Burning down the house…

KIEV (AP) 15:15 07 May 2009 – A Ukrainian emergency official said nine people have been

killed in an explosion at a gambling hall in eastern Ukraine. Emergency Situations Ministry spokesman Ihor Krol said 11 were wounded in the blast in Dnipropetrovsk early Thursday. Krol says investigators are trying to establish what caused the explosion. He says no cause has yet been ruled out, leaving the possibility it was a bomb. Krol said dozens of firefighters had extinguished an ensuing fire.

 And this is how it all started. A fire in a small slot hall unfortunately in the Prime Ministers home town was wholly regrettable; but the consequences that unfolded over barely a few days stunned the local and international casino businesses. At first an announcement was made by Prime Minister Tymoshenko that all casinos and slot halls would be shut just in the city of Dnipropetrovsk to enable checks to be carried out for safety. Strange that, as her government was already responsible for safety in

all casinos and periodic safety checks should have already have been routine. But, this is Ukraine, where an average police officer earns 3,000 UAH or 500 US dollars per month. Corruption is rife and even if checks had been carried out all it would take is a few dollars and anything wrong would be overlooked – locked fire doors, illegal machines, whatever.


KIEV (AP) 12 May 2009 – 18:12 10,300 gambling centres shut down in Ukraine

As many as 200 of them were operating without any licenses and permits, First Vice Premier Oleksandr Turchynov said at a meeting of the parliament’s conciliatory council of the leaders of parliamentary factions and committees today.

Mr Turchynov noted that according to Government members, the parliament should not delay the adoption of a law on the gambling business, despite the fact that now the owners of gambling centres are picketing the Cabinet of Ministers. He also added that the Government supported the Bloc of Yuliya Tymoshenko’s proposal to consider the question of banning the gambling business in Ukraine until the adoption of a law regulating the gambling business in the country. The Verkhovna Rada, showing unusual unity and determination, voted on June 11 to uphold a law temporarily banning all gambling establishments – some 11,000 in the nation. With 390 votes out of 429,

the parliament overrode a veto by President Victor Yushchenko, who called the far-reaching law poorly House conceived and populist. The disputed law, viewed as draconian by its many critics, takes effect at the end of June. So, the casinos gradually reopened albeit with a gun at their head.

 “Let’s do it step by step,” said Anatoliy Nesterenko, the head of the Ukrainian Casino Association, at a news conference, “let’s not throw people out onto the street.” His voice, along with the thousands of casino workers who organised protests outside parliament, fell on deaf ears.

 The gambling industry is still in a state of shock by the swiftness of it all. Many others, noting Ukraine’s chronic inability to enforce existing laws, remain sceptical that the gambling dens will really be shut down. Some see the three-month shutdown period, ostensibly until the Verkhovna Rada comes up with new gambling regulations, as an ideal time for under-the-table deals and secret negotiations to take place.

This is a country where you say one thing but do another as long as there is money to be made and that in itself throws up a number of “conspiracy theories” that are hard not to ignore:

1) That the fire was started deliberately to ensure a sympathetic backing to casinos being closed down. Hard, cynical but compared to the money that is at stake, life is cheap.

2) That the closures are being made to ensure that those who own land in the future “gaming zones” stand to profit – many of them politicians themselves – or their oligarch backers.

3) That the move is just echoing Russia’s casino closures and that Putin did a deal to make sure little brother Ukrainedid not become the gaming capital of eastern Europe.

 In the end – we won’t know and even these conjectures could be just ignoring the fact that with an election looming nobody can be bothered to risk opposing something badged as having majority support from the people. Parliamentarians however, do say they don’t want Ukraine to remain bereft of legal gambling forever (there is too much money swishing about for them to completely get rid of the trough). Hence the temporary ban while parliament works out tougher restrictions that may relegate gambling to certain geographic areas, such as the Crimean peninsula.

