Macau MOP 35 Hong Kong HK$ 40 Mainland China RMB 35
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26 48 Economy & Finance 28 Attack of the clones The number of debit card skimming cases is rising
Politics 34 The ‘To Do’ list Twelve experts give suggestions to the government for next year’s policy address 38 Reality check Which targets set in the last policy address were met and missed
Greater China 42 Red alert China’s new leadership will have to address growing outrage over graft 44 Days of anger Hong Kong’s anxiety about the mainland is growing
MB Report 48 Party’s over The government announces a new round of measures to curb real estate speculation
bizintelligenceonline.com NOVEMBER 2012
105 Gaming 58 Adults only Casino operators are not worried about the raising of the minimum age limit for entry to casinos 64 Full house All six casino operators have finally been allowed into Cotai 68 Caesars’ next battle The Las Vegas-based casino operator still wants to expand into Asia 71 Agent of change Shuffle Master changes its name to SHFL Entertainment 74 Adelson’s next big thing Las Vegas Sands has big plans for Madrid
Hospitality 78 Home, sweet home Many people with ties to Macau working in hospitality abroad are now coming back 82 Farewell, Mr Tourism João Manuel Costa Antunes will step down next month as director of the Tourist Office
Business 90 Ten out of ten Starbucks is celebrating its 10th anniversary in Macau this year
Technology 94 The like business Small enterprises are turning to Facebook as a retail tool
Arts & Culture 98 Revolutionary shots Cotai welcomes the annual World Press Photo exhibition
Special 105 Champions 2012 Your guide to the Macau Grand Prix
Opinion 14 From the publisher’s desk Paulo A. Azevedo 16 Editorial Emanuel Graça 27 In imperfect working order Keith Morrison 40 Matters of pegging José I. Duarte 47 The renminbi challenge Barry Eichengreen 77 More bricks in the wall Bill Kwok-Ping Chou 89 Not so smart Gustavo Cavaliere 104 Emerging-market resilience Michael Spence
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Editorial Council Paulo A. Azevedo, Tiago Azevedo, Duncan Davidson, Emanuel Graça Founder and Publisher Paulo A. Azevedo VOL.1 Nº103
Editor-in-Chief Emanuel Graça email@example.com
Assistant Editor-in-Chief Alexandra Lages
Contributing Editors Christina Yang Ting Yan, Dennis Ferreira, Derek Proctor (Bangkok), Filipa Queiroz, Helder Beja, Joana Freitas, João Ferreira da Silva, João Francisco Pinto, José Carlos Matias, Kahon Chan, Kim Lyon, Lia Carvalho, Lois Iwase, Luciana Leitão, Michael Grimes,Sara Farr, Sara Silva Moreira, Sofia Jesus, Xi Chen, Yuci Tai
Regular Contributors Bill Kwok-Ping Chou, Branko Milanovic, David Cheung, David Green, Dominique Moisi, Eswar Prasad, Frank J. Fahrenkopf Jr., Gustavo Cavaliere, Hideaki Kaneda, José António Ocampo, José Sales Marques, Joseph Stiglitz, Leanda Lee, Keith Morrison, Kenneth Rogoff, Kenneth Tsang, Marvin Goodfriend, Pan Yue, Paulo J. Zak, Peter Singer, Richard Whitfield, Rodrigo de Rato, Robert J. Shiller, Sin-ming Shaw, Sudhir Kalé, Sun Shuyun, Vishakha N. Desai, Wenran Jiang
Special Correspondent Muhammad Cohen
Advertising Xu Yu, Irene
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Letters to the editor
Media Relations GRIFFIN Consultoria de Media Limitada Translations PROMPT Editorial Services, Poema Language Services Ltd, TLS Translation and Language Services Agencies AFP, Lusa Exclusives Gambling Compliance, Project Syndicate Printed in Macau by Welfare Ltd Published every month in Macau. All Rights Reserved. Macau Business magazine is a media product of De Ficção - Multimedia Projects
Disclaimer: In Macau Business magazine, the translation of MOP amounts into US$ amounts (and vice-versa) is made at the rate of MOP 8 to US$1 for the purposes of illustration only.
Address: Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, No. 679 Av. do Dr. Francisco Vieira Machado, Macau Tel: (853) 2833 1258 / 2870 5909 Fax: (853) 2833 1487 Email: firstname.lastname@example.org NOVEMBER 2012
PAULO A. AZEVEDO FOUNDER AND PUBLISHER
NO TIME desk FOR EXCUSES
from the publisher’s
Where are the projects in Macau dedicated to renewable energy production? What solutions are going to be implemented in each of the mega-projects already announced to make them more environmentally friendly and reduce their carbon footprint? NOVEMBER 2012
okyo, from where I write this editorial, impresses me for a couple of reasons. At the end of Shinjuku Dori avenue is the Yotsuya area. A 13-storey building, pictured below, stands out from the busy intersection. Just a few hundred meters behind the junction is the Gyoen National Garden and the mansion of Lord Naito, a feudal lord from the Edo era. Temples are scattered here and there, including the Thirty-Six Poetic Geniuses museum. There is a view to the horizon while overlooking the Yotsuya Bridge. Looking again at the 13-storey building, its three highest floors are dominated by solar panels. They provide enough power for the property to power itself throughout the year. Not far from there, the Akasakamitsuke subway station is displaying blueprints for a solar energy-powered Tokyo Metro system. Both are proof of the immense efforts being made by Japan in the search for alternative energy sources. The endeavour is understandable in a country still tending the wounds from the disaster at the Fukushima Daiichi Nuclear Power Plant. However, both the Yotsuya building and a revamped Metro pre-date the earthquake and tsunami of March last year, which triggered a succession of nuclear meltdowns at Fukushima and has lead the Japanese to turn away from nuclear energy. The level of importance given to advanced planning in Tokyo must also be copied in Macau. The city should define measurable goals and plan for them, and launch forward-looking projects that mean the city will not be overtaken by events. We need to act, not react. When the government took dozens of
civil servants and academics to Singapore a couple of years ago to better understand the way the Lion City works, there was a hope that change was on the way. Alas, the public is yet to understand what resulted from the tours. Where are the projects in Macau dedicated to renewable energy production? What solutions are going to be implemented in each of the mega-projects already announced to make them more environmentally friendly and reduce their carbon footprint? This is more than an environmental problem. Many entrepreneurs see themselves entangled in power plays to have proper access to traditional energy sources. Many sources are controlled by decrepit monopolies that favour those with strong ties to the ruling elite. As low-quality real estate projects mushroom, largely because of unusual land swap deals, without environmental impact assessments, who or what is responsible? Who will the city hold to account if something goes wrong? This is an important point since these developments have little regard for Macau’s long-term development and the quality of life of its inhabitants. How does the city prevent similar situations from happening again? How can effective, quality town planning be enforced? What can be done to make sure the city’s developers use the latest construction techniques and cutting-edge materials that are on par with practices in developed countries? These are the topics that should be covered in this month’s Policy Address, instead of the usual boring spiel that has had no result whatsoever in pushing the government to do better.
n less than 10 years’ time, Macau may have three privately owned world-class arenas with enough capacity to host any kind of international show. There is the CotaiArena at the Venetian Macao, owned by Sands China Ltd, and a planned 5,000-seat multi-purpose entertainment studio at Melco Crown Entertainment Ltd’s Studio City. A few details about Galaxy Macau’s planned arena, the city’s third, were recently unveiled by the Business Daily newspaper, one of Macau Business’s sister publications. It is good news in a city where, until a few years ago, the government-promoted arts festival and music festival were once the only events. The ambition displayed by gaming operators promises to help fulfil the desires of people eager for true cultural diversification. Although we appreciate the effort from the private sector, the government would be well advised to steer away from the idea that it should not be an active player in the arts. This dangerous vision is already being aired by some officials who argue that casinos should foot the bill for any far-reaching cultural, entertainment, social or sporting event that takes place here. It is important to have a strategy shared by the public and private sectors. A shared vision would allow financially sound companies, mainly from the gaming sector but also banks and construction companies driven by vision and a wider responsibility to society, to support more mainstream events. The government might back events that are culturally relevant, despite a potentially smaller financial return. Keeping a low profile can be golden in business, but it would be wise to assemble the interested parties to draft common goals that ensure Macau’s cultural and artistic development, and that keep the city on the map for international-scale events.
EMANUEL GRAÇA EDITOR-IN-CHIEF
editorial GRANDMOTHERLY ADVICE
My grandmother could explain to Mr Chui’s cabinet that giving money away indiscriminately is a waste of resources and leads to worse results than selective spending
hief Executive Fernando Chui Sai On is poised to deliver his annual policy address this month, in which he will lay down the government’s priorities for next year. New measures meant to curb speculation in real estate were announced last month, so many people are now focusing on any sweeteners Mr Chui may include in his speech. Most are simply wondering how much the cash handout will be next year, whether there will be more than one cash handout and whether the government will continue to shower money on people indiscriminately through the likes of the health care voucher programme. Several grassroots groups are urging Mr Chui to keep the cash flowing. All this takes me back to my childhood in Portugal. Every Christmas Day, my family and I would visit our relatives in the country. For me, this was always a great excitement. I knew in advance that my great-aunts and great-uncles, whom I usually met only once or twice a year, would give me Christmas cash that afterwards I could squander on sweets and chocolate. At my grandmother’s house, the story was different. No cash or toys would await me. Instead, she would always present my cousins and me with winter socks and pyjamas. Every year the ritual was the same. Needless to say, that was not the kind of a treat a child would eagerly await at Christmas.
Interestingly however, as I look back today, I cannot remember how much cash I used to get for Christmas from my great-aunts and greatuncles, or name anything useful I spent it on. But I always recall I never had a cold winter night, thanks to my grandmother’s socks and pyjamas.
Open wide Often, the government here seems like a great-uncle you just see once a year. When the annual policy address comes round, the government wants to please us but it does not really know how, because the rest of the year it lives a life separate from ours. So the government resorts to the easiest trick in the book: cash. It is the quickest way to put a smile on a child’s face. Caring grandmothers think differently. They look ahead and see what is best for us in the long run, even if what they give us is not immediately popular. My grandmother could explain to Mr Chui’s cabinet that giving money away indiscriminately is a waste of resources and leads to worse results than selective spending. Good selective spending puts money into projects that will provide sustainable returns for all, especially for the poor. I hope that as the nonsensical policy of handing out cash continues and the flow of short-term sweeteners increases, we do not all end up with tooth decay. Otherwise, the dentist’s bill will be a shocker.
SOCIAL SECURITY CONTRIBUTIONS TO RISE The government will soon put forward a proposal The government hopes to adjust the social security contribution amount by the end of the year. The head of the cabinet of the Secretary for Social Affairs and Culture, Cecilia Cheung Sou Mui, said the Social Security Fund will “soon” submit proposals to amend both the
elderly pension and the social security contribution amounts for the Standing Committee for the Coordination of Social Affairs to discuss. The monthly elderly pension is presently set at MOP2,000 (US$250) even though employers and employees have to pay only MOP30 and MOP15 respectively
each month as contributions. The new contribution amount is likely to be double that, Chan Pou Wan, deputy director of the fund, said in August. Macau’s social security system currently mostly relies on government funding.
CITIC TELECOM EYES TO BUY CTM
Hong Kong-listed Citic Telecom International Holdings Ltd said last month that it is in talks to buy Cable & Wireless Communications Plc’s stake in CTM - Companhia de Telecomunicações de Macau, SARL. Citic Telecom already has a 20-percent interest in CTM. Cable & Wireless Communications is CTM’s controlling shareholder, with a 51-percent stake. Citic Telecom is part of state-owned conglomerate Citic Group Corporation. CTM is Macau’s largest telecom operator and the city’s sole Internet provider.
HUTCHISON NETWORK CRASHES
An estimated total of 30,000 Hutchison Telephone (Macau) Co Ltd’s subscribers were unable to use text messaging and voicemail services for seven hours last month, following a network breakdown. Some customers also complained about not being able to make phone calls. The company, which operates under the 3 Macau brand, blamed human error for the crash. It offered discounts to compensate subscribers impacted by the service failure. Hutchinson faced a smaller breakdown in June, which the company blamed on firewall problems.
MICE TO GET MORE SUPPORT
The Economic Services Bureau director Sou Tim Peng vowed to allocate more financial support to the meetings, incentives, conventions and exhibitions (MICE) industry next year. The official said the additional government subsidies would focus on promotions, translations and logistics and be part of the revised Convention and Exhibition Stimulation Programme. Official data shows that 505 conventions and exhibitions were held in the first half of 2012, down by 6 percent year-on-year.
GOV’T TO CHANGE RULES FOR IMPORTED LABOUR
The government has sent a bill to the Legislative Assembly to revise the imported labour law, it was announced last month. The bill continues to say that if an imported worker is wrongfully terminated, quits with proper justification, or if the contract is ended by mutual consent with the employer, that worker will not need to wait for a six-month period until they are able to get a new job in Macau. However, the bill adds a new restriction: during the ensuing six-month period, those imported workers can only be employed in a field that is similar to their previous employment.
CONSUMER CONFIDENCE STILL LOW
Macau’s overall consumer confidence index remained stable in the third quarter, at 84.9 points out of a highest score of 200. But confidence in housing and consumer prices continued to drop: they were down by 5.4 percent and 4.1 percent respectively to 47.3 and 54.4 points. The survey is run quarterly by the Macau University of Science and Technology.
SMES STRUGGLE FOR STAFF: REPORT
Association urges simpler rules for importing labour and more non-resident workers Nine out of ten small- and medium-sized enterprises in Macau faced staffing issues last year, a new study conducted by the Macau Small and Medium Enterprises Association and the University of Macau has found. The report indicates almost all small businesses ranked labour shortages as their number one problem during 2011. Following last month’s results announcement, the SME association’s administrator Kenneth Lei Chi Leong called on the government to simplify the procedures for importing workers and to review the quotas for imported workers. The number of non-resident workers reached a new record in September, at 109,000.
INFLATION TO COOL OFF SOON, SAYS FRANCIS TAM
Secretary for Economy and Finance Francis Tam Pak Yuen said last month that Macau’s inflation rate would cool off in the near future. Speaking to reporters, Mr Tam said that prices would decline due to the stabilisation of domestic demand. His estimates were also based on recent data on imported food prices from the mainland, and the impact of the global and mainland economic slowdown upon Macau. The yearly inflation rate reached 6.4 percent for the 12 months ended September.
MALO CLINIC SEEKS INVESTORS Sands China could be a potential partner, according to owner Paulo Maló
Malo Group is in negotiations with potential investors for its Macau clinic and medical spa, president and chief executive Paulo Maló says. “We are looking for investors and we are aware, for instance, that Sands China Ltd, owner of the Venetian, the complex where we are based, is without a doubt the one that better fulfils our expansion goals,” Mr Maló told Portuguese news agency Lusa. The Portuguese businessman said he has no issues with “becoming a minority shareholder in the clinic”.
ING SELLS MACAU UNIT
Dutch group ING Groep NV has sold its insurance units in Macau, Hong Kong and Thailand to Pacific Century Group for US$2.14 billion (MOP17.12 billion), it was announced last month. Hong Kong-based Pacific Century Group has interests in financial services, real estate, media and telecommunication services. ING was forced to sell its entire insurance operations after Dutch bailouts in 2008 and 2009.
Last August, our sister publication Business Daily reported that the Macau Malo Clinic was facing a suit filed by one of its suppliers. Architectural and engineering company Macau Professional Services was claiming over MOP8 million (US$1 million) in unpaid services. Lusa quoted sources familiar with the case saying that Macau Professional Services removed the claim after Sands China paid the debt. Mr Maló told Lusa the issue has been resolved, but didn’t provide more details.
CEM TO BUILD FOUR NEW AIRASIA STOPS HIGH-VOLTAGE SUBSTATIONS MACAU-CLARK FLIGHTS Electricity utility Companhia de Electricidade de Macau – CEM, SA plans to invest MOP800 million (US$100 million) next year in four extra high-voltage substations in the Peninsula and Taipa, the company announced. The main goal of the new substations is to provide power supply to the light rail transit project. Projects in Taipa are expected to be completed in the second half of 2014, while projects on the Peninsula are expected to be ready by the end of 2015.
AirAsia Philippines will suspend flights between Macau and Clark on December 1. The low-cost carrier made the announcement three months after launching the route, in July. It blamed territorial disputes between China and the Philippines, volatile oil prices and high charges at the Macau airport for the decision. Daily flights have been departing with just 30 percent to 40 percent of the seats filled, according to company officials.
NEW TAXIS LIKELY TO HIT THE ROAD ONLY NEXT YEAR
A local taxi driver association says that the 200 new taxi licences auctioned by the government earlier this year would only be in full operation in September 2013. Tony Kwok, chairman of the Macau Taxi Driver Mutual Association, told reporters that due to Euro IV requirements, taxi vehicle imports would take longer. The final batch is expected to arrive only by September next year. The 200 new taxis will increase the existing fleet to just under 1,200 taxis.
JAMAICA AND MACAU INK TAX AGREEMENT
Macau and Jamaica signed last month an agreement on tax information exchange. The deal is a move to strengthen cooperation to monitor taxpayers and “ensure that the revenue owed to each jurisdiction is collected,” Jamaica Finance and Planning Minister Peter Phillips told Jamaican media. Macau has so far concluded tax deals with 15 different countries and regions.
PENDING COURT CASES DOWN
Cases pending in the courts dropped by about 10 percent, but appeals have increased The number of cases pending in Macau’s courts dropped by about 10 percent to 7,887 as of Augustend, the president of the Court of Final Appeal Sam Hou Fai said last month. Mr Sam said the number of pending cases has returned to the level of 2005. On the other hand, the number of appeals against administrative rulings increased by 233 percent to 277 in the year ended August. Mr Sam said there is an urgent need for more judges in the Court of Second Instance to handle criminal cases because of the increase in the number of appeals.
MORE DEALS SIGNED DURING MIF
A total of 88 deals were signed at last month’s Macau International Trade and Investment Fair (MIF). The organiser – the Macao Trade and Investment Promotion Institute – said “the value [of the agreements] increased by 10 percent from a year earlier.” A total of 81 deals worth MOP5 billion (US$625 million) were signed at 2011’s MIF. Most of this year’s deals focused on food and services. Nearly half were signed by Macau enterprises. The four-day fair recorded a 9.2 percent year-on-year increase in total visitors, to close 104,000 visits.
Macau recorded positive results for the National Day Golden Week holiday, from October 1 to 7. The city welcomed more tourists and posted strong gross gaming revenue figures
MORE RESTAURANTS OPERATING IN MACAU
A total of 1,660 restaurants and similar establishments were in operation in Macau last year, up by 4.7 percent year-on-year. Data from the Statistics and Census Service released last month shows that the sector’s revenue increased by 10.7 percent yearon-year in 2011 to MOP6.1 billion (US$763 million). Total expenditure rose by 10.5 percent to MOP5.7 billion. The industry employed over 21,100 people as of last year.
CORRUPTION COMPLAINTS INCREASED IN 2011
The number of visitors Macau welcomed during the National Day Golden Week, up by 9.4 percent over the same period last year
The year-on-year increase in the number of mainland tourists visiting Macau during the holiday period. The total figure stood at 645,000
The daily average number of rented hotel rooms during the National Day Golden Week, up by 21.8 percent in comparison with last year
The average room rate for five-star hotels during the holiday period, down by 6.4 percent year-on-year
The year-on-year increase in passenger traffic at the airport. The airport handled close to 82,000 passengers during the holiday period
The gross gaming revenue recorded by the city’s casinos during the National Day Golden Week
SOURCES: MACAU GOVERNMENT TOURIST OFFICE, MACAU INTERNATIONAL AIRPORT, LUSA NEWS AGENCY
The Commission Against Corruption received a total of 804 new complaints last year, an 18 percent year-on-year increase, according to its annual report. In 2011, 575 cases were commenced for investigation, including 463 cases of administrative complaints and 112 criminal cases, 45 of which covered the private sector. Last year, the commission concluded 64 cases, “some” of which were referred to the Public Prosecutions Office for further handling.
MICE STRUGGLING FOR GROWTH
The revenue of Macaubased companies engaged in conference and exhibition organising services dropped by 34.2 percent year-on-year in 2011, to MOP133 million (US$16.6 million), official data shows. But total expenditure declined even further, by 40.9 percent, to MOP112 million. In 2011, there were a total of 26 companies operating in conference and exhibition organising services, two more than a year before. The number of people engaged in the sector increased by 13.6 percent, to 134.
