Inside Asian Gaming

INSIDE ASIAN GAMING | April 2010 10 visibility approach. In January 2009—possibly lulled into a false sense of security because he was addressing a group of investors in the US rather than the Macau government directly—Mr Weidner made a point of stressing that despite suspending its work on Cotai five and six, the company would be pressing ahead with construction of Marina Bay Sands, Singapore. Mr Weidner cited the favourable tax regime in Singapore and the likely strong yield on capital invested as the basis for the decision. This was despite the fact LVS had received its Macau concession several years before its Singapore one. “There have been some changes in the central government’s attitude towards Macau,”Mr Weidner told the US investors’ forum. “We don’t think it’s necessarily all that prudent to put more money in until we see how that attitude works its way out.” The reaction was outrage in Macau and the emergence of a group calling itself ‘The Concerned Residents Group’. They held a meeting at the Grand Emperor Hotel in Macau a week later asking local people to protest at LVS for, in the words of a group spokesman: “having suspended parcels [plots] five and six on the Cotai Strip and given [sic] priority to its new casino project in Singapore over Macau”. Mr Weidner subsequently issued a statement denying that LVS was takingmoney out of Macau, though the issue of whether LVS was using itsMacau revenue streamas leveragewith investors or potential investors in its Singapore project was not directly addressed. Shaky moment Earlier, in 2008, Sheldon Adelson, the Chairman and founder of LVS, may have inadvertently set LVS-Macau relations on a rocky path. It related to court testimony prepared for defence of a civil action against LVS by Hong Kong businessman Richard Suen. Mr Adelson claimed in the testimony that he lobbied senior US politicians asking them to support China’s bid for the 2008 Summer Olympics (eventually held in Beijing). He said this had been a key element in getting LVS a Macau licence, not the political contacts of Mr Suen, as the latter had claimed. Regardless of the merits of Mr Adelson’s statement, its repetition in court papers is likely at best to have embarrassed the Chinese government, and at worst is likely to have angered it. The Macau government has a relatively light touch on the regulatory ‘tiller’ of its gaming market compared to the ‘command and control’approach adopted by Singapore. In Macau, therefore, it’s arguably crucial to develop andmaintain good personal relationships between gaming company officials and government officials to get things done. That goodwill is particularly important for effective and timely execution on new resort projects. The Macau government understands this, and naturally sees the granting of its goodwill in co-operating on such new projects as its key point of leverage with the concession holders. Intangibles ‘Goodwill’ from government is arguably harder to define, measure and predict than the ‘fit and proper person’ test applied to licence holders by regulators in the ‘all comers’ system used in the Nevada gaming market. The people sitting on a US regulatory body don’t personally have to ‘like’ an applicant in order to find them a ‘fit and proper person’ to hold a gaming licence, though it may not do any harm to the applicant’s cause if they do. Regulators are only human after all. Nonetheless, governments, regulators and operators in Western markets know that forthright lobbying and debate via the media is an acceptable part of the rough and tumble of business. Governments and regulators in the West do not normally bear grudges against companies for engaging in this kind of public debate. Indeed, grudge holding by the authorities towards an operator (if proven) would probably be actionable in the civil courts as an unjustifiable restraint of a company’s right to do business. Such rules do not generally apply in Chinese business culture. The ‘goodwill’ dynamic is a common element encountered by foreigners doing business in China. A foreign investor may not necessarily know whether or not he’s keeping the goodwill of the powers that be. He will certainly be sure to know when he’s lost it, even if the loss is only temporary. Steve Wynn already knows how that feels. The other gaming operators in the Macau market are unlikely to want to repeat his experience. Macau Policy Mr Adelson claimed in the testimony that he lobbied senior US politicians asking them to support China’s bid for the 2008 Summer Olympics (eventually held in Beijing). He said this had been a key element in getting LVS a Macau licence