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Macau Halves Casino License Duration to 10 Years & Ups Local Ownership to 15%
By Jeff Osienya Jan 14, 2022 IndustryMacau’s gambling ombudsman announced new regulatory changes ahead of official ratification. The license duration is now 10 years, half of the initial 20-year period, and local ownership of casino operator stakes has been increased by 5% to 15%.The Macau Legislative Assembly has set a meeting to review a recently released draft of Macau’s updated gambling bill later in the month. This revision comes after more than two decades of using the Macau Gambling Law, passed in 2001 when the Special Administrative Region (SAR) was still under Portugal’s jurisdiction. It was after the liberalization of the Macau gaming industry that the SAR was handed over from Portugal to China in 2002.
Gambling operators in Macau have been keenly waiting for the last few months after the government announced its intent to tighten the gambling regulations. In September 2021, the Gaming Inspection and Coordination Bureau (DICJ) of Macau embarked on a 45-day consultative process to revamp the regulations of the gambling sector. The consultation involved government officials, the general public, and casino operators, whose opinions were taken under consideration in the revision of the gambling law. Some of the key topics discussed during the sessions included the license period, number of licensees, oversight of the businesses, criminal liability, and non-gambling activities.
This ratification process is set to be completed before the current operator licenses expire on June 26. However, there is an allowance to extend the tenure in case the approval process takes longer than expected. To the relief of the only six operators in the region, the limit for licensed concessionaires remains six, especially given that there is already enough tough competition due to challenges brought about by the pandemic.
On the number of allowed operator bids, the Macau government has earlier this month said:
Quote“A large number of bids hinders the diversified development of the industry and may lead to unhealthy competition in the gaming market and increase the difficulty and administrative cost of the government’s supervision of the industry. If the number of grants is too small, it will weaken Macau’s international competitiveness.”
Changes to License Period and Terms
Once the licenses have been renewed, they will run for 10 years with the possibility of extensions not exceeding 3 years. This is half of the previous license period, which was 20 years with extensions of 5 years. The reduction is part of a plan to diversify the Macau gambling industry and avoid monopoly by only a few key players. Just like in the previous law, the renewal of the licenses is subject to a bidding process by the operators.
Another important item to note is that the initial proposal was to reduce the number of concessionaires, but the number of licensees will remain six due to public demand. In addition, each of the licensees is required to be a full concessionaire, which means that the three sub-concessionaires will have to step up to concessionaire status.
Operators must also have at least 5 billion patacas (~$621 million) in market cap, up from 200 million patacas (~$25 million), with 15% of their shares locally owned. The initial local ownership threshold was 10%, and the increase by 5% is a result of a strong push by the public to have it upped to 50%. There was also a proposal to have a government official present at the establishments to oversee the day-to-day gambling activities, but this has now been made non-mandatory.
Crackdown on the Junket System
A distinct feature of the Macau gambling industry that has contributed significantly to it becoming an international gambling hub is the presence of junkets who have been responsible for bringing high-stake clients to casinos in the region. As such, gambling activities from these high rollers have been making more than 65% of Macau’s casino revenue.
The junket system has always operated on perks offered to the gamblers in the form of free travel tickets, accommodation, and credit to incentivize them to keep playing at the establishments. Of all the perks, the credit structure has been one of the main motivations for high spenders who have been flocking to Macau to casino VIP rooms to gamble. However, the DIJC has now declared credit offered to gamblers by junkets illegal in Macau.
Things took a dark turn for the Macau junket sector in November after Suncity Group CEO Alvin Chau Cheok-Wa was arrested for money laundering and orchestrating illegal gambling in mainland China. The scandal has dealt a blow to junkets in Macau, and since their primary revenue source is in the issuance of loans to players, the industry’s future seems bleak.
This, however, doesn’t seem to have had much impact on the official casino operators. On the contrary, the operators have even expressed confidence that they will be relicensed in June especially given the billions of dollars invested over decades of operating in the SAR. In fact, casino operators have remained silent on the matter of junkets and have already begun shutting down their VIP rooms.
Mainland China is Trying to Clean Up its SAR
All these changes are reportedly part of President Xi Jinping’s anti-corruption campaign that has been going on since 2012 he declared war on both ‘tigers and flies.’ With Macau’s economy being relatively autonomous and a big chunk of the revenue coming from gambling tourism, there have been concerns as to the intricacies of how money has been changing hands locally and internationally. It has been reported that the unregulated outflow of massive amounts of money out of the Macau SAR is a threat to national security, hence the review of the existing gambling law.
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