Casino and junket operators in Macau are gearing up for the impact of the territory’s recently overhauled gaming law, the biggest such reform in two decades for the former Portuguese colony. The latest amendments to the gaming law further standardise the size and development of the industry while meting out punishment for a number of offences, ranging from underperforming revenue to jeopardising national security. While these tighter regulations could put Macau’s pandemic-battered economy under more pressure, there are also new opportunities.
WHAT IMPACT IS THE AMENDED GAMING LAW EXPECTED TO HAVE?
Macau’s Legislative Assembly approved the new gaming law (Law 07/2022) in June, over 20 years after the enactment of Law 16/2001, which effectively ended the city’s gaming monopoly system. The latest amendment has been hailed as the biggest reform for the world’s largest gambling hub in the past two decades.
Rui Pinto Proença, a partner at MdME, says the new law reflects the different scale and maturity of Macau’s gaming industry as well as the city’s economic and societal development. “Significantly, the key economic policy objective of the 2001 Law - to use gaming as an engine for the development of tourism, economic growth, and social stability - has been replaced by the objective to leverage the gaming sector to promote economic diversification and sustainable development of Macau.” The new law also factors in national priorities by addressing national security and cross-border capital outflows.
One of the most notable provisions is the limitations on the number of gaming tables and slots in casinos. In an unprecedented move, the government sets a limit of 6 thousand tables and 12 thousand machines at a time when casino operators are vying for new concession contracts. Minimum annual gross income from each gaming table is set at 7 million patacas ($866,122) while the figure for each gaming machine is 300 thousand patacas ($37,120).
The 2001 law granted a maximum of three gaming concessions which went to SJM Holdings, Wynn Macau, and Galaxy Entertainment. The trio subsequently set up sub-concession contracts with MGM China, Melco Resorts, and Sands China. The amendment has outlawed future sub-concessions while capping the number of concessionaires at six.
Proença envisions the spate of new measures, which also include mandatory junket exclusivity to one concessionaire and the prohibition of revenue share with third parties, to lead to a cleaner, albeit smaller, gaming sector safeguarded by codi-fied social responsibility obligations. “It will likely be an industry with minimal junket activity and thus less vulnerable to unwanted influences and more focused on attracting premium and mass market players,” he says.
WHAT CHALLENGES LIE AHEAD FOR CASINO OPERATORS?
With Macau’s stringent COVID policies and tight border controls hammering its gaming revenue, Proença fears that halving the term of concession contracts to 10 years will further encroach on the gambling hub’s financial viability and resilience.
“The amendment increases the direct financial contributions of the concessionaires and introduces a new set of obligations that will carry a considerable cost,” Proença explains. “At the same time, the concessionaires are expected to commit significant capital to Macau throughout the next 10 years, both by reinvesting in, and in some cases expanding, their existing casino-resorts, and in promoting changes to their business model to create a more leisure-oriented offer that is also appealing to overseas tourists.”
Proença feels that operators are facing a herculean task to balance continued reinvestment in Macau with the need to provide a reasonable return to their shareholders – all while within a relatively limited timeframe stipulated by the new law.
IN WHAT WAYS CAN MACAU’S GAMING REGIME BE FURTHER DEVELOPED?
Looking ahead, Proença stresses that a strategic direction driven by the pursuit of prosperity while in strict compliance with the laws of the People’s Republic of China is what Macau’s gaming industry needs to sustain healthy long-term growth. The key, he believes, is an open dialogue and collaboration among casino operators, the government, and other stakeholders.
“One possible direction is a more flexible approach to the use of new gaming technologies aimed to bring a new generation of leisure travellers to Macau. Those include digital payments, on-premises mobile gaming and the offer of different types of games and digital experiences that are not currently allowed,” Proença says.
He is confident that these technologies can deliver a better experience to players while “allowing more thorough compliance with the operators’ obligations in terms of anti-money laundering, anti-corruption, and even responsible gaming.”
Ultimately, Proença hopes that by deploying new gaming technologies and perfecting relevant regulations, Macau can be elevated as an attractive destination for a new class of fun-seeking tourists from across Asia. “In the future, it could perhaps help provide the regulatory and compliance comfort that is also needed for a relaxation of visas and capital controls that apply to Chinese travellers.”