Macau is an administrative region of the People’s Republic of China. But for centuries it was a Portuguese colony leased to them by the Chinese rulers. In 1999, it was transferred back to China at the end of that lease agreement. Meanwhile, Macau had become a major resort city and one of the top destinations for gambling tourism.

A telling fact is that the gambling industry in Macau was reported to be 7 times that of even Las Vegas. However, very recently the government of China (which now administers Macau) brought down the whiplash to the thriving gambling and casino industry causing an international chain of events. The justification offered was to limit unregulated foreign funds that impact the Chinese economy.

What Influenced This Crackdown on Macau Casinos?

This decision did not come overnight. For years, China has been focused on trying to control this industry which is illegal across the mainland and is heavily responsible for capital outflows with debatable compliance, of several Chinese billionaires. Measures had already been initiated with the installation of cameras with integrated facial-recognition software installed in Macau’s ATMs, daily cash withdrawals limited to stem the excesses, and a significant increase in the number of casino supervisors to better track transactions.

While the casino industry, which was just stumbling back to health after the Covid-19 lockdowns, is bearing the brunt of the attack, it does not appear to be the only intended target. Macau is also well known as a tax haven with several of the rich and elite have established their residences or getting their companies registered in Macau to enjoy the significantly low tax rates. The lower taxes on corporate income and capital gains have seen Macau attract a lot of foreign investment, which the Chinese Government would prefer to be channelized directly via their own administration. Hence, this crackdown seems like the final nail in the proverbial coffin to regulate the entire economic setup of the territory.

It is widely anticipated that the new laws and regulations would require for re-bidding of the casino licenses, bring them into the net of firm taxes and financial compliance, regulate cross-border cash flow, clamp down on illegal lending and correspondingly revise the territory’s tax laws as well.

The Impact of the Chinese Crackdown

As per reports, in the pre-pandemic year, Macau’s 141 casinos had generated earnings of a staggering $360 billion. It also accounted for direct/indirect employment for over 20% of its population and over 80% of its tax revenues. As one would expect, this crackdown by the government made stocks of global companies, involved with these casinos, take a major plunge and also initiated panic selling by investors. Some estimate as much as $18 billion were wiped out due to this decision by the Chinese government.

On the other hand, though, there have been neighbouring countries with relaxed casino and gambling laws operational for decades. However, with Macau being the hub, the majority of the gambling tourism was diverted there. Now, in the unfolding of these recent events, countries like Singapore, Malaysia, Cambodia, and even Nepal may stand to benefit as the revenues are expected to spread across these countries. Nepal has been a haven for gambling enthusiasts in India who frequently visit their casinos. In fact, there are curated holiday packages offered by several tours and travel companies for this very purpose.

Casinos bring in a lot of tourism-related revenue and provide large employment. As is evident with the statistics we shared earlier for Macau. Even if each of these countries gets a piece of the pie, there can be a direct healthy boost to their respective economies. Especially for the developing countries like Cambodia and Nepal which can fashion a whole industry around this theme and attract foreign investments in the process.

In Summation – Way Ahead

To truly reap the benefits of this power shift, the governments and local regulatory authorities will need to group together to formulate policies that invite foreign tourism, thereby inviting foreign currencies. The popularity of casinos has always included big development projects associated with them, including malls, hotels et al. Las Vegas, Atlantic City and Macau are historical evidence of this. This means more local employment, improvement in living standards and more purchasing power for the people.

While Singapore is naturally poised to bring in more gambling tourists due to its excellent existing infrastructure, and even Malaysia due to its proximity to Singapore, the onus lies on Cambodia and even Nepal to build an environment that is welcoming and safe for tourists to bring in their cash and spend it in those respective countries.