GGRAsia – Pandemic could delay Macau tender, say former govt advisors

Pandemic could delay Macau tender, say former govt advisors

Sep 11, 2020 Newsdesk Latest News, Macau, Top of the deck

Two former advisors to post-handover administrations in Macau suggest that the disruption to the city’s casino business caused by Covid-19 is likely to lead to a delay in the anticipated public tender tied to the expiry in June 2022 of Macau’s six current casino licences.

Australian legal advisor David Green, principal of Newpage Consulting; and Portuguese legal advisor Jorge Oliveira, were speaking on Thursday via video conference in a Macau Business TV debate conducted online, in association with the Rui Cunha Foundation.

Mr Green spent 14 years in Macau, including a stint as advisor to the Macau authorities on gaming regulation. Mr Oliveira was a key Macau official in the crafting the original liberalisation process at the turn of the current century that led to an eventual six Macau operators, and was a member of the Macau Gaming Commission. After leaving Macau, he served for a period as Portugal’s Secretary of State of Internationalisation.

Mr Green said that even before the Covid-19 pandemic – which has seen almost an 82-percent year-on-year decline in Macau casino gross gaming revenue in the calendar year to August 31 – there had been “external shocks” to Macau. They dated back to 2014, he suggested, including “the crackdown on corruption” in mainland China, a key feeder market for Macau gaming; and later the United States’ trade war with China.

Speaking from Australia, he told the webinar: “There is too much sovereign risk, there is too much environmental and public health risk, associated with making a decision to proceed with a tender now.”

The legal advisor noted that the Macau authorities had the option to extend the current concessions in increments up to an aggregate of five years.

“My feeling is it may require, if not the full five years, then certainly most of it,” he said. That was in order to get some sort of stability in outlook for the industry in Macau, on which the government could then base its decisions.

Likely consensus for delay

Mr Oliveira – speaking online from Portugal – said he was inclined to a similar view on the impact of Covid-19 on the process.

“It is very likely that more time is required. In my opinion, today there would be a relative consensus in that direction,” he stated.

Mr Oliveira observed: “I think a tender will take place… But it is unwise to do it – I agree – when the overall Macau brand and overall assessment has changed.”

He noted: “We need to see some level of normalcy before a decision is taken and the path for policy is put on the table.”

Mr Green said he had some concerns that in a Covid-19 world – that in his view had advanced the appeal to consumers of remote online gambling – the Macau government “may have expectations that are just too high” in terms of what they could demand financially from casino operators, via a new public tender.

Mr Oliveira suggested however that operators would be mistaken if they thought they could ask for a reduction in gaming tax, which is currently levied at an effective rate of nearly 40 percent on the gaming gross. If anything, he suggested, it might create a political reaction to push such tax even higher.

Notwithstanding some differences on outlook among the panel members regarding the competition from online product, Mr Green took the view that it would be dangerous to assume things for land-based operators would go back to the way they were in 2019.

“I am not convinced we are going to see a snap back in business at all. In fact, I think it may be a permanent reduction in the attractiveness and volume of business that is done through terrestrial casinos,” he asserted.

“Social distancing in casinos is going to work very much against the whole dynamic of Chinese gaming, which is stack them in, get them round the tables where the excitement is, get them back betting, and really amp the volume of play, and accelerate the flow of money,” said Mr Green.

Casino industry consultant Ben Lee, managing partner of IGamiX Management and Consulting Ltd, was also on the panel, offering a perspective from the operational side of the industry.

Mr Lee said that in his view – based on visiting facilities in the Philippines and Cambodia that were providing online gaming products – that they were appealing to a “grind” market, i.e. people that cannot afford to go to Macau. There was “only a little bit of intersection” between the two consumer segments, he added.