Rear Window: New adjustment

Severo Portela

Chan Wai Kuong, the new director of the Judiciary Police, broke the news during PJ’s annual meeting with the local media that gaming-related crimes have increased year-on-year by 16%. Translating the rise into figures, Macau recorded 3,023 felonies of the kind. There were 424 more crimes taking place in casinos in 2014, mainly abductions and loan-sharking.
These are the numbers. We take the cold figures today as an opportunity to emphasize Director Chan’s open-mindedness in providing an explanation rather than…just numbers.
The PJ Director acknowledged candidly that the relative growth in gaming-related crimes came as the casino industry “entered an adjustment phase”, but he was cautious enough not to go as far as to suggest a linear cause and effect relationship.
This said, we borrow just the “adjustment phase” part in order to point to some of the broad array of problems coming on the horizon, and spin it a bit.
Only occasionally did the “adjustment phase” quasi-slogan mean more than the descent of Macau gambling revenues (gross revenue at USD 44 billion in 2014), and its short-term prospective: the overall impact of the downsizing in the junkets mechanism, and the slow-cooking wild competition for market “house” share, the effects of the downturn in the labor market and in the so-called Small and Medium Enterprise sector. Even the in-your-face growth explosion on the Cotai Strip seems to be downplayed as a natural phenomenon equivalent to the “build it and they’ll come”.
Only occasionally, did the adjustment-slogan prompt a fast-forward to the re-negotiation of the gaming concessions, and to the eventual revision of the gambling tax system. There hasn’t been much opportunity to reflect on this yet mainly because new Secretary Leong only took office on December 20th, barely over one month ago. The fact is that any change on taxes can only occur after an overall re-evaluation of the casino business to be completed this year, and that this reevaluation will serve as the basis to renegotiate the ongoing contracts with the 3+3 operators.
This said, what is on the table, or should be, are the assessment criteria, which the Secretary for Economy and Finance has disclosed and underlined in an unequivocal way: “(The evaluation) will take into consideration other elements besides gaming, like social responsibility, and training workers for non-gaming related activities”. We take as granted that everybody would agree that this demand is a polite warning to casino operators about employment as a social responsibility.
If everybody understands the substance of those demands, no one will have difficulty understanding that the re-evaluation process is substantially about checking if the operators have fulfilled their commitments to non-gaming elements. Sands China has no near match in non-gaming activities.
Strictly speaking, non-gaming activities could hardly be the answer to the call to diversify the economy tout court…but it is far from a placebo.
One could say that interested parties would do better to show a more committed attitude toward non-gaming activities, with which all casino operators are contractually obliged to comply. This, far better than dropping hints about political agenda.