Licensing Gaming Industry in Macao: Overview and Improvement

1. Licensing Gaming Industry in Macao: Overview and Improvement WANG Changbin, Professor Gaming Teaching & Research Center Macao Polytechnic Institute cbwang@ipm.edu.mo Sept. 12, 2018 Malta

2. Overview of Licenses for the Gaming Industry in Macao • Licenses for entities and licenses for individuals • Licenses for entities • casino operators • gaming promoters • gaming machine suppliers • License for individuals • shareholders with 5% of corporate capital or above • directors • key employees

3. Licensing Casino Operators • The maximum number of licenses for casino operators is three according to the law • In practice six casino operators in Macao, in which three are so-called concessionaires, the other three are sub-concessionaires which obtain their licenses through the three original ones • 40 casinos by 2017

4. Casino Operators Acquire License through Public Bidding • Must have the minimum capital of MOP 200 million (around USD 25 million) • Must be a public corporation registered in Macao • The shareholders with 5% or above of the corporate capital, directors and key employees must be suitable • The critical factors that the government considers whether or not to grant a license are • experience in gaming industry; • reputation; • financial resources; • potential benefit to Macao.

5. The Length of Concession • Not more than 20 years according to the law • In practice, one concessionaire and its sub-concessionaire were granted 18 years, the others 20 years • The earliest expiration year is 2020 • The length of concession can be extended once or multiple times under special situation, but cannot be more than five years altogether • After the expiration, a new round of public bidding would take place

6. The Role of Gaming Promoters (VIP Rooms) in Macao • In Macao, the gaming promoters run most of the VIP rooms. • The revenue from VIP rooms accounts for 65-70% of the total gaming revenue from 2002 to 2013 • 55% in 2017

7. Macao Gross Gaming Revenue(Million US Dollars)

8. Gross Gaming Revenue From Casinos(Million US Dollars)

9. Proportion in Total Gross Gaming Revenue

10. License gaming promoters as an Intermediary • A Commercial Entrepreneur in accordance with the Commercial Code • A company, can be either limited or unlimited liability; or • A natural person • The minimum capital requirements for a Commercial Entrepreneur • No capital requirements for a natural person, unlimited company and limited partnership • For a private limited company, MOP25,000 (ca. $3,000) • For a public limited company, MOP1 million (ca. $125,000) • In practice, security deposit of MOP 100,000 (ca. $12,500 ) be submitted to the regulator

11. Licensing Gaming Promoters As An Intermediary The capital requirement is not much No limit for the number of gaming promoters, thus no need of public bidding Either individual or company can be a gaming promoter

12. Gaming Promoters Need to Be Licensed As A Gaming Operator • Gaming promoters in Macao are different from other jurisdictions • Gaming promoters run VIP rooms in Macao. It is actually a partner of the casino operators. • Two types of VIP rooms: revenue sharing and commission • Revenue sharing: 60% to casino operators • Commission: must meet the minimum amount of turnover • Credit betting increases the business risk

13. Licensing Gaming Promoters As An Casino Operator • The VIP rooms need abundant capital and stable cash flow • Capital increase is being discussed in Macao • To impose higher minimum amount of capital • To increase the amount of security deposit from MOP100,000 to 10 million

14. Licensing Gaming Machine Suppliers A public corporation focus on gaming machine production or maintenance Experience inproducing or maintaining gaming machines Reputation of the producer and the products The shareholders with 5% or above of the corporate capital must be suitable No minimum capital required No limit for the number of gaming promoters, thus no need of public bidding

15. Licensing Gaming Machines • Meet the requirements of Macao’s Gaming Machine Technical Standards • Meet the basic requirements about gaming machines • Sturdy construction; • Clear label with the basic information on the producer and the machine; • A technical manual; • The programming or the games must be lawful. • Provide a name list of the engineers with the required information • Provide a certificate issued by a research institute which has been acknowledged by Macao government

16. Licensing Individuals • Individuals who need to go through suitability check • Shareholders with 5% or above of the corporate capital; • Directors; • Key employees • Only employees of high rank such as CEO, CFO etc., need to be licensed

17. Problems • A bunch of people in casinos and VIP rooms are not regulated, such as • middle managers • the customer representatives in VIP rooms • No clear and specific standards to measure whether or not the individuals are suitable • No substantial investigation has been made

18. The Licensing System Needs to be Improved • The licensing system in Macao is still quite new • A few suggests to improve the system • Expand the scope of the individuals who need to go through suitability check • Carry out serious investigations • Establish a team with knowledge and skills of investigation

19. Thank You! WANG Changbin cbwang@ipm.edu.mo