The government repeatedly says that it listens to the views of the various sectors of society before making any decision.
If so, we can deduce that the first decision that the government will take regarding the future of gambling in Macau will be to extend the concession of SJM (and thus of MGM) for another two years, bringing them all to 2022.
There is almost unanimity on this subject, and even those who are not supportive understand it.
It is true that in order to extend the operation of these two concessionaires for another two years the government has to invoke special circumstances. Local lawyer Bruno Beato Ascencão explains to Macau Business what this might entail: “Considering that the term of the MSAR’s current Chief Executive ends on December 18, 2019 it is unlikely that any amendments to the Gaming Law will occur until the end of 2019. Most likely, the current government’s intervention regarding this matter will merely determine that SJM’s concession, along with MGM’s sub-concession, will be extended to terminate at the same time as the remaining concessions (and sub-concessions) – that is, in 2022.”
From a technical perspective “that makes some sense to me if this is to put everyone in the same pack (timeline) for further consideration for policy changes,” Professor Desmond Lam of the local Faculty of Business Administration told our magazine.
Another Macau-based scholar, Ricardo Siu, cites three reasons to move the expiration date of SJM (and MGM) in line with the remaining operators.
The first: “After the MSAR Government formally granted three gaming concessions in 2002, and then approved three more related operators to develop their businesses respectively, the organisation of the industry has changed dramatically, which could never have been foreseen by the government in 2002, especially the intricate relationship between casino gaming and the various non-gaming hospitality sectors.”
Secondly the Associate Professor in Business Economics (also from the Faculty of Business Administration) envisages the need for a reformulation of the sector as a whole: “Parallel to the industry’s in-depth adjustment between 2014 and 2016, a number of new development paths for Macau have been made available from the national level, which may require a detailed re-examination of the future role and organisation of the casino industry in Macao’s economic society as whole.”
Finally, Ricardo Siu agrees with Bruno Beato Ascenção’ perspective: “Aligning the expiration date of all gaming concessions to 2022 may provide more time for the MSAR Government to formulate a better and more proactive legal framework for the long-term development of the industry. Besides, this may avoid unnecessary speculation in the market about how the other four operation rights may be handled by the government if two are processed two years ahead in 2020.”
In short, as Visiting Professor at the University of Macau Jorge Godinho has repeatedly said: “If this does not happen it would be too complex” with a public tender held in different periods “not benefiting [successive] governments.” An example: should the SJM concession be allowed to expire in 2020 would there be a subsequent public tender? What if SJM loses in 2020 but wins in 2022?
If the maths is any indication, the extension scenario has already prevailed.
Nevertheless, there are those who express reservations.
Sérgio Almeida Correia, a Portuguese lawyer based in Macau, explained to Macau Business that while he understands that “from the point of view of SJM and MGM an exceptional extension of the deadline and the defence that all concessions should be subject to the same timetables [is a case that can be made] I do not see it as a necessity”
“Most likely, the current government’s intervention regarding this matter will merely determine that SJM’s concession, along with MGM’s sub-concession, will be extended to terminate at the same time as the remaining concessions (and sub-concessions) – that is, in 2022” (Bruno Ascenção)
The lawyer even argues that “from the point of view of the interests of the MSAR it is relatively indifferent to opening a competition by 2020 or to maintaining the current situation.”
Nevertheless, recognising “advantages and disadvantages in opening a tender in 2020”, Mr. Correia concedes that “with a view to stability and the maintenance of a healthy climate among operators I am not reluctant to accept an extension of the concession period for SJM and sub-concession of MGM to 2022.”
But this will have to be accompanied, from his point of view, with a review of the conditions of operation for these two years, since for those who were awarded concessions for 18 years and invested [over the course of] this term to pay for investments an extension of two years will always work as a bonus.”
Professor Davis Fong, Director of the Institute for the Study of Commercial Gaming at the University of Macau (and deputy appointed by Chui Sai On) also expresses doubts: “The Chief Executive actually has the right to extend the contract period, up to the most, five years. However, this is a very high-level political concern and I do not think the government will easily exercise its rights [of extension]” he told Business Daily last year.
MGM: Only 15 years
Of the six casino operators operating in the Macau market three have 20-year contracts (Galaxy, The Venetian and Wynn), while SJM was awarded an 18-year contract and two of the sub-concessionaires, because they entered later, were given shorter contracts: Melco’s concession started in 2006 (and expires 2022) and MGM started in 2005 – but as its concession is linked to the SJM licence it is of only fifteen years duration.
Extending the licences ending in 2020 may be a way to give MGM some time to write off its investments – especially MGM Cotai, inaugurated a little over a month ago and which certainly needs at least three or four years to pay for itself.