27 KEITH MORRISON AUTHOR AND EDUCATIONIST - email@example.com
In imperfect working order DESPITE THE ECONOMIC BOOM, THE UNEMPLOYMENT RATE SHOWS STRUCTURAL INEQUALITY acau’s unemployment rate of 2.0 percent in the three months ended August could be the envy of many countries. However, quarterly official data, which are more detailed, paint a different picture. The tables here show the quarterly unemployment rates for the various age groups over three years, and the percentage of the population in each age group in each year. Despite the economic boom, unemployment in Macau has not dropped much over the past three years. In each age group and overall, with few exceptions, the unemployment rate has been consistently higher among men than among women, indicating the feminisation of the workforce. While unemployment among men has fallen more rapidly than unemployment among women, the difference in the rates of unemployment endures. When comparing the trends in the unemployment rate with the composition (i.e. base rate) of the population by sex and age, the mismatch becomes clearer. Except among those aged between 55 and 64, the unemployment rate in each age group, for men and women, separately or together, is disproportionate. This means unemployment is unevenly distributed, being worse among some groups than others. A disproportionate number of men are unemployed. And unemployment is particularly acute among young people.
Young man’s fantasy Youth employment – employment among those aged between 15 and 24 – is in crisis worldwide. For example, nearly 11 million young people in Organisation for Economic Co-operation and Development (OECD) countries were out of work earlier this year. The youth unemployment rate in the OECD area in March was 17.1 percent, twice as high as the general unemployment rate. In Spain and Greece, the youth unemployment rate was more than 51 percent; in Britain and France it was close to 22 percent; in the United States it was 16.4 percent; and in Italy it was 35.9 percent.
The International Labour Organisation’s “Global Employment Trends for Youth 2012” says young people are three times more likely to be unemployed than their elders. The report says the youth unemployment rate in East Asia, now the world’s lowest, will rise to 9.3 percent this year. Even though the unemployment rate for Macau’s 15-to24-year-olds has fallen, it has been consistently much higher than the unemployment rates for any other age group in the past three years – in some cases more than three times higher. Without exception, the youth unemployment rate in the past three years has been higher for men than women. It has never fallen below 6.2 percent for young men. For men and women, separately or combined, youth unemployment is disproportionately high. In short, youth unemployment is worse than unemployment generally and consistently higher among men than among women. The governments of many countries experiencing unemployment are taking steps to reduce it, to offer young people something better than dead-end, low-productivity work, and to correct imbalances among the sexes. Where are the initiatives by industries and the government here to find the causes of the problems and to tackle structural inequality?
QUARTERLY UNEMPLOYMENT RATES BY AGE GROUP AND SEX AGE GROUP 16-24 25-34 35-44 45-54 55-64 ALL AGES
M F M F M F M F M F M F
2009 Q3 Q4
2010 Q2 Q3
9.9 7.5 2.7 2.4 2.1 2.6 4.8 3.0 4.4 2.2 4.1 3.3
8.6 2.6 2.1 1.0 2.5 1.9 3.8 3.3 4.4 2.7 3.7 2.1
6.6 3.2 2.7 1.6 1.6 1.4 5.0 2.6 4.4 0.7 3.7 1.9
7.1 4.0 2.1 1.1 2.6 1.4 4.4 3.2 5.7 3.2 3.9 2.2
7.9 5.3 2.3 1.5 2.2 1.0 3.8 2.6 3.9 1.4 3.5 2.1
2011 Q2 Q3
2012 Q1 Q2
7.5 3.9 1.7 1.8
7.1 3.2 2.7 1.9
8.7 4.9 2.6 1.2
7.3 6.3 2.1 1.2
6.2 4.1 1.7 1.0
6.4 2.2 2.6 1.1
6.2 3.6 1.6 1.6
1.8 1.5 3.4 2.2 4.6 2.3 3.3 2.1
2.2 2.3 3.5 1.8 2.6 1.4 3.2 2.1
1.7 2.1 2.9 2.2 2.9 1.8 3.2 2.2
1.6 1.4 2.8 2.9 3.6 1.9 3.0 2.4
1.8 1.1 2.6 2.1 3.6 1.2 2.7 1.7
1.0 1.5 1.4 2.3 2.2 0.9 2.3 1.6
1.4 1.6 2.3 2.0 2.0 1.6 2.2 1.9
Source: Statistics and Census Service
PERCENTAGE OF POPULATION IN EACH AGE GROUP 2009
AGE GROUP 15-24 25-34 35-44 45-54 55-64
Source: Statistics and Census Service
Economy & Finance
Attack of the clones
Macau is not immune to a spree of debit card skimming cases that is causing havoc all around the world BY ALEXANDRA LAGES
eter (not his real name) was at home two months ago when he received several text messages from his bank confi rming that a series of cash withdrawals from automated teller machines had been successfully executed. He had not made the withdrawals and his debit card was in his wallet. Peter received the fi rst text message around 1pm and seven more within an hour. “The fi rst two messages indicated that the transactions had been rejected but the following six were approved and money was being taken from my account,” he tells Macau Business.
While he was busy calling his bank to check what was happening, more cash withdrawals took place. Peter had lost around MOP16,000 (US$2,000) before he could cancel his debit card. Later that day, his partner, Ana (not her real name), found herself in a similar situation. “I received the same kind of message on my phone and I immediately called the bank asking to cancel my card as fast as possible. I did not lose any cash since the fi rst withdrawal attempt was rejected,” she says. “On the same day, a friend of ours now living in Buenos Aires, but who
previously lived in Macau, informed us that the same had happened to him. He lost around MOP16,000.” The next day Peter was still receiving text messages from his bank saying that someone was trying to withdraw money from his account. All transactions were rejected. Peter and Ana reported their cases to their bank and the police. He wants the money back. The bank says Peter is a victim of card skimming.
Skimming scam hits home The number of debit card skimming cases is increasing in Macau. So far this year the Judiciary Police have
29 received more than 30 complaints. Just four were recorded last year. “Three cases of unusual fixtures on ATMs have been reported by local banks,” a police spokesperson said. Six mainlanders have been arrested in connection with the cases. The police investigation eventually concluded that 20 of the complaints received this year were connected with those three cases. The victims had all used the rigged ATMs. Card skimming is the illegal copying of information from the magnetic strip of a credit or debit card, either by tampering with ATMs or using doctored PIN pad devices in shops. The scammers try to steal the information encoded on a card so they can get access to the bank account behind it. Once the scammers have successfully skimmed a card, they can create a fake or cloned card with the same information on it. The scammers then use the clone to run up charges on the bank account. Card skimming is common worldwide. Doctored PIN pad devices were discovered at more than 60 Barnes & Noble bookstores in the United States last month. The police say the devices are likely to be the handiwork of a well-orchestrated fraud scheme. The head of the Information Technology Crimes Division of the Judiciary Police, Sou Sio Keong, told reporters last month that scammers here usually used cloned cards to withdraw cash outside the city, mainly in the mainland. Peter’s bank told him that his card data had probably been stolen at an ATM near a casino. The cash withdrawals took place in Cambodia.
The number of debit card skimming cases is increasing in Macau. So far this year the Judiciary Police have received more than 30 complaints. Just four were recorded last year them. The bank’s head of marketing, Jessica Wong Soi Ieng, says the deadline is February 2014. “After these projects are finished, it will be harder to clone a card’s data,” she says. BNU has also increased surveil-
lance of its ATMs. The bank has more than 100 in Macau. Ms Wong says BNU has told its staff and companies using its PIN pad devices that they need to check the devices regularly to see if they have been tampered with. As a precaution, the
Banks alarmed Macau banks admit skimming cases are increasing but would not give Macau Business the figures, saying it was a sensitive issue. Some banks say they have improved their ATM network to prevent scams. Banco Nacional Ultramarino (BNU) aims to make all its ATMs EMV-compliant by February next year, meaning its entire network will be able to read debit or credit cards with smart chips that are much harder to clone. The next step will be for all BNUissued debit cards to have EMV chips. The bank’s credit cards already have NOVEMBER 2012
Economy & Finance
bank also sends cardholders alerts by text message every time their cards are used abroad. The assistant general manager of Industrial and Commercial Bank of China (Macau) Ltd (ICBC), Wanda Wong, says her bank has been striving to improve the security of its ATM network and reduce the risk of fraud. Ms Wong says ICBC has fixed covers over ATM keypads to prevent snoops from seeing which keys a user presses. It has installed round-the-clock surveillance cameras to watch ATMs. 1
Risk and profit By the end of June, nearly 600,000 credit cards had been issued here, according to data from the Monetary Authority of Macau. No statistics for the number of debit cards are publicly available. Mr Sou of the Judiciary Police urges the public to notify the authorities immediately if they suspect an ATM has been tampered with. He advises cardholders to cover the keypad when entering their PIN to keep it away from prying eyes. Mr Sou also says banks should keep the footage from their security cameras longer to give the police more leads in investigating skimming cases. Geoffroy Thonon, an expert on information systems security, says the rising number of skimming complaints may mean not only that there are more cases, but also that the problem is getting more attention. “These figures seem to be a positive sign that action is being performed to detect the problem successfully,” he says. “Work on preventing card skimming should be front and centre of our attention.” Mr Thonon says prevention starts with monitoring the places where the scams have occurred, to find out where skimming is more likely to happen. He says it is also important to determine how long card-skimming apparatus has been attached to an ATM. “It will indicate how much opportunity for skimming there is. Reducing the time between installation and removal of the offending skimming equipment will alter this activity’s profit margin against the risk of getting caught, to a point where it is no longer worth undertaking card skimming,” he says. NOVEMBER 2012
HOW DOES IT WORK? Skimming requires the illegal installation of a device, usually undetectable by ATM users, that secretly records bank account data when a cardholder inserts their card in the machine. Criminals can then encode the stolen data on a blank card and use it to loot the cardholder’s bank account.
3 Keypad overlay
A keypad overlay placed on top of a genuine keypad is the alternative to using a concealed camera. When a cardholder keys in their PIN, circuitry inside the overlay stores the number.
1 Hidden camera A concealed camera is typically used in conjunction with the skimming device to record a cardholder keying their PIN into the ATM. The camera is usually hidden somewhere on the front of the ATM or somewhere nearby – for example in a light fixture.
A skimmer device is a convincing-looking card reader placed over a genuine card reader. It blends in with an ATM’s façade and is usually undetectable by users. When a cardholder inserts their card, bank account data on the card is skimmed (stolen) and stored.
4 Another way of skimming a card is to use a doctored PIN pad device in a shop. A cardholder swipes their card and then enters their PIN, and the phony device captures both the card data and the number. The doctored devices look exactly like the genuine article. In some cases they may actually be genuine PIN pad devices that have been tampered with.
Statistical Digest Year-on-year change (%)
2011 GDP at current prices
MOP 292.1 billion
GDP in chained prices
MOP 273.1 billion
GDP per capita at current prices
GDP per capita in chained prices
Employment Oct - Dec 2011
29.1 20.7 26.2 18.0
Median monthly employment earnings
11.1 5.5 percentage 1.5 points
Labour force participation Non-resident workers (end-balance)
2011-end Domestic loans to private sector
MOP 161.9 billion
MOP 291.6 billion
Foreign exchange reserves*
MOP 272.4 billion
Inflation rate (full year)
External merchandise trade 2011
17.0 2.7 percentage -0.3 points
Year-on-year change (%)
27.7 22.7 43.2 percentage 2.5 points Year-on-year change (%)
MOP 62.3 billion - MOP 55.3 billion
Year-on-year change (%)
- Direct tax revenue from gaming
MOP 99.7 billion
MOP 49.0 billion
MOP 63.7 billion
Utility consumption 2011 Water Electricity Gasoline Liquefied Petroleum Gas Natural Gas
MOP 112.7 billion
0.2 41.2 --
MOP 7.0 billion
-0.6 percentage points
Exports Trade balance
Year-on-year change (%)
Money and prices
16.0 7.3 ---
MOP 81.9 billion MOP 72.0 billion
Year-on-year change (%)
-0.6 percentage points
Year-on-year change (%)
41.5 44.9 29.7 -Year-on-year change (%)
70.5 million m3 5.1 3,857 million kWh 5.5 81.7 million L 9.3 42,908 tons 5.3 73.6 million m3 -52.4
Jun-Sep 2012 Jun-Sep 2012 Sep 2012
Year-on-year change (%)
16.2 24.9 -percentage -0.8 points
Year-on-year change (%)
MOP 180.7 billion MOP 341.0 billion MOP 133.2 billion
MOP 5.4 billion MOP 46.5 billion - MOP 41.1 billion
19.4 19.6 -Year-on-year change (%)
MOP 61.1 billion
14.8 16.0 27.8 9.0
Year-on-year change (%)
MOP 93.5 billion MOP 79.7 billion MOP 32.4 billion
48.5 million m3 6.4 2,815 million kWh 9.9 57.5 million L 7.1 29,101 tons 0.2 -- million m3 -100
Aug 2012 Aug 2012 Aug 2012 Sep 2012
Notes Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012
Notes Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012
Notes Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012
Transport and communications 2011-end Licensed vehicles - Automobiles - Motorcycles Mobile telephone users Internet services subscribers
206,349 95,151 111,198 1,353,194 209,223
Year-on-year change (%)
4.9 5.5 4.5 20.6 22.7
212,767 99,235 113,532 1,511,969 222,190
Year-on-year change (%)
5.0 6.3 3.9 17.7 9.6
* A new fiscal reserve system was introduced in January 2012, impacting the way foreign exchange reserves are accounted for NOVEMBER 2012
Notes Aug 2012 Aug 2012 Aug 2012 Aug 2012 Aug 2012
Source: Statistics and Census Service and Financial Services Bureau
Economic Trends by JosĂŠ I. Duarte Economic full circle
GRAPH 1 - Rates of unemployment and under-employment Unemployment rate
The long-term trend for unemployment suggests two economic booms about 20 years apart, one in the early 1990s and the other currently taking place. By the mid-1990s, the average annual unemployment rate had started climbing to reach its highest values at about the same time as the handover took place. Only after 2004 did unemployment begin to decline in a meaningful way. The rate of under-employment broadly followed the same trend as unemployment but the correlation broke down momentarily in 1997, when it reached its historical low of 0.8 percent.
Unemployment is at historical lows in Macau. Labour market data has existed since the early 1990s, which was another period of low rates of unemployment, similar to todayâ€™s statistics. It seems one long cycle has ended.
4 3 2 1 0 1992
GRAPH 2 - Unemployed by gender Male
NUMBER OF PEOPLE
6,000 4,000 2,000 0 1992
GRAPH 3 - Unemployed males, by age group Below age 25
4,000 NUMBER OF UNEMPLOYED MALES
When we look at the data by gender, the patterns are distinctly different for men and women. The number of unemployed men closely follows the overall unemployment trend. The number of unemployed women is consistently lower, which is a common feature worldwide, partially explained by a lower level of attachment to the labour market. Women are also less sensitive to the economic cycle. In absolute terms, the proportion of unemployed people has never been excessive, always below 15,000 people.
The number of unemployed males by age presents a more complex story. Males most affected by the unemployment surge around the time of the handover were in the middle of their careers, aged 35 to 44. A peak in the number of unemployed in that age group is noticeably more abrupt than for the other age groups, but no age bracket was immune to the economic slowdown. Older workers, aged between 45 and 54, were more affected by the surge in unemployment during the handover period than the youngest workers, but also recovered faster in absolute terms. The number of unemployed males younger than 25 increased during the 1990s but later stabilised.
GRAPH 4 - Macau’s land mass Peninsula
Each of the city’s three main areas, the peninsula and the islands of Taipa and Coloane, has increased in size since 1989. Not long ago, Cotai was little more than a causeway. Today, it represents a distinct fourth land mass, on its way to an area of 6 square km. Over the past 20 years, Macau’s total area has grown by more than 70 percent, to almost 30 square km. The only part of the city somewhat immune to this boom was Coloane. It has grown by just 0.5 square km since 1989.
25 20 2
15 10 5 0
GRAPH 5 - Road network Peninsula
Another relevant change to the city’s geography has been its road network. It has expanded by almost 30 percent since 1999. Growth was especially noticeable on the islands, where the road network has increased by about 50 percent. There is no data available for 2010 and only partial data is made available for 2009. GRAPH 6
The city’s physical growth could not prevent traffic congestion from increasing. The number of vehicles per square kilometre has grown by 55 percent since 2000, while the number of vehicles per kilometre of road has risen by 42 percent. This means the reclamation of land that has taken place has not been enough to accommodate the net surge in vehicles.
180 150 120 Km
The fixation with the city’s rapid economic growth often obscures the fact that it is partly due to the expansion of its land mass.
90 60 30 0 1999
GRAPH 6 - Vehicle density Vehicles/Km of road
Vehicles/Km2 of area
INDEX 100 = YEAR 2000
120 100 80 60 40 20 0 2000
THE ‘TO DO’ LIST
Photo: Luís Almoster
Macau Business asks 12 experts in several fields for their suggestions for Chief Executive Fernando Chui Sai On’s upcoming policy address for 2013, to be delivered this month
Higher wages for civil servants
José Pereira Coutinho Legislative Assembly member and president of the Macau Civil Servants Association
1. The government should announce a 6.8-percent salary increase for civil servants. The lower ranking public workers deserve special attention. There are people who wash dishes for a living earning higher wages than some civil servants. 2. A proper accountability system for senior officials should be implemented. This is of paramount importance. 3. The government should build housing projects for public workers only. In the meantime, it should raise the rental subsidy for civil servants to MOP3,000 (US$375) from MOP1,500.
A proper court building 1. The government should launch rules overseeing how polls and public consultations are conducted to prevent manipulation of results. Jorge Neto Valente President of the Macau Lawyers Association
2.There should be a greater effort to boost overseas recruitment of judges, although that is actually decided by an independent commission. Court workload keeps increasing. There is also need for more public prosecutors. 3. The construction of proper facilities to host Macau’s courts is something very important. Lack of money is not a problem here. It is a shame to have the Court of First Instance working in a commercial building.
ECONOMY AND FINANCE
More imported labour 1. The existing labour policy should be reviewed to allow for more skilled and nonskilled imported labour. Many senior executives tell me that the current shortage of labour discourages companies from investing here. Jacky So Yuk Chow Dean of the University of Macau’s Faculty of Business Administration
2. The government should set up new institutions to help finance small and medium sized companies in investing abroad and in new ventures. Similar institutions already exist in the mainland. 3. Macau’s economy must be diversified to include international resorts, financial services, entertainment, technology, culture, and so on.
Ricardo Siu Chi Sen Associate professor of business economics at the University of Macau
1. There is a need for more proactive measures to ensure the sustainable growth of the casino resort industry. But more important than just announcing new measures, is to ensure their proper implementation. Two areas that need to be addressed are human resources and infrastructure.
1. The social security system should be reviewed to provide better allowances for future pensioners. It should also enlarge its scope, by running day-care centres and elderly homes.
2. The government should introduce supportive policies to help develop quality human resources.
Larry So Man Yum Associate professor of the Macau Polytechnic Institute’s School of Public Administration
3. Officials must ensure that the new infrastructure projects boosting regional integration, like the light rail transit system and the Hong Kong-Macau-Zhuhai Bridge, remain on schedule.
3. The government should put forward a long-term policy focusing on disabled people. It should give priority to community care and career development.
Hong Weng Kun President of the Macau Police Association
2. The way resources for social welfare are distributed should be changed. Private sector social workers receive lower salaries than their counterparts who are civil servants. Furthermore, the city’s big, traditional associations monopolise government funding. Smaller organisations find it hard to access grants.
Better police welfare
1. The implementation of a new recruitment method for the public security forces is very important. It should ensure that recruitment is made more flexible.
1. There is a need for more healthcarerelated manpower. There are several new healthcare centres and one public hospital in the pipeline, but there is not enough human resources planning. In recent years, recruitment and training of medical practitioners has not matched the city’s needs. We should recruit more interns.
2. Police welfare should be reviewed. Currently, police officers work eight hours more than the average civil servant. The extra payment should be higher. Police officers also put their lives on the line, but receive no special allowance. There should also be a comprehensive retirement system, making early retirement easier for police officers who have reached a minimum number of years in the force. 3. The promotion method should be revamped. It should ensure that more people are able to reach top positions. It should include performance records, work attitude and discipline. Career progression should be fast tracked.
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Choi Nim Chairman of the Macau Health Bureau Doctors Association
2. Salaries for physicians should be raised. It is very hard to get experienced experts to come and work in Macau. We need to improve our conditions to attract more overseas qualified workers. Although salaries were revised two years ago, wages in the mainland are still higher. Also, we need to retain staff and avoid them from going into private practice. 3. The establishment of a medical council and the enactment of a medical malpractice law are very important to better regulate the sector.
