Thursday, July 07, 2022

Twenty years of Macau’s unplanned miracle


Six gaming companies have transformed a sleepy colonial outpost into one of the richest cities in the world. But despite the vast wealth, infrastructure and social policies are still lagging.

As Macau celebrates twenty years since the return to Chinese rule, most observers agree that the gaming industry has produced vast fortunes, but the government’s development goals have not kept pace.

“Looking back over the past fifteen years, one can easily see the contributions that the gaming industry has made to Macau’s economy,” said Andrew Klebanow, the principal of Klebanow Consulting. “Starting with the opening of Sands Macau in 2004, followed by Wynn Macau, Grand Lisboa, StarWorld, and MGM Macau on the peninsula, and culminating in the massive developments on what was to become the Cotai Strip, the industry transformed Macau into an international destination for tourism.”

Ben Lee, managing partner of IGamiX Management & Consulting, agrees that “the development has been, on the whole, a huge positive for Macau,” and he adds, “Macau was cast from very much a third-world standard country or economy to the first world in the space of the last fifteen years.”

With a roughly 40 percent effective tax rate imposed on the gaming industry, an avalanche of funds suddenly became available to the government, raising the per capita income into first-world rankings. Indeed, there was more money available than Macau’s government knew how to spend, collecting fiscal reserves in the neighborhood of US$70 billion.

The people of Macau have shared this wealth, with unemployment levels falling close to zero, many of them fast-tracked into middle management positions if they showed a degree of capability, and skill-building training readily available. 

Although the pace of change has been dizzying, there is another consensus that this pace of development has not been matched by equally impressive strides in government administration and public services.

“The problem has always been in Macau on the implementation,” notes Fred Gushin, managing director of the Spectrum Gaming Group.

One of the most visible aspects of this deficit can be seen in the lagging pace and quality of infrastructure construction.

Glenn McCartney, associate professor of International Integrated Resort Management at the University of Macau, cites the contrasting example of Singapore Changi Airport to highlight what he believes Macau has been missing. In the redevelopment of its airport, the Singapore government has created a new entertainment center and a new living space for the city-state. However, in Macau, “No one is going to our ferry terminal to enjoy it.”

“Macau government public policies haven’t kept in tempo with the rate of development of the broad hospitality sector,” McCartney adds. “You can say there’s a list of outstanding regulatory and policy issues that are outdated in many ways.”

Observers agree that the Macau government has sorely needed an effective development planning organization, but has never created one. Instead, lines of authority within the bureaucracy aren’t always clear, and there have been many cases of trying to shift responsibility to other departments rather than taking charge.

To make matters worse, Macau “has not been open to the idea of foreign talent to assist it in its planning,” Lee says. And with such a small native population, “The talent pool to staff and man the government ranks is just not great enough.”

As a result, there have not been effective five or ten-year development plans in Macau, even though they are quite obviously needed.

“Macau has never been,” McCartney says, “able to scenario plan itself, and is always sort of fighting the fires as they appear.”

This weakness in planning, implementation, and collaboration without outside experts may have also allowed some bad habits to develop among the gaming concessionaires.

While the operators have been making huge contributions to government finance, and have been attentive in obeying government orders, such as enforcing non-smoking policies, most of them, are mainly interested in enhancing their profitability.

Lee points out that the operators’ interests do not always line up perfectly with the Macanese public interest. “When the industry realized the biggest profit came from the mainland Chinese, everything was geared towards the mainland China market,” he says.

One consequence, Lee asserts, is that the non-gaming facilities within Macau’s IRs are underdeveloped in comparison with many other jurisdictions around the world. Indeed, some non-gaming attractions promised to the Macau government at the time a license was awarded were later quietly dropped.

For its part, the Macau government has no mechanism to ensure that operator designs are implemented in the way they were originally approved. “Whatever the new concession winners promise to build and to operate, they should be held to that,” Lee states.

There is a general consensus Macau has so far been much more successful in becoming a mainland Chinese center of entertainment than it has been in its stated objective of becoming a truly global center for leisure and entertainment.

 

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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