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Assessing Macau’s legislative landscape

By - 3 June 2020

Expert legislative insight into the Macau gaming industry from Pedro Cortés, Senior Partner at Rato, Ling, Lei & Cortes. 

COVID-19 pandemic outbreak had a great impact on the Macau gaming industry. It is expected that this will continue to be felt throughout 2020 and, most likely, in the 1Q of 2021. The direct effects of the crisis may lead to a new approach/philosophy on the need to diversify Macau’s economy.

It has been voiced that the losses associated to the strong decline on the number of visitors and consequently on the gaming gross revenue, may lead to the Chief Executive considering extending all casino gaming concessions (and authorising the extension of all casino gaming subconcessions), eventually to the maximum allowed by law, i.e. up to five years (until 26 June 2027). This was already voiced by me even before the crisis, e.g. during the IAGA conference held during the G2E Asia in May 2019.

Despite this potential and now more likely scenario, what we shall expect in the coming year in terms of legislation is the following:

The revision of the regulations on gaming promoters (including on suitability and financial capacity requirements) and gaming machines (including on the improvement of the licensing of gaming machines manufacturers), announced by the Macau Government in the past, might take place during 2020.

Additionally, it is also expected that legislation long due on administrative offences in the gaming sector and on gaming chips and tokens be enacted.

In fact, the Macau Gaming Law stipulates that complimentary legislation shall be enacted by the Macau Government covering, in particular, the public tender process, concession contracts, the use and frequency of casinos, the operation of the premises used for the exploitation of casino gaming concessions, the monitoring of gross gaming revenues, the casino gaming operators’ employees, the practice of casino games of chance and administrative infractions.

As yet, only legislation on the public tender process and concession contracts (Administrative Regulation No. 26/2001), the frequency of casinos (Law No. 10/2012, as amended) and administrative infractions restricted to the piece of legislation where they are included (Administrative Regulation No. 6/2002 and Law No. 10/2012, as amended) has been enacted.

Returning to the point of the potential extension, and although the Macau Chief Executive may decide to further extend the term of the concessions (and authorise for extension of the term of the sub concession in conformity), one or more times and up to five years, the Macau Government has announced several times that a public tender to award casino gaming concession will be open in 2022. If that would be the case, 2020 might be the year to launch the preparatory works to that effect. Nonetheless, and despite this time frame, one may expect some delay due to the current Covid-19 situation.

In case the public tender is still going to take place, and taking also into consideration a recent public speech by the Chief Executive, it is expected that social responsibility be a topic of paramount importance in the public tender to be open in 2022.

Notwithstanding the Macau laws not foreseeing explicitly – there are contributions to public foundations in the Macau gaming law and in the concession (and sub-concession) contracts – any at the moment, casino gaming operators have been putting in place mild measures in this regard, especially because Macau legislators from time to time voice out for such a need and the Macau Government has been advising its implementation, particularly in relation to the casino employees.

The Chinese lotteries operator has a contractual obligation to deposit (in a bank account opened in its name specifically to the effect) the amount of all unclaimed premiums and donate them to charitable institutions chosen by the operator directly and accepted by the MSAR; the instant lotteries and sports betting operator has a contractual obligation to deposit MOP1m every year to a fund, denominated “Health Fund”, created with an initial capital of MOP2.5m pursuant to a contractual obligation; SJM and MGM agreed, as consideration for the extension of the contractual term of their casino gaming contracts, to be included in the mandatory social security regime and to provide the Macau Government with a bank guarantee to secure the payment of labour debts.

In relation to labour concerns, operators seem to have as top priority the maintenance of its employees.

Despite some public speeches asking for more, the fact is that keeping the employees, which represent directly 25 per cent of the active population of Macau, is already a social responsibility action which helps to maintain the social harmony of the Special Administrative Region.

Furthermore, if the times were challenging in the gaming industry before the Covid-19 pandemic, there’s now the momentum to start seeing also moves towards mergers of gaming companies worldwide, which could have direct impact in the chessboard of the local industry.

Macau will surely recover – maybe sooner than other jurisdictions – from this crisis. However, there are plenty of chips on the table which may define the framework of the local industry in the future.

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