GGRAsia – Amid Covid-19 crisis, Macau casino CSR put to the test

Amid Covid-19 crisis, Macau casino CSR put to the test

Apr 09, 2020 Newsdesk Features, Latest News, Macau

The ongoing Covid-19 pandemic has led to increased calls from the Macau population and government for the city’s casino operators to up their support for the community via so-called corporate social responsibility (CSR) initiatives. Several commentators have suggested to GGRAsia that a win-win scenario is possible for both sides. They say the casino industry is likely to listen to all reasonable requests that balance the interests of all involved, and are proposed in such a spirit of cooperation.

“The government has done an amazing job in handling the Covid-19 emergency in Macau. I believe that the integrated resorts will cooperate fully with the government to come up with reasonable win-win solutions to handle the crisis moving forward,” industry consultant Niall Murray told GGRAsia.

Mr Murray is a former senior executive in the Macau and Las Vegas, Nevada, gaming markets, and is chairman of gaming and hospitality consultancy Murray International Group.

He added regarding the Macau operators: “They will do everything they reasonably can to safeguard Macau and be responsible corporate citizens. The key to success is cooperation, with government and the integrated resorts working closely together to find the right solutions, implemented properly, at the right time to get through this crisis together safely.”

On Wednesday Macau’s Secretary for Economy and Finance, Lei Wai Nong, said during the daily government briefing on the local impact of the pandemic, that the city’s gaming operators had “for now… fulfilled their promise to keep their workers employed.”

Mr Lei is the official with general oversight of the Macau casino sector.

He added, referring to the six Macau licensees: “We thank them for their taking care of 82,000 local employees, which also represent their 82,000 families.”

Govt subsidy schemes

But he also noted – in response to a media question about why the gaming operators were not included in a MOP10-billion (US$1.25-billion) subsidy scheme to support local businesses and local employees and help them survive the economic effects of Covid-19: “Frankly these big companies… have accumulated much wealth over the years and I believe they have the conditions to sustain their operation and protect employment.”

Sources have told GGRAsia that a number of casino operators is already urging staff to take non-paid leave for varying periods of time as the Covid-19 crisis lingers.

Mr Lei noted in his Wednesday comments: “This MOP10-billion fund is to help employees, residents and SMEs [small and medium-sized enterprises]. We hope they [gaming operators] understand we are leaning the help to them [small local firms].”

In early March the Secretary stated the Macau government had no plans to consider giving the local casino industry some tax breaks to ease business uncertainties over the Covid-19 virus alert.

In February, Ambrose So Shu Fai, vice-chairman and chief executive of Macau casino operator SJM Holdings Ltd, had floated such an idea. Taxation on Macau gross gaming revenue (GGR) is currently levied at 35 percent, although other charges – for certain community causes locally – take the effective tax rate on GGR up to 39 percent.

Several commentators have told GGRAsia that with the current small levels of monthly GGR, such a break would not be meaningful at present, but could be of more benefit during a post-coronavirus recovery phase for the sector.

Macau GGR declined by 79.7 percent in March in year-on-year terms, according to data issued by the city’s casino regulator, the Gaming Inspection and Coordination Bureau. In February – when the city’s casinos were closed for 15 days to halt the spread locally of the Covid-19 virus – Macau casino GGR tallied MOP3.10 billion, an 87.8 percent decline year-on-year.

A fortnight ago a number of legislators at a plenary session of the city’s Legislative Assembly suggested that some new social commitments should be written into gaming concession contracts at the time of the public retender process linked to the expiry in June 2022 of the rights of the existing six licensees.

Industry consultant Mr Murray noted to us that “all integrated resorts” in Macau, many of them involving billions of U.S. dollars in terms of capital cost, were “in this business for the long run”. He added all operators were “committed to Macau, its citizens, and are anxious to renew their concessions”.

A recent memo from Macquarie Capital noted to gaming sector investors: “Macau has maintained impressive social stability since the coronavirus, which we attribute to operators’ abilities to maintain employment.”

It added: “We believe this interdependence between the [Macau] Special Administrative Region and casinos bodes well for 2022 concession renewals.”

Financial donations, masks and more

Macau’s casino operators have announced a range of corporate social responsibility measures they say aim to help the local community cope with the impact of the Covid-19 pandemic. These range from direct financial assistance to those affected by the crisis, to other forms of support for local SMEs.

Most of the casino operators have donated protective face masks and hand-sanitiser gel to help meet the community’s need for such epidemic-prevention materials. In addition, several operators have introduced special rent-free periods for retail tenants at their venues, to help them cope during the crisis.

The Macau government has said companies can count as deductions for tax purposes any donations they make in cash or kind to any government body, charity or similar institution in Macau or mainland China for the purpose of countering the Covid-19 pandemic.

Glenn McCartney, associate professor in international integrated resort management at the University of Macau, says the gaming industry too is suffering, facing a sharp decline in all sorts of revenue, not just from casino operations, but also from shops and restaurants at casino resorts.

Mr McCartney told Portuguese news agency Lusa that the Macau authorities should focus on promoting “cooperation” with the city’s casino operators in terms of a coordinated response to the Covid-10 crisis, instead of the government imposing measures on operators. He noted that all those firms had so far been “good corporate citizens”.

Recently Macau’s Chief Executive, Ho Iat Seng, had – in a media briefing on the local situation regarding the Covid-19 alert – acknowledged that the city’s casino operators had offered paid leave to their workers during February’s 15-day shutdown of gaming floors, and also donated protective equipment to the community.

Defining corporate social responsibility

But Mr Ho added that “corporate social responsibility” for the industry was “not only about doing promotion in newspapers and giving out some gifts”.

The city’s leader mentioned during the briefing that he had been “disappointed” that – up to that time – the government “could not reach [an agreement with] any integrated resorts” when pursuing local efforts on the pandemic.

That was a reference to the government’s work to find hotel space to carry out one of its present policies on Covid-19, requiring certain people entering Macau to undergo a 14-day supervised quarantine.

Shortly after Mr Ho’s comments, the government announced that part of the Sheraton Grand Macao hotel at the city’s Sands Cotai Central casino resort run by casino operator Sands China Ltd, had been allocated for Macau-government use during the city’s response to the Covid-19 emergency.

The ongoing response of the Macau casino industry in supporting its host community will be influenced by how the situation develops regarding the coronavirus pandemic, says Ricardo Siu Chi Sen, associate professor in business economics at the University of Macau.

Asked whether there was more that the local casino sector should or could do in terms of corporate social responsibility, Mr Siu told GGRAsia, referring to local measures to control the Covid-19 infection linked to the virus: “In such a very abnormal period, I believe that it may be more realistic to say that it is quite dependent on the progress of this epidemic.”

He added: “If the situation can be softened sooner or later, everyone would be happy.”

The academic further stated – using a Chinese term to describe a key pillar of a community’s economy: “As Macau’s dragonhead and most profitable industry in the good time,” the casino business might “have to share more social responsibility in the bad time”.