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Cyprus to gamble on casinos

Australia understands better than most countries that after a great disaster comes the great rebuild. This awareness has come largely through natural rather than economic destruction, and while both are harrowing and debilitating, they both also offer the opportunity to start fresh and lay more solid foundations.

This can be a turning point in creating a thriving, successful future. A place that debt ravaged Cyprus can only dream about today. The question is, how can Cyprus build these new foundations?

The government is hoping casinos may be part of the answer as it prepares a 12-point growth plan for the country’s future, including plans to lift the current ban on casinos, stimulate foreign investment and become a hub for offshore finance.

While it’s hard to imagine Australia’s banking giants Commonwealth Bank (ASX: CBA) and National Australia Bank (ASX: NAB) chomping at the bit to set up shop on the small island, overturning a casino ban could hold merit. In 2007 government funded study estimated that tax revenue from casinos could add be between €35-50 million to the country annually. It would also draw back tourist spending to the Island which needs to raise €6 billion toward its own bail out.

The tact certainly worked to boost Macau.  As a result of a boom in casino investment and gaming, Macau’s GDP annual growth rate averaged a huge 13.93% for the ten years 2002 – 2012.  The growth was so significant that gaming now accounts for 50% of GDP, 84% of fiscal revenues and employs 21% of the region’s workforce.

It’s certainly one way to kick-start a starving economy.  It would also present a potential growth opportunity on favourable business terms for the likes of casino operator Crown Limited (ASX: CWN), or gaming supply company Aristocrat Leisure (ASX: ALL) who may not otherwise consider expanding into Europe.

Foolish takeaway

Cyprus has already been labelled a ‘casino economy’ by French politicians – a criticism of the country’s practice of luring large offshore bank deposits with favourable interest rates which contributed to its demise.  Now it stands the chance to become an economy driven by real casinos, and with that the opportunity to use foreign investment to build a foundation for the future built on something other than stodgy debt.

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Regan Pearson doesn’t own shares in any companies mentioned in this article.

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