Main points of consultation
The government is holding a public consultation from 15 September 2021 to 29 October 2021 as part of the process to amend the existing legal framework for the operation of games of fortune and chance. The goal is to improve the current legal regime and the approach towards new external and internal trends.
The consultation document refers to some essential background information, including the following:
- Macau's gross domestic product increased from 58.8 billion Macanese pataca in 2002 to 434.7 billion Macanese pataca in 2019. The government's total revenue was only 11.08 billion Macanese pataca in 2002 but it increased to 133.5 billion Macanese pataca by 2019.
- In 2011 the 12th National Five-Year Plan charted Macau's development towards becoming the "World Tourism and Leisure Centre".
- The 2019 Guangdong-Hong Kong-Macau Greater Bay Area development planning guidelines mentioned that Macau, as the primary driver of regional development, should continue to maximise and enhance its advantages by strengthening the guidance and momentum for the development of the surrounding areas.
- As the term of the current concessions is set to expire on 26 June 2022, a reassessment of Law 16/2001 (the Gaming Law) is seen as necessary to understanding whether the current legal requirements imposed on concessionaires are sufficient, as well as the supervisory actions defined for them.
- Compatible regimes must be clearly established in matters of administrative penalties and criminal liability.
All of the above needs to be reflected in and considered by the new public tender for granting gaming concessions.
The government intends to achieve the following objectives by amending the Gaming Law.
Number of concessions for operating of games of chance in casinos
By focusing on the quality rather than the quantity of gaming operators and concessionaires, restricting the number of concessions does not mean reducing the competitiveness of the sector. On the contrary, it aims to ensure a balance between the stability of the size of the gaming market and the liberalisation of the industry, thus strengthening the competitiveness of the local tourism and gaming sectors in an international context.
Macau is a territory with extraordinary geographic advantages and a unique sociocultural history. The consultation document states that Macau faces increasingly intense competition from the surrounding gaming markets. It is understood that Macau's tourism and gaming sectors must adjust their plans, with priority to be given to:
- increasing the presence of clientele from different countries and regions;
- increasing consumer options for tourists;
- enriching additional non-gaming facilities; and
- developing more diversified tourism products, progressively promoting a more sustainable and diversified economy.
Term of concessions
When reassessing the gaming industry so that it is in line with Macau's overall development, imposing an excessively long or inflexible concession period may cause a certain level of hindrance, with concessionaires likely to be less proactive in improving their services to attract new customers.
As such, the proposal is to review the current 20-year term with a possibility of extension of up to five years, as it may now be unsuitable. Additionally, it is proposed that the exceptional additional extension of the concession term must consider the maintenance of reasonable proportionality concerning the concession period initially granted.
Increased legal requirements concerning supervision of concessionaires
The consultation document proposes more stringent requirements on the suitability and financial capacity of concessionaires and their verification criteria. Additional caution when evaluating tenders for awarding contracts and carrying out regular post-award inspections will also be considered.
Targeted areas include:
- share capital – the minimum amount of share capital legally required of concessionaires should be increased (the current minimum is 200 million Macanese pataca);
- managing directors – the percentage of share capital held by concessionaires' shareholders who are permanent residents of Macau should be increased (the current percentage is 10% by at least one permanent resident of Macau); and
- profit distribution – the distribution of profits to shareholders (whether in cash or equities) cannot be made unless it meets the specific requirements defined for this purpose in advance and the concessionaire obtains the proper authorisation from the government in advance.
Local employment benefits and protection
In 2020 workers in the gaming sector and those engaged in gaming promotion activities totalled 82,043 people, representing 17.23% of the overall employed population in Macau.
Any incidents unfavourable to concessionaires' businesses could jeopardise the employment stability of Macau residents.
Concessionaires should constantly and proactively take measures to ensure access to employment for local workers and make an effort to promote career advancement.
Strengthening review mechanisms for concessionaires, gaming promoters and their employees
It is proposed that the government may verify the suitability of personnel hired by concessionaires (not belonging to key employees) and other individuals or entities relating to concessionaires, as well as the suitability of workers recruited by gaming promoters and their collaborators or individuals and entities closely associated with them.
Introduction of government representatives
The operation of gaming activities by concessionaires is not an acquired fundamental right, but a specific right granted to them by the government. As such, it has been suggested that reference should be made to past legislation (Decree Law 13/92/M of 2 March 1992) and government representatives should be appointed to extend the government's direct supervisory powers over concessionaires. Their presence would also seek to ensure that public interests are given precedence and to supervise the fulfilment of concession-related duties in an effective and timely manner.
Development of non-gaming elements
According to the Statistical Indicator System for the Development of Appropriate Diversification of Macau's Economy 2019, which was released by the Statistics and Census Service in 2020, the weight of the gaming sector in Macau's overall economy has been declining. The development of appropriate economic diversification is showing positive preliminary results.
Non-gaming elements should play a relevant role in supporting Macau's diversified development, driving the overall economy's growth in sync with that of the sector so that a new "win win" context of mutual benefits and healthy development can be achieved for the economy as a whole.
The government is seeking to stipulate that concessionaires should take on the following social responsibilities:
- provide support for the development of small and medium-sized enterprises;
- provide support to local industries;
- ensure that labour rights are upheld – namely, those regarding in-service training and professional advancement of local workers – as well as maintaining the effectiveness of and guaranteeing access to a workers' welfare system;
- hire disabled or rehabilitated individuals;
- provide support for philanthropic actions; and
- provide support to exchange activities in the educational and cultural areas and scientific studies.
Explicit stipulation of criminal liability and administrative penalty regime
More types of criminal liability have been added, including:
- concessionaires depositing money or other amounts unlawfully accepted on their own behalf or through their shareholders or employees; and
- concessionaires accepting the deposit of cash or different amounts provided by others and paying or undertaking to pay remuneration or any other form of consideration.
The document proposes liability in respect of administrative offences by establishing a penalty regime in the legal framework, defining the relevant circumstances and the seriousness of the breach of duty that needs to be taken into consideration when terminating the contract.
Despite the nervous response by the markets, which has seen Macau gaming stocks dive, none of these proposed policies should come as a surprise to operators.
The crackdown of the Chinese government on VIP gaming operations initiated some years ago and formalised into law in 2020, as well as other signals shown in recent years and the projects for Macau's development, may suggest that operators must reposition themselves for a more sustainable operation.
Only those intimately aware of Macau matters can consider the implications of the proposed changes from the international, national and regional perspectives.
There is still a way to go until the final version of the new law will be made public. Until then, those affected should be cautious and make suggestions during the public consultation period that may persuade the government to improve the policy, which may also influence the legislative process.
For further information on this topic please contact Pedro Cortés or Luís Machado at Rato, Ling, Lei & Cortés Advogados by telephone (+853 2856 2322) or email ([email protected] or [email protected]). The Rato, Ling, Lei & Cortés Advogados website can be accessed at www.lektou.com.