On June 25, 2009 the gambling business was banned in Ukraine. According to the decision of the Government, the ban should exist until the enactment of special legislation allowing casinos and slot halls in specially created zones. Now, after almost a year, the Ukrainian government is considering plans for the gambling establishments’ development in the resort areas in the Crimea and the Carpathians, as well as five-star hotels in other regions of the country.

Chairman of the Board of Directors of Alsart Group of Companies, Lyubov Loginova, commented on the current situation and prospects for the early opening of the Ukrainian gambling market:

Removal of the ban on gambling in Ukraine will be the most important industry event of 2010 in Eastern Europe. It’s a reasonable solution. As shown by the time, the ban has not achieved its goal of controlling the “social problem”, which Ukrainian politicians say, remains. Also, about 60% of gambling operations simply gone underground and this has impacted on corruption, which has increased. Thanks to the ban the legal casinos and gaming halls, some 1.5 billion Ukraine Hryvnia (UAH) in gaming tax have disappeared from the state budget (US $188 million).

In addition, Kiev is a one-hour flight from Moscow, and is a place with well developed entertainment infrastructure, which is always a pleasure to visit. Before closing the gambling business in Ukraine represented around US $1,8 billion, and now, that figure could grow significantly because of the proximity to Russia, where gambling is also prohibited for almost a year (except for 4 remote and actually inactive zones).

Ukraine has the best chance to become the Eastern European Las Vegas. However, much depends on the decision of the Government of the country, as well as on the clarity of the requirements of the law. The industry requires clear “rules of the game” for operators of gaming halls and casinos, betting, lotteries, manufacturers and sellers of gambling equipment.

I have note that from 25 June 2009, when the ban came into force, much has changed, and re-opening legal gambling market of Ukraine will not be the same. In contrast to the Russian scenario, the gambling business in Ukraine was closed abruptly and harshly. Businesses were suddenly deprived of income and most of their liquidity. Gaming operators have suffered huge losses on leased premises, staff salaries, and credit obligations. Actually all have sold their operating equipment at dumped prices to avoid further losses in storage (for example, Novomatic 623 could be bought for US$ 1500 apiece). Many companies, especially small operators are on the brink of ruin, and thousands of people who were left without work collected signatures and wrote a petition to the President.

I don’t want to discuss the real causes of the situation and the decision of the Government of Ukraine, but the fact remains. Large operators have left the market; their confidence in the security business in Ukraine is undermined. And the illegal establishments immediately came to replace the closed legal ones.

Also in a short time, computer clubs with ready access to Internet casinos have emerged in Ukraine and are very active. Today the market is divided and is in the hands of a new wave of operators, mostly young entrepreneurs who had time to study the situation and found a "loophole" in the law. They brought to the local customers of the closed slot halls and casinos a good alternative product.

Today part of the former premises of closed casinos has already been occupied by other businesses - supermarkets, shops, salons, etc. In other areas there are "computer" clubs with owners who have earned money over the past year and have been able to buy and operate slot machines in the same room. However, former gambling operators have little chance to return to this new market that has opened.

Now a multi faceted struggle of groups’ interests has unfolded around the final wording of the gambling business law in Ukraine. Former small operators are lobbying the opening slot halls in small format wherever possible, seeking to return to the situation of 2008-2009.

Major operators and associations of mid-grade operators are advocating for gambling halls over 1000 square metres in 4, 5 or higher stars class (or equivalent levels for other scales of assessment) hotels with luxury facilities and at least 100 rooms; in the large entertainment centers; in separate buildings intended only for the casino operations; or on passenger vessels with the capacity with over 300 persons and registered to the Ukrainian ports.

Manufacturers of gaming equipment are offering the introduction of licensing and sale of original game programmes, the use of equipment not older than 5 years, or special gaming equipment such as VLT, connected to a game server. And each manufacturer suggests specific requirements to suit their convenience.

Land owners insist on the location of gambling establishments in solely designated gaming areas… where they have the land.

The power structures of Russia are against lifting the ban in principle because open gambling market of Ukraine will prevent the implementation of their plans for the gambling business in Russia.

It is hard to predict to what extent the interests of the parties will be in lobbying the Law but you can be sure that the prohibition of gambling business in Ukraine will come to an end. There is acute need for funding the preparations for the European football (soccer) Championship in 2012, as well as that the development of the text of the Law, and the needs of the Ministry of Finance will also be strongly made.

We assumed that situation developing a year ago. So, while diversifying the Alsart Group businesses, we retained our established business connections with the owners of the closed slot halls and casinos in Ukraine as well as keeping active Alsart delivery and technical support infrastructure. Now we are preparing the opening of our sales and operating office in Kiev and are going with our business partners to capture up to 60% of the re-opening the gambling market of Ukraine.

I think such ambitious plans are attainable for us. There are some reasons for that. In fact just a few in Ukraine have the understanding of the real situation as well as (and this is the most important) the willingness and resources for large-scale business development under the new conditions. Also, scale will be critical for the success. Right now, the market for legal casinos and slot halls here after a year's ban in the country is practically new: no equipment, no ready-made facilities, no knowledge of gambling business from new operators, not the former market leaders.

So the first company that develops an aggressive business strategy immediately after the adoption of the gaming law in Ukraine; who will put the machines, will open slot halls, will begin operating – that company will lead this market, and in this, I am sure that it will be the Alsart Group and our partners. (E-04.23.10)

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