News

Macau beating the odds

April 21, 2007 Edition 1

On a Monday morning the gaming halls of Macau's newest casino, the Grand Lisboa, are packed as punters from mainland China crowd the tables. Most are dressed in jeans, but an abundance of luxury-brand shopping bags reveals their rising spending power.

Chinese consumers and gaming liberalisation have made Macau one of the fastest-growing economies globally, overtaking Las Vegas as the world's biggest earner of gambling revenue, according to Macau government data. Tourism has nearly doubled since 2003 as Beijing has allowed freer travel to the former Portuguese colony on China's southern tip, an hour's boat ride from Hong Kong.

More than 10-million mainlanders flocked here last year, half of all visitors.

While Macau's gross domestic product at US$14-billion is less than a tenth the size of Hong Kong's, the economy has been growing at double-digit rates and should expand by another 16% this year and 16,5% in 2008, Goldman Sachs forecasts.

Such fast-paced growth, however, is creating challenges, notably a labour shortage and lagging infrastructure, analysts say.

"The risk for the economy is that it does not relieve these constraints fast enough," said Enoch Fung, associate economist at Goldman Sachs. "It needs to develop into industries complementary to gaming."

Macau is the only place in China where gambling is legal, thanks to the Portuguese, who legalised it in the 1850s.

Local tycoon Stanley Ho pioneered Western-style casinos after winning a monopoly concession in the 1960s, but liberalisation in the past few years has ended his dominance as foreign casino operators have rushed in.

Local media report that the casino industry will require 50 000 croupiers by 2009. That's 10% of Macau's population.

Ho's Grand Lisboa, a towering structure shaped like a lotus flower, will soon be followed by more casinos, including MGM Grand Macau and Las Vegas Sands' The Venetian. The latter, which will open later this year, claims to be the world's largest casino, with 55 750 square metres of gambling space as well as 3 000 hotel rooms.

"There's a lot of competition for labour," said Ooi Lay Peng, vice-president of human resources at MGM Grand Macau, which is hiring 6 000 staff. "Macau needs to relax its immigration laws."

Workers from Hong Kong are taking jobs but many more are required as the enclave attracts growing foreign investment.

On an early evening ferry to Hong Kong, Italian businessmen chat in the front row of business class alongside Hong Kong executives. Ferries between the cities are crammed, and more infrastructure is needed, including a long-delayed 29km bridge link with Hong Kong and Zhuhai in south China, analysts say. The overall lack of resources is frustrating investors.

"It's extremely challenging," said Ken Kress, China head of Italian menswear retailer Ermenegildo Zegna, which has two franchised stores in Macau.

"Typically we'd look for the construction phase on a store to take two months to 10 weeks, but in Macau it's six months," said Kress. "For most of that time nothing is going on because the contractors and workers are moving around projects."

The opening of the five-star Wynn Macau casino resort last year brought in Chanel, Bulgari, Prada and other luxury retailers.

Macau's image, however, is tarnished by corruption. Its transport minister was arrested last year for allegedly accepting bribes, while the United States identified local bank Banco Delta Asia as laundering money for North Korea.

Hong Kong think-tank Political and Economic Risk Consultancy says gambling money flows into Macau - which reverted to Chinese rule in 1999 but has its own government - could be seriously hurt if Beijing were to mount an effective anti- corruption campaign.

There are signs, though, that the city is looking beyond gaming. Last year saw the opening of Fisherman's Wharf, a retail and leisure development, while The Venetian will imitate a slice of Venice's Baroque splendour, complete with canals and gondolas, and house a massive convention centre.

"Macau is attracting mainland Chinese who think they'll get rich by gambling. But in five to 10 years they'll know the risk of losing," said Kenneth Hsia, a businessman from Taiwan who visits Macau regularly. "Macau must provide more." - Reuters

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