The Hong Kong Jockey Club

I had the opportunity to attend the Hong Kong International Races at Sha Tin racecourse in December, and like most visitors from the west was impressed with just about everything the Hong Kong Jockey Club (HKJC) does, from their transparency on veterinary issues to the cleanliness of the racetrack to the manner in which stewards protect the betting public.

The results of their efforts are astonishing.

In the 83 days of the 2014-15 season at Sha Tin (which races on Sunday afternoons) and Happy Valley (the track in the heart of the bustling city that races Wednesday nights), a total of HK$107.9 billion was wagered. Converted to U.S. dollars, that’s approximately $13.9 billion, an average of $167.5 million per program.

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For comparison’s sake, there is only one racing day in the United States that generates more pari-mutuel turnover than the average Hong Kong program. That would be the Kentucky Derby, which in 2015 handled $194 million. The two days of the 2015 Breeders’ Cup handled just over $150 million. Keep in mind that the population of Hong Kong is 7,250,000 compared to 320 million in the U.S.

That $13.9 billion wagered on 83 Hong Kong racing programs is 31 per cent more than the $10.6 billion that all the American tracks combined handled for 4,973 racing days in 2014. The U.S. average betting turnover for each racing program is $2,121,901.

Our two fortunes are heading in different directions.

In 2005-06, the Hong Kong Jockey Club was struggling with year-over-year losses, annual handle falling from HK$100 billion to $60 billion (about US$7.7 billion).

By contrast, in 2006, about US$14.8 billion was wagered in the United States. In the decade since then, Hong Kong has increased its annual turnover by 80 per cent while pari-mutuel wagering on Thoroughbred racing in the U.S. has plummeted by 40 per cent.

A primary reason for the turnaround in Hong Kong was a change in how racing was taxed. Instead of a straight tax on wagering, the Hong Kong government opted to tax profits, giving the racing organization flexibility in how it conducts its business. One of the first things the HKJC did was establish a rebate program for its biggest bettors – which increased volume among those players but also brought back into the fold some bettors who had taken their business offshore to illegal internet gambling sites.

The HKJC is vital to Hong Kong’s society as the single, biggest taxpayer and one of the largest charity donors in the world. The club’s charitable arm leaves its mark everywhere, from symphony orchestras to hospitals, schools and youth sports. It is held in high esteem by the people who live there and by the politicians who make the laws.

As a result, the feeling of responsibility among those who operate the racing programs is immense. Needless to say, they take their jobs seriously.

With so much at stake, the integrity of racing is at an absolute premium in Hong Kong. Everything is done to protect that integrity, from tightly controlled licensing of personnel to strict medication rules and a drug-testing program that is recognized as the best in the world. The reason is simple: without integrity, there is no confidence in the product on which so much money is wagered.

It would be difficult for anyone in the United States or Canada to duplicate the Hong Kong model, which restricts licensing of owners, trainers and how many horses can race. There is no breeding in Hong Kong, so all horses are imported.

However, some things can be learned and adopted here.

First, every track and every racing regulatory body must operate under a guiding principle of integrity. The public must have confidence that the game is “on the level.”

Second, our sport must do a better job of controlling medication and consider a new paradigm for detecting illegal drugs. Backstretch pharmacies for dispensing therapeutic medication, greater control over the activities of private veterinarians and biological passports for doping control should replace the current system.

Transparency is critically important, whether it’s regarding the physical condition of the horses, the conduct of the participants or the officiating of the races. Hong Kong sets the standard here, and we must do better.

To paraphrase the late football coach Vince Lombardi, integrity isn’t everything; it’s the only thing.