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PUBLIC WORKS AND TRANSPORT
Faster construction licensing
1. The government should enhance training for tourism workers, to boost service quality.
Andy Wu Keng Kuong President of the Macau Travel Industry Council
2. Tourism capacity should be improved. Increasing the capacity of the border checkpoints and improving transportation to the city’s main tourist attractions can help achieve that. 3. There is a problem of ageing among Macau’s shuttle bus drivers. Many are reaching retirement age and there is no new blood. This will lead to manpower shortages soon. The government should act to prevent this from happening.
Ben Leong Chong In President of the Architects Association of Macau
1. Reviewing the tertiary education legal framework is a pressing issue due to the sector’s fast development. Another key issue is the evaluation of higher education institutions.
Director of the University of Macau’s Educational Research Centre
1. We need a long-term policy for culture. The culture-related government departments should be reformed to ensure better planning.
President of Art for All
A lot to be done
3. The government will soon launch a new consultation round on the policy on youth until 2020. This is an important strategy for the future.
Call for vision
James Chu Cheok Son
2. In non-tertiary education, there is a need to revise school curriculums and promote smallclass teaching.
2. Construction of the new Macau Central Library building should start immediately. The building should not be located in the Old Court House but in one of the new reclaimed areas near the Macau Cultural Centre. 3. The fund to support the city’s cultural industries should be launched as soon as possible. The Cultural Affairs Bureau and the Macao Foundation should also improve their system for handing out grants.
2. There is room for improvement in the Lands, Public Works and Transport Bureau regarding the handling of construction projects. The government should set up a mechanism to review the bureau’s standards and performance targets. 3. The government should improve communication with architects and engineers while assessing construction projects. It should also provide incentives to promote the construction of environmentally friendly buildings.
Reassess school curriculums
Teresa Vong Sou Kuan
1. The government should regularly review relevant regulations and standards to ensure building control systems are kept up-to-date.
Eric Ao Energy consultant
1. The government should introduce a clear set of policies for environmental impact assessments and strategic environmental assessments. There is currently no statutory framework in Macau in this area. 2. Buildings, new and old, commercial and residential alike, provide plenty of energy saving opportunities. It is essential that these buildings start being audited regularly to ensure good energy performance. There is currently no statutory requirement on this. 3. It is urgent to introduce measures to control the net number of new vehicles introduced to Macau, as well as emission standards. Only by reducing the number of motor vehicles on the road can green travel, namely public transportation or biking, be truly implemented.
Reality check What promises were kept and missed by the government from the policy address for 2012 BY ALEXANDRA LAGES
ne year ago, when Chief Executive Fernando Chui Sai On announced the policy address for 2012, there were no major surprises. Like the previous year, Mr Chui mostly vowed to improve residents’ livelihood and to tackle inflation and real estate speculation. The government has so far accomplished several of the targets outlined for this year. Still, some measures have
not yet been launched and the impact of some policies was not as expected. Mr Chui’s main achievement this year was the reform of Macau’s political system, ahead of next year’s Legislative Assembly election. After several rounds of public consultation, the governmentproposed reform was approved smoothly. The number of members of the chief executive’s election committee was increased from 300 to 400. The number of
both directly and indirectly elected legislators was increased by two seats each. Mr Chui has continued to pour resources into social affairs. The government has increased several allowances and enlarged the scope of those eligible for support. Civil servants also enjoyed a 6.5 percent salary increase. This year’s cash handout was MOP7,000 (US$875) for each permanent resident while non-permanent residents received MOP4,200. That was the same amount residents received in 2011, but combined into one cash handout for 2012 instead of two separate ones the previous year.
Going up Government action has had little impact on taming inflation. A special workforce was established and officials kept on
39 saying they would diversify food supply channels to keep prices stable. Despite this, prices continue rising fast – the average inflation rate for the first nine months of this year stood at 6.29 percent. The government has also been unable to curb real estate speculation. Prices for homes are at all-time highs. Meanwhile, officials last month announced a new set of measures eyeing to cool the market (read more in the Property section). The programme for the construction of 19,000 public housing units between 2007 and the end of this year has built momentum. But the December-end deadline will be missed. And some public housing projects have been met with criticism due to the small size of the units, poor location and lacklustre construction quality. The government agenda for 2012 didn’t include any ground-breaking initiatives for the gaming sector. Still, all six gaming op-
Chui Sai On’s main achievement this year was the reform of Macau’s political system, ahead of next year’s Legislative Assembly election. After several rounds of public consultation, the governmentproposed reform was approved smoothly
erators have finally been allowed into Cotai and the minimum entry age to casinos was increased to from 18 to 21 years of age. There were plans to create a database to record data of junket operators and their associates, but this has yet to be fulfilled.
Diversification mantra The government’s mantra of promoting economic diversification again bore little fruit. The development of Hengqin Island in cooperation with Guangdong authorities has failed so far to provide real opportunities for Macau to become less dependent on gaming. Work on a minimum wage continues in its early stages. Any breakthrough seems far away. In transportation, the biggest news in 2012 was the start of the construction works for the light rail train system. But works are already running late and it is likely the budget will need to be revised upward again. The new public bus service system, introduced in August last year, remains plagued by accidents. The government had vowed to introduce electric buses in Taipa on a trial basis, but the project hasn’t been implemented yet. Most of the policies planned for the tertiary education system this year were already passed on from the 2011 Policy Address. Still, they are yet to be fully realised, including the creation of a higher education assessment system. Some private local universities have been criticised for the poor quality of their graduates, with employers failing to recognise qualifications issued by the schools. The healthcare sector was plagued by bad news. The Health Bureau continues to face problems in recruiting new staff. The opening date of the new public hospital in Cotai has been postponed by three years, to 2017, due to poor planning. With less than two months to go until the end of the year, Mr Chui is unlikely to accomplish his legislative schedule. Two pieces of legislation that the government was supposed to introduce to the Legislative Assembly by June-end have yet to appear. These include bills on domestic violence and building management, which should only be ready next year. The government has so far only delivered one of the eight bills it had scheduled to have ready in the second half of the year. Among the proposals outstanding are the bills on land grants and urban planning – the government has said recently it expects to deliver both by year-end.
NO SUNSHINE I
n the policy address for this year, Chief Executive Fernando Chui Sai On vowed to introduce an accountability system for high officials and promote a ‘sunshine government’. But nothing has been done yet. This was not the first time Mr Chui pledged to establish such a system. When he was elected chief executive in 2009, Mr Chui had already vowed to promote a more transparent government. Directly elected Legislative Assembly members Ng Kuok Cheong and José Pereira Coutinho continue to urge the government to improve accountability for high officials. Mr Coutinho calls on the government to make public all grants to associations, including those made by the Macao Foundation. He adds that the information should be made publicly available on a monthly basis. He also says all Legislative Assembly meetings, and not only the plenary meetings, should be open to the media. Other assembly members are more concerned about livelihood issues. Directly elected member Melinda Chan Mei Yi slams the government for the delays in reviewing the amount of the contributions for the Social Security Fund, and in raising the value of the elderly pension. Ms Chan also wants more information on the government’s project to build several new elderly homes by 2015. Directly elected assembly member Lee Chong Cheng says the government should put more effort into tackling inflation. Mr Ng calls on the government to reserve space in the new land reclamation projects for resident-only housing developments. Government-appointed assembly member Dominic Sio Chi Wai says better planning should go into public housing. “The government should collect more data and calculate how many units we need to provide to the market, including the units’ A.L. sizes,” he says.
40 JOSÉ I. DUARTE ECONOMIST, MACAU BUSINESS SENIOR ANALYST - firstname.lastname@example.org
Matters of pegging FULLY DE-PEGGING THE PATACA FROM THE HONG KONG DOLLAR MAY BE HARD, BUT WHAT ABOUT RESETTING THE PEG? he currencies of China’s two special administrative regions are pegged to the U.S. dollar. That link is direct in the case of Hong Kong and indirect, via the Hong Kong dollar itself, in the case of the Macau pataca. We hear, on both sides of the Pearl River Delta, voices calling for a revision of that peg. “It has outlived its usefulness and is currently imposing severe costs to the local communities,” some critics say. At every turn, authorities are adamant about their commitment to the peg. We should not expect otherwise. Changing a monetary regime is not something one can speculate on like casually chatting about the latest fad. If the authorities admitted they were reconsidering the pegs it would invite, especially in Hong Kong, unwanted attention from global financial operators and be likely to lead to speculative flows and instability. The pataca’s situation is somehow different. The indirect peg to the U.S. dollar can be either broken as the result of a sovereign decision – breaking the peg to the Hong Kong dollar – or a decision by the Hong Kong authorities, over which officials here may or may not have a big influence. Due to the integration of Macau’s financial institutions with the Hong Kong market, not to mention their dependency on it, we may be forgiven for thinking that it will likely be the Hong Kong Monetary Authority making the decision for Macau. Isn’t it a fact already that the financial system here closes when there is a banking holiday across the Delta?
Bad peg It adds to the peculiarity of the situation that the pataca is a minority currency even on its home turf. Most deposits and credit operations here are conducted in Hong Kong dollars. The market is open and financial operations in foreign currencies are conducted with ease. These characteristics are pluses in terms of the stability they provide for external investors, making Macau attractive to them. But that benefit may be overrated today; at least, we should ponder the related costs the city incurs from this. It makes sense to evaluate the merits of a break away from the peg, independently from how it will come about. A first problem of the peg is that investment opportunities here are mostly in real estate. The peg imposes extremely low nominal interest rates (negative in real terms), which stimulates demand from investors, pushing prices up. The issue is compounded by the scarcity of lodgings designed for those who live and work here due to a complacent, if not negligent, housing supply policy. Many new residential projects are instead targeting rich mainland Chinese desiring assets overseas, or international investors looking for big valorisation. As a result, the peg is helping real estate prices to go up, making housing beyond the reach of many residents, especially the youngest ones. There is more to the peg. As Beijing allows the renminbi to NOVEMBER 2012
appreciate, imports from the mainland become more expensive, feeding, at least partially, domestic inflation in Macau (and even more negative real interest rates). Again, internal features compound the problem – namely the fast growth of demand and the monopolistic or oligopolistic nature of some import and distribution channels, especially in food products. If the pataca was allowed to appreciate freely, that trend could, in principle, be attenuated if not reversed. I say in principle because past experience suggests that market distortions result in a big elasticity of internal prices when prices in the mainland go up, but that elasticity fails to materialise when prices there go down.
Update it At least on the very sensitive topics of food and housing, a break of the pataca peg would provide welcome relief to residents. That, however, does not make it more likely. First, the costs for tourism and gambling operators would be more immediately visible, with the longer-term benefits harder to define and quantify. Cheap money attracts more tourists and reduces the U.S. dollar cost of obligations denominated in patacas. Therefore, a strong constituency would likely form to resist changes. Second, choosing a new monetary regime could prove to be a headache. Due to the increasing integration of the Macau economy with the mainland, some have suggested a peg to the renminbi. This is obviously a non-starter as long as the renminbi is not fully convertible. To peg the pataca to a basket of currencies would require skills and a financial strength that may not be available. It would also entail costs and risks. The pataca going solo is unlikely. Was there any time in history when the local currency was not pegged to some other currency? Also, it is hard to imagine the pataca going its separate way from the Hong Kong dollar. Anyone looking for signals of depegging the pataca vis-à-vis the U.S. dollar would be well advised to keep an eye and an ear on Hong Kong first. Does this mean nothing can be done? There might be a third way. The current MOP1.03 per HK$1 peg was fixed in 1983, in utterly different circumstances. In abstract, nothing prevents authorities here from achieving some of the benefits of abandoning the peg without loosing most of its virtues by just fixing a new peg. That would be a one-shot action that would re-peg the pataca at a value more consistent with today’s circumstances, providing moderating effects on inflation, interest rates and the financial flows associated with them. It would in all likelihood be cheaper and more efficient, not to mention fairer, than distributing cash handouts to the public, all of which makes the decision worth debating.
Red alert China’s new leaders to face emboldened critics BY ROBERT SAIGET*
year ago, the villagers of Wukan in the mainland forced their corrupt local leader to flee in a rebellion that shook the Communist Party and which serves as a warning to the country’s incoming leaders. At this month’s congress, the party will anoint a new chief for the next 10 years, whose regime will have to address growing anger over graft as well as challenges from a vocal band of dissidents and rights activists. In the Wukan revolt, villagers defied the usually iron-fisted police and forced their long-standing party chief to flee after angry demonstrations denouncing shady land deals during his decades-long tenure. The crisis was defused in December when provincial authorities in Guangdong stepped in, agreed to untangle the complex web of land transfers to private developers, sacked the party chief and allowed villagers to hold elections.
The newly elected deputy head of the village has a message for Xi Jinping, the 59-year-old vice president who is widely expected to be promoted to Communist Party generalsecretary this month and then state president next year. “If they don’t wipe out and punish corruption, then things are only going to get worse,” Yang Semao told AFP in Wukan, a small fishing and farming village of about 12,000 people. “If they don’t crack down on graft, then you are only going to encourage more people to be corrupt [and] the new government leaders will become corrupt,” he said in an interview in his office.
People’s victory The unprecedented government backdown in Wukan was seen by many of the mainland’s 650 million farmers and a growing community of human rights activists as a victory over despotism, as the gap between rich and poor grows ever wider. “The numbers of mass protests are increasing day by day and the scope is expanding. The ‘hated official’ and the ‘hated rich’ are becoming a part of the social psychology,” government critic Yang Jisheng, a retired editor at the state-run news agency Xinhua, told AFP. “This means political reform is urgently needed.” To quell the rising tide of unrest, Beijing this year approved a US$111-billion (MOP888 billion) annual budget for
Social grievances likely to haunt Xi Jinping’s incoming leadership team include labour disputes, judicial incompetence, environmental protests, food safety and police brutality
what it calls “stability maintenance”. “Currently the budget for stability maintenance exceeds that of national defence,” Bao Tong, the highest Communist Party official jailed following the 1989 Tiananmen pro-democracy protests, told AFP. “This is a phenomenon very rarely seen in the world. No country in the world makes its own people the biggest enemy,” added the leading dissident. Arrests and convictions of dissidents, including the 2009 jailing of Liu Xiaobo who was awarded the 2010 Nobel Peace Prize, are seen as part of the “stability maintenance” agenda. Another tactic employed to curb restive impulses among the 1.3-billion population is state censorship on “weibos”, home-grown social media sites akin to the banned Twitter that have become hugely popular. Such was the case late last month when The New York Times published an investigation into the finances of Premier Wen Jiabao reporting his family had controlled assets worth US$2.7 billion. Other social grievances likely to haunt Mr Xi’s incoming leadership team include labour disputes, judicial incompetence, environmental protests, food safety and police brutality.
A life-or-death matter With half of the mainland now online, local disputes can be quickly amplified through the weibos, which are challenging
the party’s ability to shape public opinion despite the censors’ best efforts to squelch debate. Government-backed land grabs remain one of the most explosive social issues. Most of the mainland’s estimated 180,000 mass incidents or protests in 2010 were linked to allegedly corrupt deals, a 2011 study by the China Academy of Social Sciences said. Outgoing President Hu Jintao repeatedly called fighting graft a matter of “life or death” for the ruling party, while Mr Xi has also lambasted rampant dishonesty in government. Political reform, if it comes at all, is likely to be a slow process, say analysts, and must focus on curbing graft in government. Encouraging the “Wukan model” of free local elections is one option available to Mr Xi and his comrades in the leadership, but some residents say it has not brought the accountability for local officials and businessmen they hoped for. Despite mandates from above, county and prefectural-level leaders have refused to investigate years of village land deals due to the tangle of interests, they say. “Nothing has been resolved, we have been cheated,” resident Liu Hanxu said over a game of cards with his neighbours in Wukan’s village square. “We want the land back, we want money for the land that was stolen from us. Nothing has been resolved, they are cheating the people.” * AFP NEWS AGENCY NOVEMBER 2012
Mainland smugglers laden with goods prepare to cross the border to Shenzhen
Days of anger Anti-mainland sentiment is growing among Hong Kong’s grassroots BY MARY ANN BENITEZ* IN HONG KONG
or years, many in Hong Kong turned a blind eye to parallel trading: mainland smugglers or couriers laden with goods going back and forth, crowding railway stations on the border with Shenzhen. But now Hongkongers are questioning if the city has been too welcoming to mainland Chinese. Call it an identity crisis or mid-life crisis, Hong Kong’s anxiety about the mainland has surfaced time and time again in the past few months, some 15 years after Britain handed the city back to Beijing.
Few in Hong Kong disagree that influxes of mainland tourists and capital have bolstered its economy in recent years. But many fear that mainlanders are now crowding them out, arriving in such numbers that they threaten to dilute the city’s identity. Mainland Chinese are vilified for clearing shop shelves of daily necessities, which they think are better quality if bought in Hong Kong. They are accused of driving up housing prices and crowding maternity wards. Some Hongkongers call them “locusts”. And
there were loud protests against the government’s push for “national education”, meaning education about the mainland. Hong Kong’s anger at the mainland beset Chief Executive Leung Chunying’s first four months in office. Confronted by demonstrations in the streets against the national education curriculum, Mr Leung eventually bowed to public pressure to scrap the government’s schedule for its introduction in schools. Another public outcry persuaded
45 Mr Leung to suspend a scheme that would have entitled mainland internal migrants working in Shenzhen to multiple-entry visas for Hong Kong. Shenzhen’s 2.8 million permanent residents have been entitled to such visas since 2009.
Unwanted pregnancies The prospect of 4.1 million internal migrants flooding across the border made knuckles in Hong Kong turn white. The scheme was due to begin on September 1. No new date has been set and there is no sign that a new date will ever be set. Hong Kong Tourism Board chairman James Tien Pei-chun, who is also a member of the Legislative Council, has said many internal migrants in Shenzhen do not earn much, so would not be able to spend much if they visited. He fears that some would stay and work illegally. Housing is another cause of tension between Hongkongers and mainlanders. Of all the money spent in Hong Kong on buying homes in the first quarter of this year, mainland Chinese
Hong Kong’s anxiety about the mainland has surfaced time and time again in the past few months spent more than one-third, according to Midland Realty Ltd, one of the city’s biggest estate agents. So the cabinet announced in September a pilot scheme for a “Hong Kong land for Hong Kong people” policy. About 1,100 flats will be sold to permanent residents of Hong Kong on condition that for 30 years they can sell the flats only to other permanent residents. The government also said it would levy a duty of 15 percent on purchases of property by outsiders or corporations. Anti-mainland sentiment was brewing even before Mr Leung took office, stoked by the increasing number of pregnant mainland women coming to Hong Kong to give birth, so giving their
offspring the right of abode in the city. Mr Leung made an election campaign promise that from next year no mainland Chinese would be permitted to give birth in a private hospital unless she was married to a permanent resident or had a work visa. The government has also set a cap on the number of deliveries by outsiders in public hospitals.
For better, for worse Immigration officials said last month that the authorities had arrested more than 400 mainland women that had come to give birth in the past year. Most were detained within one or two days of giving birth, and nearly all were given short prison sentences for overstaying. The issue seemed to have simmered down until an outspoken former secretary for justice, Elsie Leung Oi-see, brought it back to the boil again. Ms Leung said judges did not understand the relationship between the Hong Kong and central governments. She said this had led to mistaken rulings by the Court of Final Appeal, which
Greater China leisure, shopping, education or other things, and that this had “both positive and negative effects to different extents”. Mr Leung said these issues were often too politicised. “What a small group of people say and do may impact on the relationship between Hong Kong and the mainland,” he said.
