A brief history of Casino industry in Macao

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Macao, the world’s casino capital, had 41 casinos as of 2020. According to Statistica, in 2020, the city generated gross revenue of 7.61 billion U.S. dollars from gaming and gambling. China is the world’s most populous country and Macao is the only part of China where gambling is legal.

Macao is the home to some of the world’s largest and most fabulous casinos operated by global casino companies. The city is economically quite dependent on its gambling industry for revenues.

First settled by the Portuguese in the 16th century, it was handed back to China on December 20, 1999.  Gambling history in Macau dates back to 1849 when colonial rulers, first legalized the commercial operation of the game of fantan.

Fan-Tan a game of chance. Fan-Tan or fantan as per Wikipedia is a gambling game long played in China. It is a game of pure chance which has similarities to roulette. The game is played by placing two handfuls of small objects on a board and guessing the remaining count when divided by four.

Over the next 170 years, Macau rulers relied on the revenue generated by the gaming industry to meet their expenditures. The legal framework governing Macau’s gaming industry is based on the administrative law concept of concession:

A concession is a temporary contract between the Government and a private entity that has been selected by means of a public tender. Macau follows a concession model that was created in Portugal in 1927. The concession methodology implemented by Macau today has been used since 1961. In a system of concessions, gaming is an activity reserved for the Government. It is seen as a privileged activity that is part of the public economy. Therefore, the private sector cannot operate gaming, unless under the express license.

In the system of concessions, the concessionaire is under a requirement to perform certain minimum investments, mainly the construction of a casino-hotel, which should be constructed within a specific deadline. If the obligations under the concession agreement are not performed in a timely manner, the concession may be withdrawn as per the terms of the contract. And when a concession period ends, the assets created by the concessionaire get transferred to the State.

In 1961, the then Portuguese Governor Marques designated Macao as a “permanent gambling region” liberalized gambling operations and put them up for public bidding. Stanley Ho and his partners won the monopoly concession to operate casinos and lotteries in 1962. Stanley Ho and others soon transfer their concession to Macao Tourism and Entertainment Corporation (STDM) in which Stanley Ho was a major shareholder.

The concession with STDM was negotiated and renewed multiple times giving Stanley Ho the monopoly till 2002. Although the law was amended in 1982 to permit more casinos, the Portuguese rulers did not implement the law considering the uncertainty over their own rule. In 2002, the new Chinese rulers took the initiative to liberalise the gambling sector.

The new rulers ended up awarding three casino gaming concessions in 2002:

  1. Wynn Resorts;
  2. A joint venture between Galaxy Entertainment of Hong Kong and Las Vegas Sands; and
  3. SJM (of Stanley Ho)

In the next four years, three additional sub-concessions were authorized by the Macau Government:

  1. 2002 – Galaxy to Las Vegas Sands was granted;
  2. 2005 – a sub-concession from SJM to a joint venture between the US gaming operator MGM and Pansy Ho, the daughter of Stanley Ho was granted;
  3. 2006 – a sub-concession from Wynn Resorts to a joint venture between Melco of Hong Kong (owned by Lawrence Ho, son of Stanley Ho) and Crown of Australia was granted.

At present, Macao has 41 casinos. The events in 1961 and 2002 are referred to as ‘big bang’ reforms that changed the economy of Macao. The concessions granted in 2002 are set to expire in 2022 and the move of the government in 2022 is expected to shape the economy of the next few decades.

Traditionally, Hong Kong was the source of the largest number of visitors to Macao, which is one of the reasons for transactions in Hong Kong dollars. However, today, according to Statistica, the number of visitors to Macao has grown quite rapidly in the last decade with Mainland China accounting for 90% followed by Hong Kong and Taiwan.

Last month, Macau’s Secretary for Economy and Finance, Lei Wai Nong, announced that the six casino gaming operators whose term is scheduled to expire on 26 June 2022 are extended till 31 December 2022 as a proposed law tabled in January is pending.

Under the proposed law, there would be a maximum of six concessions, with an end to the existing sub-concession model. The concession period would be a maximum of 10 years, but it could be extended by a further 3 years under exceptional circumstances.