“Bottoming” is the new buzzword that has been on everyone’s lips for a few months now. It intends to convey the positive outlook that our whole economy could soon be recovering after 20 straight months of dwindling gaming revenues. Although it is a very large step away from the more robust “upturn” or “recovery”, one gets the feeling that there is finally some light at the end of the tunnel—even if the light is still distant and the “bottoming” stage surely prolonged.
Beyond the necessary confidence bolstered by casino operators to reassure investors, the “bottoming” credo rests on two main arguments. First, that the shift towards the mass market is finally happening, and that revenues from what constitutes now half of the pie is slowly but surely making gains—only VIP rooms are still steeply declining; and second that the downward trend is decelerating—gaming revenues shrank by 21.4 percent in January 2016 whereas they plummeted by a record 48.6 percent in February 2015. With that perspective in mind, and despite an overall staggering contraction in gaming revenues of 34.3 percent for 2015, one could say that we are now falling at half the pace of a year ago.
All this is very well: casino operators are still turning hefty profits and with an estimated MOP350 billion in GDP for 2015, Macao should still be No. 2 on the world listing of GDP per capita—don’t ask me about distribution though as the last time we “extrapolated” a Gini Index in the SAR was in 2011.
Yet, the “bottoming out”, the real change on the road to recovery, is heavily dependent on the success of the oft-repeated “diversification” and transformation of Macao into “a world centre of tourism and leisure”. The diversification here can be either “path dependent” and/or resolutely novel. The first direction considers the development of tourism as the extension and necessary complement of the gambling industry. Huge properties have already been built, more are scheduled to open (with further delays) in 2016/2017 in Cotai, and then many more will mushroom in Hengqin—Maldives- or Bhutan-like, but all mega in size. Upper mass market is the target, and more in line with the VIP heritage that is presently restructuring. And then there is the entirely new route: think Marina ripping the benefit of an extension of our maritime borders; think business and finance in Shizimen; think creative industries in Xiangzhou Culture Street; think medical tourism investments from well-established local companies; think industrial park; think transportation hub connected with China’s fastest network; etc. In the meantime, local SMEs are being pampered. Energetic young people are opening cafés all around town with generous government funding, and creative industries of all guises are being given the nod.
Indeed, how can one doubt that the next stage of development for Macao has to be found in the periphery if we want to spare the suffocation of Macau’s heart and soul while making the whole ‘MSAR experience’ something that visitors remember and possibly come back to? But the question of the short- and medium-term remains. When will this periphery be up and running? What about the sustainability of all these small service outlets enriching our neighborhoods? Who will actually benefit in the end? Unimaginative and greedy vested interests are also a Macao specialty.
As of now, we had only marginally fewer tourists in 2015 (30.7 million) than in 2014, but tourists still stay on average 1.1 nights per visit (against 3.3 in Hong Kong) and visitor expenditures have gone drastically down with the per capita average registering a staggering 15 percent contraction—so much for the “upper mass market” drive! And then general retail is down too, by 10.4 percent year-on-year—the first yearly decline since 1999! Providing Macao citizens with incentives to consume cannot hurt—“Macao loves locals”—but long-term recovery goals will require bigger sweeteners and a thorough upgrade of the operating system if innovation and talent are to prevail.
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| © Rodrigo de Matos, MDT |
Published in Macau Daily Times, February 26 2016
By mid-2015, gambling-related crimes had already gone up by more than a third, with loan sharking cases and unlawful detentions being of particular concern. This trend was just confirmed by Secretary for Security Wong Sio Chak during a media briefing held on December 2nd: for the first nine months of 2015, the overall increase in gambling-related crimes stabilized at 34% (1,118 cases in total), with loan-sharking offences increasing by 40% year-on-year and unlawful detentions by a staggering 112.5%! Mr Wong also previously insisted on a turning point in March this year, with no further explanations being given.
In fact, quite the contrary: the Secretary was adamant in downplaying the significance of this highly noticeable jump. For him, in official speak, the rise was not to be attributed to the “adjustment in the gaming industry” — even though many junket venues are shutting down and all analysts seem to concur that credit lines have been crunched. Furthermore, he insisted on the fact that most of the victims and suspects of these crimes were “non-residents” and that these offences had no spillover effects on the rest of the community, as demonstrated by a slight decrease of the overall number of crimes over the first nine months of the year. To support Mr Wong’s claim, I would even add that gambling-related crimes appear rather limited in scope, representing a mere 11% of the total number of crimes (10,347 over the period), whereas revenues attributed to “gaming” amounted to 85%! Still, there was and there will continue to be an upsurge…
Ultimately, what I find really suspicious are these efforts at attenuating the meaning of everything. This of course goes beyond Macao and local politics: most modern politicians tend to “shelter” public opinions just like a mother or father protects her or his own children from hearing too blunt a disturbing reality and eventually one always benefits from showing that he or she is fully in control of the inner workings of any situation. No wonder then that Mr Wong would remark that the Dore case — theft and default in repayment put together — exclusively resulted from the shortcomings of the gambling promoter itself, and had therefore nothing to do with the ailing situation of the gambling industry. Yet, just like it is pure hypocrisy and manipulation to use the palatable and entertainment-minded word “gaming” (博彩 bocai or even 玩樂 wanle) instead of the highly hazardous and irrational term “gambling” (赌博 dubo), “adjustment” actually means a complete revamping under duress of the industry that has made Macao a “success” over the past decade. Article 118 of the Macao Basic Law has not changed, but drawing policies that will promote “tourism and recreation” in line with Macao’s interests has taken a whole new meaning.
Contrary to what some lawyers and foreign observers profess, it is highly debatable to univocally state that “the territory would not have achieved what it did if the [gambling] industry had been over-regulated.” First, because remaking history with “if” is pointless. Second, because one could infer that whatever the legal framework, investors would still have been tempted by the proximity of such a huge market, especially in a monopolistic position and with a cultural background somehow favoring games of luck. Third, because a lot of rich Chinese millionaires, whatever the origin of their wealth, saw Macao has a way out and on top of that credit did not have to be guarantied by the casinos themselves. In short, Macao was bound to be a magnet.
Actually, I would argue quite the opposite: lax regulation of THE industry delayed necessary adjustments and long term vision — money was simply too easy to make — and we are finally witnessing the beginning of the unraveling of the promise made back in 1993 when the Basic Law was passed. Before Dore, there was Huang Shan in May 2014, with some HKD10 billion vanishing in smoke, so clearly the “adjustment period” is closely related to the “new normal”, for better and for worse.
Published in Macau Daily Times, December 4th 2015
