September 4, 2012 business daily | 5
MACAU
Diversification seen as exports’ only hope The trade deficit will keep growing as manufacturing contracts and the economy concentrates on tourism and gaming, an economist says Tiago Azevedo
tiago.azevedo@macaubusinessdaily.com
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s the city moves towards a record trade deficit this year, there is little upside for domestic exports as the manufacturing sector continues to shrink and the economy increases its dependence on gaming and tourism, says Henry Lei Chun Kwok, a professor of economics at the University of Macau. Exports were worth 638.9 million patacas (US$79.9 million) in July, 10.8 percent more than a year before, Statistics and Census Bureau data show. But that growth was due chiefly to re-exports. They were worth 423 million patacas in July, 15.6 percent more than a year before, while domestic exports grew by 2.3 percent to 215 million patacas. In the first seven months of this year, exports were worth 4.58 billion patacas and imports were worth 40.6 billion patacas, widening the trade deficit to 36.02 billion patacas – 23.2 percent more than the same period last year. Mr Lei sees “no hope for Macau’s exports to recover significantly before the achievement of economic diversification”, he said in an emailed response to questions from Business Daily.
Exports were worth 4.58 billion patacas in the first seven months of the year (Photo: Manuel Cardoso)
“Given the service sectordominated economic structure, there are very few manufacturing firms left in Macau.” If trade continues this way for the rest of this year, the city will end 2012 with a deficit of about 61.7 billion patacas, 11.6 percent more than last year. “The widened trade deficit could be regarded as the impact of continuous contraction of Macau’s manufacturing sector which is the result of concentration [on the] tourist/
Fresh gambling focus pays off for Paradise
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aradise Entertainment Ltd increased its first-half profits by more than 100 times in yearon-year terms as the operator of the Casino Kam Pek Paradise concentrated entirely on its gambling businesses. Paradise Entertainment told the Hong Kong Stock Exchange last week its profit had risen to HK$52.8 million (US$6.8 million) in the first half from HK$484,000 for the same period a year earlier. Paradise Entertainment said the growth was due mainly to the continuing strength of the performance of its gaming business, which includes LT Game, a supplier of gaming machines and equipment. Revenue rose by 54.7 percent to HK$318.1 million. The company sold a loss-making subsidiary, LifeTec Pharmaceutical Ltd, for US$1 in April to exit the
pharmaceutical business. “The disposal enables the group to focus on its gaming business in the future,” Paradise Entertainment said. Paradise Entertainment said it remained optimistic about the future of Macau’s gaming industry and that it expected tourist arrivals to increase. The company had 356 employees at the end of June, 23 fewer than at the end of December, most of them marketing and promotion executives in Macau. But it said it was “actively seeking talent” to cope with the fast growth in its operations. Paradise Entertainment is giving two of its three executive directors a five-fold increase in salary. Chairman and managing director Jay Chun and Shan Shiyong will now be paid HK$12 million a year.
Paradise Entertainment’s businesses includes the Casino Kam Pek Paradise and gaming machine supplier LT Game
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gaming business,” said Mr Lei. The city’s transformation into an entrepot could also face hurdles. “Unlike Hong Kong, Macau is not specialised in [the] transhipment business and I speculate that the volume of re-exports from Macau may not be able to expand extensively,” Mr Lei said. Official data show that 20.5 percent of domestic exports in the first quarter went to the United States and 14.2 percent to EU countries. But sales to these two markets are declining. In the first seven months,
exports to EU countries were worth 210 million patacas, 14.9 percent less than a year before, and exports to the United States were worth 302 million patacas, 13.4 percent less. Mr Lei said lack demand in the United States and European Union could be the major cause of the decline in domestic exports. “Macau’s manufacturing sector has been losing its international competitiveness given the increasing costs of production faced by the territory,” he said.