The Macau government plans to be ready next year with a bill that will set the terms for the award of new casino licenses after the six existing concessions expire in June 2022.
In announcing the plan, Secretary for Economy and Finance Lei Wai Nong also dismissed speculation that the process, which is expected to include open bidding for the licenses, would be delayed to provide leeway for the government to revise the bill in light of the devastation the coronavirus pandemic has wrought on the territory’s tourism-dependent economy.
Existing gaming law includes an option to move the re-tender past 2022, if the government chooses to exercise it, up to a maximum of five years.
“The key considerations under such a scenario would revolve around what economic impact the new concession regime would have,” a trio of analysts with brokerage Sanford Bernstein said recently.
A tax increase could figure into that, they said, along with other tools for raising the industry’s “economic rent,” as they termed it, including a possible tax on profits and/or dividends and upfront fees.
The government’s timing could be complicated as well by the Legislative Assembly, which has to pass a final bill into law. The election of a new Assembly is slated for next fall, and some lawmakers have questioned whether there will be enough time before then to review the bill and vote on it before the concessions expire.
Analysts with JP Morgan Securities (Asia Pacific), for one, have said they “wouldn’t be surprised” to see the re-tender “postponed by a year or so.”
There is speculation as well about whether the Trump administration’s history of trade hostility toward China will jeopardize the concessions controlled by U.S.-based operators Las Vegas Sands, Wynn Resorts and MGM Resorts International.
The Bernstein analysts, however, said they believe such a possibility is “remote”𑁋that is, “unless the (U.S.-China) relationship sours significantly further and we see directed action against U.S. businesses in China, which would raise risk levels in Macau as well.”
But that, too, is unlikely, they said, noting that China’s retaliatory actions against the U.S. so far have been “largely restrained with respect to U.S. business operating in China.”
As they see it, Beijing is more focused on maintaining foreign capital and investment inflows and pushing for the internationalization of the yuan and opening up access to the country’s financial markets.
“Directly attacking U.S. business (especially ones that have been solid partners to the Macau government) is not a very likely course of action,” they suggested in a client note.
Rather, the “most likely scenario,” they said, is that “all six concessionaires will have new concessions and there will be no new entrants.”
