Concession tender not likely delayed, law clarity seen by year-end

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Macau’s public consultation process has ended with little clarification on the intended changes to gaming laws, although the industry is likely to hear before the end of the year to give time for the renewal process ahead of the June deadline, a leading industry consultant said. 

Ben Lee, managing partner of iGamiX Management & Consulting, said he doesn’t believe the government will extend the current concessions beyond the June expiry to give more time for the tendering process. It’s more likely to begin in January, he said. 

The Macau government published its draft consultation paper on Sept. 15, which was the first necessary step to start the concession renewal process. The deadline for comment ends on Oct. 29th and the government has held a series of public consultation sessions, with a separate one for the six operators.

From the end of the public consultation, it has 180 days to produce its summary report, which takes the timetable to mid-March. The final draft of the revised gaming law then needs to be submitted to the Legislative Assembly for approval before the tender can begin. 

Analysts at J.P. Morgan wrote that they expect a six-to-12 month extension to the current concessions to allow more time for the tender given the tight timetable.

Lee said it would make more sense for the government to grant an extension to any potential losers after the tender to allow them to continue operating only for a limited time and to put pressure on to negotiate a fast exit. 

In its draft paper the government has not said how many licenses will be available for tender. It has only said that it will do away with the sub-concession system that doubled the original number of licenses from three to the current six. 

The more widely held view is that all six of the current operators will retain their right to continue in Macau, although Lee is not convinced.

“I have never believed that we will see the same six and I still don’t,” he said. “I think six will be the upper limit and there may actually be fewer. As far as Beijing is concerned they probably still don’t understand how the three became six.” 

Asia Gaming Brief is carrying out an anonymous survey on the gaming law proposals and the future of Macau for the November edition of our magazine. One of the sections solicited views on the potential number of casino licenses.

The overwhelming majority of respondents said they believed Macau would keep the same number of concessions, but the picture becomes blurred when asked whether the market can expect new entrants. Just under half of those who have expressed a view so far strongly expect newcomers into the market, with a quarter strongly believing that one of the current participants will lose out. 

The government has made it clear in its draft consultation that it is seeking to nurture the “healthy and sustainable” development of the gaming industry in Macau, leading to debate as to what level of gross gambling revenue is deemed acceptable. 

“With the number of properties we have, we have an oversupply of gaming products,” Lee said. “We could easily lose a casino operator and still produce the same GGR.”

Lee said he doesn’t think a level above $30 billion would be tolerated by Beijing, which has been cracking down on a wide range of industries in its efforts to crack down on what it deems social ills and to achieve its common prosperity goals. Lee points towards one of the official objectives for the introduction of the digital RMB, which is to “combat gambling.”

He also argues that another reason weighing against the potential extension of the current licenses to give more time for tendering is the current push to develop the Guangdong-Macau Intensive Cooperation Zone in Hengqin. 

The operators are expected to be key players in the policy initiative to a tourism and industrial zone to diversify Macau’s economy. “Hengqin has to get underway and delaying the concession tender will only add to the lack of progress to date,” he said.

The full results of Asia Gaming Brief’s Macau survey will be published in the November magazine.