 The president, in vetoing parliament’s law on June 4, was having no part of this moral crusade. Yushchenko noted that 200,000 people could be thrown out of work by the immediate shutdown and the state would lose up to 1.5 billion UAH in much-needed tax revenue. He also cited the possibility of lawsuits against the nation because of the cancelled gambling licenses. While each license costs more than $200,000, it can be used to open multiple gambling halls. Valery Pysarenko, a lawmaker from Prime

Minister Yulia Tymoshenko’s faction, who authored the gambling ban said that “only 2 percent of the turnover in this industry is being taxed and we want the other $5 billion to come out of the shadows and be used to solve social problems.” So, why did they not introduce a better system of taxation? Why did they not rigorously enforce the existing laws? Answer: all the corruption money never filtered its way up high enough for them to lose out if it stopped. And on the other hand, corruption at the lower levels can never be stopped.

 Meanwhile the PM has taken the moral high ground: “Gambling will not exist in Ukraine. Ukraine will live patiently, spiritually, morally. And I am convinced it will be good for the Ukrainian people,” Tymoshenko said. She also condemned gambling as “dangerous and addictive.”

 Once the new law takes effect – from July 1st – the Verkhovna Rada has three months to draft new regulations for the industry. The new regulations are expected to feature tighter financial control and special designated zones. In just a month, the gambling industry’s perfectly legal operations were outlawed. Those who have invested in the business are at a loss about what to do. “I’m confused. I’m in a hurry to collect my stuff so I don’t need to pay another month’s rent. My equipment is impossible to sell. I might as well dump it to the metal scrap,” Ihor Kulyk, president of Extrema-Ukraine gambling chain, said. Pysarenko, however, offered reassurance. He said the casinos will be moved to economically deprived regions of Ukraine such as the steppe part of Crimea, the Donbas or along the western Ukrainian border. Chornobyl region is also a possibility. Gambling will still flourish, he said. “If you find a business more attractive than gambling in Ukraine I will uncork the most expensive bottle of Champagne,” Pysarenko said.

 Some speculate that lobbyists in the Rada will vote to set at least some of the gambling zones closer to Kyiv, such as on Trukhanov Island, or the prestigious suburbs along the Obukhiv Road south of Kyiv. Some of the deputies are believed to own land along that route and would benefit from such regulation. Myself, I would favour the Odessa highway – good roads and on a main transport link between two major cities but if an exclusion zone comes into force – any of the sites on main roads 30Km from any of the main cities will become very valuable indeed. Back in the real world though, gambling business owners say they are pessimistic about zoning restrictions, noting neighboring Russia’s difficulty in moving such businesses outside of Moscow to more remote regions of the nation. “We can’t operate in a bare field. Entire cities need to be built. But during the economic downturn, who is going to invest?” Kulyk said. “Look at Russia! They had two-and-a-half years but none of the entertainment zones is ready to function and none will work in Ukraine either.”

 “Gambling business needs new regulations, there is no doubt about that,” said Hrygoriy Trypulskiy, vice president of the gambling business association. His association had drafted a law in conjunction with the Finance Ministry, tightening regulation on location, safety rules and taxes. It banished advertisement of gambling halls as well. Many experts predict that Pysarenko’s law will push the gambling industry into the shadows, much like the Prohibition era in America, when the nation made an ill-fated attempt at banning alcohol from 1919-1933.

 Meanwhile, from a personal standpoint I have been unimpressed with how the industry has failed to unite and put forward their case. The main problem has been that until the recent legislation all the operators were competitors and had no common goal. The ban came out of the blue, did not allow time to organise but even then, any solidarity movement” would have had to mean key operators ceding powerfor the good of the cause. Perhaps they knew this and so a movement was not formed but I expected more… just think if the casinos had devoted their regular billboard advertising (now useless) to a single message to the government… A “group” of sorts was formed but all it did was meet and issue a press release that stated the obvious, was badly translated into English and was ignored by everyone.

 As in Russia, poker tournaments may now increase in popularity in the Ukraine, because poker tournaments in both countries are classified as an official sports competition instead of gambling, so are exempt from general gambling laws. This creates opportunity but again, i cannot see any form of transformation of casinos to poker venues yet.. but watch this space.

 The death knell was finally sounded on June 23rd, when the President finally succumbed and signed the act.

 No more bets please.

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