Chief Executive Fernando Chui Sai On stepping down at the end of the year and a possible sharp escalation in the Sino-US relationship will pose challenges to 'foreign' gaming operators, according to the annual Asia Risk Assessment report released by Steve Vickers and Associates.

Macau (MNA) – The annual Asia Risk Assessment report for the year 2019 was released on Thursday by Steve Vickers and Associates (SVA), a specialist political and corporate risk consultancy.

The report posits that the geopolitical risks facing the gaming concessionaires, such as Chief Executive (CE) Fernando Chui Sai On stepping down at the end of the year and the stresses in the Sino-US relationship, will climb sharply this year, presenting challenges for ‘foreign’ gaming operators, meaning operators without a direct Chinese connection.

With the concessions of Sociedade de Jogos de Macau (SJM) and MGM China Holdings Ltd set to expire in 2020 the report speculates that the SAR government could extend them until 2022, when all the other gaming concessions are set expire, so as to ‘deal with them all at once’.

However, with gaming rising by 14 per cent last year and reaching a value of US$37.6 billion (HKD294.8 billion), SVA considers that local authorities will unquestionably not want to destabilise the gaming sector, despite the overall Gross Domestic Product (GDP) growth only at 6.8 per cent for the year 2018, and the central government wanting a shift away from gaming into a more diversified economy.

Regarding the Sino-US relations, any spiralling tensions with the US could spur Macau to ‘dilute US casinos’ sectoral dominance’, with SVA presuming that the government might urge Chinese companies to take over or buy into existing businesses, ‘not least given the links between gaming tycoons and the Republican Party’, or ‘simply refuse to grant a new right to new concessionaires’.

The report states this would be more likely if Ho Iat Seng, the Legislative Assembly’s (AL) current chair, takes over the helm of Chief Executive, as Mr. Ho recently ousted Portuguese jurists from the AL and may welcome a similar ‘Sinofication of the gaming sector’.

Overall, with Macau remaining loyal to Beijing, SVA believes the political environment will remain steady in 2019.

Risks for Hong Kong and Mainland China

In Hong Kong, the political climate should also remain steady, but at an expense of ‘diminished rule of law’ and ‘loss of local autonomy’ as Chief Executive Carrie Lam Cheng Yuet-ngor continues to promote Hong Kong’s inclusion into the Greater Bay Area as well as give over more policy control to the central government.

Instability or large protests also pose smaller risks as the Hong Kong government’s harsh action against the Occupy Central protest leaders and any pro-democratic legislator “should deter people from large scale rallies.”

The SVA report asserts that the neighbouring SAR’s economy is reportedly slowing, with GDP growth dropping to 2.3 per cent last year, a further decrease from its previous 2.9 per cent, due to a declining housing market and trade tensions.

Meanwhile, SVA states that risks will increase for China in 2019, largely credited to the country’s heightened geopolitical tensions, tougher controls on business and politics paired with a slowing economy that could pose a long list of challenges for international companies operating within the country.