For richer, for poorer
Mainland tourists in Hong Kong
Tourism is a big earner for Hong Kong. More than 70 percent of visitors are mainlanders. They are also the biggest spenders had usurped the power of the central government. She did not say which rulings she was referring to, but many inferred that she meant the ruling in 2001 that gave right of abode to offspring born to mainland mothers in Hong Kong. On his last day as a judge of the Court of Final Appeal before retiring, Justice Kemal Bokhary delivered what appeared to be a riposte. He said the NOVEMBER 2012
rule of law was clouded by “a storm of unprecedented ferocity” and that voices disrespecting the city’s autonomy were growing louder. A week before Mr Justice Bokhary fired his parting shot, the chief executive had told the Legislative Council that the reality was that Hong Kong was a part of China. Mr Leung said stronger cross-border ties meant more mainland Chinese were coming to Hong Kong for
“In recent years, there has been public concern about some of the activities of mainland visitors to Hong Kong, such as giving birth, buying milk powder, purchasing residential flats and parallel trading,” Mr Leung said. “I and the government are concerned about these issues, and have taken timely and appropriate actions to deal with them.” He said that for the past five years, residents of only 49 of the more than 600 cities in the mainland had been allowed to visit Hong Kong on an individual visa. The Secretary for Security, Lai Tung-kwok, has rejected calls to prohibit mainland Chinese from entering Hong Kong more than once a day. The purpose of the prohibition would be to curb parallel trading. Mr Lai said it would do more harm than good. Tourism is a big earner for Hong Kong. In the first nine months of this year 35.4 million visitors arrived, 16 percent more than in the equivalent period last year. More than 70 percent of visitors are mainlanders. They are also the biggest spenders. It is estimated that a mainland visitor that stays overnight spends, on average, HK$8,568 (US$1,105) and that a day-tripper spends HK$2,479. Despite the surge in anti-mainland sentiment, the Hong Kong government intends to increase cross-border ties. The One Country, Two Systems Research Institute, a think-tank, says the cabinet is considering establishing a visa-on-arrival economic zone on the border where mainland Chinese can travel freely. The zone, covering 2,400 hectares, could be set up within five years. The institute’s assistant chief research officer, Fang Zhou, says the zone would be for manufacturers of high-end goods, service industries and retailers. *COPY EDITOR FOR THE STANDARD (HONG KONG) NEWSPAPER
47 BARRY EICHENGREEN PROFESSOR OF ECONOMICS AND POLITICAL SCIENCE, UNIVERSITY OF CALIFORNIA – BERKELEY
The renminbi challenge WILL BEIJING’S PLAN FOR TRANSFORMING THE RENMINBI INTO AN INTERNATIONAL RIVAL TO THE U.S. DOLLAR SUCCEED? n September, China unveiled its first aircraft carrier, and is gearing up to challenge the United States in the South China Sea. By initiating a plan to internationalise its currency, Beijing is similarly seeking to challenge the U.S. dollar on the international stage. In carving out a global role for the renminbi, Chinese policymakers are proceeding deliberately. In the words of the venerable Chinese proverb, they are “feeling for the stones while crossing the river.” The authorities’ first step was to authorise mainland companies to use the renminbi in cross-border trade settlements. As foreign firms exporting to the mainland accepted payment in renminbi, the currency piled up in their bank accounts in Hong Kong. That led to the next step: foreign firms wishing to invest in the mainland were allowed to tap those deposits by issuing renminbi-denominated bonds, and eligible offshore financial institutions were permitted to invest renminbi funds in the mainland’s interbank bond market. Then, last summer, Beijing announced plans to allow banks in Hong Kong to lend renminbi to companies in Shenzhen, opening that city financially to the rest of the world. The expectation is that if financial opening works in Shenzhen, it will be implemented more widely. Finally, as a step toward making the renminbi a reserve currency, China signed currency-swap agreements with the Philippines, South Korea, Japan and Australia. Meanwhile, Malaysia, Nigeria and Chile have already acquired modest amounts of renminbi reserves. Other central banks are expected to follow. So, will Beijing’s plan for transforming the renminbi into an international rival to the U.S. dollar succeed?
Four big challenges The answer, in my view, turns on how Beijing addresses four challenges. First, the mainland will have to build more liquid financial markets. Its bond markets remain small and trading volume is low, because the majority of bonds are held to maturity by domestic investors. This is a matter of considerable importance to central banks, which value liquidity when deciding which currencies to hold as reserve. After all, it is the liquidity of U.S. Treasury bonds that makes them the world’s leading reserve asset. Second, much will depend on how the mainland navigates
In carving out a global role for the renminbi, Chinese policymakers are proceeding deliberately. In the words of the venerable Chinese proverb, they are “feeling for the stones while crossing the river”
the transition to a more open capital account. History is littered with financial crises occurring in the wake of precipitous capital-account liberalisation. Falling prey to a crisis would not exactly encourage international use of the mainland’s currency. Third, the renminbi’s international and reserve-currency prospects will be shaped by how the mainland handles its growth slowdown. The key will be whether it manages a smooth deceleration, in which case renminbi internationalisation will proceed, or suffers a hard landing, in which case social unrest will intensify and all bets are off. The last challenge can be stated as a question that is rarely posed: is the mainland’s political system an obstacle to renminbi internationalisation? The pound sterling and the U.S. dollar, the principal international and reserve currencies of the 19th and 20th centuries respectively, were issued by democracies. Britain and the U.S. had contested elections and political systems that limited the arbitrary exercise of executive power – institutions that are absent in the mainland’s political system.
More transparency One reason why democracy might matter for international currency status is that democratically elected governments are best able to make the credible commitments needed to develop deep and liquid financial markets. They can commit not to expropriate creditors, since the latter will vote them out of office if they do. And the same respect for creditor rights that reassures domestic investors reassures foreign investors – both official and private – as well. Might it be possible for Beijing to establish limits on arbitrary executive power and strengthen creditor rights sufficiently without undertaking a full-fledged transition to democracy? Until now, constraints on decision-making by the general secretary of the Chinese Communist Party, the country’s highest-ranking official, have been – how to put it politely? – limited. But that is beginning to change. The general secretary is increasingly constrained by other institutions. The deliberations of the National People’s Congress, for example, are becoming less ceremonial and more substantive. Other bureaucratic decision makers, for their part, are increasingly constrained by requirements of transparency and disclosure. Internet-based movements are forcing Chinese policymakers to strengthen labour and environmental standards. Why not creditor rights? Since the early 19th century, the leading international currencies have been those of countries with democratic political systems, where arbitrary official action is constrained and creditors are well represented. This does not imply that the mainland must have a “Democratic Spring” before the renminbi becomes a leading international and reserve currency. But it does suggest that it will have to strengthen the powers of the National People’s Congress further and create a more transparent rules-based bureaucracy in order to achieve its monetary goals. NOVEMBER 2012
mbreport PROPERTY 48
RESTRICTIONS ON SALES OF COMMERCIAL AND OFFICE SPACE ARE LIKELY TO HELP DAMPEN TRANSACTIONS WITHOUT LOWERING PRICES BY ALEXANDRA LAGES PHOTOS BY LUÍS ALMOSTER
49 his year had looked as if it would be a great one for investors in commercial and office property. It no longer does. In July, the average price per square metre of commercial space was nearly 60 percent higher than 12 months before, at MOP130,000 (US$16,250), according to official data. There were reports of big deals being made, including the sale of a set of retail premises in the Senado Square area to a Hong Kong investor for HK$168 million (US$21.7 million). Office prices were also rising fast. The average price per square metre of office space was MOP43,000 in July, one-third higher than a year before. Secretary for Transport and Public Works Lau Si Io gave the Legislative Assembly the figures last month, when the government asked it to expand the special stamp duty on property sales. The government’s message was clear: the party was over. Mr Lau said speculative investment in shops and offices had been increasing, “causing negative effects” felt by the city in general and the retailing industry in particular. It was time for the government to step in. The assembly approved the expansion of the special stamp duty using an emergency procedure. The special stamp duty, introduced in June last year for housing sales, has been expanded to cover commercial and office premises and parking spaces. Sellers will now have to pay a levy of 20 percent of the price if they sell property within a year of buying it, and a levy of 10 percent if they sell property within two years of buying it.
Well running dry Real estate agents had been bullish about the commercial property market, predicting that it would continue to growth strongly next year. “Retail property was very popular among investors because they did not face restrictions as they did in the residential sector,” says Jane Liu, executive director of Ricacorp (Macau) Properties Ltd. Jones Lang LaSalle’s managing director in Macau, Gregory Ku, had been expecting the number of commercial premises sold to continue to rise in the next 12 months, because of strong demand from investors and limited supply. The market was so active that supply was beginning to dry up. Ms Liu says because the supply of shops was limited and prices were rising fast, investors were looking instead at offices. She says sales of space in the new Fortune Business Centre, or FBC Tower, were hot. “It’s not complete yet but owners were asking HK$4,200 per square foot,” she says. Three whole floors of office space were sold in the NAPE district this year. Two of them, together worth about HK$160 million, are in Dynasty Plaza. The other, worth about HK$80 million, is in China Civil Plaza. Estate agents now expect the special stamp duty to severely curb sales of commercial property. “Transactions will drop substantially, at least NOVEMBER 2012
mbreport PROPERTY 50
30 percent,” Mr Ku says. He predicts that investors that turned to commercial and office property because the special stamp duty scared them away from residential property will now return to the housing market. Ms Liu’s sales forecast is similar to Mr Ku’s. She says the market reacted immediately after the new measures were announced. “Transactions dropped by 50 percent, while the interest of buyers fell by 20 percent,” she says.
their pockets and bank interest rates are still low,” he says. People will continue to look for investment opportunities in property. Agents expect rents for commercial space, buoyed by higher capital values, to continue rising. Ms Liu says rents in the city centre are close to those in Hong Kong’s prime areas. In the Senado Square area, rents for retailing space are over HK$50 per square foot.
SALES OF COMMERCIAL AND OFFICE PREMISES BY NUMBER 400 Number of transactions
John Ng of Centaline (Macau) Property Agency Ltd is a little more optimistic. He forecasts that sales will decrease by 20 percent in the short run. But no one Macau Business spoke to said they expected prices to fall. On the contrary, they predict prices will keep rising. Mr Ng forecasts that the price of commercial property will increase by 50 percent in the next 12 months. “Due to the special stamp duty, most people who bought property will hold on to it. But the duty will do nothing to prices. Prices will increase but there will be fewer transactions,” Ms Liu says. “Some of the best shops in town, such as those located in prime areas, will not be affected by anything, and in any way. The economy is good and there are lots of tourists,” she adds. Mr Ku says the fundamentals of the market are unchanged by the special stamp duty. “People will still have money in
350 300 250 200 150 100 50 0 Jan 2010
“Some of the best shops in town, such as those located in prime areas, will not be affected by anything, and in any way. The economy is good and there are lots of tourists,” says Jane Liu from Ricacorp SALES OF COMMERCIAL AND OFFICE PREMISES BY VALUE 2,000 1,800 1,600 MOP million
1,400 1,200 1,000 800 600 400 200 0 Jan 2010
Value of commercial transactions
Value of office transactions
João Afonso, the director for Macau operations of real estate investment firm Sniper Capital Ltd, says the expansion of the special stamp duty will only affect the market for a short while. It was reported in September that Sniper Capital was raising another US$50 million for a fund that invests in the food and beverage industry and retailing property in Macau. Mr Afonso says his firm still means to do so. “The real estate market for commercial and residential property will only slow down a little bit in three to six months’ time, but I don’t see any effect in the longer term,” Mr Afonso says. “People will be a little bit distrustful but as time goes by they will get used to it and the real estate market will continue to grow.” Sniper Capital expects the limited supply of commercial and office property and parking spaces to push up prices and yields. Mr Afonso says new infrastructure being built in the Pearl River Delta, such as the Hong Kong-Zhuhai-Macau Bridge, new airports and Macau’s Light Rail Transit elevated railway, coupled with the city’s economic growth, will continue to draw the attention of investors here. He is also bullish because Macau’s property market is still in its infancy. “Compared to Hong Kong and Singapore, there is a long way to go. In Hong Kong, there are residential units being sold for HK$80,000 per square foot. There is still a huge gap between Macau and Hong Kong,” he says. NOVEMBER 2012
mbreport PROPERTY 52 52
SCRATCHING THE ITCH
part from expanding the special stamp duty on property sales, the government tightened the rules on mortgage lending last month. All this is intended principally to deter non-residents from buying high-end homes. Non-residents and corporations will now have to pay a stamp duty of 10 percent on purchases of residential property. And the amounts homebuyers, whether residents or non-residents, can borrow from the bank to buy residential property have been reduced – although the reductions apply only to residents that buy upmarket homes, and they are greater for non-residents. Real estate agents say the effect will be temporary. “The residential property market will be the same as before,” says Gregory Ku, managing director in Macau of Jones Lang LaSalle. Mr Ku says foreigners and corporations do not buy much residential property. “It’s around 10 to 20 percent of the total of transactions in the past two years,” he says. In the first eight months of this year, non-residents bought 9.4 percent of homes sold and spent 15.9 percent of the money paid for them, the government’s data shows. Centaline (Macau) Property Agency Ltd sales director Noelle Cheung says the new mortgage lending rules will impede only middle-class buyers who simply want a flat to live in, not speculators. “I have a client that has MOP2 million (US$250,000) for the down payment but he cannot buy a MOP6 million unit. Under the new rules, he will have to pay a down payment of MOP2.4 million,” she says. Sales of housing will slow for a while, Ms Cheung says. She forecasts a drop of 50 percent in transactions in the short run. “Prices will remain stable,” she says. Jane Liu, the executive director of Ricacorp (Macau) Properties Ltd, says the biggest decrease will be in sales of homes costing over MOP6 million. “Below that, we will still have transactions, but there won’t be any price drop,” she says.
MORTGAGE LOAN-TO-VALUE CAPS FOR COMPLETED HOMES PRICE
More than MOP8 million
MOP6 million to MOP8 million
60% to a maximum of MOP4 million
50% to a maximum of MOP3.2 million
MOP3.3 million to MOP6 million
70% to a maximum of MOP3.6 million
60% to a maximum of MOP3 million
Under MOP3.3 million
90% up to a maximum of MOP2.3 million
70% to a maximum of MOP1.98 million
MORTGAGE LOAN-TO-VALUE CAPS FOR UNFINISHED HOMES PRICE
More than MOP8 million
MOP6 million to MOP8 million
60% to a maximum of MOP4 million (70%)
50% to a maximum of MOP3.2 million (50%)
Less than MOP6 million
70% to a maximum of MOP3.6 million (70%)
50% up to a maximum of MOP3.2 million (50%)
Ms Liu also expects more demand for flats on the market for less than MOP3.3 million, for which residents are still eligible for a mortgage of up to 90 percent. “More people will be looking for those apartments but there is not much supply, so prices will go up,” she says. The average price of a home in the first eight months of this year was MOP4.1 million. In September, the average price per square metre of residential space was the highest ever: MOP62,552 (US$7,819), 1.3 percent more than in August and 60 percent more than a year before.
Third time lucky The London-listed Macau Property Opportunities Fund, managed by real estate investment firm Sniper Capital Ltd, sells or lets homes in several high-end housing developments it owns here. In its latest update for investors, released last month, the fund says the new mortgage lending rules “will dampen demand for high-end residential property, especially for large transactions”. But it expects “continued growth over the medium term, driven by a shortage of supply, strong local demographics and the escalating demand for luxury assets across Asia”. The stamp duty on purchases by non-residents will “increase barriers to entry for foreign buyers, and as an unintended consequence could drive them towards the leasing market”. The changes the government announced last month are the third set of measures meant to curb speculation in the housing market since September 2010. Some of the measures announced in 2010 have yet to be taken. The Legislative Assembly passed the bill to regulate estate agents only last month, and the law will only come into effect next July. The assembly is still debating the bill on the sale of unfinished homes. NOVEMBER 2012
SHUN TAK INVESTS IN PROJECT IN BEIJING
Shun Tak Holdings Ltd announced last month it has entered into an S$500 million (MOP3.2 billion) joint venture for a mixed development in the new Central Business District of Beijing in the Tongzhou district. Shun Tak will hold an effective stake of 24.0 percent in the venture. The project is expected to comprise a retail podium and retail basement, an office block and a block of residences. It is to be completed by 2016. Shun Tak will invest S$120 million in the development.
GRAFT-BUSTER SLAMS LAND GRANT SYSTEM
The head of the Commission Against Corruption, Vasco Fong Man Chong, says the government should improve the land grant system. In his opening remarks in the graftbusterâ€™s half-yearly bulletin, released last month, Mr Fong wrote that the current land grant system is among the legal frameworks in need of improvement. Further in the bulletin, the graft-buster suggests the Shanghai Land Transaction Market could be used as a reference for Macau.
OVER 29,000 HOMES WAITING FOR CONSTRUCTION APPROVAL
A total of 232 private dwelling projects, comprising 29,230 units, were waiting for a government go-ahead by September-end. Data released by the Lands, Public Works and Transport Bureau, show that most of the planned projects are on the peninsula, with 178 projects, including close to 19,000 units.
LAND AUCTIONED IN 2008 FINALLY TO BE DEVELOPED
Developer Tin Wai has reached an agreement with the government
Four years after two neighbouring plots of land in Patane were put up for grabs through a public tender, developer Tin Wai Investment Co Ltd has finally reached an agreement with the government to start developing the two parcels separately, both for residential usage. Construction is expected to start early next year, according to Liu Chak Wan, the head of Tin Wai. Besides being a high-profile businessman, Mr Liu is also a member of the Executive Council, an advisory body to the chief executive.
In 2008, Mr Liu was the highest bidder for the two plots of land, paying a total of MOP1.4 billion (US$175 million), almost 10 times more than the combined ask price. The plots are around 1,700 square metres and 3,000 square metres respectively. Tin Wai had since unsuccessfully requested the government for authorisation to merge the two plots into just one. Since the handover, the government has only organised two public tenders for granting land.
Property | Market Watch Notable residential property transactions - 01/10 to 15/10, 2012
Block 1, M/F, unit A
Chuk Wan Hou Yuen
Block 5, M/F, unit T
Block 4, L/F, unit P
Block 5, H/F, unit B (with car park)
Block 5, H/F, unit A (with car park)
Block 2, H/F, unit A
Block 2, H/F, unit A
Block 2, H/F, unit B
Block 2, M/F, unit B (with car park)
Block 1, L/F, unit A (with car park)
South Tower, H/F, unit A
One Oasis Cotai South
Block 8, M/F, unit G
Block 5, H/F, unit B
Villa de Mer
Block 1, M/F, unit B
One Oasis Cotai South
Block 8, M/F, unit G
Floor area (sq. ft)
Sale price (HK$)
Price per sq.ft. (HK$) 9,200
South Tower, M/F, unit B (with car park)
Villa de Mer
Block 1, M/F, unit A (with car park)
Block 5, M/F, unit B
Block 13, L/F, unit A
Villa de Mer
Block 5, L/F, unit B
One Oasis Cotai South
Block 8, H/F, unit D
North Tower, L/F, unit E (with car park)
North Tower, L/F, unit F (with car park)
Block 3, L/F, unit C
Block 1, L/F, unit F
Block 9, H/F, unit D
Block 9, H/F, unit D
Block 9, H/F, unit G
Block 9, H/F, unit G
Block 9, H/F, unit G
One Oasis Cotai South
Block 11, L/F, unit A
Block 9, L/F, unit E
One Oasis Cotai South
Block 4, L/F, unit A
Block 9, L/F, unit F
Note: L/F - Low floor; M/F - Middle floor; H/F - High floor
Notable residential property rentals - 01/10 to 15/10, 2012
Floor area (sq. ft)
Lake View Tower
Block 2, H/F, unit M
Lake View Tower
Block 2, M/F, unit M
Block 9, H/F, unit A
Supreme Flower City
Block 3, M/F, unit K (with car park)
Block 4, H/F, unit B
Block 13, L/F, unit A
Block 6, M/F, unit B
Block 4, L/F, unit F
Block 3, L/F, unit F (with car park)
Villa de Mer
Block 2, M/F, unit G
Block 22, M/F, unit J
Villa de Mer
Block 2, M/F, unit E
Rent price (HK$)
Price per sq.ft. (HK$)
Edf. Palácio do Sucesso
Block 1, L/F, unit G
Block 2, M/F, unit B
Block 24, L/F, unit B
Block 24, L/F, unit B
Villa de Mer
Block 5, H/F, unit F
Note: L/F - Low floor; M/F - Middle floor; H/F - High floor
Construction - private sector
Year-on-year change (%)
1,387 1,099 231 38 19 2,159 2,053 86 3 17
Building units completed - Residential - Commercial and offices - Industrial - Others Building units started - Residential - Commercial and offices - Industrial - Others
-69.4 -73.0 -45.9 --44.1 148.2 162.9 8.9 200 88.9
- Residential - New building - Old building Resident buyers (as percentage of total buyers)
4.6 144.5 -3.1
2,196 269 1,927
- Commercial - New building - Old building Resident buyers (as percentage of total buyers)
42.9 10,300.0 27.3
932 103 829
- Offices - New building - Old building Resident buyers (as percentage of total buyers)
- Industrial - Others Total value of total units transacted (2) - Residential
Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012
-26.3 -77.2 -18.5 7.3 percentage points
-40.3 -71.1 -34.9 1.6 percentage points
88.1 153 3,150
Notes Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012
Jan-Aug 2012 Jan-Aug 2012
28.1 41.0 5.4 84.0 88.0 83.6 128.8 --115.7 -0.7
-9.8 -18.7 14.5 37.0 ---11.1 -----
- Old building
MOP8.7 billion MOP3.0 billion
--MOP0.9 billion MOP3.8 billion
MOP30.0 billion MOP15.8 billion MOP10.0 billion
--MOP1.6 billion --MOP0.8 billion MOP3.9 billion
Average transaction price of residential units (3) Year-on-year change (%)
2011 MOP45,027 /m
- New building
- Old building
- Old building
- New building
- New building - Commercial
3.5 percentage points
385 28 357
-11.6 percentage points
-29.9 -22.4 -32.6 -13.2
1,361 56 1,305
-2.3 percentage points
Year-on-year change (%)
16,169 11,120 4,594 6,526
-1.7 percentage points
-4.5 26.3 -90.9 --50.0 -2.7 0.4 -44.6 -37.5
-6.7 -4.5 26.8 -20.7
27,624 17,176 7,783 9,393
Total units transacted
932 907 19 -6 757 715 31 -11
Year-on-year change (%)
Year-on-year change (%)
- Macau Peninsula
21.6 32.9 1.4 6.4
Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012
Month-on-month change (%)
Latest MOP62,552 /m
MOP56,548 /m2 MOP72,837 /m2 MOP83,930 /m2
1.3 -4.8 14.6 4.9
Notes Sep 2012 Sep 2012 Sep 2012 Sep 2012
(1) The data covers transactions with stamp duty paid during the reporting period, including transactions exempted from stamp duty (2) Figures are rounded, therefore they may not add up exactly (3) The data covers transactions with stamp duty bill issued during the reporting period, including transactions exempted from stamp duty NOVEMBER 2012
Source: Statistics and Census Service and Financial Services Bureau
Adults only Casino operators do not expect the new minimum age for entry to casinos to harm their business BY ALEXANDRA LAGES
59 rom this month, by law, nobody under the age of 21 may enter a casino. Casino operators and analysts expect the raising of the age limit from 18 to make little difference to the gaming business. The government says the raising of the age limit will help curb social problems caused by gambling, particularly among youths. The new age limit applies to employees of casinos as well as patrons. Under-21s already working in casinos may continue to do so. The law also now allows the gaming regulator to restrict an individual’s access to a casino if the individual themself or a relative requests it. “It is unlikely that there are many casino customers, especially in VIP or the premium mass market, that are under the age of 21,” says Grant Govertsen of research firm Union Gaming Group. “We would estimate that, notably, less than 1 percent of gaming revenues are generated from customers under the age of 21.” Mr Govertsen predicts that the effect of the new age limit on gaming revenue will be negligible. He says the new age limit makes sense because it brings Macau into line with other important gaming centres. The age limit in Singapore and Las Vegas is 21. Gaming operators applaud the new rules. A spokesperson for Sands China Ltd says the company “is in full support of the government’s under-21 initiative. We do not see an impact to our future business”. Less than 1 percent of Sands China employees are under 21 and the company foresees no drop in the number of candidates to fill vacancies.
