MACAU (Reuters) - A no-nonsense approach by the Macau government in disputes with land developers is rattling the nerves of casino executives, who fear it portends a rough ride from authorities in talks they will hold to renew operating licences.
The government has seized more than 100 plots of land from developers under a 2013 law it says is intended to root out corruption and better utilise land that has stood idle for over 25 years.
For casino executives, the government’s uncompromising position in the land disputes despite protests from investors, some lawmakers and would-be residents, is a flavour of the uncompromising attitude they expect to face when they negotiate to renew their gaming licences, which start to expire in 2020.
“It’s really a warning sign that the government is not backing down for the casino concessions,” said a senior casino executive. Like others interviewed for this story, he requested anonymity due to the sensitivity of the issue.
“Nobody really knows what is going to happen.”
Macau is the world’s biggest gambling centre by revenues and casino operators, such as Galaxy Entertainment Group’s (0027.HK) Galaxy Macau to Wynn Macau’s (1128.HK) Wynn Palace, have invested some $30 billion (£22.81 billion) into the centre.
The government’s fight with land owners has no direct connection to the casino owners’ licence negotiations. The Macau government has said it has no intention to change the land law and would only say it will analyse several options for how it will conduct the licence renewals.
“Just because you have a licence now doesn’t mean you will have one in the future. They are setting our expectations that some operators may not continue,” said a second senior casino executive.
The licences were first awarded in a complex process in the early 2000s. Government officials have said there may be a new public bidding process when they expire.
Sands China, MGM China, Galaxy and Wynn declined to comment, while SJM did not respond to a request to comment. Melco said it hoped to continue working with the government.
“Melco has deep roots in Macau, we are confident that the government will set and communicate clear and appropriate renewal guidelines and criteria,” a company spokeswoman said.
The land disputes have their roots in a real estate boom in the 1990s and early 2000s, when many developers rushed in to buy up plots of real estate hoping they would appreciate in value.
Critics say the government is using the land seizures to deepen its control over the special administrative region.
In one example, a parcel of land was seized even though the developers had carried out infrastructure work including building underground tunnels, roads and manmade lakes.
The tough stance helps prevent future graft cases, said one civil servant, who was not authorised to speak to the media. In July, Ho Chio Meng, the territory’s chief public prosecutor until 2014, was jailed for 21 years for graft in a case that prosecutors said involved about 2,000 public contracts that were illegally awarded.
Despite the concerns of the gaming executives, the casino sector is a huge part of the economy. Casino resorts employ two-thirds of Macau’s workforce, and their taxes produce around 80 percent of government revenues.
The casino executives said their companies are taking action to make sure they stay on the right side of authorities. This includes efforts to take on more local staff and working more with small local companies and suppliers. Conversely, many executives are subject to shorter-term contracts given the uncertainties of the licensing round.
The casinos are also pushing soft diplomacy. In July, for example, MGM hosted an event to provide the elderly with health checks.
Within the companies, the tempo of internal meetings to discuss the upcoming licensing rounds have become more frequent, the executives said.
“It’s all very sensitive at the moment,” said a fourth, senior executive at a casino company. “We are just trying to understand what the government wants.”
Reporting by Farah Master; Additional reporting by Anne Marie Roantree in HONG KONG' Editing by Clara Ferreira Marques and Neil Fullick