MACAU - Gaming revenue in Macau rose 67% during the first six months of this
year to 85.9 million patacas (US$10.7 billion). The numbers confirmed the
festive atmosphere at last month's Global Gaming Expo (G2E) Asia, where
predictions were made of annual visitors from mainland China doubling to 22
million (and total visitors breaching 30 million), with gaming revenue limited
only by casino operators' imaginations.
At the region's largest gaming conference and trade show a year ago, the mood
was funereal. It wasn't the global economy recession that depressed delegates
and shaved G2E Asia attendance numbers, but restrictions on visas for visitors
from the mainland that began in 2008. The limits torpedoed gaming
revenue, leading to the first quarterly declines since the casino building boom
began in 2004.
Beijing never announced its reasons for the visa restrictions - indeed, it
never announced there were any. The reasons were believed to include
dissatisfaction with the rapid growth of casino revenue, especially from
high-roller VIP baccarat, without diversification of Macau's economy beyond
gaming. The restrictions faded during the second half of last year, again
without a word from Beijing.
Replay?
Many believe VIP baccarat provides a conduit for laundering illegal funds from
the mainland. There's also widespread suspicion that mainland gambling debts
are collected using force.
VIP baccarat leads this year's rampant expansion, growing 85% from last year
and accounting for 71% of total gaming revenue, up from 67% last year. There
are no signs that shopping or shows or property speculation are challenging the
dominant role of gaming in the local economy. Yet there's no hint of concern
among Macau gaming operators that visa restrictions will reappear.
Despite the silence, visa restrictions remain the elephant in the room for
Macau's gaming industry. "Everyone has, is, and will continue to be concerned
about it," according to Macomber International president Dean Macomber, who a
year ago was helping Sands China - owner of the Venetian Macao, Sands Macao and
Four Seasons/Plaza Casino - steer through the hard times as an acting senior
gaming executive.
A 35-year gaming industry veteran, Macomber notes that governments in casino
jurisdictions throughout the world routinely restrict access through a variety
of tactics: barring local residents (as in South Korea), requiring a casino
entry fee (as in Singapore), and limiting bet sizes and/or hours of operation.
"The distinction," Macomber says, "is that most other governments tend to
employ long-standing policies in this regard, not take such steps suddenly that
abruptly constrict the visitor flow with great force."
Visa card Although the conditions seem similar to 2008, there are some key
differences that explain why Beijing hasn't played the visa card again this
year, according to a range of observers of Macau.
"To my understanding, a key consideration ... is whether there is increasing
evidence which shows 'uncontrolled' gambling behavior of mainlanders in Macau,
including Chinese officials gambling here," University of Macau Associate
Professor of Business Economics Ricardo Siu says.
"Although Macau's gross gaming revenue was increasing significantly, we - as
outsiders - do not see extraordinary serious evidence as reported in the past
few months for 'uncontrolled' gambling behavior of mainlanders in Macau, no
'uncontrolled' competition measures ... [such as rising commissions for junket
operators above the industry standard 1.25%], as compared to what we observed
in the second half of 2007 and the first half of 2008. Accordingly, the
likelihood for the Beijing government to restrict the visa policy seriously
again may not be high," Siu says.
Nevertheless, Siu warns that the continued dominant position of VIP baccarat
may risk future action from Beijing.
Top down view Another difference from 2008 is the man in charge in Macau. In December,
Fernando Chui Sai-on took office as Macau's chief executive. His predecessor
and first chief executive of the former Portuguese enclave, Edmund Ho,
successfully presided over gaming industry liberalization but his second
five-year term was marred by the US$23 million corruption scandal centered on
Secretary for Transport and Public Works Ao Man-long that broke in December
2006. The scandal heightened public dissatisfaction that manifested in violent
May Day demonstrations in 2007, which left a passerby wounded by a police
warning shot.
Some felt that Beijing had lost confidence and patience with Ho, and visa
restrictions were a way to express its displeasure. By contrast, Chui remains
on his political honeymoon. "The central government is fully supportive of the
new chief executive and has expressed this on several occasions," CLSA analyst
Huei Suen Ng says. "It does not make sense for them to tighten visa rules at
the moment."
Huei also contends that visa restrictions aren't necessarily effective. "The
impact is less severe than many expect," according to the investment banker.
"Mainland tourists are able to switch to traveling by tour groups available at
the border gates. The number of tourists to Macau currently is similar to
before stricter rules were implemented in September '08."
Most important, Huei believes that the mainland and provincial governments
"have many issues to worry about - yuan appreciation, wage issues, trade
problems, et cetera - which take priority over Macau".
Still, even though Beijing may be preoccupied as it tries to guide its economy
to a soft landing and play a responsible international role, Macau still
matters.
Quick change tools "Make no mistake about it, China's central government has clearly mandated
the new chief executive of Macau to focus on diversifying away from casino
gaming as fast as possible," according to Jonathan Galaviz, managing director
of consultant Galaviz & Co. "Visa restrictions are one tool, out of many
possible ones, that Beijing's policymakers could use to temper the wild growth
of Macau's casino gaming revenue."
Felix Ling, managing director of consultant Platform Asia and a former senior
gaming executive in Macau, notes that Macau labor officials have slowed
progress on the resort projects in Macau's Cotail strip by Galaxy Macau and
Sands China. Macau's government has invoked the one-for-one rule on imported
labor, requiring one local worker for every foreign worker. Ling calls it "a
writing on the wall warning" from authorities regarding casino oversupply.
Dean Macomber hopes Macau's key players are getting past writing on the wall.
"It behooves all of the stakeholders in the Macau gaming industry to
proactively open and sustain multiple, large, and free-flowing communication
channels with the government of ... Macau ... [and the People's Republic of
China] so that mutual goals can be identified and mutually exclusive goals kept
to a minimum, worked out, or at least understood so trigger points can be
avoided.
"This will minimize, if not prevent, unnecessary punitive use of entry/exit
visa restrictions," according to Macomber. "A more stable policy will benefit
the PRC [People's Republic of China], too, in a circuitous manner:
owner/operators will be able to rely upon broad policies, determine mid- and
longer-term strategic plans accordingly, and convince investors to fund such
efforts thereby allowing Macau to realize its destiny to become a major gaming,
tourist, and MICE [meetings, incentives, convention, and exhibitions]
destination."
Macomber warned that "Big, monolithic institutions are the players, however,
and slow to change," but eventually "the episodes of sudden, radical changes in
entry/exit policy will be a thing of the past, only a part of the early lore of
Macau. The sooner this occurs, the better for the good of everyone."
Macau Business special correspondent and former broadcast news producer Muhammad
Cohen told America's story to the world as a US diplomat and is author
of Hong Kong On Air, a novel set during the 1997 handover about
television news, love, betrayal, financial crisis, and cheap lingerie. Follow
Muhammad Cohen's blog for more on the media and Asia, his adopted home.
(Copyright 2010 Asia Times Online (Holdings) Ltd. All rights reserved. Please
contact us about
sales, syndication and
republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
