Macau Gaming Policy Update

Macau Gaming Policy Update

6/25/2008
By: António Ramirez and and Luís Pessanha On April 22, 2008, Edmund Ho, Macau SAR Chief Executive, made at the Legislative Assembly what was to become a famous and somewhat unexpected announcement regarding the future of Macau's gaming industry. The Chief Executive stated that it would be the policy of the Government of Macau to award no further gaming concessions in addition to the six casino sub/concessions already granted. Furthermore, he announced that no additional land would be allocated for casino development and that no more casino venues would be permitted; only ongoing casino projects already submitted for Governmental approval would be considered. The Macau Chief Executive stated the Government would not approve any increase in gaming tables at the existing casinos or of the number of tables requested for projects under approval - but apparently does not prohibit an increase slot machines. Overall the message was that at least for now there should be a freezing and cooling-off period of the gaming market of Macau. The Macau Government also made known that, in the short term, it intends to submit a new legislative package to impose stricter regulations on a number of sensitive issues, ranging from rezoning of gaming free city areas (so far gaming can be offered anywhere in Macau), to issuing new regulations to deal with the qualifications of the top management of casino operators, and that the commissions paid to the gaming promoters (better known as junkets) should be regulated (which appears to imply imposing a mandatory cap on the commissions paid out to the gaming promoters). It was even suggested that this course of action was in accordance with the wishes of Beijing. This is somehow surprising, since as a matter of principle the policy decisions in question must have been taken by the local Government, as these matters are part of the exclusive regional competence of the Macau SAR. However, it may be that the Chief Executive mentioned Beijing regarding the new land at the Cotai Strip, since reclamations must be approved by the Central Government. The reaction of the stock markets to this announcement was nothing but enthusiastic, with the shares of the gaming companies already operating in Macau gaining in value as news of the announcement made by the local regional Government broke. However, this may have been an excessive reaction, as the Chief Executive essentially restated what has been the official policy of the local Government for the last several years (not to issue new casino gaming concessions at least until 2009). Indeed, this could have been expected, as the Government of the Macau SAR would certainly be hard pressed to make major policy changes at this stage, as the Chief Executive is reaching the end of his mandate and cannot be reelected (the Chief Executive can only serve two terms (article 48 of the Basic Law of Macau)). It is also becoming more obvious that local politics is increasingly being overshadowed by the backstage maneuvering with regards to the choice of the next Chief Executive. In Macau, little is more scarce than land, and in the recent past there has been a considerable public investment in the promotion of new casino sites, not only because land has in some cases been leased bellow market price, but because a great share of the new land obtained by reclamation was allotted to gaming projects (e.g., the Cotai Strip). This was done because of a deliberate political decision to prioritize and promote the local gaming industry, as such was considered to be in the public interest. But in years to come, the use of land for residential purposes will most likely be the new priority, as it becomes clear that more has to be done with regards to provide affordable housing to the population. Worthy of attention is surely the fact that the Government of the Macau SAR appears to be set at finally pushing forward the next big wave of gaming legislation which has been on the pipeline for the last five years. This is good news for the gaming industry as a whole, as a more or less obvious lack of key regulations has been highlighted in the recent past and clear rules are essential to ensure fair competition and the healthy future development of the Macau gaming market. It is still too early to fully understand the legislative agenda and to know what will be the main focus of the legislative reform. Nevertheless, it may be expected that the Macau Government will determine in which areas of the city gaming may or may not be permitted (e.g., to avoid casinos near hospital, schools, temples and churches), which so far has not been regulated. A greater mystery has to be what future regulations, if any, may be enacted regarding the requirements imposed upon the management of the gaming operators. Other issues clearly in need of legislative action are the regulation of slot machines (setting a minimum percentage of return of the betting amounts and regulating the licensing of slot machines in the Macau SAR, as well as their maintenance and other issues; so far the approval of new slot machines is purely discretionary), the regulation applicable for the licensing of gaming vendors in Macau, the enactment of regulations dealing with the administrative fines applicable for breaches of the gaming law of Macau by the gaming operators (which has long been expected to pass) and potentially also some form of basic regulations to start to address problem gambling (so far unregulated in the Macau SAR, but gradually a more visible concern).
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