Macau’s “go-go years” appear to be over, with signs both the central Chinese government and local Macau authorities want tighter control and investors should manage their expectations accordingly, a report from a senior risk consultant warns.

In a stark report on Macau, Steve Vickers & Associates said that the rapid expansion of the casino industry had relied on a degree of “acquiescence regarding capital outflows and widespread, if concealed, organized crime involvement with the junkets.”

“Now the central Chinese and the local Macau governments have restricted that acquiescence and display an appetite for tighter controls,” it said.

Vickers points to the proposals put forward by the government to amend the city’s gambling laws, which include increasing the share capital held by Macau residents, which will force casinos to become more “Chinese” and patriotic in outlook. The operators will also need approval to pay dividends outside of Macau and face greater oversight of their operations.

The amendments, which were published in mid-September as part of the government’s review process leading up to the expiry in the six concessions in June next year, raised alarm bells in the investment community. The stocks had the biggest one-day fall on record the day after they were published.

Since then, there has been little further clarity on what some of the guidelines may actually mean. Although analysts have noted after the 45-day public consultation process that the government appeared to be taking a pragmatic approach and was listening to concerns.

However, the SVA report notes that Chief Executive Ho Iat Seng’s Nov. 16th policy address did nothing to address the uncertainty.

“What Ho did say, though, held out scant hope for the sector in the short term. In particular, he spoke of the need to ensure “healthy” development, and above all stressed the battle against COVID. Investors should thus expect continued travel restrictions coupled with a sectoral cleansing, perhaps comparable to those under way in the tutoring and video gaming sectors in mainland China.”

Under the direction of Beijing, SVA said the Macau government appears determined to diversify away from its reliance on casinos, which make up 80 percent of Macau’s gross domestic product.

The upcoming concession tender will provide the government with great leverage to force through the necessary changes.

The consensus view is that the existing concessionaires will retain their license, though SVA said there is an element of doubt one may lose a license, or be forced to restructure in favour of local owners.

“Such an outcome was previously inconceivable,” the report says. “Now thought, investors must factor such an outcome, and other uncertainties, into risk calculations.”