“The initials GNP are a nice coincidence”, muses Lawrence T Wong,the Hong Kong Jockey Club’s Chief Executive and current Chairmanof the Asian Racing Federation, virtually all of whose 20 membersare now signatories to a Good Neighbour Policy – less than twoyears after its inception as a bilateral agreement between the Club and the Japan Racing Association. The Policy states that thesignatory organisations will neither offer nor advertise bets toresidents in one another’s jurisdictions without authorisation.Federation members account for more than 60% of total worldwagering turnover on horseracing.

Strength inNumbers

5

The initials serve as a usefulreminder of the powerfulsocio-economic argumentfor waging war on ‘3U’ –unlimited, unregulatedand uncontrolled –

betting. “Uncontrolled Internet-basedand offshore betting is eroding nationaltax bases around the world; unregulatedoperators pay no tax or betting duty. Andin a community such as ours, regulatedbetting on horseracing and footballchannels billions of dollarsmore to education, publichealth, cultural and keycharitable causes. Let’s faceit: unregulated operators are eating into the publictreasury; and they threatento rob our children of theirfuture and the elderly andthe disadvantaged of theirdignity. One can’t put it more plainlythan that.

“And that’s not counting the hugesocial cost the community pays for thecriminal activity and social problemswhich come with illegal betting. Nocommunity wants to see this.”

The diplomatic connotations of the term “good neighbour” belie thesignatories’ fierce determination tocombat the spread of 3-U betting.

Hong Kong Jockey Club ChairmanRonald Arculli says, “The GNP gives thesignatories ‘strength in numbers’. Itstiffens our resolve to gain the supportof, to partner with, local governments,policymakers and enforcement agencies.

“Yet to be meaningful, this partnershiphas got to be expressed through hard-and-fast, and enforceable, legislation,such as Hong Kong’s own Gambling(Amendment) Ordinance.” The 2002Ordinance has made betting with anunauthorised bookmaker illegal, even ifthe bet is received outside Hong Kong.

“Overseas-based operators, especiallyonline betting exchanges, are a moreintractable problem,” Mr Arculli points out.“But they have to be tackled. There is plenty

of evidence that the ‘backing to lose’ aspectof betting exchanges encourages thecorruption of sports, with horseracing,by its nature, most vulnerable.”

The Club was among the first organisations to see the coming threat ofunregulated Internet-based betting. “Wewere particularly sensitised,” notes MrWong. “Being an early adopter of mobilecommunications and informationtechnologies, Hong Kong had long beenan irresistible location and market for

unauthorised operators. We began tosound the alarm at the international levelin the late 1990s.” The Club holds aseat on the Executive Council of theInternational Federation of HorseracingAuthorities. First to heed the call wasthe Japan Racing Association, theInternational Federation’s biggest memberin terms of race betting turnover, whichwas seeing billions of dollars being lost to unauthorised domestic operators withties to organised crime and to offshoreoperators taking bets from Japaneseresidents in breach of the JapaneseCriminal Code. In December 2002, theClub and the Japan Racing Associationbecame the first signatories to the GoodNeighbour Policy.

“We in Hong Kong were and remainparticularly exposed,” Mr Wong says.“The Internet has enabled overseas-based betting operations to ruthlesslyexploit the growing price disparitybetween their betting products and ours.This price disparity stems from twothings: the rise in our average bettingduty, which at 13.5% – compared with8.8% 30 years ago – is among the highestin the world; and an outmoded tax

“The only way of combating the emergingproblem is the development of a policybetween racing organisations in the Asia-Pacific Region ... a Good Neighbour Policy.”— Former Prime Minister of New Zealand,the Rt Hon Sir Geoffrey Palmer, addressingthe 29th Asian Racing Conference in March 2003.

6

structure, which by focusing on top-lineturnover rather than bottom-line profit,greatly reduces our flexibility to pricecompetitively.”

