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China – Monetary Fund urges Macau for new laws forcing diversification

By - 27 February 2019

The International Monetary Fund (IMF) wants the Macau government to double the expiration and probable renewal of the SAR’s six gaming licences over the next three years with an opportunity to diversify away from VIP, high roller gaming.

After a recent visit to Macau, it said it hoped the government would use the expiration as an opportunity to ‘craft the new regulations with stronger incentives for operators to expand non-VIP tourism.’

The IMF said: “With all six gaming concessions expiring in 2020 and 2022, the authorities have the opportunity to further advance their growth strategy and should craft the new regulations with stronger incentives for operators to expand non-VIP tourism. Diversification policies should be guided by careful study of Macau SAR’s comparative advantage. In addition, to accommodate the higher number of tourists under a mass-market and non-gaming model, infrastructure plans should advance in order to ease supply-side bottlenecks. Some of these areas are expanded entertainment, convention and exhibition options, hotels and retail, including via integrated resorts and family-oriented facilities.”

It added: “There are three top policy priorities. First, higher public investment would support the diversification agenda while further targeted social spending would foster inclusion. Second, a medium/long-term fiscal framework would facilitate judicious and efficient use of gaming-dependent fiscal resources. Third, the exchange rate peg continues to serve Macao SAR well and should be maintained including via supportive policies (including prudent fiscal policy, sound financial sector, and adequate reserves). In addition to supporting diversification and fulfilling social needs, these policy priorities will reduce external imbalances.

The report recognised Macau SAR’s progress in enhancing Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) framework, including on preventive measures and supervision of the gaming sector. It said: “Since the evaluation, Macau SAR has intensified efforts to limit the number of junket promoters, which could be supported by an upgraded regulatory framework to promote robust AML/CFT controls by junket promoters.”

It warned that Macau’s small and open economy was highly vulnerable to economic, financial and policy developments in mainland China. “With most tourists coming from the mainland, any policy that undermines their spending power abroad would negatively affect growth,” it warned. “Worsening of trade tensions between the US and the mainland could significantly impact Macau, including via a fall in tourism inflows from the mainland and reduced investment by the three US casino operators. In addition, the banking sector’s investments linked to global trade, including the mainland’s, would be affected.”

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