As referred to in the previous articles in this series, it now seems quite clear that the Macau government is intent on completing the gaming concession relicensing process before the current concessions expire on 26 June 2022. This means clarity on the upcoming Macau gaming law amendments is coming soon, which should go some way to calming a very nervous marketplace.
Those nerves infamously led to the 15 September panic selloff of Macau gaming stocks, which wiped 26% or US$18.4 billion in market capitalization off the Hong Kong listed entities of Macau’s six gaming concessionaires.
Most of this panic was caused by several big-ticket issues in the Macau government consultation document released late on 14 September 2021, but one by one the Macau gaming industry commentariat is coming to acknowledge that the final outcomes might not be nearly as bad as initially feared – or even very bad at all. Predicting doom and gloom may be good for grabbing the media spotlight, but in the fullness of time calmer heads tend to prevail over the fearmongers.
Having covered the issue of government authorization of dividends on Sunday, let’s move on to what is perhaps the most fundamental question of all: how many casino concessions will be allowed in Macau?
Of course, the current number is six, with three concessions (Galaxy, SJM and Wynn) and three sub-concessions (Melco, MGM and Sands) – although it’s long been acknowledged there is no substantive difference between the two groups.
The consultation document contained a proposal to scrap the sub-concession concept, which makes sense given that it was always just a bit of convenient early 2000s sleight of hand to sidestep the pesky legal requirement limiting concessions to a maximum of three.
The document also referred to the concepts of “quality” and “quantity” of concessions, and contains warm fuzzy language such as “ensuring the stability of the market size”, “not reducing market competitiveness, “balancing the stability and openness of the gambling market”, “enhancing the competitiveness of Macau in the international tourism gaming market” and a desire for the Macau SAR to “attract enterprises with high development potential and strong capital to enter the Macau gaming market.” All good stuff!
The consultation document noted the “many large-scale construction projects” which the concessionaires have completed in Macau and the introduction of “various types of non-gaming venues, bringing a range of business opportunities” to Macau, and providing “many job opportunities” as well as “enriching Macau tourism elements” and “introducing many international high-end brands and entertainment activities” which have “enhanced Macau’s international reputation.” More good stuff!
On the downside, the consultation document noted that over the past 20 years the gaming industry has “pushed up the salaries of local employees, putting pressure on other industries, and even monopolizing labor” in addition to “creating competition and the squeezing of small and medium-sized enterprises.” Also noted were issues of inflation, problem gambling and various social problems.
The document also referred to the need to “carefully consider the positive and negative impacts of the gaming industry on society, the economy and Macau people’s livelihoods”, and to consider the limited “land resources, human resources, industrial structures and urban carrying capacity” of Macau.
Also raised was Macau’s “unique cultural and historical background” and the fact that Macau faces “increasingly fierce competition in the surrounding gaming market.” It was suggested that “the focus of Macau’s gaming tourism industry should shift to broaden the source of tourists from different countries and regions and increase the consumption of tourists” by offering “rich non-gaming elements” and “diversified tourism products” in order to “bring new consumption enjoyment for tourists to Macau, so that everyone can find their own fun experience in Macau.”
Seemingly compulsory for any Macau government communication these days, there was reference to Macau’s “future development strategy to eliminate the current single economic structure and gradually move towards diversified development.” The document went on to state that the introduction of “too many” approved companies may cause “vicious competition” and even “irregular behaviors” (possible code for undesirable or even criminal activity) which would increase the “difficulty of supervision” and “affect Macau’s hard-won reputation as an international tourism and leisure center.”
Given all these factors, the consultation document recommended a “study and review of the number of concessionaires to ensure the continued healthy and orderly operation and development” of the gaming industry.
During the 45-day public consultation period from 15 September to 29 October, 217 opinions were received relating to the number of concessions which should be granted, as follows:
|Opinion||Number||% of all responses||% of those with a clear attitude|
|No more than 6 concessionaires||22||10.1%||14.4%|
|Exactly 6 concessionaires||95||43.8%||62.1%|
|More than 6 concessionaires||36||16.6%||23.5%|
|No clear attitude/neutral||64||29.5%|
Public opinion during the consultation period mainly agreed with keeping the status quo at six concessionaires.
Different views mentioned by the public in relation to the number of concessions to be granted were summarized in the report as follows:
- Keeping sufficient concessions ensures social stability, guarantees the employment of gaming workers, aids the sustainable and healthy development of the gaming market and guarantees the stability of fiscal revenues for the Macau government
- Reducing the number of concessions could weaken Macau’s competitiveness and dynamism, making the international market feel the scale of Macau’s gaming sector is shrinking, and affecting Macau’s economic stability
- The number of concessions should be more than six, perhaps increasing to around eight, to introduce a new dynamic in the gaming sector and increase employment
- The number of concessions can increase to 10, to attract more investors from different countries and promote Macau’s international status
- The “quality is more important than quantity” concept mentioned in the public consultation document is debatable, and having a maximum limit reduces competition and is not conducive to the healthy development of the industry
- The more important point is the proper supervision and inspection of the industry by the government
- Increasing in the number of concessions may exceed Macau’s land capacity, impeding the diversified development of Macau and leading to unfair competition
- Too many concessions would increase the difficulty for the government to supervise the gaming industry
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The government provided an analysis of and response to the public’s views, specifically noting, “it appears that society generally agrees with the Macau SAR government’s proposal in the consultation document on the prohibition of sub-concessions. As for the number of concessions, most opinions are that the number should be six, the same as the current total.
“Some opinions reflect that less than six concessions may have a negative impact on society, especially involving the instability of employment in the gaming industry.
“On the other hand, some opinions also hope the government will consider the affordability of land and human resources in Macau to avoid adverse effects of competition.
“In the development process of the gaming industry, maintaining a certain scale is an important foundation for ensuring social stability and employment of residents. It can also guarantee stable taxation, balance the overall expenditure of the SAR government, and provide favorable and stable conditions for maintaining residents’ livelihood and welfare and implementing various social development initiatives.
“The SAR government will comprehensively consider all the collected opinions and suggestions, combined with social policy direction and economic and other factors, to determine the appropriate number of concessions.”
Reading between the lines
I believe the government response is a very clear message that the preferred number of concessions is an absolute minimum of six, and likely staying at that number. The Macau government is notorious for maintaining the status quo if there isn’t a compelling reason to change, subscribing to the “if it ain’t broke, don’t fix it” maxim.
Consider the language used in favor of more licenses rather than fewer:
- “local employment” (always a hot topic in Macau)
- possible “negative impacts on society” of reducing the number of concessionaires
- guaranteeing “stable taxation” (remember Macau has to be self-reliant for government revenue generation, and cannot rely on mainland China)
- “ensuring social stability” (that’s another hot code phrase in Macau)
- “favorable and stable conditions for maintaining residents’ livelihood and welfare”
- “implementing various social development initiatives” (another widely stated government policy objective)
Now compare the above to the much more tepid language used in favor of fewer licenses rather than more:
- “affordability of land and human resources in Macau”
- avoiding “adverse effects of competition”
We will have to wait until the draft amendments are made public to know for certain but given the tone of the government’s language in the public consultation final report, I would be extremely surprised indeed if there is any proposal to reduce the number of concessionaires.
MACAU GAMING LAW PUBLIC CONSULTATION FINAL REPORT SERIES