Inside Asian Gaming

June 2008 | INSIDE ASIAN GAMING 7 W hat were Macau’s objectives in liberalising its casino industry? Clearly the goals were not 9.75% inflation, clogging of the transport infrastructure to breaking point, the closing down of small- and medium-sized businesses and incitement of civil unrest. These have nevertheless been some of the side effects, but it’s not really the fault of the gaming industry. It could be argued that these unsought outcomes occurred because Macau’s development objectives have been muddled and incoherent from the start. If you don’t state clearly what you want from casino liberalisation in the first place, or measure it against a verifiable set of criteria, there’s not much chance of a satisfactory outcome. Stating what you want doesn’t simply mean public platitudes about building up tourism. Nor does it mean creating a fat public surplus in case of hard times to come. All the money in the world won’t help you if you don’t have a coherent strategy for what to do with it. Limited power Many of these problems seem to stem from the fact Macau is not an autonomous jurisdiction, whatever the Basic Law—the document that serves as Macau’s constitutional framework since the handover from Portuguese administration in 1999—may say. When a casino operator enters negotiations with the Macau government, he can’t be completely sure whether he’s negotiating with Macau or with Beijing. He’s best off playing safe and assuming it’s both. Anyone who suggests otherwise has only a slim grasp of the political realities in Macau. Leaders of sovereign governments don’t fly up to the Chinese capital to be lectured on whether they’re doing a good job. Edmund Ho, Macau’s chief executive, does. This lack of genuine autonomy has helped fuel Macau’s confusion and lack of direction in public policy regarding the gaming industry. Macau’s politicians are serving not just the interests of the territory’s citizens, but also of the motherland. And in a matriarchy, what mother wants, mother generally gets. Flawed This need to serve two constituencies has not only failed the local community. It has also arguably failed the interests of the casino operators. By focusing its administrative effort on regulating the casinos to protect ‘social harmony’—as the mainland government calls public order—the Macau government appears to have been completely distracted from the urgent commercial need to rein in the number and scope of operations of the junket agents. Getting a Macau casino concession or sub concession is expensive and difficult, and just got more difficult since the announcement of a moratorium on new casino licences and projects by Macau’s chief executive Edmund Ho. Getting a junket agent licence is child’s play by comparison. The result in Macau is that the junket operator tail is wagging the casino dog.Over 67% of Macau gaming revenue came from the VIP sector in 2007, and the margins on that business are being squeezed tighter and tighter by junket organisations that are getting bigger and more powerful thanks to aggregation in the industry. Roles reversed António Ramirez, managing partner of Ramirez Law Firm, a Macau-based company specialising in commercial contract advice, told Inside Asian Gaming : “The main issue here under legislative review is the growing perception of the necessity to regulate and restrain the excessive command and control of the Macau casino premiummarket by the local junkets. “Indeed, not only are the local junkets increasingly organised and able to impose ever higher commissions, but if this trend persists they will quickly capture the larger share of the gaming revenues generated by the premiummarket,leaving the local casino operators with shrinking profit margins and becoming little more than mere suppliers Orderly Competitor Macau doesn’t seem to know what it wants from its casino industry. Singapore does