Casino plans mock
Macau chief's words By Muhammad
Cohen
MACAU- Does he or doesn't he? Does
Macau Chief Executive Fernando Chui Sai-on still
favor the "orderly development" of the casino
industry that remains his administration's stated
policy? Or has the chief changed his tune, as no
fewer than five new casino resort projects are
about to begin simultaneous development?
Since his selection as Macau's political
leader nearly three years ago, Chui has taken
steps to slow expansion of the casino industry.
"Orderly development" has meant restricting work
permits for foreign construction workers,
effectively limiting development to one casino
resort at a time, as well as other curbs on the
industry that dominates Macau's economy.
Perhaps the most dramatic move to limit
casino development
came in December 2010,
when Chui's government denied a building site to
casino operator Sands China. The government said
it wanted to reassign the land for a different use
to diversify the economy.
Casting
lots The site, known as Lots 7 and 8, is on
the Cotai landfill linking Macau's outer islands
of Coloane and Taipa. Cotai has become the center
of casino resort construction. That's largely
thanks to Sands China's plan to create an Asian
version of the Las Vegas Strip there, starting
with its flagship Venetian Macao resort in 2007.
The plot had been earmarked for Sands
China under the government's longstanding informal
system of land grants that often left formal
approval until construction had begun. Earlier
this month, Sands China announced it had dropped
its appeal against the decision and would write
off the US$110 million the company claims it spent
on site preparation work there.
Chui's
administration initiated a gaming table cap,
limiting the total number of gaming tables to
5,500 through 2013, and then limiting table growth
to 3% for the next 10 years. The government also
moved to raise the age for entering casinos - and
for working in them - from 18 to 21, a proposal
that's been stalled since 2009 by legislative
inaction. (See Macau
hesitates on age-limit gamble, Asia Times,
June 8, 2012)
The government has also
pressed operators to move casinos and slot parlors
out of residential neighborhoods. That's more
difficult than it sounds, since Macau is so
densely populated and developed; the slot machine
room at the long-established dog racing track is
considered to be in a residential area.
Serious or delirious? Casino
insiders and close observers of the business
regard the government's restrictions with a
mixture of concern, amusement and disdain. Asked
if the government really is trying to control
gaming growth, a veteran industry insider replies,
"What would you expect them to say?" The insider
suggests the government is simply putting on a
show for local residents, who benefit little from
the gaming boom.
While Chui's government
has taken all of these steps purportedly aiming to
restrict casinos, Macau's gaming revenue has grown
from 119.4 billion patacas (US$14.9 billion) in
2009 to 267.9 billion patacas last year, likely
surpassing 300 billion patacas this year. The
character of gaming hasn't changed under the Chui
rules. VIP baccarat still comprises more than 70%
of total gambling revenue, and mainland high
rollers still account for an estimated 90% of VIP
wagering.
If the government really wanted
to control gaming, some observers say, it would
move to tighten rules on junket agents who provide
credit to VIPs. But the Chui administration has
never proposed increased regulation of junket
agents and their activities.
Few of the
Chui administration's measure to control gaming
are really as they seem; some restrictions have
the Alice in Wonderland quality of being what
authorities say they are, without strict adherence
to reality.
Tight squeeze For
example, the table cap was stretched to its limit,
or beyond, with the opening of Sand Cotai Central
in April. The 200 tables remaining under the cap
have already been used in the property's Himalaya
casino opened as part of phase one. As for the
Pacifica casino scheduled to open in September,
"Our understanding is that is that we have another
200 new tables that we were essentially promised,"
Sand China chief operating office David Sisk told
Macau Business magazine.
Wynn Macau CEO
Steve Wynn gave the magazine a similar answer when
asked about the 500 gaming tables he wants for his
new Cotai resort, approved last month and
scheduled to open by 2016. Wynn expressed
"confidence" that the government will allow the
tables, even though that figure represents nearly
the entire total of added tables through 2016, and
at least four other casino projects are due to
open before or just after Wynn Cotai.
Meanwhile, Macau's Secretary for Economic
Affairs and Finance Francis Tam keeps asserting
that the table cap will remain in place without
adjustments. That's left observers and analysts
scrambling to make sense of the apparent
contradictions.
From the announcement of
the cap, there were some who didn't believe it
mattered. Casinos had underutilized tables they
could shift to new properties. Terminal betting,
where one table can accommodate more than 100
bettors wagering on table results electronically,
has gained acceptance for baccarat, the dominant
game, as well as for sic bo (big-small, the
most popular Chinese dice game) and roulette.
Having excess demand would also allow traditional
tables to exact a premium, that is, set higher
minimum bets, the way that building a stadium with
fewer seats lets teams charge more for tickets.
New math But it's not just about
shuffling resources if casinos are saying, with a
nod and wink, that they'll be getting hundreds of
tables in excess of the cap. Some observers have
tried a version of new math to explain the
apparent contradiction. They contend that there
can be different ways to count tables. For
example, maybe a table doesn't count as a table
during the times when it's closed. Perhaps 6,500
open tables on weekends and 4,500 open on Mondays
and Tuesdays averages out to the 5,500 cap figure.
You can massage the numbers all you want,
but the only explanation that makes sense is that
the table cap is just a myth, a talking point for
the Macau public that doesn't affect casinos. Most
likely, the cap started out as real, but it's been
overwhelmed by events, and the government can't
publicly back down from it.
Similarly, the
government may have thought it would be best to
limit resort development to one by one to keep a
lid on new foreign workers and try to lure
businesses beyond gaming to Macau.
But
last year, Beijing's 12th Five Year Plan declared
Macau as China's center for tourism and
entertainment, meaning that many more resorts and
other attractions will be necessary to fulfill
that goal. After sitting on development
applications, for years in some cases, the Macau
government now has pressure from above to speed
development.
Chui's polices have suited
Macau and Macau's government has been getting what
it wants out of casino development, University of
Macau associate professor of business economics
Ricardo Siu says, but that chapter has closed.
"Whether [Macau's success] can be sustained in the
future depends on whether the government changes
policies and becomes more transparent," Siu says.
Clear as mud We may be
witnessing Chui's government changing policy
before our eyes, but there's nothing transparent
about it. The government hasn't stated that it's
changed policy on casino development, foreign
labor, or the table cap, but its actions indicate
that it has. It just hasn't bothered to tell
anyone.
Attorney Luis Melo believes
there's room for more development, more openness
and more regulation of the gaming industry. "We're
at the start of Macau 2.0 with this next wave of
development. I expect that would also mean
improvement to the legal system and Macau's gaming
regime with more transparency and more oversight.
"Macau is becoming a more international
city in terms of what's being invested here -
US$12 billion in the next four years. We can no
longer rely on government letters, we need the
legal system to provide assurances," Melo, a
partner at MdME Lawyers, says.
"After 10
years [since the start of gaming liberalization],
a lot should have been done to learn from
experience, to correct what's wrong. It hasn't
been done and that's worrying. It's time to sit
down and talk about what can improved. Lawyers,
academics, and operators should talk to the
government."
Macau's government should
listen, for sure. More importantly, it should talk
back, to the casino and the public, about what
it's doing and what it wants from the industry
that's driving the economy.
Macau
Business magazine special correspondent and former
broadcast news producer Muhammad Cohen told
America's story to the world as a US diplomat and
is author of Hong
Kong On Air, a novel set during the 1997
handover about television news, love, betrayal,
financial crisis, and cheap lingerie. See his blog
and more at MuhammadCohen.com.
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