MACAU BUSINESS


director at casino consultancy firm 2NT8 Limited. Ben Lee, another well-seasoned gaming consultant and a former Vice President at Venetian Macao, concurs that “the continuing escalation of tensions between the two countries will continue to increase the risk of one or two of the US operators either not securing a new concession or giving up their controlling equity to retain a presence in the world’s biggest gaming market”. In such a scenario, a Chinese company or investor would become a key stakeholder.


Sub-concessions waning


Part of the answer to these uncertainties can be found in the key political decisions that will shape the future gaming law. And one of the main ones lies in the number of concessions, which will be awarded in the public tender. The current law comprises only a maximum of three concessions; however, they were unfolded into three other operators under the sub- concession model - a controversial approach that played a pivotal role in the magnitude of the boom which the city witnessed over the past two decades. In practice, there are a number of additional de facto casino operators (satellite casinos) through the third-party revenue sharing service arrangements, a legacy of the pre-handover period. The “3+3” model is set to be overhauled according to most


observers. Carlos Siu Lam, an Associate Professor at Macau Polytechnic Institute’s Centre for Gaming and Tourism Studies, points at that direction. “The number of concessions and the concept of sub-concessions need to be reassessed; the practice of restricting the number of concessions without restricting the number of casinos is another regulatory conundrum, as are the relationship between concessionaires and junket operators and the regulations governing the reversion of assets to the government”, Siu notes, pinpointing key areas in the government’s regulatory review efforts. Industry insiders are also convinced that the model will be adjusted. “I believe that what brought us here will not necessarily take


us to the next level”, argues António Ramirez, a local lawyer and consultant who served as Senior Vice-President for Human Resources at Sands China. The way ahead may lead us to “six or seven concessions”, he anticipates, as “bringing more players will most likely result in a gain for Macau and local people”. In addition to tackling the sub-concessions conundrum, the


Government might also address the grey areas wherein the “satellite casinos” operate. Former Melco Crown senior legal counsel Óscar Madureira believes that “this kind of operations bring some lack of transparency that should terminate soon”. Under this line of reasoning, Madureira, from the Rato, Ling, & Cortés law firm, is certain that the law will be adjusted away from the three concessions system to allow for more fully-fledged players: “Not less than 6, but eventually more, I would say”. Ben Lee claims that the “3+3” model has become “meaningless, given the plethora of casinos we have in the form of satellite casinos”. What stands out as the most likely scenario is the “formalization of the current six concessionaires and sub-concessionaires, as “it would be extremely difficult to squeeze six back into three”. Jorge Oliveira, who played an important role as a top legal officer for the Macau Government in devising the sub concessions’ arrangement back in 2002, believes that a “a prudent and


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cautious approach will likely lead to a public tender for six concessions”, in a wording that preferably “would not exclude the possibility for more concessions being granted along the way”.


D-Day for the D-word


However, before making the call on who will be awarded or re-awarded a concession, the crux of the matter lies in what the operators will be required to do, what their social and economic role will be, in line with the overall political and economic master plan set by the Central Government, and in the direction and implementation to be adopted by the local SAR Government. In that respect, all roads lead to the D-word: Diversification. It might seem like an oxymoron: casino operators contributing to economic diversification away from gaming. However, the future lies in building an economic structure less reliant on gaming. Local Government officials have been “paying lip service” to that aim over the years, but given his administration it sounds like Ho Iat Seng is determined to walk the talk. The public tender provides an opportunity to inscribe that in the respective concession contracts. Secretary for Economy and Finance Lei Wai Nong said in late April that the Government will listen to citizens’ opinions on the role of the future casino concessionaires in developing non-gaming elements, enhancing social responsibility or supporting local small- and medium-sized enterprises (SMEs). How could this be translated? António Ramirez, current Managing Director of gaming and hospitality investment company CAP Limited, has a few suggestions. Operators may play an active role in “education, training, and development that can help and support the gaming industry and such, as supporting new companies that contribute to the diversification of the economy – for example, having IT companies develop management solutions for hotels, casinos, procurement, or security”. This means that gaming companies “may have to present investment plans, not only that support the gaming industry, but that also help to support the region and diversify Macau’s economy”, Ramirez anticipates.


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