The monopolization of Genting?

Genting Group, is one of the few Malaysian conglomerate. Genting Berhad is the parent company to a few subsidiaries engaged in different industries. One of the most commonly known is the casino industry. When the word casino is in mind, the only place in Malaysia one could think of is Casino de Genting.

Why people only think of Genting? 

This is because Genting is monopolizing the casino market of the country. 

The high barrier of entry into this industry awarded Genting such a prestigious status. 

 

One of the reasons is government directive. New firms have a very minimal chance of entry because the government is strict and conservative in awarding another casino licence.

Currently, Genting Malaysia Berhad is holding the sole legal casino licencing.

Even if there are no government interventions, another reason that might discourage other firms from entering the market is that other firms are aware that Genting is a large firm. 

They currently holds a market capitalization of US $6.8 billion in the leisure and hospitality business, in which casino is the major business activity. They have a massive 200000 sq ft gaming space at Genting Highlands. 

Besides, the numerous awards they received added the prestige of Genting. 

Therefore, if new firms would like to enter this industry; they need a huge initial investment to stay competitive in the market, besides finding massive difficulty to match Genting’s branding.


For these reasons, new firms are also discouraged from entering this industry.

Since Genting is a monopoly, they are price-setters. 

In this case, they can fix the minimum bet for each type of gaming. Even if they increase the minimum bet, it will not deter people from visiting and gambling in the casino.

 This further exemplifies the characteristics of a monopoly.

This monopoly makes it possible for Genting to earn supernormal profits. This is mainly due to the high barriers of entry mentioned earlier.

From the graph, the area in green shows the supernormal profits earned by monopolistic firms, which in this case indicates Genting. 

There are two sides to a coin. A monopoly also brings disadvantages such as complacency. However, Genting is not in such position. Though being the sole firm in the industry, they still strive to improve themselves. Just recently, Genting revealed they are planning a whopping RM3 billion facelift for their casino resort in Genting Highlands. This is planned in an effort to double their earnings. This massive plan proves that not all monopolists are complacent.

Should Genting continue to monopolize the Malaysian casino market?

One of the major setbacks by the monopolization of Genting is the creation of a black market. Black market causes the shrinkage of the formal economy and causes tax losses for the government. Black market will also increase borrowings from loan sharks, fighting and other crimes.

In my opinion, the government should approve more casinos licensing in the country to combat the black market. This would allow a much higher tax collection for our debt-ridden country.

Besides, it creates job opportunities.

New firms will need employees to operate the casinos, hence, reducing the unemployment rate of the country.

A better use of police resource

The police force can reduce their budget on tackling illegal casinos, since more legal casinos can shrink the black market. Instead, they could focus their resources on more serious crimes such as murder, kidnapping and rape.

Competition may benefit the economy

With competition, firms are more prone to improve themselves in terms of consumer benefits and welfare in the face of competition. Though a firm may not be able to be a strong competitor for Genting, but they can at least reduce Genting’s market share. Hence, firms will try to innovate to give casino in Malaysia new perspective.

As a conclusion, Casino de Genting is an example of a monopoly in the country. If the barriers of entry remain high, the chances of monopolization of Genting in the casino industry will be high.

List of reference:
http://www.gentingcasino.com/about-us/genting-malaysia/

http://www.economicshelp.org/

http://www.theedgemalaysia.com/highlights/241734-exclusive-genting-mulls-rm3b-facelift-for-genting-highlands.html

http://yogonet.com/

Written by:

Michael Yeo (0314238)
Lim Foong Kien (0315622)