China Tourist

Problem in the Pacific

Saipan’s fledgling casino project runs into trouble over Chinese workers

Best-Sunshine-w

Betting big on Saipan

The bankruptcy of First Natural Foods was a major stockmarket scandal in Hong Kong. The Fujian-based frozen seafood provider was declared insolvent in 2009 and its prospects were dire until a restructuring in 2014, with the emergence of a new controlling shareholder.

The seafood firm then renamed itself Imperial Pacific and switched its focus to the gaming industry in the US territory of Saipan.

As part of the revamp it appointed former FBI chief Louis Freeh as an advisor last year and a few months later it added James Woolsey, former head of the CIA, as a non-executive director.

The heavyweight backing got investors excited. Imperial Pacific’s share price is volatile but its market value had rebounded to about HK$18 billion ($2.3 billion) as of this week. Much of that transformation can be linked back to changes in Saipan’s immigration and gambling laws.

Saipan is the largest of the Northern Mariana Islands, a US commonwealth in the Western Pacific. It is just four hours flight from China and Chinese tourists can stay there for up to 45 days visa-free. That has supported an influx of much-needed tourists, following a decline in visitors from Japan in preceding years. Arrivals from China now account for more than 30% of total tourists.

Saipan also pushed through casino legislation in late 2014 and Imperial Pacific was the first to take advantage of the island’s emergence as a destination for Chinese high rollers. It bought a Macau junket operator in 2014 and around the same time it was awarded the rights to develop Saipan’s first casino. Imperial Pacific is investing as much as $3 billion building a luxury gaming resort on the island.

In the meantime it has been granted the rights to operate a temporary casino called Best Sunshine Live. The venue runs just 16 VIP tables but racked up $32 billion in gaming revenue last year, outperforming Macau’s most profitable casinos on a per-table basis.

The numbers look impressive and Imperial Pacific is already the largest private sector employer in the Marianas. But its management has also been fielding questions about its association with Donald Trump. Non-exec director James Woolsey was a national security adviser for the Trump campaign and the Hong Kong firm has also hired Mark Brown, former chief of Trump’s casino resort operations, as chairman and chief executive of Best Sunshine Live.

The company also made headlines when FBI agents raided the construction site of the new casino and discovered hundreds of undocumented Chinese workers (the intervention followed the death of a Chinese worker who had arrived in Saipan as a tourist two weeks earlier). Prosecutors have since filed criminal charges against a number of individuals associated with two Chinese construction firms working on the resort.

Newspapers in the US did their best to make the connection back to the newly-elected American leader. “The Saipan situation comes as President Trump calls for tougher limits on immigrants working illegally. In that regard, the investigation in Saipan carries a twist of irony: the chairman of the company that is building the casino hotel was once a protégé of Mr Trump’s own casinos in Atlantic City [aka Mark Brown],” the New York Times reported.

“‘Trump protégé’ makes for a good story,” Brown responded in an email to the newspaper, but “the facts are we have many prominent individuals on our board of directors.”

Imperial Pacific denounced the employment of illegal workers by its contractors but the drama around the casino project looks like it could be embarrassing for the Chinese government as well.

One of the Chinese firms under investigation for hiring illegally is an affiliate of state giant Metallurgical Corp of China (MCC). And another of the Chinese sub-contractors, Suzhou Gold Mantis, has even been trying to position the casino project as part of Xi Jinping’s signature Belt and Road Initiative (BRI). It has battled negative coverage over a strike by its workers about unpaid wages after irate employees sent a letter of complaint to the Chinese consulate. In a sign that the Chinese contractors are keen to kill the story, Gold Mantis paid for plane tickets home for the disgruntled staff, plus their unpaid wages and additional compensation.

But that’s not all: three contractors working for Imperial Pacific were fined almost $200,000 this week for subjecting their workers to workplace hazards, while MCC and another construction firm from Nanjing could still face lawsuits from prosecutors for breaching labour laws, ThePaper.cn has reported.

Imperial Pacific planned for its new casino to open over a staggered schedule this year. The authorities then blocked the opening of the first phase of the resort, which was earmarked for the end of May.

This week the casino commission changed stance and gave a provisional greenlight for that opening, although Imperial Pacific has to guarantee first that the building’s emergency systems are in full working order and that none of its contractors are employing unauthorised labourers.

The company has also requested an extension to the deadline for completing the gaming venue. Certainly, it’s hard to see how construction firms like Gold Mantis and MCC will be able to finish the job (photos of the site show half-finished buildings) unless they replace the departed Chinese with legal American workers. And the practicalities of hiring these crews will pose a challenge too: tiny Saipan has a limited labour supply and Los Angeles is almost 10,000 kilometres away.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.