GGRAsia – Macau smoke ban could spark 16 pct GDP dip: study

Macau smoke ban could spark 16 pct GDP dip: study

Nov 12, 2015 Newsdesk Latest News, Macau, Top of the deck

A study from consulting firm KPMG says a full smoking ban inside Macau’s casinos could lead to a 16-percent decline in gross domestic product (GDP) for the city. The study was commissioned by Macau’s six gaming concessionaires.

Representatives from the six firms on Wednesday presented the results to a working committee of the Macau Legislative Assembly.

On July 10, legislators approved the first reading of a government bill that proposes the abolition of casino smoking lounges and a full smoking ban in VIP areas. The bill is now at committee stage in the Legislative Assembly, but it is likely to be next year before the revised rules become law.

The committee is currently inviting several interested groups to share their views about the impact of the proposals in the new bill on smoking. The bill also covers other topics beyond smoking in casinos – for instance, it bans the sale of electronic cigarettes in Macau.

A Wednesday press release issued on behalf of Macau’s six gaming concessionaires – Galaxy Entertainment Group Ltd, Melco Crown Entertainment Ltd, MGM China Holdings Ltd, Sands China Ltd, SJM Holdings Ltd and Wynn Macau Ltd – stated that “the group believes that maintaining well-constructed and independently-ventilated smoking lounges in casinos could be an alternative to a full smoking ban”.

It added: “The group believes that retaining smoking lounges to protect the health of employees and guests while also offering the amenities requested by many of their customers would avoid the negative effects on the economy that a total smoking ban could trigger.”

‘Negative chain effects’

The release stated the KPMG study – which at the time this story went online had not been made available to the media – showed that, “should there be a complete smoking ban, Macau GDP could fall substantially by another 16 percent”.

It added: “The significant GDP drop and tax revenue reduction could have negative chain effects on overall tax revenue, which could then impact the city’s social welfare in the long-run.”

The study noted that a reduction in GDP “would also compromise the overall business market as the impact will not be limited to casino operators, but also to small- and medium-sized enterprises”.

In the first six months of 2015, Macau’s GDP contracted by 25.4 percent year-on-year in real terms because of the ongoing downturn it the city’s casino industry, according to official data. Macau also gets most of its public revenue from taxes on casino gaming, levied at an effective rate of 39 percent of the gambling gross.

The city’s casino gaming gross revenue (GGR) monthly tally has fallen for 17 consecutive months, judged year-on-year, since June last year. Macau’s accumulated GGR for the first 10 months of 2015 stood at MOP196.07 billion (US$24.6 billion), a fall of 35.5 percent compared to the same period in 2014. Investment analysts covering the sector attribute the decline to several factors, including the ongoing anti-corruption drive in mainland China, a slowdown in the Chinese economy and increased scrutiny of the junket system.

The six gaming operators had released some initial results of the KPMG study in June. Those showed that about two-thirds, or 66 percent, of Macau casino workers and 71 percent of customers supported the retention of smoking lounges in the casinos.

The working committee of the Legislative Assembly on Wednesday also met with representatives from the Macau Junket Operators Association. Working committee head, Chan Chak Mo, told reporters that the junket representatives warned legislators about the potential negative impact in the VIP sector of a full smoking ban.

“It was stated that the sector includes more than 100 VIP rooms, with about 2,000 gaming tables and around 10,000 workers [excluding dealers],” public broadcaster Radio Macau quoted Mr Chan as saying. He added that junket representatives feared a full smoking ban would jeopardise their operations, with VIP gamblers choosing to place their bets elsewhere, like Singapore.

Smoking on casino main floors in Macau is currently only allowed in airport-style enclosed smoking lounges that do not contain any gaming tables or slot machines. Having a cigarette while gambling is at present still allowed in VIP rooms.

Investment analysts have said removing mass floor smoking lounges could shave 10 percent from mass market gaming revenue, and a VIP room smoking ban as much as 15 percent from VIP revenue.

The Macau government has admitted it might reconsider its position regarding the proposed full smoking ban, depending on the results of the ongoing consultations being conducted by the Legislative Assembly’s working committee.

Macau’s Secretary for Social Affairs and Culture, Alexis Tam Chon Weng – who oversees smoking control policies – said in August that if the consultation results showed the majority of the population and gaming workers were in favour of keeping smoking lounges, the government would be open to discussing the matter and could reconsider its stance. But he denied this meant a U-turn, adding that the government’s smoking lounge ban proposal was aimed at protecting the health of casino workers and visitors.

He had previously argued that smoking lounges inside casinos were not completely effective in preventing non-smokers being exposed to second-hand smoke.