Texto do SCMP (fev22) com ponto da situação: Macau sem gambling, sem junkets, XJ, mais concorrentes, etc

 

New casino concessions but less gaming: can Macau reinvent itself?

Gone are the days when construction workers from mainland China, harbour coolies, and domestic workers would try their luck on wooden tables scattered across Macau’s narrow streets.

[The contrast between the “Fantan” stalls – a Chinese game similar to roulette – which in previous centuries thrived in the city, and the 42 dazzling casinos that sprang up in the past two decades could not be greater. These opulent buildings decorated with flowery carpets, marble floors, ostentatious chandeliers, and pristine gambling tables have brought billions to a city that was once a sleepy fishing village.

But its overreliance on casinos is more than ever being put into question, and Beijing wants to see major changes taking place.

As Macau gears up to launch a public tender for six gaming licences, observers say that the former Portuguese colony is now left with no option but to forge a new identity for itself – the billion-dollar question is how.

 “There was tremendous growth until 2019 and, let’s be honest, it is probably about time to control the market. Macau will have to change and be something else beyond gaming,” said Pedro Cortés, a Macau-based leading lawyer who is an expert on gaming law.

: “The overreliance on gaming is an old problem,” he noted. “I think the government wants to reduce its importance and eventually abolish it. At least, the weight of gaming will have to diminish. In fact, if Macau could, it would have no gaming at all.”

The meteoric rise of the special administrative region as the world’s largest gambling hub hasn’t gone unnoticed. Thousands of headlines have been written about the city, which has been dubbed the “Las Vegas of Asia”.

But Macau – the only place in China where casino gambling is legal – has by far surpassed the profits from the US city, often making more in a single week than Vegas does in a month. In 2019, before the Covid-19 pandemic struck, Macau’s 42 casinos racked up US$36.5 billion, generating more than six times the revenue of the 144 casinos in Las Vegas.

The fact that Macau has been the top destination for China’s high-rolling millionaires explains part of its success. Wealthy businessmen and officials used to flock to Macau to gamble huge amounts of money, skirting Beijing’s strict rules on how much cash could be taken out of the country.

But the message that things had to change was delivered years ago by President Xi Jinping himself.

When he joined the 15th anniversary of the former Portuguese territory’s return to China in December 2014, Xi talked about the need to “actively promote an adequate diversification and the sustainable development of the economy”. He noted that it was necessary to “better regulate the gaming industry” with “courage and wisdom”.

That same month, Li Gang, director of the Central People’s Government Liaison Office in Macau, also sent a clear warning: “The dominance of one industry can lead the city to prosperity, but it also can lead to its demise.”

Xi’s nationwide crackdown on corruption started to scare off Chinese high rollers, which triggered a plunge in gaming revenue after 2014. But the president’s words seemed to have sunk in slowly in Macau. Casino operators made some attempts to diversify their offerings, while fortunes continued to be amassed in the years that followed.

After the pandemic swept through the city, the excessive economic dependence on gambling became even more obvious and the government started moving forward with plans to revamp the industry.

 “I believe we’ve reached a sort of a turning point. A lot has been said and not much has happened, but this time diversification needs to be taken a lot more seriously,” said a Macau legal expert, who worked with one of the gaming operators and requested not to be named.

 “Beijing is not going to continue tolerating the overgrowth of industry and the local government needs to make that happen,” he said.

Authorities have meanwhile started to crack down on junket operators – sort of go-betweens responsible for running VIP rooms and bringing in high rollers from mainland China to Macau.

Since November, police have arrested 15 people, including the bosses of the two largest operators of junkets in Macau, on illegal gambling and money laundering charges, which has shaken the entire gaming industry.

As authorities show less tolerance, analysts have predicted the decline of the opaque VIP sector – which used to make up about half of the gaming revenues before the pandemic.

The need to overhaul the industry and tighten its oversight has also been made clear in the new legal proposal for the gaming sector. Its details were shared last month, when the government announced that the number of new licences would be capped at six and last for only 10 years ­– half the length previously granted, despite an option of extending it for another three years if needed.

 “The new law sends a message of continuation, stability, maintaining the status quo, but with necessary reforms,” said Sonny Lo Shiu-hing, a political scientist and commentator who has written extensively about Macau.