The Good Neighbour Policy has animportant role to play in this regard, aswell. Mr Arculli explains, “In the realityof the marketplace,competitivenesscan be our mostpotent weaponagainst 3-U betting.In the long run,customers will beattracted to thebetting service thatoffers the greatest value. GNP signatoriesalready offer a superior product in termsof reliability, transparency and, in thecase of Hong Kong, a unique not-for-

GNP

GNP

profit, racing-for-charity ‘brandpromise’. But these selling pointsaren’t sufficient. And so it behovessignatories to form a united front – to support one another’s efforts inlobbying for uniform legislationwhich protects all of our jurisdictions,

as well as for reform of outmoded tax and duty structures within thegroup which, perversely, benefitunauthorised offshore operators.”

Oct 99The Hong Kong JockeyClub (HKJC) speaks onthe threat of unauthorisedillegal and offshorebetting to individualracing jurisdictions at the33rd IFHA InternationalConference in Paris.

Nov 01The HKJC chairs theBusiness session onWagering & Technologyat the 28th Asian RacingConference, where theproblem of 3U –unlimited, unregulatedand uncontrolled –gambling is brought up.

Sep02The HKJC and the JapanRacing Association (JRA)reach a mutual agreementto adopt a GoodNeighbour Policy (GNP)on wagering. Both theHKJC and the JRA agreeto respect each other’sjurisdictional integritywith regard to wagering.

Dec 02JRA President MasayukiTakahashi and HKJC ChairmanRonald Arculli formally sign theGNP agreement in Hong Kong.The ceremony is witnessed bythe Executive Council membersof the Asian Racing Federation(ARF) and IFHA.

EVOLUTION OF THE GOOD NEIGHBOUR POLICY

Oct 02Members of theExecutive Council of theIFHA agree to establish aSteering Committee whichwill be entrusted withdefining priorities andmanaging progress of anaction plan on commercialterms and the GNP.

COMPARISON OF HORSERACING DIVIDENDS AND RETURN TO GOVERNMENTIN SELECTED RACING JURISDICTIONS

Dividend return to customers (%) Return to Government (%)

1995 2002 %+ /- 1995 2002 %+ /-

Hong Kong 81.3 81.3 12.8 13.3 +0.5

Australia 84 82 -2 9 2.81 -6.19

United Kingdom 76.9 85 +8.1 8.03 2.3 -5.73

France 72.75 71.39 -1.36 14.85 13.83 -1.02

USA 79 79 3.3 3.13 -0.17

Japan 74.19 75.05 +0.86 8.8 9.34 +0.54

Source: International Federation of Horseracing Authorities

In October 2001, UK introduced Gross Profits Tax calculated as 15% of the sum of thevalue of the stakes less the value of winnings paid out to winning customers.

*

*

“I strongly hope that racing authorities throughoutthe world will immediately recognise its merit andadopt this Policy as a framework for internationalcooperation against illegal gambling and tosustain the ... growth of the thoroughbred industryworld wide.” — Masayuki Takahashi, Presidentand CEO, Japan Racing Association.

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Mar 03During the 29th AsianRacing Conference inAuckland, New Zealand,the ARF adopts theGNP in principle aftera comprehensivediscussion.

Jul 03The Australia Racing Board, JRA, KoreaRacing Association and HKJC agree tosign a multilateral GNP agreement.Chairman of the ARF, Lawrence T Wong,urges all members of the ARF to supportthis international cooperation and actionagainst illegal and unauthorised gamblingoperators by joining the agreement.

Aug03The Jockey Club ofTurkey, New ZealandThoroughbred Racing,Singapore Turf Cluband Turf Authoritiesof India agree tobecome signatories.

Sep 03The eight racingjurisdictions sign amultilateral GNPagreement in aceremony atGovernment House,Hong Kong.

Apr-Jun04Eleven furtherjurisdictions sign up to the GNPagreement.