Leanda Lee
What was to be of interest in Wednesday’s presentation of the gaming industry’s mid-term review was not so much the content but how it was to be framed, its justification and purpose, and for whose benefit, or even demise.
Most of what was reported was as expected. There was the focus on the prioritisation of local human resources; diversification to family-oriented entertainment options; and impacts upon the social structure, the business environment and macro-economic indicators of Macau.
Macau regulation is notoriously opaque and the implementation of it confounding. Exceptions and discretionary powers make this so and what may have been common practice at one time changes with prioritised issues of the day, policy shifts, community rumblings or new people at the helm. We have an uncertain regulatory environment in which to do business. So, we expected some underlying agenda in this data-gathering exercise.
Organisations and individuals are used to social and institutionalised coercive and disciplinary approaches to government driving required behaviours. The acceptance within the community of a multitude of penalties for misdemeanours from fines for late bill payments to demands for compensation for even minor traffic accidents is indicative of this: rarely seen is inspirational encouragement, sometimes the carrot, most often the stick.
So it is with some relief – and perhaps disbelief for many – that the mid-term review has been delivered as not so much of a warning to those concession operators that have not complied with contractual and operating conditions but as a baseline report, a state of play. Indeed, there was even a nod of approval towards the casino operators that have, on the whole, met their obligations. The Secretary for Economy and Finance, Lionel Leong, would not be drawn into making any link between the review and gaming concession renewal, suggesting instead that environmental factors impacting upon the industry would require investigation first. This foretells of deep and profound change, the outcomes of which are to be reflected upon before the renewal conversation is to be had.
What we are seeing is that as long as compliance is maintained – entertainment offerings continue to be meaningfully diversified and local employment concerns are catered for – concessionaires will be less directly managed by government. Gaming industry oversight will be managed through stronger regulatory control of the nerve centre, – to date the real business behind the business (and under the table) of gaming in Macau – the junket operators.
However, far from being let of the hook – “anti-climactic for casino operators” or “quite benign” as some commentators are want to purport – such regulatory control of and heightened governance over what has been a major conduit of gaming capital means that concessionaires potentially have a very large hole to plug in terms of customer base to bring gaming revenue back up to earlier levels. Junkets, through their capital structures, networks and marketing infrastructure, have contributed substantially to casino operator profitability for many a year. The concessionaires’ own marketing reach beyond China has thus been understandably negligible. This costs money and resources of which relatively very little investment has been required to date as the junkets have been more than merrily carrying that burden, drawing to the tables the major China market. Depending upon how far governance oversight on junket operators goes, the customer mix and marketing investment requirements will change dramatically for casino operators. Need a job in marketing? Here’s your opportunity.
I have a renewed confidence in Macau. The relatively subtle and understated tone of the message imbued in the review obscures a thoughtful, professional and insightful determination to normalise and make transparent the workings of our main industry. If the trajectory continues and at this pace both within and beyond the gaming regulator, we are looking at a new Macau.
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