Mystery lingers

The multi-billion-dollar questions regarding the future of the Macau gaming industry beyond June 2022 remain unresolved, with the current six operators far from securing the status quo. 


The much-anticipated maiden Policy Address by Chief Executive Ho Iat Seng was finally delivered last month, however, marked by the unprecedented outbreak of the novel coronavirus (COVID-19) that has brought the global economic activities into a standstill. Covering multiple areas, including the measures to rejuvenate the lacklustre economy, the restructure of numerous government departments, and the closer integration with the Guangdong-Hong Kong-Macau Greater Bay Area, the new Chief Executive even took time in the Policy Address for 2020 to reflect Macau’s efforts in facilitating that economic diversifications from gaming were still far from substantial, a change from the stance of the previous administration that the city’s endeavour ‘has started to yield outcomes.’ 

A significant part is still absent in Mr. Ho’s first Policy Address – the details of the local gaming development beyond June 2022, when the six gaming concessions and sub-concessions expire. From the revisions, to the gaming regulations, to the timeline for opening the re-tendering process, to the number of available licenses, these are all still up in the air, awaiting for “a political decision,” say analysts and observers, who alert it should not be taken for granted that all current six operators could retain their licenses. 

“As the gaming concessions [and sub-concessions] will expire by 2022, [the government] will continue to heed the public calls, earnestly review, and conclude the past experiences for the relevant preparatory work [for the retendering process],” the Policy Address states. “[The government] will improve the [gaming] legal framework and supervision mechanism, as well as continue to carry out the retendering work of the gaming licenses.” 

As the official document lacks any further details concerning the process, Mr. Ho only noted, after being questioned in a press conference later, that he hopes a public consultation on the revisions to the gaming regulations could start in the second half of this year, which “has been delayed for a few months by the virus outbreak.” The official noted the sub-concession model would be eliminated, but declined to say the number of gaming licenses to be granted in the future, as the government awaits for the public opinions on the topics during the consultation exercise. 

Timeline 

Given the current schedule by the government, investment bank, JP Morgan, noted in a recent research note that the rebidding process might not be ready when the six licenses expire by 2022 as the revisions to the gaming regulation will only be completed by next year at the earliest. “We wouldn’t be surprised to see the renewal [retendering] process postponed by a year or so versus the current expiry of June 2022,” the research note read. 

In other words, the six gaming licenses have to be extended for a certain time period if the retendering process could not be completed before June 2022. According to the current gaming rules, the existing operators could see their licenses to be extended by a maximum period of five years at the end of their concessions or sub-concessions. The licenses of SJM Holdings Ltd and MGM China Holdings Ltd have been extended for two years from 2020 to 2022 by former chief executive Fernando Chui Sai On in a bid to align the expiry date of all the licenses. 

The current regulations also mandate the government has to extend the existing concessions and sub-concessions at least six months prior to the expiry. Given the lapse of all licenses here on June 26, 2022, this means the government must extend the licenses no later than the end of 2021, should the rebidding process not be concluded on time. 


“In consideration of the competition from nearby gaming markets and other factors, it’d be ideal for the government to complete the retendering process before the expiry [of the existing licenses]” – Ricardo Chi Sen Siu, director of Centre for Career and Research Advancement in Integrated Resorts at the University of Macau 

Achievable before deadline 

While Ricardo Chi Sen Siu, director of Centre for Career and Research Advancement in Integrated Resorts at the University of Macau, acknowledges the possibility for the government to extend the gaming licenses for a short time period beyond 2022, the scholar believes there is still time for the government to complete all the works for the rebidding process before the deadline. “The time frame is tight, but it is not impossible to achieve,” he notes. 

“In consideration of the competition from nearby gaming markets and other factors, it’d be ideal for the government to complete the retendering process before the expiry [of the existing licenses],” he says. “There will be more uncertainties in the process should the current licenses be extended [for a certain time period].” 

“The previous administration has done a lot of preparation for the rebidding process with many documents ready to go, thus enhancing the efficiency of the current administration [on the matter],” Prof Siu continues. Provided that the public consultation exercise to be completed this year, there are still “a couple of months for the Legislative Assembly to review and approve the revised gaming regulations in 2021 and then the government could reopen the tender by 2022,” he notes. 