Three more cheers Only 2 percent of Galaxy Entertainment Group Ltd’s workforce are under 21, says the company’s vice-president for public relations, Buddy Lam Chi Seng. “They are allowed to continue to work in the casinos,” Mr Lam says. “Also, our businesses are not limited to gaming only. We have many different jobs on offer, in other areas as well, that allow young people to pursue something different from working in the casinos.” Mr Lam says his company agrees with the limit. “Galaxy Entertainment is a firm supporter of responsible gaming and a strong advocate of higher education,” he says. NOVEMBER 2012
One of the purposes of the new age limit is to encourage young people to further their studies. The aboveaverage salaries offered by the casinos for low-skilled jobs such as croupiers often attracted youngsters that had just finished high school or were university dropouts, who might otherwise have continued studying. Mr Lam does not expect the new age limit to reduce the number of visitors to his company’s casinos. “The percentage of visitors to Galaxy Entertainment properties under the age of 21 is negligible and we will not be impacted by the new government policy,” he says. Melco Crown Entertainment Ltd told Macau Business the new law is unlikely to have any significant impact on business. Wynn Macau Ltd says it supported what it considers an “important government initiative”. It foresees no adverse effects on its business. MGM China Holdings Ltd and SJM Holdings Ltd did not reply to Macau Business requests for comments.
What goes up There is no up-to-date data available on how many casino employees are under 21. The most recent official figures show 2,800 under-21s were working in casinos in 2010 and that casinos employed one-fifth of all workers aged 18 to 21. The gaming industry had nearly 53,000 employees at the end of June. Croupiers accounted for 44 percent and a large proportion of the rest did other jobs on the casino floor, working for example as cage cashiers, pit bosses or slot-machine attendants. The average salary in the gaming industry at the end of June was MOP17,740 (US$2,218), about 60 percent more than the median monthly earnings of all employees. The Macau Gaming Industry Employees Association’s vice-president, Lawrence Tai, does not foresee any reduction in the availability of croupiers under the new rules. His association is among the main trainers of casino workers, having trained more than 15,000 croupiers since its establishment in 2002. “Over 95 percent of our students are 21 years old or above,” Mr Tai says. But he notes some under-21s were among the 320 students enrolled in the NOVEMBER 2012
WISDOM OF SOLOMON
rant Govertsen of research firm Union Gaming Group says the forthcoming ban on smoking in casinos is much more of a worry for the gaming industry than the new minimum age for entry to casinos. “In other markets that have instituted 100 percent smoking bans, gaming revenues have typically declined by up to 10 percent. For Macau, we think the impact will be much lower, given that it is only a 50 percent smoking ban,” Mr Govertsen says. The rules for smoking areas in casinos were gazetted last month. The ban on smoking in casinos comes into effect on January 1. Casinos can designate up to half of their gaming floors as smoking areas. In contrast, no smoking is allowed anywhere in restaurants and cafes. Casinos are allowed smoking areas because the authorities were persuaded that a complete ban on smoking would be bad for the gaming business in particular, and the economy in general. Existing casinos must separate smoking and non-smoking areas with either 4-metre wide buffer zones, air curtains, 2-metre high walls or special
ventilation systems. Future casinos must divide their gaming floors physically and have separate ventilation systems for their smoking and non-smoking areas. If casinos have more than one floor, their smoking areas must be on the upper floors. The smoking arrangements must be approved by the government. The rules do not say what proportion of a casino’s gaming tables must be in non-smoking areas but the government will take the distribution of tables into account when considering the casino’s smoking arrangements. Casinos must ensure that the quality of the air in smoking areas meets a minimum standard, and give the Health Bureau monthly reports on air quality. To protect the health of employees, they must be rotated between smoking and non-smoking areas. Employees who are pregnant or who have recently given birth, and employees with cardiac or respiratory ailments will not be allowed to work in smoking areas. Casinos that break the rules may have their smoking areas reduced in size, or may face a complete ban on smoking on their premises.
61 two baccarat courses held by the association so far this year. The raising of the age limit was proposed in 2008 by the chief executive at the time, Edmund Ho Hau Wah. Curiously, it was Mr Ho who put forward, in 2001, the bill to lower the minimum age for access by residents to gaming tables from 21 to 18.
Check behind the ears The government submitted the bill to raise the age limit to the Legislative Assembly last year. The assembly took more than a year to pass it. Some members had misgivings, pointing out that that an 18-year-old in Macau may vote, marry and be a party to a contract. A problem for casinos is how to prevent under-21s from getting in. Gamblers in general are not required to show identification before being allowed entry. The casinos say they will tighten their screening for age. But in busy periods such as the National Day holidays, when crowds of visitors from the mainland pour into the casinos, effective screening will be hard.
There is no up-to-date data available on how many casino employees are under 21. The most recent official figures show 2,800 under-21s were working in casinos in 2010
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Sands China says it has enlarged a number of the entrances to its gaming areas to make it easier for its security staff to detect under-21s. The company has also increased the number of security staff at the entrances to its gaming areas. “Those of youthful appearance will be requested to produce proof of age prior to being allowed access into a gaming area,” Sands China’s spokesperson said. “All operational staff are being given additional awareness training to ensure that they are aware of the changes to the law, and that each and every employee has a role to play in ensuring that individuals under the age of 21 do not gain access to a gaming area.” A spokesperson from the Gaming Inspection and Coordination Bureau says: “All entrances to a casino floor should have clear signage to remind customers
that any players under the age of 21 years old should be prohibited from entering.” Casino staff are authorised to demand that a player show identification if they have doubts about the player’s age. The bureau will not assign any of its own personnel exclusively to monitor the enforcement of the new age limit. “In case there are disputes between the players and the casinos, our bureau inspectors will come to assist in settling the disputes,” the spokesperson says. A casino that allows in an under-21 is liable to a fine of between MOP10,000 and MOP500,000. Claiming that it did not know is no defence. An under-age gambler is liable to a fine of between MOP1,000 and MOP10,000 and, if they win, is liable to have their winnings confiscated by the government.
GET NICE FAILS TO SELL GRAND WALDO
MELCO CROWN FINALLY INKS DEAL FOR MANILA CASINO The gaming operator is to partner with Philippine property developer Belle Corp
Philippine property developer Belle Corp said last month it has signed a deal with Macau-based gaming operator Melco Crown Entertainment Ltd to develop and operate a casino resort complex in Manila. Under the cooperation agreement, both entities are expected to make equal investment contributions to the project, Belle said in a statement to the Manila stock exchange. Melco Crown first announced on July 5 that it had entered into a memorandum of agreement with Belle to develop a casino resort in Manila. At the time, it added that a final deal between both parties would be finalised within the next two months. This will be Melco Crown’s first venture outside of Macau. The company will be incharge of operating the casino resort.
Hong Kong-listed Get Nice Holdings Ltd failed to reach an agreement to sell its 65-percent stake in casino-resort Grand Waldo. The company told the Hong Kong Stock Exchange in July it was planning to sell the property to “a member of an international group engaged in the operation of a number of hotels, casinos and other entertainment facilities”. Last month, Get Nice announced that it had not reached an agreement with the purchaser.
LET’S TALK IT OVER
GRAND LISBOA GETS GREEK MYTHOLOGY TABLES
The 40 gaming tables removed by SJM Holdings Ltd from Greek Mythology in August have been put into operation at the Grand Lisboa casino, said Ambrose So Shu Fai, chief executive of SJM Holdings. The removal of the 40 tables – around one third of Greek Mythology’s overall inventory – was spurred on by the disputes over the control of the casino, Mr So said. “Greek Mythology operates under a satellite-casino agreement [with SJM Holdings] and the deal states that if the business drops, the operating rights of some tables can be terminated,” Mr So told our sister publication Business Daily.
Las Vegas Sands Corp is in discussions over a possible settlement with the U.S. Justice Department regarding a probe into whether the company violated U.S. moneylaundering rules, The Wall Street Journal reported. Las Vegas Sands is under investigation into whether it failed to report potentially suspicious financial transactions by two big customers who were later charged with crimes, the newspaper said. There are no indications that the investigation includes Macau-based Sands China Ltd, a subsidiary of Las Vegas Sands.
Gaming ast month is one to remember for Macauâ€™s gaming industry. The sector posted a new monthly casino gross gaming revenue record, at MOP27.7 billion (US$3.5 billion), and all six operators were finally allowed into Cotai. But analysts say it will take up to five years until each casino operator has a property running there. Last month, MGM China Holdings Ltd and SJM Holdings Ltd separately announced that the government had granted them a plot in Cotai. They were the last two gaming operators to be given the right to build there, after Wynn Macau Ltd was granted a piece of land in May. Unlike Wynn Macau, both the land grants for MGM China
65 and SJM Holdings had yet to be published in the Official Gazette as of October-end. “We believe the timeline for official gazetting is somewhat opaque and could take some time (months),” Sterne Agee analyst David Bain wrote last month in a note. After that, gaming operators still need to get a construction permit from the government to break ground, which could take some more time, he added. Wynn Macau is still waiting for the issuance of its Cotai construction permit. Hong Kong-based brokerage CLSA Asia-Pacific Markets said construction permits could take up to 10 months.
MGM China’s Cotai plot covers an area of 72,000 square metres, according to a company release. The gaming operator will pay the government a total premium of MOP1.29 billion for the land. The company says it plans to build a casino resort with capacity for approximately 500 live gaming tables and 2,500 slots, as well as 1,600 rooms. The project has a HK$20-billion (US$2.6 billion) budget and over 85 percent of the property’s gross floor area will feature non-gaming offerings. “This destination resort represents a significant growth opportunity for MGM China. The project will fully demonstrate our strengths in terms of design and branding, quality
Photo: Luís Almoster
All six casino operators have now been given the right to build in Cotai, after SJM and MGM also received the government’s nod
SJM Holdings plans to develop a casino resort in Cotai with up to 700 gaming tables and 1,000 slot machines. The resort will have approximately 2,000 hotel rooms and suites
of service and thoughtful diversification of product offerings,” said Jim Murren, MGM China’s co-chairperson.
Time is ticking SJM Holdings’ announcement came just one day after MGM China. The company said it had formally accepted a proposed draft land concession contract from the government to develop a casino resort on 70,500 square metres of land in Cotai. The company will have to pay a total premium of MOP2.15 billion. SJM Holdings said in a press release that it plans to develop a casino resort with a total approved building area of 521,000 square metres, including a casino with up to 700 gaming tables and 1,000 slot machines. The resort will have approximately 2,000 hotel rooms and suites. “SJM’s acceptance of the proposed draft land concession contract is a milestone development for the company as it offers the opportunity for the group to expand its existing operations from Macau Peninsula to Cotai,” said the gaming operator’s chief executive, Ambrose So Shu Fai. Both MGM China and SJM Holdings say they expect construction of their respective projects to take up to 36 months. But analysts argue it is unlikely that either property will be running by 2015-end. NOVEMBER 2012
Currently, all six gaming operators have plans to open casino resorts in Cotai between 2015 and 2016. Industry insiders expect the government to delay a couple of openings for 2017, either via the timing of construction permits or the granting of labour quotas. Projects further along the development pipeline should be completed earlier, according to CLSA.
Need for manpower One project already likely to face delays is Sands China Ltd’s ‘The Parisian’. Chairman Sheldon Adelson said in September he was hopeful work on the US$2.5 billion casino resort could start within this month, but the government has hinted project approval may still take a while. The project, to be located beside Four Seasons, on so-called parcel 3, will include 3,300 hotel rooms and have a half-scale Eiffel Tower replica. It is expected to take about three years a to complete. Galaxy Entertainment Group Ltd is already expanding is Galaxy Macau casino-resort. And, according to our sister publication Business Daily, the gaming operator is also planning to add a 10,000-seat arena to the property. The design plans are due to be submitted for government approval by late December.
In August, Melco Crown Entertainment Ltd recommenced construction works on its Studio City project. Cochairman and chief executive Lawrence Ho Yau Lung says the development remains on track to open around mid-2015. According to the gaming operator, the total budget for Studio City is approximately US$2.9 billion. The project is expected to have gaming capacity for up to 500 gaming tables and over 1,500 gaming machines. It will also host a 5,000-seat multi-purpose entertainment studio and TV production facilities. Another concern related to the construction and operation of the new Cotai projects is the lack of available manpower. Macau’s unemployment rate is currently at 2.0 percent, the lowest level ever, while the number of imported workers is at an all-time high. According to a forecast by the Statistics and Census Service, Macau will need over 45,000 extra workers between now and 2016. The hotel and casino industries will need close to 40,000 of those workers. MGM China expects to require about 8,000 employees for its new casino resort in Cotai. Last month, chief executive Grant Bowie said he is confident the government will come up with measures to ensure all Cotai projects in the pipeline will have enough manpower.
Caesars’ next battle
The Las Vegas-based casino operator hasn’t given up on getting a presence in Asia BY MICHAEL GRIMES
teven Tight has possibly one of the toughest jobs currently in the casino industry. This is to persuade Asian jurisdictions considering gaming expansion or legalisation of casinos, that Caesars Entertainment Corp – a company that as Harrah’s Entertainment Inc passed on a chance in 2002 to bid for a Macau concession, and four years later pulled out of bidding for a Singapore casino and refused to bid on Wynn Macau Ltd’s gaming sub concession – is the perfect partner to build a new Asian casino resort. Mr Tight’s employers have now acknowledged that a belated attempt to get a casino presence in Macau – via the 2007 purchase of a Cotai golf course for US$577 million (MOP4.6 billion) – is not so much in the rough as under water. The company recently said it is looking to sell the 175-acre Caesars Golf Macau site. But Mr Tight – Caesars’ president of international development, based in Hong Kong – insists that doesn’t mean the company has given up on Macau. “We are still committed to Macau and we are still very interested in pursuing opportunities,” he says, while con-
firming to Macau Business that the golf course is for sale. “Right now we are in the process of speaking to potential buyers. There’s a tremendous amount of interest,” he states. “I don’t know if it will make a profit, but we’re looking for an offer that will be a significant one. Our focus is to try and redeploy that capital into investments that generate a greater near-term return.” Mr Tight’s boss Gary Loveman, Caesars’ chairman and chief executive, had a now-famous moment of honest reflection about the 2006 refusal to bid on Wynn Macau’s gaming sub concession. “We did not pursue an opportunity in Macau when one was offered, which I think our chairman continues to acknowledge was his worst professional decision,” Mr Tight recently told delegates at the International Association of Gaming Advisors’ 2012 International Gaming Summit in Singapore.
Positive outcome Mr Tight accepts there might be some scepticism among governments and in-
vestors in the region that Caesars is in good enough financial health to take on the commitment of a big Asian casino project. Despite being the largest owner of casino venues in the U.S., Caesars recently reported a third quarter loss of US$505.5 million. In the second quarter, it wrote down US$101 million on costs linked to its Macau golf course purchase. In 2011, U.S. commercial casino revenues (excluding tribal casinos) grew by 3 percent year-on-year according to the American Gaming Association. Macau revenue for casino games grew by 42 percent year-on-year in the same period, according to data from the city’s Gaming Inspection and Coordination Bureau. Caesars’ situation has not been helped by massive storm Sandy that last month battered the east coast of the U.S., including Atlantic City, New Jersey, where Caesars is the largest owner of casino properties. The company – which as Harrah’s took on US$30.7 billion debt when it was purchased in a leveraged buyout in
69 tion timetables of any Disney property. Ground breaking was in January 2003 and it opened to the public in September 2005. But the negotiations leading to that launch dated back to 1998.
Caesars Golf Macau
“We are still committed to Macau and we are still very interested in pursuing opportunities,” says Steven Tight, Caesars’ president of international development January 2008 – still had US$22.7 billion in total debt as of June 30, according to an August 8 regulatory filing. To reduce that burden, the company might raise money from its private-equity investors to repurchase Caesars’ bonds at a discount. “One of the challenges we have is Caesars itself,” says Mr Tight candidly. “We don’t yet have a presence here in Asia for a couple of different reasons.” “Given the fact we went through a leveraged buyout a while ago [and] we have a significant amount of debt, I think people look at us and wonder whether we have the capacity to expand in these
markets,” admits Mr Tight. “In fact, we have a tremendous amount of cash. We do have access to credit, and we don’t feel that this is an issue. But that’s an ongoing challenge that we face.” Mr Tight isn’t a stranger to challenges and does have a track record for delivering big tourism projects in Europe and Asia. He spent 17 years with Walt Disney Co including in executive roles in the development and operation of Disneyland Paris, as well as leading the successful negotiation for Hong Kong Disneyland where he was appointed managing director. The theme park had one of the shortest construc-
“I think the most important thing I learned from the Hong Kong Disneyland process was patience. Any of these large capital projects – whether it’s a theme park resort or an integrated resort with a gaming component as the anchor – require a significant amount of time, a supportive relationship with the government and with fellow investors,” Mr Tight says. “It takes time to address all of the very complicated issues, which are further complicated by the regulatory environment, by legislation and the implications of working under the U.S. regulatory constraints such as the Foreign Corrupt Practices Act (FCPA),” he adds. “When you’re in China – particularly with some of our non-gaming initiatives – not being able to take someone you’re meeting out to lunch or dinner is a real problem. They don’t understand we can’t do it for FCPA reasons.” Mr Tight says Japan is “one to watch” for the future, but Caesars is currently more focused on a casino opportunity in Taiwan, which he says has “huge potential”. “Taiwan is close to passing the legislation necessary for gaming in the outer islands. We think that the outer islands that haven’t yet held a referendum – particularly Kinmen, given its proximity to the mainland, only a 45-minute ferry ride away – hold huge potential,” he states. Caesars is also interested in South Korea, despite the fact only one of the country’s casinos – Kangwon Land – is currently open to local players. Caesars is in talks with the Asian conglomerate Lippo Group about involvement in a US$500 million casino resort project proposed for Incheon, near Seoul’s international airport. “We aren’t pushing for a ‘locals play’ licence there. We respect the government’s position that it’s foreignersonly,” Mr Tight says. “The site we’re looking at is part of a larger scale development that Lippo is leading as majority shareholder. It’s called Midan City,” he adds. “At the moment we’re focusing on getting approval from the government for a licence.” NOVEMBER 2012
VIP REVENUE DOWN IN THIRD QUARTER
Casinos recorded their first year-on-year drop in VIP gross gaming revenue in over three years Macau’s casinos’ VIP gross gaming revenue went down year-on-year in the third quarter of this year, official data shows. Figures released last month by the Gaming Inspection and Coordination Bureau show that the city’s casinos reported MOP51.2 billion (US$6.4 billion) in VIP gross gaming revenue between July and September this year, down by 1.1 percent year-on-year. The drop was widely expected, based on non-official figures provided by
gaming analysts. The last time VIP gaming revenue in Macau contracted was in the second quarter of 2009. In the opposite direction, mass gaming revenue (including slotmachines) continued to grow fast – it went up by 26.8 percent year-onyear in the third quarter of 2012, to MOP23.4 billion. Even so, this was the first time since the end of the third quarter of 2009 that the growth rate stood below 30 percent.
