Inside Asian Gaming

INSIDE ASIAN GAMING | January 2011 18 a bit of both. The ‘one for one’ policy on imported labour for casino construction sites announced in late April appeared to be in reaction to local unemployed demonstrating outside the Labour Affairs Department. Then again, the government may have used the protests as a convenient cover for something they already had in mind—i.e. to slow growth on the gaming supply side. Opinion is divided both inside and outside Macau about how much the local leadership calls the shots on policy and how much it’s the central government in Beijing that drives the process. Perhaps a more relevant point is that Macau’s unusual, semi- autonomous status within China, and its special political set up (neither a one-party system nor a representative democracy) means the Macau government tends to seek legitimacy by courting the approval of both the local population and Beijing in almost equal measure. The needs of the guest casino industry tend to trail some way behind in third place. That’s largely because Macau’s gaming industry is an oligopoly (a government- held monopoly divided between a limited number of concessionaires and sub- concessionaires), unlike the all-comers free market (subject to probity checks) found in the US. If an operator in the US runs into regulatory or political problems of the sort first encountered in 2009 by MGM MIRAGE (now MGM Resorts International) in Atlantic City, that operator can always pull out of the market with the option of coming back in when the political dust has settled or trading conditions have improved. Alternatively, a casino operator in the US can use the threat of market withdrawal and loss of local jobs and taxes as a form of leverage with local lawmakers. No such leverage is possible in Macau. The operators know that if they pull out there will be any number of operators ready and willing to take their place. The withdrawing operator would also take a huge hit on lost infrastructure costs. There’s a striking illustration of the difference between the political influence of the gaming industry in Las Vegas compared to Macau. In February last year, Democrat party lawmakers in the State of Nevada proposed levying a relatively modest US$32 million per year on casino operators as an additional contribution to the costs of the Gaming Control Board. The industry said no and lobbied hard against it. The State’s Republican governor said he wouldn’t support a tax increase unless there was consensus. That pretty much killed off the initiative. Toe the line In Macau, by contrast, when the government says ‘Jump’, the industry tends to ask ‘How high?’ Resistance on the part of operators to this trend may not be entirely futile. But Inside Asian Gaming has yet to see evidence that confronting the Macau government either overtly or covertly on regulatory issues has actually improved the commercial position of operators. It may actually have made things harder for them. That’s because Asia’s cultural secret weapon for dealing with troublesome individuals or corporations—passive resistance, whereby permissions slow to a crawl and piles of paperwork become ever-larger—functions in such a subtle way it’s difficult even to prove it’s happening. An oligopoly also exists in Singapore’s casino market, so an interesting question is why doesn’t the Singapore government play faster and looser with its guest casino operators by changing the rules for its casino investors at short notice? One possible answer is that Singapore’s goals in introducing modern casino resorts were very clearly spelled out from the outset. They were to boost tourism numbers to 17 million arrivals by 2015 and tourism receipts to S$30 billion annually by that year. The Singapore government can measure the performance and success of its casino operator guests against that yardstick and, if necessary, ask those operators to operate more conservative or more liberal business practices (in relation to say credit issuance for VIP players) as circumstances allow. By contrast, Macau’s aims in market liberalisation appear much more vague— i.e. a diversification of the tourist industry away from hard gambling. This vagueness means the implied social contract and the actual legal contract between government and operators is open to much wider interpretation and can become effectively a hostage to political expediency. Singapore’s clarity on casino policy and strategic economic aims is also arguably a function of the fact it operates an administrative system much closer to Western norms than does Macau. The broad idea from the Macau government side seems to be that limiting the supply of gaming by curtailing further table supply and property expansion will somehow control demand for gaming. The thought following on from that is this will MGMMIRAGE voted with its feet in the row with New Jersey, selling its stake in the Borgata in Atlantic City Macau Policy