Gaming | Mid-term report focused on need to diversify, regulate junkets

Paulo Barbosa Thursday, May 12, 2016 - 9 years ago No Comments 6,524 Views

This photograph taken with a tilt-shift lens depicts casino resorts in Cotai

The closely watched report on the mid-term review of the city’s gaming industry was released yesterday, with a focus on the efforts made by gaming operators to add non-gaming elements to their offerings. Employment of local residents and the need to regulate the junket sector are other topics which the study addresses.
During a press conference held yesterday, the Secretary for Economy and Finance, Lionel Leong, mentioned that the report “has nothing to do with the gaming concession renewal.” However, he disclosed some of the guidelines that the gaming operators are expected to follow. “We very much hope to have more tourist products suitable for the family,” Leong said, adding that “in the past we only looked at gaming revenue,” an approach that is now being challenged. “We cannot only depend on a small number of customers [VIP players] to generate most of the revenue. We need to have new clients,” he urged.
The Institute for the Study of Commercial Gaming of the University of Macau (UM) was commissioned to undertake the interim review. It covers nine research topics over four categories, including the contractual and operating conditions of concessionaires and sub-concessionaires; economic, social and livelihood impacts of the gaming industry’s development; and the current situation of junket promoters. The research team concluded that the development of the gaming industry has created a positive impact on the local economy and society, but it has also brought negative impacts, such as pushing up the inflation rate, housing prices and business operating costs, in addition to creating crowding out effects on SMEs and affecting social values.

Davis Fong (left), Lionel Leong (center) and Paulo Martins Chan pictured yesterday during the press conference

The study also shows that the proportion of local employees in gaming operators is much higher than that of overseas employees. Additionally, all of the six gaming operators reportedly provide their employees with opportunities for upward and lateral mobility. As a result, the proportion of local employees of managerial grade or above increased from around 60 percent in 2008 to 80 percent in 2014.
The UM-commissioned report also identifies “problematic areas” regarding the junkets business that brings in high-stakes players to the local casinos. It states that there is a need for a “stronger regulatory effort in order to enable a healthy and orderly development of the industry.” Lionel Leong admitted that the government is “paying more attention to the junket sector and intends to improve regulations.” In this regard, he intends “to make sure that the sector abides by the law,” something that he considered positive for the sector “in the long term.”
The director of the Gaming Inspection and Coordination Bureau (DICJ), Paulo Martins Chan commented on the ban on the use of phones on VIP rooms, which came into effect on Monday. He admitted that “in the past, to give them [high punters] some convenience, some clients were allowed to use phones in VIP rooms.” The new regulations, he said, “are in line with the best international practices.”
Among those measures are increasing capital requirements for gaming promoters and the possible establishment of a credit database to weed out risky gamblers. “For the time being, the biggest problem faced by junkets is debt […] The database would give adequate information,” he remarked.
Martins Chan said that “a credit database is very important to the survival of the industry” and that DICJ is studying whether it will be made available on open source, due to privacy concerns. However, the gaming regulator head said that the viability of the database is still under analysis.
The 280 pages (Portuguese language version) report also shows that gaming operators have invested MOP262 billion (about USD33 billion) in the 13 years preceding 2014. It was presented by Davis Fong, the director of the Institute for the Study of Commercial Gaming, who explained that most of the data used in the study was compiled up until September 2015.

sands ‘pleased’ with report

Sands China issued a statement yesterday reacting to the mid-term review announcement. It mentioned that the gaming operator “was pleased to hear today’s gaming interim review announcement, and to gain a deeper understanding of the directives, guidelines and policies moving forward for the development of the gaming industry in Macau.”

junket assessment completed on q4

Paulo Martins Chan revealed that the operation of junkets has been undergoing assessment throughout the year to see if they comply with the guidelines launched last year. The assessment will be completed in the fourth quarter of the year. The DICJ head also admitted that the regulator is “seriously understaffed” due to the growth within the gaming industry and plans to recruit more inspectors and improve its IT system. “We probably need some new methods to collect the evidence and to fight gaming under the table,” Martins Chan added.

setting policy direction

Union Gaming Group analyst Grant Govertsen has said that the report is intended to help set policy direction. “This document could be used as some sort of general framework upon which license renewals will be discussed over the coming years, although there’s nothing in the report that explicitly says this,” he told Bloomberg. “We haven’t seen anything that suggests this will result in any changes to the status quo.”