Macau lawmakers, who could soon sign the city’s proposed gaming amendments into law, expect “enough votes to pass,” according to Chan Chak Mo, president of the second standing committee of the Legislative Assembly (AL).
Chan spoke to the media June 15 after the standing committee signed the final draft of the amendment, according to Macau Business.
Chan said there may be minor, last-minute adjustments to the law before it’s signed, but some changes were disclosed for the first time when the final draft was published last Wednesday. Those changes include an effective 1 percent gaming tax increase, which would raise the rate to 40 percent, with a possible reduction of up to 5 percentage points for gaming operators who target and attract international customers beyond Mainland China.
Chan said the bill will become effective after its publication in Macau’s Official Gazette, but articles that pertain to gaming promoters, intermediaries and management companies won’t take effect until after the government of the special administrative region (SAR) signs contracts with gaming concessionaires.
Their concessions have been extended by six months, from June 26 to December 31, to give the government time to complete the tender process that will award new, 10-year concessions (half the length of the original concessions). Each concessionaire paid a premium of MOP$47 million (US$5.8 million) to take advantage of the extension.
Lawmakers paid special attention to amendments regarding satellite casinos, smaller gaming operations that operate under the licenses of primary concessionaires. Satellites are managed and promoted by third parties.
In previous discussions about the amendments, lawmakers considered a plan to close any satellite casino based on real estate not owned or acquired by one of the city’s Big 6 concession-holders. Though lawmakers added a three-year grace period to phase out the operations, the plan raised concerns about increased unemployment as the SAR struggles to recover from Covid-19.
“We have taken into account that if many satellite casinos cease operation, many people may lose their jobs,” Chan acknowledged.
But in May, the government back-pedaled on that plan. An updated version of the draft bill proposes that even if a satellite location is not fully owned by the gaming concessionaire, it could continue operating as a managing entity with the permission of the city’s chief executive.
The proposed amendments also stipulate that concessionaires and any shareholders who own a stake of 5 percent or more in a concession cannot directly hold capital of other concessionaires, though they can hold up to 5 percent of other concessions indirectly, “for example, in the form of a fund,” said Chan. He added that the government “made the change in the hope of preventing collusion among the concessionaires to enhance their competitiveness.”
In addition, the latest draft mandates that all Macau licensees must reserve MOP5 billion (US$620 million) in capital at all times during their concession terms. According to brokerage JP Morgan Securities (Asia Pacific), “This probably explains why Wynn Macau recently boosted its liquidity capacity by US$500 million via a revolving facility from its parent Wynn Resorts, despite what we view as ample liquidity for normal operation.” Another operator, SJM Holdings Ltd., just received approval from the Macau government and a syndicate of banks for a HKD19 billion (US$2.4 billion) refinancing package.
All this is unfolding in a critical time for Macau, which saw gross gaming revenues drop 68 percent in May. According to a June 1 Reuters report, the plunging revenues “are taking a heavy toll on the wider economy, forcing hundreds of businesses to close down and pushing unemployment to its highest level since 2009.” The Macau government has warned that “rising job losses and financial strains could trigger social conflicts and destabilize the city’s security.”
“We are the most reliant city in the world on tourism,” said Glenn McCartney, an associate professor at the University of Macau. “Of course, we didn’t have any other industries to fall back on. Given that we didn’t diversify for 20 years, (a recovery) isn’t going to happen tomorrow. There’s no quick fix.”