Exclusive Interview | Steve Vickers : Gaming should ‘not grow faster than the national growth rate of GDP’

In an interview with Macau Daily Times, Steve Vickers, the high profile CEO of Steve Vickers and Associates, a political and corporate risk consultancy, addressed the Macau gaming sector’s “current market turbulence and strategic issues” in the light of Beijing’s policies, and the shortfall in new gaming table allocations. He also noted that Beijing is inclined to “favor local champion(s) over the foreign investors” when concessions are renewed in 2022.  Vickers also discussed the “moderate” likelihood of an Islamic terror attack in Macau.
On Macau gaming, Vickers, whose company specializes in risk mitigation, corporate intelligence and risk consulting, said the current “potentially turbulent and uncertain phase” is more “systemic…while the center of focus for most analysts are symptoms of the larger issues at play.” He outlined as principal factors “PRC political policies and machinations, PRC economic policies, Macau Government policy issues,” as well as gaming table numbers and allocations, and the 2022 reissuing of gaming concessions and subconcessions.
The severe decline in VIP betting, an area which previously provided the overwhelming majority of gaming revenue, has been blamed on the massive ongoing anti-corruption campaign in the mainland, in conjunction with China’s moves to stem illegal capital outflows. These two elements have contrived to scare off the vital high stakes players from China. Even so the mainland clampdown on underground banking, he believes, is the main reason revenues of junket operators who bring in VIP room gamblers, have crashed. Junket operators have been facing hard times as their unpaid debts mount, because “as shadow banks have closed their lending windows, many gamblers who used these facilities to service their gambling debts have been left with no viable option… the single biggest reason accounts receivables [unpaid debts] of junket operators have been steadily climbing.”
In the past, Beijing’s “tacit acquiescence to the violation of its currency regulations, [is] the primary reason Macau has prospered as a gaming hub catering to (mostly PRC) gamblers”. Vickers notes that this “had served Beijing’s fiscal requirements” providing “a much-needed channel to bleed off excess liquidity from a (then) red hot Chinese economy.” However, the economic slowdown and reassessment of liquidity movements “will have a severe impact on gaming in Macau,” he added.
Vickers said that other Beijing policies affecting gaming growth are the requirements that “Macau gaming not grow faster than the national growth rate of GDP” and that the city diversify its economy.

A major issue the city government has to decide on is the number of new gaming tables for new casinos due to come on line by 2017. This decision has the capacity to greatly impact the profitability of new gaming projects, as the current policy will see a massive shortfall. Vickers said that the casinos expect “the government to cave in.” However, he cautioned that “our assessment, based on our understanding of how this issue is driven by Beijing, is quite different.”
Vickers warns too that Western concessionaires face much stronger local competition in the 2022 granting of gaming licenses. He noted “another economic policy that has gained favor with the current PRC government is one involving elements of economic nationalism, favoring local champion(s) over the foreign investors in the same sector.” The original newcomers advantage of “badly needed Western gaming experience and management practices… will not be so true in 2022.”
The former head of the Royal Hong Kong Police Force’s Criminal Intelligence Bureau downplayed the risk of an Islamic terror attack in Macau and Hong Kong, despite noting that Xinjiang terrorists struck again this month in Guangzhou, and there are significant fears of the impact fighters returning from Syria may have in future terror assaults.  “My view is that prudent precautions should be taken but that the overall risk is currently moderate. Hong Kong and Macau are two cities with open transport and communications… no more or less vulnerable than other targets. The truth about terrorism today, is that, if you take the Paris attacks for example, that a group of returned Syrian fighters, and others, took part.”
However, he admitted that an attack could not be ruled out. “Xinjiang terror is a real factor in China and most recently we saw an attack on Guangdong Railway Station. So it would be wrong to state that there is no possibility of an attack in Hong Kong and Macau. But the threat is currently assessed to be moderate.”
“The ownership of major Macau casinos by Americans, and the Islamic disapproval of gaming, could be a factor in attracting the attention of Muslim terrorists,” Vickers conceded. However, he underlined that the issue is hypothetical in the absence of intelligence indicators pointing to an attack.
“Whilst the Macau casinos might be an appealing target to Islamic terror groups because of gambling activities and American ownership, there is no current intelligence to suggest that this is a likely scenario.”
Vickers urged preparedness as well as getting on with life, so as to not send signals of fear to terror groups.
“Being prudently prepared for such [an incident] is the right approach. However equally important is that we go about our business in a normal fashion and that we do not let such threats intimidate us.” He added that “the possibility of a terrorism attack on Macau has been overblown by certain media outlets.” Robert Carroll, Hong Kong, MDT Correspondent