“If the number [of gaming licenses] is set at six or less, there is a likely chance that not all existing operators will retain status quo given the bidding process is open to all parties; if there are seven to eight licenses or more, it is then very likely the existing operators could continue to operate” – Wang Changbin, director of Centre for Gaming and Tourism Studies at the Macau Polytechnic Institute 

Geopolitical struggle 

The authorities had indeed started a so-called “mid-term review” of the gaming industry in 2015, with a detailed report completed a year later, which was described as paving a way for the future retendering process. However, it has been reported by local media outlets that the government had completed drafting the public tendering documents and the rebidding process was supposed to be concluded last year — but the trade war between China and the United States since 2018 has hindered the process, as three of the six gaming operators in Macau are backed by the U.S. capital, namely Sands China Ltd, Wynn Macau Ltd, and MGM. 

When asked about the possibilities of any existing six gaming operators failing to retain their licenses, Prof Siu declines to make any guess and only says “a lot has happened” in the past year and more. 

Though the world’s two largest economies have signed a phase one trade deal earlier this year, which has ameliorated the trade tensions between the two countries, the relationship between China and the U.S. has not seen any signs of improvement, with both sides pointing fingers at each other over the ongoing COVID-19 pandemic and the months of protests in Hong Kong since last year. Hong Kong-based political and corporate risk consultancy, Steve Vickers and Associates, has warned the Macau gaming operators with the U.S. capital “are sitting on a geopolitical fault line” and the local authorities “might simply refuse to grant a new right to current concessionaires.” 

While the latest Policy Address, and Mr. Ho’s recent remarks, did not comment on the future of the current gaming operators, the Chief Executive emphasized last month the retendering process would be a public tender. “Any parties are welcome to join the bidding and [the government] will not mandate only a certain company could participate in the process,” he added. His comment seems to have squashed the realms of possibility that the authorities might lay down bidding rules to make it difficult for other companies, rather than the current operators to participate in and win. 

Photographer: Billy H.C. Kwok/Bloomberg

Number of licenses 

Billy Song Wai Kit, president of the Macau Responsible Gaming Association, has expected not all the existing players would retain a license. “The operators have to hand back the casinos to the government at the expiry of their licenses, and the government could assign the properties for others to run,” he talked about this possible scenario. 

Some companies have already shown interests in the past few years that they would be interested in setting foot in the world’s most prominent gambling enclave, including David Chow Kam Fai, executive director and co-chairperson of Macau Legend Development Ltd, which runs three satellites casinos in the territory; Chan Meng Kam, who controls Golden Dragon Group that operates four casino-hotels here; and Suncity Group, one of the largest junket operators here. 

Mr. Song expects the new tendering process would attract new companies to run for a license, but stressed the turnout depends on how the economy and the industry will shape out in the coming months. Prior to the turmoil caused by COVID-19, the Macau gaming revenue declined 3.4 percent last year, the first annual drop since 2016, over the slowing mainland economy and the Sino-U.S. trade war. In the first quarter of this year, the gaming revenue recorded the biggest quarterly loss on record of 60 percent since the liberalization of the gaming industry in 2002 over the pandemic. 

Wang Changbin, director of Centre for Gaming and Tourism Studies at the Macau Polytechnic Institute, also acknowledges the possibilities of the existing operators failing to gain the future license. “It really depends on how many licenses the government will issue in the retendering process,” he explains. “If the number is set at six or less, there is a likely chance that not all existing operators will retain status quo given the bidding process is open to all parties; if there are seven to eight licenses or more, it is then very likely the existing operators could continue to operate.” 

But, the scholar pinpoints the rationale behind the future number of gaming licenses will not be pure science. “There are six gaming operators now, but there are actually 41 casinos, and from a science perspective, it’s difficult to say how many gaming licenses are suitable for the city,” he remarks. “At the end, it is a political decision.” 


Gaming Initiatives Laid Out in Policy Address for 2020 

●       The compound annual growth cap of three percent on casino tables continues to be in force 

●       The proportion of local residents in the mid-to-high level management of gaming companies of no less than 85 percent continues to be in force 

●       The government continues to encourage the gaming operators to develop the mass market and non-gaming offerings 

●       A review on how casino companies implement the anti-money laundering guidelines will be completed by the third quarter of 2021 

●       A review on the compliance of the internal operations of gaming concessionaires and sub-concessionaires will be concluded by the last quarter of 2020 

●       An array of measures to strengthen the supervision over the junkets, including better background checks and a review on their audit and anti-money laundering procedures 

●       Establish a specific project enquiry platform for gaming concessionaires and sub-concessionaires