BAD NEWS FOR GAMING IN 2013
Deutsche Bank has revised downward its forecasts for Macau’s casino industry. Deutsche Bank analyst Karen Tang cut her Macau 2013 gross gaming revenue growth estimate to 7 percent from 11 percent, she wrote last month in a client note. That was after cutting her 2013 VIP gross gaming revenue growth estimate to zero percent from the previous 5 percent. Ms Tang downgraded all Macau-based gaming operators to hold from buy, except Melco Crown Entertainment Ltd and Galaxy Entertainment Group Ltd.
MGM CHINA WINS LAWSUIT OVER DEBT
A Hong Kong court sided with MGM China Holdings Ltd in a lawsuit over a gambling debt of HK$9.3 million (US$1.2 million) incurred by a Hong Kong-based businessman last year. When MGM China resorted to the Hong Kong courts to get the money back, the businessman appealed, arguing that Macau would be the appropriate forum for the proceeding. According to the judgment handed out last month, judges stressed that the businessman himself had agreed that “the loan agreement could be enforced by the plaintiff in the jurisdiction where his assets may be found”, our sister publication Business Daily reported.
SANDS RECRUITS 600 DEALERS
Sands China Ltd held a dealer recruitment fair last month, offering close to 600 vacancies for Macau residents. The two-day event welcomed a crowd of over 1,200 applicants, from which nearly 50 percent were given job offers, according to a Sands China press release. The job fair featured dealer positions for the various gaming areas at Sands China’s Cotai properties. NOVEMBER 2012
The SHFL Entertainment stand at last month’s G2E Las Vegas
Agent of change Shuffle Master Inc changes its name and moves near Cotai BY LUCIANA LEITÃO
huffle Master Inc started a new chapter in its history last month with a change of name to SHFL Entertainment Inc. The global rebranding came at the same time the company moved its Macau headquarters from the Peninsula to Taipa, nearby Cotai. SHFL Entertainment’s executive vice-president for Asia, Ken Jolly, says the new name represents the gaming supplier’s evolution. The company started as card shuffler maker in 1983 and now carries products in five distinct categories, from roulette chip sorters to electronic table systems to mobile gaming applications. “It was a shuffler company for a number of years. It went into the table games and then it has been expanded to other gaming products, like slot machines
and building gaming terminals for live and virtual dealers,” Mr Jolly says. The new name for the U.S.-based gaming supplier keeps the “traditional name” and “respects the founders of the company”, he says. SHFL, pronounced “shuffle”, is a tribute to the company’s original name and its legacy product, card shufflers. The goal is also not to waste the company’s strong brand equity. SHFL is also the company’s Nasdaq ticker symbol. Mr Jolly, a veteran gaming executive with more than 30 years’ experience, says the second part of the name works because “we’re in the entertainment business supplying products for the gaming entertainment industry”. The rebranding was scheduled to coincide with the Global Gaming Expo
(G2E), the world’s biggest gaming trade show and conference, which took place last month in Las Vegas.
Overlooking Cotai SHFL Entertainment has moved its headquarters from NAPE, on the Peninsula, to Taipa. The company’s new office is located at the CAM Building, near the airport and Cotai. Mr Jolly says the company wanted to be closer to its clients. Each of the city’s six concessionaries is due to have flagship properties in Cotai within the next five years. SHFL Entertainment was able to create a showroom in the new office. It allows the company to display concepts and products in a targeted way, Mr Jolly says. NOVEMBER 2012
SHFL Entertainment’s goal here remains the same: to further its footprint, especially in categories beyond the utility product segment, where the company already has a strong market position The firm’s new base also includes a conference room, technical area and a components store. Despite the changes undertaken by SFHL Entertainment in such a short period of time, Mr Jolly is bullish on growth in Macau. SHFL Entertainment’s goal here remains the same: to further its footprint, especially in categories beyond the utility product segment, where the company already has a strong market position. There has been an increase in the demand for its shufflers in Macau, particularly the latest
generation MD3 shufflers. SHFL Entertainment is eyeing to further increase its overall presence in Asia, already responsible for 13 percent of the company’s global revenue. The gaming operator saw revenue here almost double for the quarter ended July 31, in comparison with one year before, reaching US$8.24 million (MOP65.9 million). Besides Macau, SHFL is also expanding in India and the Philippines.The company is planning to open an office in Manila. The gaming supplier already
has one office in Singapore. Looking ahead, SHFL Entertainment is enhancing several of its products, to provide secure and faster operations, but also to offer more features, says Mr Jolly. There are also more games being produced for its slot machine product range. One of the latest offerings is the Asian-themed “Duo Fu Duo Cai – Fu”. The link is housed in SHFL Entertainment’s Equinox cabinet, which debuted last year in Asia.
UP FOR THE FIGHT
HFL Entertainment Inc has been entangled in a legal dispute with Macau-based gaming supplier LT Game Ltd over patent issues for more than three years. Rights for multi-terminal systems combining electronic betting with a live dealer and live baccarat are the main issue behind the quarrel. The number of system installations has soared since 2010, after the government introduced a cap of 5,500 on the number of live gaming tables. LT Game says it has the only patented system available here, enjoying a de facto monopoly of multi-terminal systems for live baccarat. SHFL Entertainment strongly denies LT Game’s patent has any relevance to its own multi-terminal live baccarat product. The company itself boasts about 2,400 registered and pending patents, trademarks and copyrights.
“Our position is strong and we’ll continue to fight back in court,” says Ken Jolly, the SHFL Entertainment’s executive vice president for Asia. The legal dispute exploded again at this year’s Global Gaming Expo (G2E) Asia. Controversy flared up when SHFL Entertainment displayed a multi-terminal system for live baccarat. LT Game had obtained a court injunction blocking rival manufacturers from displaying at the trade show any product that breached its patents. Initially, SHFL had to cover its system, but it was eventually allowed by the court to display it. At the expo’s 2009 edition, customs officials, acting on a complaint by LT Game of patent infringement, seized a SHFL multi-terminal system for live baccarat. The dispute has since dragged on in the courts.
Casino gaming 2011 MOP 267.9 billion
Gross gaming revenue
5,302 16,056 34 casinos
Gaming tables Slot machines Number of casinos
Market share per casino operator* 2011 SJM Holdings Ltd Galaxy Entertainment Group Ltd Sands China Ltd Wynn Macau Ltd Melco Crown Entertainment Ltd MGM China Holdings Ltd
29% 16% 16% 14% 15% 10%
Year-on-year change (%)
MOP 27.7 billion
42.2 10.7 14.3 1 casino
5,497 17,029 35 casinos
Year-on-year change (%)
-3 7 -2 -1 --1
Year-on-year change (%)
percentage points percentage points percentage points percentage point
Month-on-month change (%)
27% 19% 21% 10% 14% 9%
3.2 2.2 7.1 1 casino
-1 3 -3 --1
percentage points percentage points percentage points percentage point percentage point percentage points
Notes Oct 2012 Sep 2012 Sep 2012 Sep 2012
Notes Oct 2012 Oct 2012 Oct 2012 Oct 2012 Oct 2012 Oct 2012
Gross revenue from casino games Roulette Blackjack VIP Baccarat Baccarat
MOP783 million MOP2,712 million MOP196,126 million MOP48,669 million
Mahjong Slot machines 3-Card Poker Fish-Prawn-Crab
MOP70 million MOP11,425 million MOP190 million MOP51 million
3-Card Baccarat Game
Texas Holdem Poker
Lucky Wheel Live Multi Game
MOP35 million MOP311 million
Fortune 3 Card Poker
Year-on-year change (%)
16.5 18.4 44.6 39.4 15.3 34.3 32.6 105.9 32.6 45.0 -45.2 28.3 -7.4 28.2 9.4 103.3 23.5 43.3 29.4
Latest MOP193 million MOP746 million MOP51,166 million MOP16,805 million MOP56 million MOP1,398 million MOP20 million MOP52 million MOP3,149 billion MOP50 million MOP6 million MOP90 million MOP35 million MOP69 million MOP10 million MOP259 million MOP368 million MOP57 million MOP51 million
Year-on-year change (%)
2.1 13.5 -1.1 32.8 1.8 10.3 -28.6 205.9 11.2 4.2 -45.5 28.6 -2.8 3.0 -191.0 7.0 -1.7 37.8
Notes Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012
Gross revenue from other gaming activities 2011 Greyhound Racing
Sports Betting - Football Sports Betting - Basketball
MOP362 million MOP86 million
Year-on-year change (%)
-12.6 0.2 -56.5 -4.7 8.9
Latest MOP50 million MOP90 million MOP2 million MOP0.0002 million MOP115 million MOP15 million
Year-on-year change (%)
-39.0 -20.4 --71.4 36.9 -11.8
* Figures are rounded to the nearest unit, therefore they may not add exactly to 100 percent
Notes Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012
Source: Gaming Inspection and Coordination Bureau and industry sources
Sheldon Adelson addresses the media in Madrid
Adelson’s next big thing Las Vegas Sands plans to break ground on its EuroVegas project next year BY ANDREW GELLATLY*
epresentatives of Las Vegas Sands Corp met last month with the government of Madrid and confirmed that they plan to break ground on the company’s 15 billion euro (MOP157 billion) EuroVegas project late next year. Ignacio González, the new president of the region, said the government planned to have final legislation for the EuroVegas project “at the beginning of next year”, with the aim of starting construction on a schedule that has been confirmed by Las Vegas Sands chairman Sheldon Adelson.
Las Vegas Sands is the parent of Macau-based gaming operator Sands China Ltd. Mr Adelson and his team, who reportedly requested the meeting, reiterated their commitment to execute the project in three phases starting in December 2013. Mr Adelson and other Las Vegas Sands executives have already visited three locations around Madrid, all of which have plots of land that have stood empty since the start of the financial crisis and the collapse of Spain’s property market, although the exact location
for EuroVegas has still to be decided. Company executives reportedly also told Madrid regional officials that Las Vegas Sands had already attracted sufficient funding to start construction. “Mr Adelson said he couldn’t say which banks were giving them the financing, because that’s still being negotiated,” an anonymous source told AFP. “They have the financing, it is just a question of seeing which bank lends them the money most cheaply,” the source added. Mr Adelson also said he would not reveal further information about the project until the location is unveiled to avoid placing unnecessary “pressure” on this very “complex project”, which “should not be endangered by getting too ahead of things”.
Red carpet out Madrid president Mr Gonzalez said the project that would feature a resort with six casinos and a dozen hotels to lure gamblers from across Europe had “great importance for Spain and for the Madrid region”. “The Las Vegas Sands team is working to finalise the site where this project
75 will be located, and also the financial terms of this project over the next few months,â€? Mr Gonzalez said. Mr Gonzalez also told Spanish reporters he did not believe the door was closed on possible changes to Spanish anti-smoking laws to allow exemptions for EuroVegas. When Barcelona and Madrid were vying for the right to host the project, Madridâ€™s regional president at the time indicated they would be willing to rewrite laws to facilitate the project, although any moves by the regions to ease taxes may be opposed by the cashstrapped central government under Prime Minister Mariano Rajoy. â€œI doubt that itâ€™s case closed on the part of the [Spanish] government,â€? Mr Gonzalez told Europa Press. â€œI imagine that it is being considered.â€? Spainâ€™s existing casinos have seen their revenues slide 40 percent since 2007 and are hoping that any regulatory changes in Madrid will widen to include other regions, where casinos typically pay tax of 55 percent of gross revenues plus corporate tax. According to the Spanish Casino Association, between 15 percent and 18 percent of the gaming sectorâ€™s revenue declines have been due to anti-smoking rules. Asked whether other casinos would
With Spainâ€™s worsening economic uncertainty, there is a good deal of scepticism as to whether EuroVegas will ever become a reality be granted the same concessions as EuroVegas, Mr Gonzalez said that it â€œdependsâ€?. Although there are two other casinos in the Madrid region, EuroVegas is a huge resort project that is also set to include shopping centres, restaurants and other amenities. â€œItâ€™s not that they may be special conditions for Mr Adelson, but for those that come forward with a project like Mr Adelsonâ€™s,â€? Mr Gonzalez said.
Tough times With a little more than 12 months to secure the financing, there are still question marks over the willingness of international banks to join with Las Vegas Sands in the Spanish project, and the time scale in which EuroVegas, once begun, could be completed. Speaking at a recent Deutsche Bank/
UBS Gaming Investment Forum in Las Vegas, company chief financial officer Kenneth Kay indicated that Las Vegas Sands would aim for a 30 percent to 35 percent equity investment of their own, with the balance coming from project financing. â€œGiven the fact that these projects get phased out over time ... youâ€™re not spending all the money at the same time. The spending goes out four to five to six years and that allows us to phase our spending and obviously pursue multiple projects at the same time,â€? said Mr Kay. With Spainâ€™s worsening economic uncertainty, there is a good deal of scepticism as to whether EuroVegas will ever become a reality. U.S. credit rating agency Standard & Poorâ€™s last month cut Spainâ€™s sovereign credit rating to BBB-minus, close to junk bond status, citing a worsening economic slump that is constraining the governmentâ€™s policy options. â€œIn our view, the capacity of Spainâ€™s political institutions (both domestic and multilateral) to deal with the severe challenges posed by the current economic and financial crisis is declining,â€? S&P said in a statement. * ADDITIONAL REPORTING BY JAMES KILSBY GAMBLINGCOMPLIANCE
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WORKERS FIGHT FOR SALARY HIKE
The Macau Gaming Industry Labourer’s Association is fighting for a salary hike for casino workers next year. Leong Sun Iok, vice-president of the association’s board of directors, says he is optimistic about a wage rise. Mr Leong didn’t disclose the salary increase rate the association is proposing. In June, average earnings of full-time employees in the gaming industry stood at MOP17,740 (US$2,218), up by 7.8 percent year-onyear, according to official data.
KIOSKS TO PROMOTE RESPONSIBLE GAMING
The Institute for the Study of Commercial Gaming at the University of Macau is setting up six kiosks to provide responsible gaming information to gamblers, the institute’s director said. Davis Fong Ka Chio told reporters that the three-month trial would start in December. Each gaming operator will have one kiosk in one of their casinos. The Institute for the Study of Commercial Gaming is spending MOP1.3 million (US$163,000) on the project.
ECONOMY MORE DEPENDENT ON GAMING
The gaming sector’s gross value added, measuring its contribution to the economy, amounted to MOP161.13 billion (US$20.1 billion) in 2011, data from the Statistics and Census Service shows. The figure was up 42 percent year-on-year, showing Macau’s increasing dependence on gaming. Last year, the gaming sector’s gross fixed capital formation soared by 104 percent from 2010, to MOP2.24 billion, on account of the construction of largescale casino resort facilities.
GAMING REGULATOR HEAD RE-APPOINTED Manuel Joaquim das Neves’ term has been extended until November 2014 Manuel Joaquim das Neves will continue to head Macau’s Gaming Inspection and Coordination Bureau for a further two years. The announcement was made last month in the official gazette. Mr Neves’ appointment as the director of the gaming regulator office was extended until November 2014. Mr Neves has headed the Gaming Inspection and Coordination Bureau since 1997. He first started working there in 1985.
77 BILL KWOK-PING CHOU ASSOCIATE PROFESSOR OF POLITICAL SCIENCE, UNIVERSITY OF MACAU
More bricks in the wall THE GOVERNMENT’S PROPOSED POLICY ON YOUTH WOULD DO LITTLE FOR THE DEVELOPMENT OF YOUNG PEOPLE ublic consultation on the government’s proposed policy on youth from 2012 to 2020 ended last month. The proposed policy covers people between the ages of 13 and 29. It raises several concerns. The policy would mean even easier access to government grants for pro-establishment youth associations. This means increasing their revenue, free of control. The leaders of these associations, already heavily funded by the government, argue that they are working to boost the civic development of young people. In fact, their activities tend to be more like brainwashing. “Backed by Macau’s stable economic development and public finances, [the government] will increasingly provide financing to youth, youth-related associations and nongovernment social service groups to ensure young people can enjoy diversified measures adapted to their integral development needs,” the policy proposal says. There have been several cases of pro-establishment associations taking advantage of government funding for their private benefit or to pay for dinners and other kinds of merrymaking. As associations do not need to put their purchases out to public tender, even when using money granted by the government, there is no way to check for or avert conflicts of interest. Associations are not even obliged to request a minimum number of quotations from different suppliers. The Education and Youth Affairs Bureau also lacks the ability to effectively supervise how associations spend money they are granted. The proposed policy would do little to change this. To increase funding to youth associations without careful consideration means to transfer resources to those groups with no assurance that their activities will mean better development of young people.
Hegemony reinforced The policy proposal mentions a need to improve the competitive skills of young people. But it says efforts should focus on leaders of youth associations by giving them leadership training and coaching. This raises several questions. Many outstanding young people either do not belong to any association or, if they do, are not leading members. The proposed policy would ignore these people completely and waste their potential. If one only needs to be an association leader to get special training, no skill assessment is involved. Privileged youngsters are more likely to be eligible for training, without having shown that they are in the least deserving. The Education and Youth Affairs Bureau does not explain how we can enhance the competitive skills of all young people by giving special training only to leaders of youth associations. This would also reinforce the social hegemony of pro-
establishment associations, whose leaders would more likely be selected for training. If the proposed youth policy focuses on putting even more resources into the hands of pro-government associations, it is likely to be a waste of public funds. It may lead to allegations that the Education and Youth Affairs Bureau unfairly favours some groups.
Economic tools The policy proposal speaks of a need to cultivate young people’s “sense of identity and of belonging to society and to the motherland”. It says they should “understand and respect their own country and culture”. For Chinese, the word “respect” means to accept without questioning. For instance, when the central government calls for the world to “respect” Chinese sovereignty over Tibet and over the Diaoyu Islands, it is demanding that its authority there go unchallenged. However, as the debate on “national education” in Hong Kong has clearly demonstrated, to expect young people to identify with China but not to analyse its past mistakes critically means contaminating education with ideological brainwashing. This is unacceptable. The youth policy proposal makes clear its purpose from the very beginning. “Macau is moving towards developing into a ‘world tourism and leisure centre’, having launched and improved several policies eyeing to promote economic diversification ... providing youth with opportunities for their integral development,” it says on the first page. The proposed policy sees young people only as tools in the service of the economy. It ignores their need to develop as independent individuals. Elsewhere in the modern world youth policies aim to nurture young citizens armed with critical thinking, but the government here thinks differently. NOVEMBER 2012
hen Andrew Kok and his family left Macau and moved to Britain in the late 1970s, the city was very different from today. “Macau was just a small town, following Hong Kong. It was Hong Kong’s little sister,” the 53-year-old restaurant manager says. About 40 years later, Macau is an international tourist destination standing on its own two feet. The number of hotel rooms has almost tripled since 2005 and most of the new rooms are in five-star hotels.
