction in energy consumption. Other initiatives include the
changing of the incentive structure to encourage energy efficient
devices such as solar panel systems and developing a National
Building Code to include mandatory stipulations for energy
efficiency. Golding also said he had a plan to work with a private
sector company to convert ubiquitous taxis from petrol to LPG, which
could save 30 percent on fuel costs.

Comment
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8. (SBU) From all indications, Golding's maiden budget presentation
appears to have been well received among Jamaicans. Most analysts
are suggesting that he demonstrated a good command of his areas of
responsibility. This is not surprising, given that he started
preparing for this moment almost 36 years ago. Performance aside,
the decision to introduce casino gaming is fraught with political
danger, given the influence of the church, and must have been a
delicate balancing act between economics and politics. But
Golding's government must start delivering on its promise of job
creation, so economics was the easier choice at present. The fact
that the decision was taken so early in the administration allows
the government some time to point to any economic expansion that
follows before facing elections. There is speculation that at least
two more licenses may be issued in the near future. The likely
candidates are Canadian-Jamaican billionaire Michael Lee-Chin and/or
hotel mogul Gordon "Butch" Stewart. Both have major interest in
Portland, an unspoiled area currently being developed as a high end
tourist destination. End comment.
HEG