MACAU BUSINESS
“With Beijing becoming more directional in their management of the economy and leading industries, the presence of a government representative is probably to ensure that no operator tries to game the system and to promote gambling over in the mainland ”
chiefs, DICJ is better prepared for the future”, Professor Siu noted to MNA, alluding to the increase in the number of DICJ inspectors from 159 to 324. For casino concessionaires, the introduction of
Government-appointed delegates will be a novelty. The consultation paper refers to in Decree-Law no. 13/92/M – appointment of Government representatives to companies that operate activities on an exclusive basis. This is the case in several companies – namely utilities – operating under the concession arrangement. “I personally assume that it is something similar to the reps for other concessionaires like Macao Water”, Mr Siu told MNA. “If this is the case, they are expected to monitor the concessionaire on behalf of the government and they receive remuneration from the government. I don’t think they will interfere in daily operations unless some negligence is found”. The consultation paper states that the role of the delegate will be related to providing the Government with greater capability in monitoring and controlling the daily operation and operational situation of the gaming companies. For Ben Lee, this move should be read in light of the overall trend in the mainland. It is time to bid farewell to the current laissez-faire ways. “With Beijing becoming more directional in their management of the economy and leading industries, the presence of a government representative is probably to ensure that no operator tries to game the system and to promote gambling over in the mainland”.
Vetting profit distribution
Another proposal raised eyebrows among industry insiders – a vetting mechanism for distribution of profits to gaming operators’ shareholders whereby that an only be carried out after meeting certain requirement and upon authorization from the Macau Government. For António Lobo Vilela, this raises several questions:
“How this is to be implemented and how to reconciled with the generous tax exemptions that casino operators have enjoyed since 2002”, the legal expert asks. Lobo Vilela questions if the Macau Government is to hold ‘golden shares’ in the future casino gaming operators. A key problem, he argues, is that “an artificial
involvement in fundamental management decisions and any vetting mechanism for distribution of dividends distorts the principles of a market economy and would
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certainly weight on the decision to invest or continue to invest in Macau”. Hong Kong-based political scientist and author of
several books on Macau and Greater China Sonny Lo underscores that the rationale behind the proposed mechanism to oversee profit sharing is related “preventing Macau casinos from being a place to siphon off the revenues from casinos to foreign companies and countries through stock reinvestment and through other money transfer means”. Some of these proposed measures and requirements could also raise questions for the listed companies and specifically for the operators owned by foreign (US) capital, as they are also subject to supervision by the US authorities regarding their licenses in the United States. With regards to the Government delegate, should he be vested with powers to veto decisions of the concessionaires’ board of directors, Mr Lobo Vilela questions whether “his suitability be scrutinized by the American regulatory entities concerning the casino operators that have American interests”, in an article published by the International Association of Gaming Advisors (IAGA).
Junkets: tightening the screws
Alongside concessionaires, gaming promoters (junkets) are set to feel the heat of tighter rules. The trend towards more stringent regulations attached to junket operations is not new. It has indeed being adopted over the past few years, but a beefed-up system was seen as inevitable and necessary. For Mr Lobo Vilela, one needs to bear in mind that “gaming is a highly regulated industry”. Indeed, “in some jurisdictions gaming is the most regulated of all industries” and the fact of the matter is that “Macau is still an under-regulated gaming jurisdiction and oversight is the way Macau seems to tackle the issue”, he added.
The public consultation document also proposes to include in the gaming law penalties against accepting cash or other deposits illegally, and if violations are made by VIP junkets, the gaming concessionaires should bear the corresponding legal responsibility. The document clearly defines the criminal liability and administrative penalty system with authorities adding criminal responsibility for illegally accepting cash or other deposits, suggesting offenders could face a sentence of up to five years in prison or they could be fined. Sonny Lo links these newly proposed measures to wider
picture related to the Central Government’s comprehensive approach to national and economic security. For Beijing it is of paramount importance to “prevent Macau casinos from becoming a conduit for money laundering and money transfer from mainland businesspeople and party cadres and officials. This explains why the gaming law needs to be tightened to control the middlemen or the junket operators who cannot and will not be allowed to market casino gaming in mainland China, unlike the past”, Mr Lo adds. The case for tightening the screws on gaming
promoters’ activities is also shaded by brokerage Sandford C. Bernstein. “Junket regulation and supervision and regulation over
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