5.2 percent growth predicted
Five months of positive gaming revenues show Macau is in growth mode after a two-year downturn. But the Asia Risk Assessment from Steve Vickers and Associates Ltd. of Hong Kong says the world’s top gaming town still faces challenges.
“Beijing’s current preoccupation with curtailing capital outflows, rising economic nationalism and the outside chance of a terrorist attack still pose threats,” the firm noted.
It added that the jurisdiction could see 5.2 percent economic growth in the new year, echoing a December report from Fitch Ratings saying the Macau casino market “appears poised for a long recovery.”
According to GGRAsia, Vickers said strained political relations between the U.S. and China could adversely affect the city’s casino industry, including a number of casinos operated by U.S. companies which may find new obstacles to the renewal of their gaming concessions.
“A further concern is rising economic nationalism in China, which could seep into a debate about the renewal of the six existing gaming concessions that expire in 2020 and 2022,” stated the firm. “A more protectionist Beijing may wish to cultivate a national champion in the Macau market, a stance in line with Chinese industrial policy, or refuse to countenance the renewals for foreign businesses—particularly if tensions with the U.S. rise” under President-elect Donald Trump, who recently told the Wall Street Journal his administration may not agree with Beijing’s “One China” policy as it pertains to Taiwan.
The China Daily says Beijing would “have no choice but to take off the gloves” if Trump maintains that stance.
Vickers reported that “a final and understated threat is terrorism. Macau represents a unique agglomeration of Chinese, American and Jewish interests, engaged alongside triad societies in an activity that Islamists deem sinful. Worse, the city is vulnerable.”
At the same time, new competition in Asia has prompted talks of a new tax structure for Macau’s No. 1 industry. According to the South China Morning Post, the gaming franchise renewal process will begin in 2020, and Paulo Martins Chan, head of the Gaming Inspection and Coordination Bureau, says he is “willing to listen” to plans to change the current high rate of 39 percent on gross gaming revenue. The Post reported that direct taxes from gaming accounted for about 78 per cent of total government revenue in the first 11 months of 2016.
Cahn told public broadcaster TDM the government may consider a change in the rate “as long as it is beneficial to Macau’s gaming sector.”
Earlier this month, Wang Changbin of the Gaming Teaching and Research Centre at the Macao Polytechnic Institute told GGRAsia that different tax rates for mass-market and VIP gaming revenues should be modified, particularly as mass becomes more important to the market.
In 2016, despite the downturn, Macau’s total visitor arrivals reached a record-breaking 31 million, a year-on-year increase of 0.8 percent, the Macau Government Tourism Office reports, and international visitor arrivals were up by 8 percent. Most visitors hailed from Mainland China, Hong Kong and Taiwan.
