To control the tidal wave of slot machine outlets and casinos which have flooded Ukrainian cities, politicians are looking to copy a radical step taken by Moscow.
The Russian capital passed a law in December 2006 forcing all gaming operations to move outside city limits to specialized gambling zones, and certain Ukrainian members of parliament (MP) want to do the same, not only to clear the city but to impose stricter regulations for collecting taxes and combating addiction.
„This would be a step forward for legal gaming operators that have invested into developing their business,“ said Oksana Bilozir, an Our Ukraine-People’s Self Defense parliamentary faction MP who helped draft the bill.
Legal gaming operators would benefit from such a measure because the industry and its competition would be regulated in these zones and the licensing process will be simplified, according to the bill.
Currently, about 1,800 gaming businesses have licenses to operate in Ukraine, according to the Ukrainian Association of Gaming Industry Representatives (UAGIR), representing only 30 to 40 percent of the total market.
The rest are illegal, the association said.
About half of the USD 100 million annual legal gaming business in the Kyiv oblast is Ukrainianowned, the association said, and the other half is foreign, overwhelmingly Russian.
The industry brought USD 50 million in revenues to the Kyiv budget in 2006, the association said, but could potentially bring much more if illegal operations come out of the shadows.
„Just one slot machine brings USD 200 to USD 500 profit per day,“ said Viktor Unts, assistant manager of the city’s Improvement Administration.
Gambling is not yet completely removed from Moscow city limits, but will be by June 30, 2009, according to the 2006 law.
Zones were established within six months, after which relocating began.
The Ukrainian effort is led by four female MPs from different parties, who want to create gambling zones outside major Ukrainian cities. If their law is passed, gaming operators will have a year to adjust and relocate.
The proposal has wide support, with as much as 85 percent of Ukrainians wanting stricter regulations on gambling venues, according to a Kyiv Institute of Sociology poll last fall.
With as many slot machines (more than 100,000) as more populous nations like Germany and Italy, gaming operators in Ukraine have created a market glut and hazard to citizens, according to experts at the State Institute of Family and Youth Development.
In the biggest cities, slot machine outlets are in almost every neighborhood.
About 5 percent of Ukrainian teenagers 14 to 17 years old spend time at slot machines, compared to 0.5 to 1.5 percent in countries where it’s regulated, according to the Ukrainian Institute of Sociology.
Up to 20 percent of Ukrainian adults engage in gambling to some extent, the research said.
Gaming operators don’t want such clientele to decline.
After being flushed out of Moscow, Russian businesses are trying to prevent the same scenario in Kyiv and other Ukrainian cities, said Iryna Smirnova, head of the law department at Alliance Games and Entertainment, among the biggest legal Ukrainian gaming operators.
The Russian Association of Gaming Businesses claim after the new law, they are severely restricted in their ability to do business, drawing little sympathy from the Russian government.
Therefore, many are looking to expand their business even further in Ukraine, said Serhiy Tretiakov, chairman of the UAGIR.
In Ukraine, numerous attempts to regulate Ukraine’s booming gambling business have been dubious, with four bills in the pipeline this year, seven drafts prepared last year, and the parliament having passing nothing.
The bill to push gambling outside city limits proposed on Feb. 20 offers specific proposals for the first time, designating six months for cities to create the zones.
It places the burden of moving on the gaming operators, while at the same time requiring that new gaming outlets have at least 10 slot machines, which gaming operators have the biggest complaint about. The bill forbids solitary slot machines and casinos in underpasses, transportation stations, marketplaces and educational institutions. Violators could face up to three years in jail.
This year’s bill is not likely to muster enough support with legislators, Smirnova said, citing the strong industry lobby.
UAGIR representatives said they are not against moving gambling beyond city limits, but claim it’s almost impossible because of the large investment that would be required for new infrastructure and a lack of space to build. Operators would need three to five years to relocate, not the year suggested in the legislation, according to Tretiakov.
„We are talking about rich people,“ Tretiakov said. „Why would they choose our city outskirts? Who will go to those gaming zones outside the cities? Where is the government going to find land plots near cities for those zones?“
Middle and smallsized gaming operators said they can’t afford to reestablish their business in the new zones and will need government tax breaks.
„I’ll quit this business, as many of my colleagues will I guess, as it just won’t bring enough profit any more,“ said Ihor Podilchuk, a Kyiv casino owner.
„To implement such ideas costs crazy money. Where will it come from? I don’t see any ways,“ Podilchuk said.
Instead of improving the situation, establishing the zones will cause even more gaming operators to take the illegal route, Smirnova added.