The licences of the six current casino operators SJM Holdings, Sands China, Wynn Macau, MGM China, Galaxy Entertainment, and Melco Resorts are set to expire in June. Both existing and potential operators will have to apply through a new tender process.

Lo does not completely exclude the possibility of new contenders, but he finds it unlikely.

 “The six franchises are predictable. I think the potential bidders will try to form strategic alliances and the losers will perhaps find ways to work with the winners of the concessions,” he said.

 “It looks like the existing six will be the winners, but they cannot rest on their laurels without coming up with new things. The 10-year-plan that they will present to the authorities will be extremely important.”

The Macau-based legal expert, who asked not to be named, said that he too was confident that the current operators would be able to remain in the game.

 “Granting six licences is the most sensible decision in the current context. The concessionaires made significant investments and it’s fair that they are allowed to maintain their licences – I believe the six will run and win,” he said.

 “I don’t see other candidates, in particular foreign companies, wanting to run for a 10-year licence. For a new operator, it would take perhaps three to four years to build the infrastructure and then they would only have about six years to operate it and recover the investment.”

The draft bill – which passed at first reading and is going to be further discussed at the city’s legislative assembly – clearly mentions in its opening article that gaming must not undermine China’s “national security”. It also notes that the industry should “foment the adequate diversification and the sustainable development” of the city’s economy, adding that operations should be “free from criminal influence”.

Sérgio de Almeida Correia, a Macau-based lawyer, said the emphasis on national security and greater social responsibility demanded from the operators was expected.

 “These changes are in line with the politics from the central government. They also reflect the campaign against corruption and money-laundering led by the Chinese president, because there were billions leaving China and not returning. It was money that would go through Macau but it wouldn’t stay here either,” Correia said. “Cleaning up the junket industry and the questionable businesses around the casino industry had to happen.”

Correia said that “for now the goal is cleaning up the underground, so the gaming industry can generate revenues in a more transparent manner without causing power imbalances in Macau and mainland China”.

 “The next step, I believe, will be to completely eliminate gaming or at least dramatically reduce its weight to say 20 per cent of the city’s revenues,” he added.

After Hong Kong became a British colony in 1842, Macau’s role as an important trading port declined, and in an attempt to bring in cash and diversify the city’s economy, the Portuguese government eventually decided to legalise gaming.

With the sector quickly becoming the main tax revenue source, it didn’t take long before the overreliance on gambling was felt.

 “I am trying to reduce the number of Chinese lotteries in the hope that it might be possible to suppress them entirely, and in the same way I hope to be able … to reduce the number of fantan gaming houses, with the [objective] of eventually doing away with any revenue derived from such sources,” said former Macau governor Artur Tamagnini Barbosa to Hong Kong’s Daily Press in December 1929.

 “This line of action has to be, in my opinion, the principal concern of the person entrusted with the government of the colony,” he said.

But the fact is that while other industries ended up disappearing or relocating to mainland China, gaming only gained strength – and even more so after the Portuguese colony was transferred to China in 1999.

Following decades of a casino monopoly run by magnate Stanley Ho, the authorities opened up the market after 2002 to five other competitors, and then profits skyrocketed.

The new proposed bill sets fresh demands for casino operators, marking the most significant reform in two decades for the world’s biggest gambling centre, with many questioning what that will mean for the city and its gaming industry.

Leonardo Dioko, a professor at the Institute for Tourism Studies in Macau and director of its Tourism Research Centre, said it was hard to predict how much the gambling sector was about to change.

 “Because of Macau’s unique circumstances and history, I don’t think there really is an ‘ideal’ model or template for the industry,” the expert said.

 “Twenty years ago, when Macau embarked on the radical decision to liberalise the gaming industry, few could probably have anticipated with certainty the remarkable change that it would usher.

 “It has propelled the economy dramatically but at the same time spurred profound and rapid social and cultural changes. So it is really hard to understate the significance of these new amendments to Macau’s development in the next 20 years.”

Macau’s gaming industry usually accounts for more than half of the city’s gross domestic product and about 80 per cent of government revenue. It is also a top employer – by the end of 2020, more than 82,000 people worked in the sector, which corresponded to almost a fifth of the city’s working population.