Inside Asian Gaming

inside asian gaming May 2014 14 Unfinished Business When Macau began gaming liberalization the authorities envisioned a new Macau that would become an international tourist destination no longer dominated by casinos. Ten years after Sands Macao ushered in liberalization, results remain mixed. Macau has become the world’s largest gaming revenue market by far, and government coffers overflow. But VIP play through junket promoters still dominates the revenue stream, non-gaming accounts for a small fraction of resort incomes, and nine out of 10 visitors hail from greater China. Unintended consequences, such as widening income gaps and property price inflation, abound. “Gaming liberalization has been successful in providing a prolific and sustainable revenue stream for government and maintaining stable and full employment for Macau residents,” Newpage Consulting principal David Green, who worked on the feasibility study for gaming liberalization, says. “It has had its downside, though: skyrocketing rents, accentuated inequality of wealth distribution, inflation well above what might be expected in a developed economy, and infrastructure stress. It depends on what one uses as indicators of success whether the promise of liberalization has been delivered.” Directly elected Legislative Assembly member Jose Pereira The new Macau envisioned by gaming liberalization remains a work in progress By Muhammad Cohen US lawsuits against LVS by people claiming they helped LVS get its gaming license. Testifying in one suit, Tender Commission member and government point man on casino liberalization Jorge Oliveira said of Macau, “We, being the only center in China where it is possible lawfully to operate casino gaming, it doesn’t require a genius to make money with casinos there.” In other words, for $500 million, Macau was offering a virtual license to print money. Yet interest from the gaming giants of Las Vegas was muted. “Their biggest concern was not the size of the investment,” US- based Mr Gallaway says, “but the regulatory regime that was in place prior to 2002. Casino licensees operating in US jurisdictions risked jeopardizing those gaming licenses if they did business in jurisdictions with lax regulatory oversight.” Yet interest from the gaming giants of Las Vegas was muted. “Their biggest concern was not the size of the investment,” US- based Mr Gallaway says, “but the regulatory regime that was in place prior to 2002. Casino licensees operating in US jurisdictions risked jeopardizing those gaming licenses if they did business in jurisdictions with lax regulatory oversight.” “Macau’s casinos had acquired a seedy reputation, and there was a perception that Macau would remain in the thrall of STDM,” says Mr Green, who worked on consulting firm Arthur Andersen’s Sands Macao’s success broke a losing streak for Macau dating to 1637, when the Portuguese trading post that had elbowed into a Chinese fishing village lost its monopoly on commerce between Japan and Canton (now Guangzhou). Cover Story