The hotel boom triggered by the liberalisation of the gaming market in 2002 has created thousands of new jobs in hospitality. The number of people working in the industry is six times what it was eight years ago. The change has not passed by unnoticed by people with ties to Macau working in hospitality abroad. After building their careers overseas, many are coming back. With the advantage of their international experience, their right to residency, the government’s restrictions on imported labour and the lack
are probably “those who studied abroad for tertiary studies, who remained working abroad, perhaps to obtain residency, and now find the economic climates in Europe and the Americas less than ideal compared to Macau”.
Two steps forward Mr Kok returned two years ago. He is now assistant manager of a restaurant in the Four Seasons Hotel Macao. He managed several MacDonald’s restaurants in Vancouver NOVEMBER 2012
Photo: Luís Almoster
of suitable manpower otherwise available here, they can easily find better-paid jobs. Because it is difficult to find suitable workers here or to import them, some international hotel chains try specifically to poach Macau people working in the hospitality industry abroad. A good example of this is the Sheraton Macao Hotel, which opened in September in Sands Cotai Central. Leonardo Dioko, who heads the Institute for Tourism Studies’ Tourism Research Centre, says most of the returnees
Andrew Kok moved to Britain in the late 1970s. He returned two years ago. He is now assistant manager of a restaurant in the Four Seasons Hotel Macao
Ashley Chan came back to Macau to work at the Grand Hyatt, having pursued her career entirely in the United States. She was promoted last year
for more than 10 years. He moved to Hong Kong in 1996 for family reasons and in 2010, found himself in an uncomfortable situation. “I couldn’t find a job in Hong Kong because I didn’t have an ID card. I could go to Vancouver or Macau. Vancouver was at a flat line and Macau was going up and up, so I picked Macau,” Mr Kok says. After one year as the manager and then director of an Indian restaurant here, Mr Kok sought to further his career with one of the international hotel chains. Although he is now only an assistant manager, Mr Kok says he does not regard this as a retrograde step. Being able to work in a big international hotel chain is like a big promotion, he says. “I wasn’t in food and beverage when I was in Hong Kong, despite the fact that I had 15 years of experience in Canada. I had to step back a little bit and upgrade myself,” he says. Ashley Chan returned to Macau to work at the Grand Hyatt Macau, having pursued her career entirely in the United States. She was promoted last year and, at the age of 35, is now the hotel’s gold passport manager, taking care of VIP guests.
position now,” the 30-year-old says. When he was a teenager, Mr Calado lived in Macau for seven years before obtaining residency and then returning to Portugal to complete his studies. Between 2006 and last year he worked for several hotel chains in Spain, including Le Meridien, also run by Starwood Hotels and Resorts Worldwide. He has worked as a receptionist, front office night manager and concierge. Mr Calado saw the opening online at the Sheraton Macao, applied and got the job. “The hotel industry is booming. There are big hotels opening every year. This was a good opportunity because I’ve worked for Starwood before and I like the company,” he says. Ricardo Pina was among the first to return to Macau when
HOTEL EMPLOYEES 45,000
Land of opportunity
40,000 35,000 Number of employees
Ms Chan studied in Denver, got a permit to work in the U.S. and worked in several establishments managed by international hotel chains, including the Hyatt Regency Denver and the Grand Hyatt Denver, run by Hyatt Hotels Corp. “I spent almost four years with the company. Two years ago, I decided to come back to Macau,” she says. “All my family is here and I wanted to spend some time with them. It was a win-win situation, because I also got to continue my career with Hyatt.” João Calado’s return to Macau to work in the Sheraton Macao, run by Starwood Hotels and Resorts Worldwide Inc, meant a promotion. “I came back in May this year and started in June. I’m a guest service manager. I’m working in a higher
30,000 25,000 20,000 15,000 10,000 5,000 0 Mar 2004
João Calado’s return to Macau to work in the Sheraton Macao meant a promotion
Ricardo Pina was among the first to return to Macau when the hotel industry began to boom seven years ago
the hotel industry began to boom. Since then he has left and returned again. Born in Macau, Mr Pina moved to Portugal when he was a child. Before finishing his studies in hotel management, he took a job in Jamaica as an assistant food and beverage manager. He stayed there for two years before returning to Macau.
Unlucky for some In 2005, several new casino resorts were under construction and there were plenty of job opportunities. “At that time, Wynn Macau was under construction and I sent my curriculum vitae to them before I left my job. I had an interview but it was still too early,” Mr Pina says. He tried to get some work experience.
AVERAGE MONTHLY EARNINGS OF FULL-TIME HOTEL EMPLOYEES
Younger hotel staff that have had a taste of working abroad have also opted to return, like 26-year-old Cyrus Im
“I was from Macau but I had never worked here. So I thought I should take a step back to learn about how things work in Macau,” he says. “I took a job at Macau Tower as restaurant manager. I was supposed to take care of one restaurant, but I ended up managing two restaurants and one patisserie.” Mr Pina took a break to finish his studies at the Institute for Tourism Studies and got a part-time job as an adviser in the Macau Government Tourist Office. “It was a fantastic experience and I learned a lot about how things work in hospitality in Macau,” he says. The hospitality industry beckoned again in 2008. “I joined the pre-opening team of the Shangri-La Macau. I was the seventh employee. I used to say I was the lucky seven,” he says.
NUMBER OF HOTEL ROOMS 25,000
0 Mar 2004
Mar 2006 Resident workers
Non-resident workers NOVEMBER 2012
Farewell, Mr Tourism Observers of the tourism sector laud the legacy of the departing head of the Tourist Office, Jo達o Manuel Costa Antunes BY ALEXANDRA LAGES
The Portuguese administration appointed Mr Costa Antunes director of the Tourist Office in 1988. He is the last Portuguese in the senior ranks of the government NOVEMBER 2012
Photo: Luís Almoster
he Macau Government Tourist Office relied for some years on the slogan “Macau: a world of difference, the difference is Macau” to promote the city abroad. Observers of the tourism sector say that in the city’s tourist bureau, the difference was its outgoing director, João Manuel Costa Antunes. The 62-year-old director will step down next month. That Mr Costa Antunes is going took most by surprise. The office is in the portfolio of Secretary for Social Affairs and Culture Cheong U, who announced last month that the appointment of Mr Costa Antunes would not be renewed. The reason for his departure has been the subject of considerable conjecture, none of it confi rmed. Mr Costa Antunes has not commented publicly.
He declined to be interviewed for this report. Mr Cheong told reporters the replacement of Mr Antunes was a “normal change of personnel instead of a punishment for any kind of mistake”. But it follows five consecutive months of falls in tourist arrivals, during which time tourist arrivals in Hong Kong have increased. Mr Costa Antunes is also the coordinator of the Tourism Crisis Management Office, coordinator of the Macau Grand Prix Committee and chairman of the Pacific Asia Travel Association or PATA. Mr Cheong said this was a heavy burden for one person. Mr Costa Antunes will now become full-time coordinator of the Macau Grand Prix Committee and continue to chair PATA until his two-year term ends in April 2014.
The Portuguese administration appointed Mr Costa Antunes director of the Tourist Office in 1988. He is the last Portuguese in the senior ranks of the government.
Phenomenal era Much of Macau’s success in tourism in recent years is due to the liberalisation of the gaming sector in 2002 and the central government’s easing of restrictions on travel to the city by mainland Chinese. But observers say Mr Costa Antunes played an important role in overseeing the development. They credit him with being the strategist behind today’s image of Macau as an international tourism destination. Mr Costa Antunes was “very important” for the development of the tourism industry, says Glenn McCartney NOVEMBER 2012
of the University of Macau, a hospitality management specialist. “He had very consistent policies and built a very consistent tourism board.” Mr McCartney lauds the vision of Mr Costa Antunes in promoting the city’s heritage to counterbalance gaming and entertainment as tourist attractions. “He was very avid of cultural tourism and of promoting Macau as a heritage site, because that’s what makes it very unique,” Mr McCartney says. “He will always be important in Macau’s tourism, and a reference to those who worked with him.” The growth that took place while Mr Costa Antunes was in charge was phenomenal. The annual number of visitors increased fourfold between 1994 and last year. The number of four-star and five-star hotels rose by over 300 percent, and average room occupancy rates climbed from less than 60 percent to more than 80 percent. Mr Costa Antunes also led crackdowns on cheap tours run by operators that provide transport, accommodation and activities for less than cost. They make their money from commissions paid by owners of shops they herd tourists into or from overcharging for extras. He pushed for a more recent crackdown on illegal inns, overseeing the closure in the past two years of more than 260 establishments without licenses to offer accommodation.
Accommodation failures Mr Costa Antunes didn’t succeed in some critical endeavours. One was to increase the average length of stay of visitors, which remains more or less one day. Another was to entice more tourists to come to Macau for purposes other than gambling – business tourism has yet to take off despite strong government support. Some criticise him for turning up his nose, until recently, at the idea that the city needed more low-cost accommodation. Mr Costa Antunes recently admitted that more hotel rooms were needed. He said the city had fewer than 30,000 hotel rooms, while Las Vegas had about six times that number. He said another challenge was to maintain the quality of service as the tourism industry grew rapidly. Mr Costa Antunes is a civil engineer by profession. He came to Macau in 1983 as an adviser to the government on public works. NOVEMBER 2012
Chief Executive Fernando Chui Sai On’s chief of staff, Alexis Tam Chon Weng, says Mr Costa Antunes has “showed great leading qualities in various roles that require great responsibility”. Mr Tam praises Mr Costa Antunes for his “unusual ability to work and adapt to new realities, professionalism, accuracy and competence, but also his creativity”. Mr Tam and Mr Costa Antunes worked together closely for almost 10 years, when Mr Chui was the secretary for social affairs and culture. Legislative Assembly member Chan Chak Mo describes Mr Costa Antunes as diligent and hard-working. “He has a lot of foresight as far as tourism is concerned. The Grand Prix, the food festival and all promotions in the mainland and all across the world are his main contributions to Macau,” says Mr Chan, who is also the chairman of the United Association of Food and Beverage Merchants of Macau. “I’m sure he will leave behind him a legacy that everyone will remember him by.”
Fortunate timing Another member of the assembly, Ng Kuok Cheong, has a less fulsome view. “Mr Costa Antunes is one of the normal bureaucrats in the government,” Mr Ng says. “The tourist industry’s great development just came from great support from the mainland.” Luís Herédia was an adviser to Mr Costa Antunes in the Tourist Office for nine years. Before that they worked together on the establishment of the Institute for Tourism Studies and on organising the ceremony in 1999 for the handover. “I’ve learned a lot from him,” Mr Herédia says. Mr Herédia, now a tourism adviser in the private sector, says Mr Costa Antunes is a focused organiser and planner. “He works with coordination and objectives. He likes to work, but also to see things progressing in the process,” Mr Herédia says. He notes Mr Costa Antunes, originally from Lisbon, regards Macau as his home. Mr Costa Antunes is married to a Chinese. “He became integrated in the community,” Mr Herédia says. Mr Costa Antunes also played a notable role in the Portuguese community here during the years of uncertainty among its members that followed the
Mr Costa Antunes was “very important” for the development of the tourism industry, says tourism expert Glenn McCartney
Chief Executive’s chief of staff, Alexis Tam, says Mr Costa Antunes has “showed great leading qualities”
“He has a lot of foresight as far as tourism is concerned,” says legislator Chan Chak Mo
Legislator Ng Kuok Cheong says “Mr Costa Antunes is a normal bureaucrat in the government”
“I’ve learned a lot from him,” says Luís Herédia, a tourism adviser in the private sector
handover. He was the first president of Casa de Portugal, an association created in 2001 to promote the interests of the Portuguese who decided to stay on.
Planning ahead Mr Herédia says Mr Costa Antunes shows his qualities as a leader in critical moments. Mr Herédia says one example of this was when the Indian Ocean tsunami in December 2004 killed several Macau residents holidaying in Thailand, and the Tourist Office helped survivors and the families of the victims. “After that, he realised there was a need to create a crisis management office, despite the small size of Macau,” he says. Mr Herédia says the foresight of Mr Costa Antunes proved its value during the political unrest in Thailand in 2008. “The Hong Kong authorities were still thinking about what to do and Macau had already sent a plane to pick up residents,” he says. The incoming director of the Tourist Office is its deputy director, Maria Helena de Senna Fernandes. Ms Senna Fernandes also praises the legacy of Mr Costa Antunes. “I have worked with Mr Costa Antunes since the 1980s. I have learned a lot from him,” she told reporters last month. She said she would follow in his footsteps. Two of her aims were to attract more tourists and clamp down on illegal accommodation. One of the next important tasks for Mr Costa Antunes will be to organise the 60th Macau Grand Prix next year. An event suitable for a diamond anniversary is expected. NOVEMBER 2012
Macau’s souvenir industry is expecting sales volume to slow down to a single-digit growth rate this year. The head of the Macau Pastry Specialty Association Alan Ho Hoi Meng said last month that despite sales in souvenir pastry shops having increased during the National Day Golden Week holiday period, tourists are
spending less on souvenirs during their trips. Over the past few years, souvenir shops have been enjoying double-digit growth in sales. Mr Ho said that the local industry was working on introducing new products and finding ways to re-design the packaging of their products to make them more appealing to shoppers.
Photo: Luís Almoster
SOUVENIR INDUSTRY GROWTH TO SLOW DOWN
Souvenir shops expect single-digit sales increases for full-year 2012
TOURISM DROP TEMPORARY, SAYS IFT PRESIDENT
The president of the Institute for Tourism Studies Fanny Vong Chuk Kwan said last month that the current drop in visitor arrivals is temporary. Ms Vong said it was normal for the industry to have ups and downs. She is optimistic about the industry’s long-term prospects, arguing that many new tourism-related projects would be completed in the next few years. These will help to boost visitor arrivals, according to Ms Vong.
JAPANESE TOURISTS CANCEL VISITS TO MACAU Hundreds of Japanese tourists are cancelling trips to Macau, tourism agents say. Information requests about Macau have also dropped, Portuguese-language newspaper Jornal Tribuna de Macau reported. Industry insiders say tourists from Japan are scared of coming here
after the mid-September violent protests in the mainland against Tokyo following the territorial dispute with Beijing over the Diaoyu/Senkaku Islands. Visitor arrivals from Japan already decreased by 0.9 percent year-on-year in September, to 35,300, official data shows.
NEW CENTURY WORKERS REPORT WAGE DELAYS Some 187 employees of the New Century Hotel have submitted complaints to the Labour Affairs Bureau over wage delays. The bureau confirmed that it received 40 cases from the hotel’s workers between July and October 11, Portuguese-language newspaper Jornal Tribuna de Macau reported last month. Most of the complaints were still under investigation,
the bureau said. Some workers were quoted as saying that they had not received any payment for three months already. Earlier this year, New Century Hotel was involved in a dispute over its ownership between junket room operator Ng Man Sun and his former girlfriend Chen Meihuan. A deal between both parties was allegedly struck in September.
Visitor arrivals Year-on-year change (%)
2011 Total - Same-day visitors - Overnight visitors Average length of stay
28,002,279 15,077,119 12,925,160 0.9 days
Year-on-year change (%)
20,864,685 10,815,039 10,049,646 1.0 days
12.2 15.6 8.4 --
1.0 -2.3 4.8 0.1 days
Notes Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Sep 2012
Visitors by place of residence Year-on-year change (%)
2011 Asia - Mainland - Guangdong - Fujian - Zhejiang - Hunan - Beijing - Shanghai - Tianjin - Chongqing Individual visit scheme - Hong Kong - Taiwan - Japan - South Korea - Others America Europe Oceania Others
27,287,076 16,162,747 8,196,139 932,316 575,595 533,495 314,696 471,366 100,585 172,140 6,588,722 7,582,923 1,215,162 396,023 398,807 1,531,414 310,608 251,748 127,983 24,864
Year-on-year change (%)
12.4 22.2 131.1 164.2 140.1 191.9 185.6 159.0 151.2 166.8
20,341,959 12,458,605 5,991,993 608,782 455,012 436,711 235,675 365,251 94,569 143,842
20.1 1.6 -6.0 -4.2 20.2 -0.6 4.5 3.0 0.3 8.8
5,283,287 5,373,074 817,080 319,067 331,435 1,042,698 221,961 185,762 95,096 19,907
-0.9 -8.4 7.6 16.7 4.9 6.0 45.3 24.8 8.3 -7.0 -13.4 12.7 9.6 -4.5 -0.2 3.7 4.0 13.5
Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012 Jan-Sep 2012
Hotels Hotel and guest-house rooms Hotel guests Hotel average occupancy rate Average length of stay
11.3 22,356 11.0 8,612,127 4.3 84.1 1.53 nights -0.01
percentage points nights
Year-on-year change (%)
24,266 9.7 6,233,666 11.4 percentage 82.8 -0.9 points 1.39 nights -0.12 nights
Notes Aug 2012 Jan-Aug 2012 Jan-Aug 2012 Jan-Aug 2012
Visitor expenditure 2011 Total spending (excluding gaming) MOP 45.3 billion - Non-shopping spending - Shopping spending Per-capita spending
MOP 22.9 billion
22.4 billion MOP 1,619 MOP
Year-on-year change (%)
20 23 16 7
Latest MOP 11.4 billion MOP 5.8 billion MOP 5.6 billion MOP 1,713
Year-on-year change (%)
13 9 17 16
Notes Apr-Jun 2012 Apr-Jun 2012 Apr-Jun 2012 Apr-Jun 2012
Source: Statistics and Census Service
Year-on-year change (%)
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Not so smart
MORE SMARTPHONES IN THE HANDS OF MORE HOTEL EMPLOYEES MEANS WORSE SERVICE
martphones are becoming ubiquitous, for good or for bad. This applies to the hospitality industry as much as any other walk of life – and the effect on service is often plain bad. Just walk into any big hotel here, any time of the day or night. You can easily spot staff absorbed in their smartphones – and they are not using them for work. In the worst cases, guests are waiting to be attended to, but the staff are paying more attention to what is happening on their phone screens than to what the customers want. This obviously damages a hotel’s reputation, quite apart from being very annoying for guests. Smartphones have introduced a new layer of distractions in the workplace. Yes, they can be used for work. But often they are put to other uses: checking social networks, messaging friends, playing games or browsing the web. A survey in 2010 by the Society for Human Resource Management found that more than 70 percent of personnel managers believed people in their companies were too distracted at work. As smartphones become widespread at all levels of corporations and among people of all ages, the amount of distraction is bound to increase. Some argue that using a smartphone at work is not detrimental to performance. One just needs to know how to multitask. This is wrong. Seldom does multitasking mean excelling at two or more tasks at the same time. More often it means underperforming in all the tasks being juggled. Researchers at the University of Michigan found that productivity dropped by up to 40 percent
when the subjects of a study they conducted tried to do two or more things at the same time. In a hotel, this means it is improbable that front-desk staff will be able to deal with guests properly while keeping an eye on what is happening on their smartphones. The staff will probably be unable to give a guest a warm welcome, anticipate the guest’s needs, or converse with the guest more than is strictly necessary – all because they are not focusing on the work on hand.
Frenetic networking Wireless telecommunications have allowed individuals and corporations to do great things. But they have also created barriers to face-to-face communication and diminished human interaction. In some cases the use of smartphones and other devices can become an addiction. The frenetic use of such devices to send messages or check the status of friends on Facebook can trigger sensations similar to those felt by pathological gamblers when winning at a casino. We know about problem gambling but we are still at the early ages of understanding smartphone addiction. It is difficult to distinguish whether someone is just an enthusiast of new technology or is suffering from some sort of addictive behaviour. How can companies, including hotels, take advantage of the best that wireless telecommunications have to offer, while averting their power to distract? An employer should first have a clear policy on the use of smartphones at work. The policy should be unambiguous, well disseminated among employees and properly enforced. The policy should be feasible. A total ban on using smartphones at work is too restrictive, hard to enforce and likely to cause resentment. The same applies to a total ban on using social networks or instant messaging – even though their use can be blocked on smartphones supplied by the employer.
Flesh and bone
How can companies, including hotels, take advantage of the best that wireless telecommunications have to offer, while averting their power to distract?
