MACAU - WHY NOT?  Could online gaming be a pain killer to mitigate the economic impact of a virus outbreak.
Provided by Carlos Eduardo Coelho, Senior Associate, MdME Lawyers, Macao

Where are we now? The outbreak of the novel coronavirus has exposed the frailty of Macau’s economy and its long-discussed overreliance on the brick-and-mortar gaming industry.

Daily visitation and hotel occupancy at its lowest, gaming premises closed for a 15 days period led to a completely new economic reality. Macau gaming industry is highly dependent on mainland visitors and due to the travel ban imposed to them, this is impacting significantly the economy.  If we just look at the numbers, gross gaming revenue (GGR) in Macau took a huge hit for February - it was down 87.8% year-on-year and the forecasts for March are not much better. On the 19th March, Macau Government announced a revised 2020 budget plan, that has halved its forecast for this region full-year 2020 GGR. The forecast is now MOP130 billion (US$16.3 billion), down from a projection of MOP260 billion, announced in November. 

What does this means? This reflects the need for economic diversification and reconsider other alternatives for local economy. Macau has been trying to push forward economic diversification aimed at steadily shifting Macau’s focus from a gaming centric city to a tourism centric one (focusing on MICE, Entertainment, F&B), while other alternatives are also being explored. But, let’s face it, Macau is a gaming market and gaming will continue to be its economic engine. Given Macau’s reality, authorities could also consider, as a complement (and not as an alternative), diversification within gaming. It may therefore be time to consider the possibility of allowing online gaming operations in Macau.

Online gaming can help securing a new generation of customers (Millennials and Generation Z that may not be interested in sitting at a rowdy baccarat table), bring new technologies and new games and, very importantly from a Macau Government perspective, create high-skill jobs to support the necessary regulatory and technological infrastructure. Obviously, we shall not forget the possibility of creating an additional tax revenue stream, one that it is not dependent on an influx of tourists (one that does not need to cannibalize the existing land-based market). 

Where should we go? As the current gaming concessions are set to expire in 2022, this may be the opportunity for government to revisit and reconsider regulating the offer of online gaming operations. Macau’s gaming framework is not unfamiliar with online gaming. The commercial operation of online gaming can only be pursued by privately owned entities that have been granted a concession to that effect, through entering into a concession contract with the Macau Government. However, the Macau Government has not yet issued regulations governing the concession and operation of online gaming (and has not launched a tender to grant these concessions).  

If there is something we must draw from the current reality is that Macau should prepare its economy and society to face disruptive events, such as Covid-19. That will take a collective effort, and an honest debate, between regulator and operators and between the Macau government and Beijing. We must all think outside the box which, at this stage, may be looking beyond brick-and-mortar. Macau has created the most successful land-based gaming market in the world. It may do the same online. Even though online gaming may not be the cure to Macau’s economic dependency, it sure could be a strong palliative.

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