Gambling crackdown brings big revenue drop in South Korea
Stars and Stripes July 6, 2008
CAMP RED CLOUD, South Korea — Slot machine revenue on U.S. installations in South Korea has dropped by millions of dollars since rules to prevent illegal gambling were introduced in January.
But despite the downturn in one of the big funding sources for the peninsula’s Morale, Welfare and Recreation system, officials say users won’t see a drop in services.
Revenue for February through April, the first three-month average under the current enforcement measures, was $8.48 million, according to figures Stars and Stripes obtained over the past two months from MWR and Installation Management Command-Korea and the Air Force Personnel Center at Randolph Air Force Base, Texas. The amount is a 49 percent drop in the average three-month gross revenue of $16.75 million in fiscal year 2007.
In fiscal year 2007, South Korea’s Army and Air Force gaming machines took in $67 million of the program’s $113 million gross revenue from bases in Europe and the Pacific. South Korean installations had 623 fewer machines than in Europe — where off-post gambling is more readily available — but still took in nearly $40 million more than Europe.
In a January series on gambling abuse and illegal slot machine use at overseas installations, Stripes learned of numerous incidents of illegal gambling by South Koreans without status-of-forces agreement access to bases on the peninsula. Servicemembers and others citing those incidents also claimed there were cases of loan sharking to gamblers needing money.
On Jan. 20, U.S. Forces Korea began mandatory identification card checks and increased random police checks, along with other measures to stop illegal practices.
In February, each service on the peninsula saw its gaming revenues drop considerably.
Kunsan Air Base’s revenues went from $214,297 to $64,122 in one month; Chinhae Naval Base’s revenue went from $370,598.90 to $98,341.98; and the Army’s total take went from $3.97 million to $2.44 million.
While gross revenues best reflect how much money users are spending on slot machines, net revenue is a better indicator of what comes back to servicemembers in MWR services.
In 2007, MWR received about $25 million from the Army Recreation Machine Program fund after it paid for program upkeep.
The region’s MWR program expects to have about an $11 million yearly drop in revenue, South Korea MWR chief Dan Ahern said.
That won’t affect services budgeted in MWR Korea’s $130 million annual program as much as it will projects such as new sports fields and buildings.
But MWR has already built so many fields and buildings they don’t believe there is much demand left for them at bases expected to remain past 2012, Ahern said.
"There will be impact, but to customers it will be essentially invisible," Ahern said. "The program is still very profitable and will be based on projections for next year."
Fields on the drawing board like those at K-16 and Camp George have already been paid for, Ahern said. So have several "minor projects" — those costing less than $750,000 — such as a renovation at the Schoonover Bowl at Camp Casey, Ahern said.
Other improvements will be covered by the South Korean government as part of the plan to relocate servicemembers at Yongsan Garrison and bases north of Seoul to Camp Humphreys in 2012.
The Installation Management Command-Korea, which oversees bases and facilities, is an indirect beneficiary of MWR’s construction projects.
"We want to make it clear that appropriate enforcement of the rules against unauthorized gambling will continue, regardless of its impact on revenue or profits," command spokesman Ed Johnson said. He added that the drop in revenues could be attributed to both the new rules and a weakening economy.
Since tighter controls went into effect, military police say they have detained only one person for using the slot machines illegally, according to U.S. Forces Korea.
"We feel that the new rules have effectively deterred unauthorized persons from attempting to use gaming machines peninsula-wide," USFK spokesman Dave Palmer said.
Stripes recently asked numerous soldiers and civilians whether they had seen illegal activity in gaming rooms over the past six months. Although a few said they had seen South Koreans in the gaming rooms, none could be sure if they were unauthorized.
Also, no one reported open loan sharking or payments to Korean employees from others for guest access to base gaming rooms.