Inside Asian Gaming

11 Pearl—blaming the foreign operators for inflating dealer wages by in effect starting a pay war in the early heady days of market expansion after 2004. Policy risks Were the Chief Executive-elect Mr Chui to raise the casino employment age, then the new rules are unlikely to be applied retrospectively. Inother words, those under- 21s already working in casinos would be allowed to stay on. Nonetheless, it would effectively remove a whole generation of school leavers from the casino job market. To do that at a time when the number of casino tables is still going up in Macau (albeit more slowly than in previous years) could only have an inflationary effect on dealer salaries. A way to prevent that would be for operators to form a ‘cartel’ or price-fixing agreement on wages of the sort recently announced by Las Vegas Sands Corp and Melco Crown Entertainment Ltd regarding a ceiling on commission paid to VIP agents. Such arrangements are illegal in mature markets such as the United States, Australia and the European Union as they are considered to be against consumer and worker interests. In developing markets such as China, there are no such legal constraints. Tough call Unless the operators were given an assurance they would be allowed to cap casino worker wages, it seems unlikely they would support a rise in the casino employment age to 21. For the Chief Executive-elect to propose raising the minimum age during a recession without creating any immediate, quantifiable return in terms of building the economy, would certainly require boldness and a willingness to overrule lobbying by the casino industry. The political leadership in Mainland China has shown on a number of high profile occasions it is willing to put the public interest ahead of private interest. The example closest to home in Macau is when last year China began restricting the issuing to its citizens of Individual Visit Scheme travel permits for Macau. Other examples are China’s one child policy (though that appears to have softened as of late) and the capping of personal borrowing within the domestic banking system. Cynics in the West might argue this is because China’s leaders don’t have to test their popularity in Western-style democratic ballots. Yet if there is one factor that stands out above all others in terms of Asia’s economic development model versus that of the West, it is the willingness in Asia in general and China in particular to think long term. If Macau’s Chief Executive-elect wants to prove his patriotic credentials with Beijing he may need to make some tough decisions on structural issues that reap rewards tomorrow, rather than simply presiding over a ‘steady as she goes’ administration that deals only with the needs of some of his constituents today. Edmund Ho has been serving as Chief Executive of Macau for two consecutive terms B ill Lerner of the consultancy Union Gaming, formerly Managing Director, Senior Gaming & Lodging Analyst at Deutsche Bank in LasVegas, gave his reaction to the selection of Mr Chui as Macau Chief Executive-elect. “It is our view that Macau visa restrictions have been easing quietly, which seems more characteristic than a splashy announcement about an official ease that some are anticipating,” said Mr Lerner. “That said, we do believe Beijing, as a sign of support for the new administration, will ultimately issue a supportive statement about the importance of Macau’s key industry, and ultimately higher frequency visitation will become easier. Since the 10th anniversary of Macau’s handover to China coincides with Chui’s effective date (December 20), this timing seems logical. “We anticipate additional catalysts in Macau, near-term. These include an implementation of junket commission caps (SJM’s Stanley Ho has organized a meeting of concessionaires/sub-concessionaires this week regarding implementation); the 60th anniversary of PRC establishment (1st October 2009); a macro credit thaw would work its way to Macau helping to shorten junket credit cycles—bolstering working capital and rolling chip volume in turn; further expansion of the Individual Visit Scheme (IVS) to extend to additional provinces; phase two of Gongbei Gate expansion (4Q09), Lotus Bridge gate expansion (Year ending 09 twenty more vehicle lanes), Pac-On ferry terminal additional berths (YE09); Encore Macau, L’Arc, and Oceanus openings; potential HK listings for WYNN and LVS (which could favourably mark-to-market valuations for Galaxy and SJM).” Market View An analyst expects at least some honeymoon effect from Mr Chui’s election Cover Story