This article first appeared on May 16, 2017 in ALB Insights, a weekly, ad-free newsletter that is sent to subscribers. To purchase your subscription, please email Amantha at amantha.chia@thomsonreuters.com or call her at +65 6870 3917.
A corruption crackdown caused Macau’s gambling-generated revenue to decline for three straight years, adversely affecting the fortunes of the territory’s legal industry. But now that the world's largest casino hub is back to its winning ways, lawyers tell John Kang that they are bullish about Macau’s future.
Macau’s gaming industry is on a nine-month winning streak, with gambling revenues rising 16.3 percent last month and raking in about $2.5 billion. But the Chinese gambling enclave has endured tough times in the past, notably three years of decline triggered by Chinese President Xi Jinping's anti-graft campaign in 2014.
With the territory’s economy almost totally reliant on gambling – the industry accounts for over 80 percent of the government's revenues – law firms were unsurprisingly affected, although some were more affected than others. “A lot of small law firms entered the market and focused on some specific practice areas. Those were the ones that suffered,” says Manuela António, founding partner of Manuela António – Lawyers and Notaries.
The ability to offer a diverse range of services was what helped bigger law firms weather the storm. “When the economy is expanding, we have a lot of work related to M&A, corporate and commercial, contracts and more,” says Nuno Sardinha da Mata, a partner at C&C Lawyers. “But in a down cycle, we have litigation, credit recovery, bankruptcies and restructuring, and so on.”
Now that the gaming boom is back, Macau’s law firms are seeing a return of legal work related to the industry. As President Xi’s anti-graft campaign eases, new resorts are being built to attract both high rollers and casual gamblers to China's only legal casino hub. This has led to a feeling of optimism not just for gaming work but for more work overall as well.
“If the gaming industry is doing well, then other sectors of the economy will grow more confident,” says Carlos Simões, a founding partner at DSL Lawyers. “In general, investors are more open to taking on new projects and making decisions on existing projects. There have been a lot of delays from local players on important decisions during the downturn, so once investors begin making these decisions, then we will have more work for sure.”
UNFLUSTERED BY COMPETITION
Macau looks like it’s on a path to recovery, but rivals in Singapore and the Philippines are challenging the Chinese city, In addition, other competitors close to Macau have recently entered the market.
For example, Paradise City – South Korea’s first casino resort – opened just last month. The country’s gaming industry is heavily dependent on Chinese gamblers, who account for about half of South Korea’s gaming revenue from foreigners. Meanwhile, Japan legalised casinos in December, and people familiar with the matter told Reuters that casino resorts could open in the world’s third-largest economy by 2023.
Law firms in Macau, however, aren’t worried. “Those casinos could affect the VIP market, but Macau has been evolving in the past years to be less dependent on the VIP visitors,” explains Sardinha da Mata. “Macau is moving to mass-market gaming, which has visitors coming from China, Hong Kong and nearby places.”
António agrees that the new markets won’t hurt Macau because it remains the only place in China where citizens are legally allowed to gamble. “Chinese gamblers will go to Japan just once, like they go to Singapore and the Philippines,” she says. “But they will come to Macau because they speak the same language, they are the same people. They feel more comfortable in Macau."
To contact the writer, please email john.kang@tr.com.