You could be forgiven if the obscure town of Bavet, on the border of Cambodia and Vietnam, does not top your list of places to see. After all, Cambodia’s own tourism body describes it simply as a checkpoint between the neighbouring nations.

But Bavet is home to one of Cambodia’s casino and gambling hubs, and it’s a hit with the Vietnamese.

“They nickname that Cambodia border town ‘casino city’,” said Jonny Ferrari, a gaming industry consultant based in Cambodia. “Every day, it is only Vietnamese coming in – in and out, in and out, all the time.”

As many as 12 casinos operate in Bavet, but with a landmark decision by Hanoi to allow Vietnamese people to gamble legally, the transient town and the businesses based there may have run out of luck.

Late last month, Vietnam’s government announced that from mid-March and for a three-year trial period, citizens aged above 21 and earning at least 10 million dong (HK$3,400) per month would be allowed to gamble at two soon-to-be-completed casinos – one on the island of Phu Quoc and the other in the Van Don Special Economic Zone in the northern Quang Ninh province. A third location in Ho Tram is expected to be added to the list of approved casinos.

Similar to rules governing gambling in Singapore, Vietnamese residents will have to pay to enter the casinos – about 1 million dong per day or 25 million dong per month.

With average incomes under 4 million dong per month, the fee is expected to act as a barrier to many everyday Vietnamese. The nation’s other casinos and slot parlours will continue to be for the use of foreign passport holders only.

Vietnamese are reputed for their appetite for both legal forms of gambling – such as the lottery, dog and horse racing – and illegal, underground wagers.

Yet this vast demand has been largely unmet due to laws restricting locals from gambling, according to Union Gaming, a global securities firm.

This pent up demand has made neighbouring Cambodia a honeypot for casino developers targeting cross-border players. There are some 69 licensed casino operators in Cambodia, according to the government, with the vast majority located on either the Vietnamese or Thai border.

But the latest development leaves Bavet vulnerable. According to Union Gaming, the small border town could bear the brunt of the impact of the Vietnamese government’s decision. “Many businesses there will struggle to survive,” warned analyst Grant Govertsen, who said a local and legal casino would be a “death blow” for Bavet.

Hanoi’s decision is likely to prove costly for the Cambodian government, too. Cambodia’s Ministry of Economy and Finance collected US$37.4 million in taxes from its 69 casino licensees during the first nine months of 2016, up from US$34 million in all of 2015. More than half of that came from border casinos.

“Yes it is true, it will impact us for sure. Our existing casino policies have focused on developing the rural areas,” Ros Phirun, deputy director of the finance industry department at the Ministry of Economy and Finance, told This Week in Asia.

“With Vietnam legalising gambling for its citizens, of course it means not so many will come here.”

Phirun confirmed that Cambodia was working to release its own new regulations this year to keep its industry competitive.

Industry insiders expect these to include a Singapore-style two-tiered gaming tax to replace the current annual fixed fee. At present, Cambodia’s largest casino operator, Nagacorp, is required to pay just 2 per cent of its gaming revenue in tax in a one-off annual payment.

Vietnam’s latest move, meanwhile, is aimed at offsetting some of its own deterrents for would-be developers.

Hanoi has insisted on a tax of up to 35 per cent on gaming firms and demanded a minimum investment threshold of US$4 billion for would-be casino operators.

That figure, however, has been revised downwards to US$2 billion as part of the new decree.

These reasons, along with the venues’ locations, had historically been major hurdles for casino projects in Vietnam, according to Ben Lee, managing partner of IGamiX Management & Consulting.

“The two extreme locations of the designated zones of Phu Quoc and Van Don would not be commercially viable at all without the possibility of the local market, thus this new initiative,” said Lee.

“The risks and challenges for any investor entering Vietnam are already well established. Having said that, the potential benefit of being the first mover in any new market is a great incentive.

“If nothing else, this new initiative shows the Vietnamese communist government is capable of being flexible as the economic environment changes.

“Consider this – both Vietnam and China are communist regimes, yet Vietnam has broken the mould both on allowing casinos within its shores and now its locals can gamble.”

By Edouard Morton - The South China Morning Post - February 5, 2017