MACAU GAMING UPDATE : UPCOMING REGULATORY CHANGES

by António Ramirez /Luís Pessanha

I. BACKGROUND
For quite some time there are has been much talk about the upcoming next wave of gaming legislation in Macau. Everything points to that it is coming soon. But it is still early days and not easy to fully and wholly understand the legislative changes still under review by the lawmakers of Macau. But at this stage it appears reasonably certain that the main focus is now on the regulation of the employment of local labor by the casino gaming sub/concessionaires and on the commissions paid out to the local gaming promoters (junkets). These two quite distinctive issues are certainly worthy to be further considered. Not least, because they clearly represent the increasingly complex political climate that the lawmaker of Macau is facing.
II. PROTECTING LOCAL WORKERS
For once, it most keep the local population happy and prevent that the unavoidable import of an increasingly numerous workforce from outside Macau is used to depress wages and cut labor benefits. The concern is understandable, as this has in fact happen in the past, as manual labor imports into Macau is rightly perceived to have restricted the job opportunities of local unskilled employees in the past. Hence, as necessary it is to continue to bring people from outside Macau to work in the many new casino, resorts and hotels, it is also indispensable to manage and limit the potential negative impact of their sudden arrival on the local labor market.

The Government has proposed to do that by making clear that it expects that the sub/concessionaires fully complies with the contractual obligation they have assumed to “give preference” in hiring local residents. But this is understood not to be enough, and the legislator is now considering establishing certain fix quotas to be filled by local residents. It was even suggested that a certain percentage of the corporate management positions could be earmarked exclusively for local employees. This certainly will have to raise significant concerns before the casino sub/concessionaires and has the potential to provoke considerable difficulties in finding sufficient local talent to actually fill out all these spots. This would be hard to accomplish.

At this stage it is a policy of the Government that only Macau residents should be hired as dealers, on the long term this measure may however not help the Macau residents and the Macau population. A local youngster with 18 years can apply and probably will be hired as a dealer, he can make more than MOP $ 15,000 per month and that’s a lot of money for a kid with 18 years of age, so we can see now in Macau kids dropping school to work in the gaming industry. The major part of these kids will not have the required tolls for a future promotion or to be in different rolls in other industries.

The next generation of casino patrons will be more opened to gamble in high sophisticated machines than on traditional table games, they are the playstation and game box generation. So this means that in a few years casinos will need less dealers and more technicians, the question will be what to do with the Macau residents that only prepared to be dealers?

Maybe it would be better to allow the casinos to have a mixed work force, even in dealers positions and impose other rules, like only people above 21 years of age can work in a casino (in any role; this will help prevent kids to drop school), or even offer tax benefits or quota benefits to the casinos who promote and support the local employees to obtain degrees and further qualifications (this will help to have more people in Macau with better education and more university degrees), impose training programs, languages skills programs, IT training programs, etc…

A final remark on this issue is that if the “blue cards” holders (non residents temporarily permits to stay and work in Macau) can not be promoted, this may raise unnecessary discrimination and be deemed unfair (up to some point can even be considered a violation of the Macau Basic Law), and an environment where some local staff may feel that it does not need to give their best to be promoted and some non local staff may feel that they have nothing to gain in giving their best because they anyway cannot be promoted. This is counterproductive and may rightfully be perceived as an unreasonable double standard. Macau has a long tradition of welcoming and treating well foreigners and it should remain in this way. The keys to protect the Macau resident’s workers? Education, Education and Education…
III. REGULATING COMMISSIONS
The other big open issue has long been the need to regulate and impose a cap on the commissions paid out to the local junkets. After it has become clear that the operators would and could not agree by themselves on a voluntary maximum ceiling for the commissions paid out to the local gaming promoters, not least because this would breach competition rules.

The Government recently announced publically that it intended to issue a Dispatch of the Chief Executive, a form of legal statute, to set a mandatory maximum amount or percentage that the operators would be allowed to pay as commissions to the gaming promoters. So far this has not happened. But the Government has made plain that it wishes to pursue this avenue. It should be mentioned that in response the main gaming promotion companies, who have been raising considerable amounts of capital in the Hong Kong Stock Exchange and were consolidating a vast number of gaming promoters and buying over the management of VIP rooms, finally express their dissent view with regards to this policy. This should be noted. As from the beginning they probably deserved to be heard, as they are going to be directly and adversely affected by the proposed legal amendments. Even if they are perceive to be part of the problem and not of the solution.

It is nevertheless questionable that even if the Government should effectively regulate the commissions paid out to the gaming promoters this will be enough to have a substantial and long-term effect on how the operators are felt pressed to pass on a increasingly share of their profits to the gaming promoters they employ. After all, there will be intense pressure to breach any such mandatory restrictions and even if they are vigorously enforced and hold up, which certainly is optimistic, it most be kept in mind that the amounts paid out as commissions are only a part, even if a key element, of the wider package deal agreed between the various operators and each gaming promoter. It can be expected that the fierce competition in the premium casino market will shift from the commissions paid out to other issues, namely lodging or credit conditions, but will continue to press profit margins. Hence, this new law should take in consideration to enact some basic measures regarding the credit that the casinos can extend to junkets in order to have the desired effect on the market. Nevertheless, in the end, the command and control that the gaming promoters have of a significant portion of the high rollers will continue to be felt.

Therefore, the Government would be well advised to consider to extend some basic rules presently applicable solely to the sub/concessionaires also to the junkets companies, like imposing certain minimum investments that needs to be made in Macau and it clearly should have a more restrictive and tight control on who can be license and operate as a junket. It should also be considered if and how these public trade companies from Hong Kong can lawfully operate as a junket company in Macau, since presently the law seems to indicate that such is not possible. Even if they are major players.

Last, but certainly not least the casino operators should really consider to start making a greater effort to expand the relevance of alternatives markets, which would not make them exces

Date Posted: 29-Sep-2008

Antonio Ramirez is the Managing Partner of Ramirez Law Firm. Member of International Masters of Gaming Law, with years of experience in the Gaming Industry, worked as an in-house counsel for an American gaming operator. He can be reached via e-mail: antonio.ramirez@ramirezlawfirmacau.com or by phone (+853) 2871 6221.
Luís Pessanha is a lecturer on the Faculty of Law at the University of Macau, where he lectures tax and administrative law. He earned his L.L.B. from the New University of Lisbon; he has a postgraduate from the Catholic University of Lisbon and obtained his L.L.M. from the University of Macau. He may be reached via e-mail at luisp@umac.mo.