LAST WORD 54
Sharon Singleton
Managing Editor, AGB
Legal changes broadly positive, but no cause for celebration Steve Vickers & Associates, a corporate intelligence and risk mitigation firm with deep roots in Asia, is warning against irrational exuberance in the wake of the publication of Macau’s new gaming law.
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n initial read indicated that the amendments the management companies and the concession were far more benign than doomsayers had holders, which Ben Lee of IGamiX Management been expecting after the government published and Consulting says appears to have a direct impact on how the U.S. operators charge for their services. its consultation paper in mid-September. While many of these are flat fees, there are some However, as always the devil is in the details and some of the details could prove to be problematic for that are calculated as a percentage of revenue. For long-term investors being asked to plough billions example, Sands China has to pay Las Vegas Sands 1.5 percent of the gross revenue at the Venetian and its of dollars into the city. The first stated purpose of the draft law is to safeguard other properties for the right to use certain trademarks under the trademark sub license agreement currently the national security interests and those of Macau. It’s a theme that is repeated throughout the 44-page in place, subject to a cap. That fee (for the Venetian, document and is also given as a reason over which the Sands Macau and the Plaza Macau) is capped at $128.3 million this year. chief executive could unilaterally Also still in the vague column cancel a concession. is how the operators will be Unfortunately, the concept expected to contribute to the is vague and there is no detail as The first stated healthy development of Macau, this to what the government plans to includes supporting activities of focus on when it comes to national purpose of the public interest, as well as cultural security and what it would consider draft law is to and sporting activities. to be a grave enough breach for To be sure, all six operators a license to be removed. safeguard the are already involved in corporate “The major risk to gaming national security social responsibility projects in operators is not regulatory but is the city and have been key backers nakedly political,” Vickers says. interests and of the government’s efforts to “The primary factor which the those of Macau. promote vaccinations for example. Chinese and Macau authorities However, there is still room consider when evaluating concession for concern that there may be renewals and new regulations clearer mandates on exactly is clearly the National Security criteria and whether, for example, capital flight can what they are expected to do that don’t necessarily be contained, especially when linked to US operators jibe with the way management feels company cash could be best deployed. seeking to repatriate dividends.” President Xi Jinping’s pet project is the development The new laws didn’t in the end impose restrictions on the distribution of dividends, but did stipulate that of the Greater Bay Area. Galaxy Entertainment the government needs to be informed before major and Melco Resorts & Entertainment have already financial transactions take place. It remains to be seen announced plans for non-gaming facilities on the what level of distribution they will find acceptable. Mainland. However, is this an area into which a U.S. The Macau government could still act on dividend casino company wants to enter? On the whole, the legal amendments as they payments perceived as excessive, particularly if severe capital outflows from mainland China prompt stand appear to be manageable and for the most part national security concerns in Beijing, Vickers warns. provide clarity over the next stage of the industry’s The amended rules also ban revenue sharing, both development. But they’re probably not something to between junket promoters and operators and between warrant investors jumping for joy.
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Asia Gaming Briefings | February 2022
