Inside Asian Gaming

October 2010 | INSIDE ASIAN GAMING 19 Macau Policy lawyers to blast away at the local system in the manner of the 19th and 20th century foreign gunboats that pounded rebellious settlements along China’s rivers. By that reading, it’s better for Macau to keep things loose and fluid in policy terms, and keep its foreign guest companies guessing. Not having a predictable policy and running things in a seemingly ad hoc manner might actually be a policy in its own right. Table cap Take the Macau government’s decision to cap at 5,500 the number of live gaming tables in the market between now and the end of 2012. Gaming industry analysts have amused themselves by pointing to apparent inconsistencies in thegovernment’sposition. An example is that Galaxy, the developer of the US$1.8 billion Galaxy Macau, and Sands China, the company behind the US$4.2 billion Cotai 5 and 6 project, when questioned separately on the table cap issue by the media and analysts, swear blind they’ve each been promised 400 live tables by the government for the first phases of their respective projects. Given that both projects are due to be completed well before the end of 2012, and that honouring such reported promises would mean the government breaking its own cap almost before the policy kicks in, some Westerners have developed the view that the local government is frustratingly ad hoc, and even amateurish. One senior gaming executive, in a moment of frustration, reportedly even referred to being “sick of village politics” in relation to apparent twists and turns in Macau public policy. That may be missing the point. It’s possible the Macau government doesn’t want to clone Western bureaucratic ways of forming public policy. It may prefer instead to keep the casino operators under personal obligation to the government, rather than having a merely contractual relationship with them. Under an informal system of obligation, good behaviour by the operator over a particular issue (say hiring locals) may get a reward from the government in the form say of flexibility over the table cap. Such an approach has echoes of the personalised patronage system used by China’s emperors. A society constructed around carefully ordered hierarchies, where each layer has responsibilities to the other, is a much more Chinese concept than the irreverent, meritocratic Western system of thought, which tends to value innovation in ideas and the questioning of received wisdom—even on occasion condoning challenges upon the most revered community leaders. Sheldon Adelson specifically said in the presence of this correspondent, that his goal was to challenge existing business models in his chosen industry. It was, he said, “the surest way” to make money. Contrast that with Stanley Ho’s approach, which is to create a systemof patronagewithin theSJMsphereof influencewhereDr Ho gives junket operators and smaller casino developers something— namely access to his gaming licence and on occasion his gaming management system andpeople. In return, the junkets and smaller casinos give him something—access to high roller players and support where necessary to the SJM ‘family.’ Singapore’s approach Singapore, by contrast, although also influenced by Confucian social ideas via its Chinese majority population, can also use a Western-style system of corporate governance and administrative regulation for its casino industry; tested, if necessary, via the courts. That’s because Singapore has world-class government in terms of the skills held by its public servants and lawmakers. Singapore can match any clever Las Vegas lawyer contract for contract and clause for clause. Macau doesn’t have government with that level of sophistication. A boxer fighting at flyweight doesn’t move up to light middleweight after a handful of bouts—unless that boxer is called Manny Pacquiao. And Macau is never going to set up an administrative system for its gaming industry that could end up, from the government’s perspective, out of its control. As an example of the government’s desire to keep ‘in control,’ let’s look at the issue of the labour squeeze that is delaying the construction of two major casino projects on Cotai—Galaxy Macau and Sands China’s Cotai 5 and 6 plots. The Macau government has been accused in many quarters of not being supportive enough of the gaming industry, considering the investment the industry is making and the Western negotiation 19th century-style Mould-breaker—Sheldon Adelson