Issue 3, 2013. June-July



In the battle to control casinos and gambling addictions, the new government could be playing a losing hand.

Paul Rimple

Georgian lawmakers may not be familiar with American journalist Heywood Broun, who once said "The urge to gamble is so universal and its practice is so pleasurable, that I assume it must be evil," but they have come to the same conclusion. Parliament is drafting a law to ban gambling in Georgia, ostensibly, to protect people from its addictive effects. But if it is passed, it's the state that could lose.

Since its first attempts to regulate gambling in 1992, the Georgian government has taken great strides in defining gaming laws and collecting revenue for the state budget. In March 2005, there were 18 gaming casinos in Tbilisi when the government slapped the city's casinos with an annual 5 million GEL licensing fee and imposed high taxes on table games and slot machines. Today, the Tbilisi market is stretched thin with three casinos and cannot handle more.

"In total, we pay half a million dollars a month in taxes and licenses," says Darren Kovler, General Manager of the Shangri La casino in Tbilisi.

In 2012, the government raised the annual permit fees on slot machine salons, which in Tbilisi were 20,000 GEL a year. Today, if you are not a licensed casino operator, you'll have to pay 1 million GEL in Tbilisi for a slot parlor. The Georgia Revenue Service reports that gambling businesses in Georgia contribute 2% of the total budget in taxes. In the Autonomous Republic of Adjara, the percentage is said to be higher.

In an effort to transform Batumi into a mini Monte Carlo on the Black Sea, the government offered incentives to attract investors, including a reduced annual fee of 250,000 GEL and a 10-year freeze on annual licenses to anyone who builds a 100-room hotel. Last year, the Adjara government hosted its first Casino Investors' Congress in Batumi, where casino industry executives offered feedback on how the government could better develop the sector. Right now, Batumi has four casinos- with a fifth to open soon, a sixth slated for August, and another due next year.

"For Adjara, it's a huge part of the budget- about one-third," says Mehmet Esen, Finance Director of the Peace Casino in Batumi. "And there's nothing to replace it if you take gambling away."

Lawmaker from the Georgian Dream coalition Koba Davitashvili, who drafted the law, says gambling money "stinks" and talks of how many Georgian families have been ruined by having to sell property to cover a relation's losses.

"Gambling leads to addiction. It's not a choice; they can't choose not to gamble," Davitashvili asserts.

He estimates that 80 percent of the population gambles and insists half do so daily, although there have not been studies that reveal how many compulsive or problem gamblers exist in Georgia. What is known, however, is that Georgians aren't going en mass to casinos to lose their pants. Tbilisi casino operators say 90-95 percent of their customers are foreigners, mostly from Azerbaijan and Iran. In Batumi, it's the same scenario, although their clients are predominately Turkish.

There is little evidence that closing casinos will reduce the number of problem gamblers in Georgia, particularly since online gambling is available to anybody with a computer and internet connection. Studies have found that electronic games such as video slots and video poker are the most addictive forms of gambling. The Illinois Institute for Addiction Recovery calls these games "the crack cocaine of gambling" and the U.K.'s Gambling Commission estimates that 7.4 percent of online gamers go on to develop an addiction.

Davitashvili is aware that a ban on gambling won't cure Georgia of its problem gambling ills and recognizes that there is little that can be done to keep kids from online betting, but the ban will certainly make a difference. "If we legalize narcotics and sell it in pharmacies, the number of addicts would increase. It's the same with casinos," he says. "Why have all our neighbors outlawed gambling if it's good?"

Casino patrons must be 21 years old and register before playing. Kovler says Shangri La monitors its regular patrons and will black list problem gamblers, those who ask to be prohibited from gambling themselves, or those whose families have called to request a ban. He maintains that outlawing gambling will only drive gambling underground, as it was during the Soviet Union.

"The fight against illegal gambling costs money," Kovler contends.

Money is one thing the government is short of. Foreign direct investment for 2012 was only $865.2 million - a 22.5 percent decline, according to Geostat. "The planned budget is based on a six percent growth of economy, while most probably, we will have less than three percent growth," predicts UNM lawmaker Zurab Japaridze. Making a complete U-turn on gambling is not how you attract investors, critics charge.

Shangri La invested $20 million into its casino. "It's taken over a year for us to break even," Kovler says. "Banning gambling is going to scare investors."