Two resort-casinos planned for China

August 15, 1994|By Knight-Ridder News Service

Wayne Newton, showgirls and blackjack tables -- in China?

MGM Grand Inc., the Las Vegas casino operator, announced plans last week to build two multimillion-dollar resort-casinos -- a first for the People's Republic -- on Hainan Island in the South China Sea, with its own unsavory reputation for bar girls, real-estate speculation and loose law enforcement.

The official announcement declaring the proposed partnership between MGM Grand and Hainan province, China's largest free-trade zone, made no mention of the fact that gambling is officially illegal in China.

Officials said that when constructed, the resorts would attract well-heeled vacationers from Japan, Indonesia, Malaysia and other Asian nations.

"This can become the destination resort for all of Asia," declared Robert Maxey, president and chief executive officer of MGM Grand, owners of the MGM Grand Hotel and Casino in Las Vegas, in an interview.

"After I tasted some of the most delicious mangoes and papaya and walked on some of the pristine beaches of Hainan, I felt like I was turning the clock back to what Hawaii must have been like 100 years ago."

Mr. Maxey said MGM Grand would commit "hundreds of millions" of dollars to construct the casinos -- one in the island's capital city of Haikou, the other in the beach town of Sanya -- if a feasibility study concludes that the ventures can succeed. Sanya lies at the same latitude as Hawaii, and a new airport makes the city accessible by 747 jumbo jet, MGM Grand officials noted.

Technically, MGM Grand and the government of Hainan signed a memorandum of understanding giving the Nevada firm exclusive rights, over the next six months, to determine whether to proceed with the resorts, which would be the company's first foreign ventures.

Mr. Maxey said no definitive agreement has been completed, but he noted the announcement would not have been made if the company wasn't confident the ventures would proceed. "There are several issues to be worked out, be we are quite optimistic that they will be resolved," he said.

Mr. Maxey and Alex Yemenidijian, executive vice president and chief financial officer for MGM Grand, emphasized that gaming activities would be "only a very minor consideration" in the creation of the resorts. Mr. Yemenidijian suggested that gaming activities would cater only to holders of foreign passports, since Chinese citizens officially are not permitted to gamble.

The resort in Haikou, an industrial city, might include a bowling alley and a theme park, Mr. Yemenidijian said, while the facility in Sanya would offer tennis, water sports and a "showroom" where world-class entertainers could perform.

"As far as gaming, that's just another form of entertainment," Mr. Yemenidijian said.

MGM Grand officials said their discussions with Hainan began almost a year ago, when an official delegation from Beijing visited the Las Vegas hotel and suggested to MGM Grand officials that Hainan might be a good place to build a resort. Hainan offers Chinese officials a chance to lure high-spending tourists to a containable resort environment where their presence won't influence citizens on the Chinese mainland.

Mr. Maxey and others subsequently visited Hainan, and met directly with provincial Gov. Ruan Chongwu, who initialed the memorandum of understanding.

Even before the MGM Grand announcement, the island has gained renown throughout Asia as a place where law enforcement is spotty, corruption is rampant and everything -- including the attention of young women -- is readily for sale.

"The reason people are interested in Hainan is you can make a lot of cash, there's not much regulation and no effective enforcement," Huan Guochang, a senior economist for J. P. Morgan, told the Far Eastern Economic Review recently.

"In Hainan you can do whatever you want."

But MGM Grand's Mr. Maxey said the introduction of a Western-style resort on the island could improve local standards.

"If we didn't believe that some of Hainan's reputation can be overcome, and the frontier-land image couldn't give way to a beautiful resort," he said, "we wouldn't be interested."

Ross Grey, a San Francisco businessman trying to conclude some deals in Hainan, said the island is "pretty wide open. . . . It's a pretty volatile place, probably one of the wilder spots in China right now."

And Bette Midler hasn't even shown up yet.

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