A policy that sets reasonable and clear limits on the use of smartphones works better. Such a policy can ensure that staff focus on their work while giving them time to attend to personal matters. For instance, a policy could allow staff to use their smartphones to make personal calls or otherwise communicate only when they are on a break and away from their workstations. Staff in hotels should be told never to use smartphones in public areas or while attending to guests. A policy should warn transgressors that they will be disciplined, and list the range of punishments. The punishment should fit the crime. Sanctions should include dismissal. Employers should inform staff about the policy and explain why it is necessary. Wireless telecommunications are increasingly important in the business world. But the hospitality industry is still all about people. The secret of keeping hotel guests happy is a fleshand-bone smile, not a digital smiley. NOVEMBER 2012
n the West, drinking coffee is a must. In the East, tea is king. But United States multinational Starbucks Corp has proven that coffee shops also have their place in this part of the world. The Starbucks chain of coffee shops, the world’s biggest, is celebrating its 10th anniversary in Macau this year. It opened its first outlet here, in Senado Square, in 2002, two years after entering the Hong Kong market. Its business is now growing faster in Macau than in Hong Kong, where there are around 120 Starbucks coffee shops, says Andrew Nathan, general manager of Coffee Concepts (Hong Kong) Ltd. Coffee Concepts is wholly owned by Hong Kong food conglomerate Maxim’s Caterers Ltd and is Starbucks Corp’s licensee in Macau and Hong Kong. Mr Nathan declines to give precise figures but says Starbucks’ business has been growing in Macau at single-digit annual rates. He says his company is “very satisfied” with turnover here. The coffee shop business has “growing momentum, like Macau itself”, he adds. Coffee Concepts intends to open Macau’s 10th Starbucks this year, Mr Nathan says, but he doesn’t disclose where. He says finding good places to put new outlets is one of his company’s main challenges. This has not prevented expansion. Starbucks had just five coffee shops here a year ago. “We got four more in just that time. So it’s an accelerating growth curve and we hope it will continue in the future,” Mr Nathan says. “It took us nine years to reach here. By the time we reach our 20th anniversary, I hope we have 20 stores to show for it.” Coffee Concepts opened two new Starbucks last month: one in Taipa Village and the other, a round-the-clock outlet, at Sands Macao. Most Starbucks are in casino resorts, but the chain also has outlets in some of the city’s other tourist spots. There is also one in the Nam Van office area.
Ten out of ten
Starbucks aims to celebrate its 10th anniversary in Macau by opening its 10th outlet here BY ALEXANDRA LAGES
Mr Nathan says Starbucks has benefited from growth in tourism here. He says brand recognition also helps. “More and more people hear from their friends and relatives about Starbucks, want to try them, and the organic growth of the business also accelerates.” He argues that a Starbucks is more than just a place to grab a cup of coffee. “Starbucks provides a kind of ‘third place’. The first place is home and second is work. We really believe there is a common need of humanity for a third place,” Mr Nathan says. “A third place is a place where you can go to connect, to chill out, to be alone with yourself and your thoughts or to meet up with your friends. That’s what Starbucks provides and is behind Starbucks’ universal appeal.” NOVEMBER 2012
Photos: Carmo Correira
The Starbucks credo
Starbucks Corp posted worldwide net revenue of US$3.3 billion (MOP26.4 billion) for the second quarter, 13 percent more than a year before. In the Asia-Pacific region, net revenue jumped by 31 percent to US$181.8 million. Starbucks added a net 231 coffee shops worldwide to its chain in the second quarter, including its 600th in the mainland and its first in Finland and Costa Rica. By July 1 the chain comprised more than 17,600 outlets around the world. The company ran about 9,200 itself, most of them in the Americas. Of its more than 3,100 outlets in the Asia-Pacific region, it ran just 607 itself.
A certain loyalty The chain opened its first coffee shops in India last month. India was one of the last main untapped markets for Starbucks, which operates in more than 60 countries. Mr Nathan says global economic conditions and the slowing of economic growth in Macau will not impede the development of Starbucks here. “It doesn’t have to be a boom time for Starbucks to grow. Starbucks has a 40-year history, and a growth history in Asia since 1996. We’ve been able to have good growth during boom times and during the times that the economy was not booming, as well. We see in Macau continued growth,” he says. Mr Nathan concedes that it is difficult to find suitable staff here but adds that once Coffee Concepts does find them, it is able to retain them. “Other businesses come and try to take our partners away because they know we have great people and we give them great training. So that’s very attractive to anyone else. We are competing with casinos and five-star hotels.” He notes his company has proven its commitment to its employees by giving them training and opportunities to grow professionally. “That makes it a very attractive and compelling workplace, which inspires a certain kind of loyalty.” Coffee Concepts has around 90 employees in its Starbucks in Macau. Others have entered the coffee shop market here in recent years. Pacific Coffee Co, a Hong Kong chain, opened its first Macau coffee shop in 2009 and now has eight. Its Macau licensee is Future Bright Holdings Ltd, controlled by Legislative Assembly member Chan Chak Mo, which has almost 40 food and beverage outlets here. And trendy independent cafés have been popping up in various places recently. Mr Nathan welcomes competition. He says it is a sign of a healthy market and of growing interest in coffee. “We always say to each other that we are our own top competitor. We have done well, so we are always trying to overtake ourselves.” NOVEMBER 2012
MAINLAND FAVOURITE T
he mainland is the focus of Starbucks Corp’s international expansion effort. The chain estimates that it will be its largest market after the United States by 2014. It expects to have more than 1,500 coffee shops in the mainland by 2015. Starbucks set up shop in 13 new mainland cities in its financial year ended October 2, 2011, opening one outlet every four days, on average. It now has more than 650 coffee shops in 51 mainland cities. Starbucks got a foothold in the mainland in 1999. Since then it has developed special drinks, such as green-tea-flavoured coffee, to appeal to Chinese tastes. It also sells its own brands of tea. The comfort of its coffee shops has helped the company thrive in a market where, in the 1990s, few restaurants had air conditioning. London research company Euromonitor International estimates that the turnover of the coffee-shop market in the mainland was 3.5 billion renminbi (MOP4.5 billion) last year, and it expects annual sales there to grow to 10 billion renminbi by 2016. Each mainland consumer drinks three cups of coffee a year, on average – fewer than the world average of 240 cups, a study last year by the China Coffee Industry Association found. The mainland’s coffee consumption is estimated to have been 25,000 tonnes in 2010. Its tea consumption, in contrast, is estimated to have been more than 1 million tonnes. Companies like Starbucks are betting on replicating in the mainland what happened in Japan, another tea-loving country. Japan’s annual consumption per head of coffee is now 300 cups a year, well above the world average.
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International Food & Housewares Fair 2012
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International Yacht Import and Export Fair 2012
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The like business
Small enterprises are turning to Facebook as a cost-effective way to sell online and beat the big boys BY SARA FARR
t is hard to say exactly when the first online purchase took place on Facebook. But the social network has become something of a 21st century flea market, for new and second-hand goods alike. This new wave of e-commerce is called F-commerce. The term originated in 2009 to describe the growing number of businesses that use Facebook pages, called Facebook storefronts, for retailing. This way of doing business has grown in popularity in Macau, especially for selling discounted clothing and fashion items. For some entrepreneurs, it is a way to expand their bricks-andmortar business or to build awareness of their own brand. For others, it is a parttime way to increase their income. F-commerce in Macau has its own peculiarities. In other parts of the world, Facebook storefronts serve not only to display goods, but also allow customers to make purchases online. Customers use a credit card or other suitable method to pay, and the goods are shipped to them. In Macau, buyers treat Facebook storefronts as if they make up a giant online catalogue. After deciding to buy one item, they pick up their purchases from the vendor to inspect the items, as there is usually no refund. This is also how F-commerce is conducted in Hong Kong. What makes it possible to run a business this way is the compact size of both cites. Other advantages are that it saves shipping costs and reduces the risk of the goods going astray in transit. Yet another advantage is that Facebook storefronts are ineffably cheaper than bricks-and-mortar shops. A retailer saves money that would otherwise be spent on rent, utilities and staff.
It is easier for a small business to open a Facebook storefront than to design and manage its own website. It needs only to create a page in the business’s name and upload pictures of its merchandise. However, since the business does not own its Facebook page (Facebook Inc does) it can often be surprised by unexpected changes in the appearance or rules that apply to its pages.
Just browsing Sellers advertise products on Facebook pages, which in some cases are just pages for individuals, rather than Facebookdesignated pages for businesses. The seller and prospective buyer negotiate online. Typically, after striking the deal, they arrange to meet to complete the transaction, including payment. As these deals are done informally, no figures are available for the numbers of buyers and sellers, the number of transactions or the amount of turnover. Using Facebook makes it easier for a new small business to become more conspicuous. Tagging a person in a photo may cause the photo to show up on the tagged person’s page, where friends (and often friends of friends) can see it. Some of Macau’s Facebook storefronts have around 5,000 “likes”. The heavy work is keeping the storefront dynamic, with frequent status updates and photos, to attract new friends and fans and keep old ones engaged. Winnie Lam launched her Facebook fashion storefront, L’s Boutique, in July 2010. She says online boutiques were not as popular then as they are now. Ms Lam eventually noticed that the ratio of “likes” to purchases was not high. People were doing a lot of “liking” but little buying. She began to wonder whether she should open a physical shop so customers could inspect the actual
goods, not just see photos, before deciding whether to buy. Business was slow for months but now both the online storefront and the shop are doing well, Ms Lam says. “I am hoping to put more effort into the shop so that the business becomes bigger,” she says. Ms Lam loves fashion but she admits that managing the business as well as doing a full-time job is sometimes hard. She works, on average, 20 hours a day, juggling her job, her Facebook storefront and her shop. Once she has finished her day job,
she goes to her shop, where she usually stays from 7pm to 9pm. Then she goes online. “I start to deal with inbox messages, photo uploads, and stock orders at night,” she says. The workload is heavy but it is something she enjoys. And Ms Lam’s enterprise is now a family business. Her mother has retired and helps run the shop. Her father lends a helping hand as well. Her brother and boyfriend deliver goods to online buyers if she cannot do it herself. The owner of Kafy Fashion Macau, who goes by the business name Kafy, set up a fashion house with her husband in
May last year. She has studied fashion design in Macau and Paris. “We focus on the quality of design, fabric and cutting of the clothes,” Ms Kafy says. Most of the clothes sold in her shop come from South Korea, Europe and Hong Kong. Most customers are women aged 25 or older seeking “elegant” fashions. But most are also career women who do not have time to shop around, she says.
Personal touch Ms Kafy says this led her to open a Facebook storefront, which gives custom-
ers “an alley to look for our new arrivals online”. She says that when she uploads pictures of new arrivals on Facebook, customers flock to the shop to buy what they saw online. “This is a really convenient way for our customers to get updated information about our shop,” she says. It is also good for business. “We have gotten more and more customers after opening the Facebook [page].” Cadi Ho opened her online business, Sala Dress, to increase her family’s income. “I wanted to be a successful entrepreneur while taking care of my baby, NOVEMBER 2012
and have my own business at the same time,” she says. Ms Ho has no physical shop. Her Facebook storefront mainly sells clothes from South Korea and shoes from Japan. “Retail prices are a lot higher for goodquality Korean fashion,” she says. “Some shops sell Korean items for MOP999 [US$125], while bags and shoes can be even more expensive. I sell most of the items at a 70 percent discount.” Her Facebook storefront opened in March last year but it was four months later that she started selling her first items. She says business has since been growing steadily, especially in the past couple of months. The advantage of running only an online business, Ms Ho says, is that she does not have to buy in bulk. “I’m sort of the middleman. Even though I sell clothes at a discount, I still collect a fee and the person in Korea also does business.” Where Sala Dress differs from other Facebook businesses is that it keeps no stock. Ms Ho posts pictures of clothes and fashion accessories online. If a cusNOVEMBER 2012
tomer orders an item, she places an order with her supplier. She takes delivery after about seven working days and hands the item to the customer in person.
Clicks and bricks Ms Kafy says it is more lucrative to have both a Facebook storefront and a physical shop. Kafy Fashion Macau’s business grew by 30 percent last year. Customers can make purchases online and collect the goods from the shop. They can also go to the shop to inspect goods they saw on Facebook. “The online shop is more convenient for our customers, [but] we need the real shop to communicate with our customers face-to-face,” Ms Kafy says. “The online shop is a ‘short-cut alley’ for our retail business.” Prospective online retailers can choose between opening an online store on Facebook or on Taobao. Taobao has restrictions on setting up an online business. Ms Ho says competition is a lot fiercer on Taobao, where people all over the mainland can buy and sell. For Ms Ho, Facebook gives the
opportunity to raise brand awareness among Macau people, who use it avidly. A survey in 2010 found 88 percent of Internet users between 13 and 29 years old in Macau used Facebook. While customers may like to browse online, some dislike buying online. Natalie Leung, a regular customer of Facebook storefronts, says she actually prefers real shopping to virtual shopping. Going into a shop allows her to check the quality, size and appearance of goods. “The photos most online shops post on Facebook are usually kind of touched-up, or photos provided by the wholesaler,” she says.
Buyer beware Ms Leung acknowledges that it is convenient for customers to be able to browse online but says buying on Facebook has disadvantages. Because there is only so much a customer can tell about a product by looking at it online, Ms Leung sets rules for herself. “I won’t buy clothes on Facebook
A survey in 2010 found 88 percent of Internet users between 13 and 29 years old in Macau used Facebook that are over MOP400,” she says. The most she has spent on a single purchase online was MOP360, for a pair of ballerina shoes from South Korea. The problem was that because Korean sizes are different from those in the rest of Asia, they did not fit. “When I placed my order I did ask the shop if the shoe sizes were normal. They said yes, but it turned out they weren’t,” Ms Leung says. Although she bought the biggest size available, the shoes were still too small. “I told the shop but, as expected, there was no refund and the owner only apologised. That’s the bad thing about Facebook shopping: customers often cannot get a refund unless the stuff is faulty,” she says. Ms Leung says that when buying more expensive goods, customers are better off going to a bricks-and-mortar shop and seeing the merchandise first hand, because they can be more confident about what they are buying. It may be cheaper to buy online but it is also riskier, she says. However, the price may make the risk worth taking. NOVEMBER 2012
Arts & Culture
WORLD PRESS PHOTO OF THE YEAR 2011 SAMUEL ARANDA, SPAIN, NEW YORK TIMES
Sanaa, October 2011
Fatima al-Qaws cradles her son Zayed, who is suffering from the effects of tear gas after participating in a demonstration in the Yemeni capital.
CASA DE PORTUGAL IS OFFERING A CHANCE TO SEE LAST YEAR’S MOST MEMORABLE PICTURES BY BRINGING THE ANNUAL WORLD PRESS PHOTO EXHIBITION TO MACAU evolutions in Yemen, Egypt, Libya and further afield – the Arab Spring – took up a large portion of international news coverage last year. It is little wonder, then, that the World Press Photo of the Year award for 2011, the most prestigious annual photojournalism prize, went to a picture illustrating events in the Arab world. The winning picture, by Spanish photographer Samuel Aranda, and 160 others that won accolades in the 55th anNOVEMBER 2012
nual World Press Photo contest are on display at Sands Cotai Central until November 18. Entry is free. This is the fifth time Casa de Portugal has brought the world’s biggest annual photojournalism exhibition to Macau. Last year the exhibition was held in Casa Garden. This year the exhibition has an extra dimension in the form of a mobile phone application. Visitors that buy the app can get extensive information about all the pictures on show and the photographers that took them, including video interviews, and can share the pictures via social media.
FIRST PRIZE, ARTS AND ENTERTAINMENT STORIES ROB HORNSTRA, NETHERLANDS, INSTITUTE FOR ARTIST MANAGEMENT Sochi, Russia, January 2011 The Sochi Project – Sochi Singers: Entertainers perform in restaurants in the Russian resort city of Sochi on the Black Sea.
FIRST PRIZE, CONTEMPORARY ISSUES STORIES STEPHANIE SINCLAIR, UNITED STATES, VII PHOTO AGENCY FOR NATIONAL GEOGRAPHIC Hajjah, Yemen, June 2011 Child brides: Tahani (in pink), who was married at the age of six, and her former classmate Ghada, also a child bride, stand with their husbands outside their home.
FIRST PRIZE, CONTEMPORARY ISSUES SINGLES BRENT STIRTON, SOUTH AFRICA, REPORTAGE BY GETTY IMAGES FOR KYIV POST/SUNDAY TIMES MAGAZINE Kryvyi Rig, Ukraine, August 2011 Maria, a drug-addicted sex worker, rests between clients in the room she rents.
FIRST PRIZE, DAILY LIFE SINGLES DAMIR SAGOLJ, BOSNIA AND HERZEGOVINA, REUTERS Pyongyang, October 2011 A portrait of North Korea’s founder, Kim Il-Sung, decorates a building in the capital.
Aranda’s winning picture is of a woman holding her incapacitated son in her arms, in a mosque used as a makeshift hospital in the Yemeni capital, Sanaa. The mosque was used to treat victims of fighting in October last year, between the security forces and demonstrators against the rule of President Ali Abdullah Saleh. “It is a photo that speaks for the entire region. It stands for Yemen, Egypt, Tunisia, Libya, Syria, for all that happened in the Arab Spring,” says Koyo Kouoh, one of the judges of the World Press Photo contest, who is the founder and artistic director of the Raw Material Company, an arts centre in Senegal. “But it shows a private, intimate side of what went on. And it shows the role that women played, not only as caregivers, but as active people in the movement,” she says.
More than 100,000 pictures by over 5,200 photographers from 124 countries were entered for the World Press Photo contest for 2011.
Special mention The judges awarded prizes in nine categories to 57 photographers from 25 countries, including China. The winners were announced last February. The judges gave a special mention to a picture of a Libyan National Transition Council fighter hauling Libyan ruler Muammar Gaddafi onto the bonnet of a vehicle. The picture is a still taken from a video shot in the Libyan city of Sirte in October last year. “The photo captures an historic moment, an image of NOVEMBER 2012
Arts & Culture
a dictator and his demise that we otherwise would not have seen, had it not been photographed by a member of the public,” said Aidan Sullivan, the chairman of the World Press Photo panel of judges and vice-president of photo assign-
FIRST PRIZE, NATURE STORIES BRENT STIRTON, SOUTH AFRICA, REPORTAGE BY GETTY IMAGES FOR NATIONAL GEOGRAPHIC
FIRST PRIZE, NATURE SINGLES JENNY E. ROSS, UNITED STATES Ostrova Oranskie, Russia, June 2011 A young male polar bear climbs on a cliff face above the sea, attempting unsuccessfully to feed on eggs from the nests of Brünnich’s guillemots.
ments for photo agency Getty Images. The judges consider a picture for a special mention when it has played an essential role in the news but was not taken by a professional photographer.
Mount Kenya, Kenya, July 2011
Rhino Wars: An anti-poaching team guard a northern white rhino, part of a 24-hour watch at Ol Pejeta Conservancy.
FIRST PRIZE, PEOPLE IN THE NEWS STORIES YASUYOSHI CHIBA, JAPAN, AFP Higashimatsushima, Japan, April 2011 Tsunami: Chieko Matsukawa holds up her daughter’s graduation certificate, which she salvaged from the ruins of their home after the earthquake and tsunami on March 11, 2011.
101 This year’s exhibition will tour a record number of 105 venues in 45 countries. The pictures were on display last month at the Hong Kong Design Institute. The exhibition will visit Taipei later this year.
FIRST PRIZE, DAILY LIFE STORIES ALEJANDRO KIRCHUK, ARGENTINA Buenos Aires, May 2009 Never let you go: Marcos and Monica were married for 65 years. In 2007 Monica, then aged 84, was diagnosed with Alzheimer’s disease. Marcos looked after her until she died in July last year.
FIRST PRIZE, SPOT NEWS SINGLES YURI KOZYREV, RUSSIA, NOOR IMAGES FOR TIME
Ras Lanuf, Libya, March 2011
FIRST PRIZE, GENERAL NEWS SINGLES ALEX MAJOLI, ITALY, MAGNUM PHOTOS FOR NEWSWEEK Cairo, February 2011 Demonstrators in Tahrir Square in Cairo react to a televised speech in which, contrary to expectations, Egyptian President Hosni Mubarak said he would not give up power. He stepped down the next day.
Rebels battle for Ras Lanuf, an oil-refining town on the Libyan coast.
CHEERS TO OKTOBERFEST MGM Macau casino resort last month hosted its annual Oktoberfest. Arguably the largest beer festival in town, it gave both residents and tourists an opportunity to taste some great Bavarian beer and food. Visitors at the 11-day event were also able to enjoy the performance of the ever-popular Högl Fun Band, who flew all the way from Munich to light up the festivity with some traditional music. MGM Macau’s Grant Bowie commences the keg-tapping ceremony
A packed house
The Oktoberfest was also great fun for kids
The Högl Fun Band in action
Bottoms up, boys!
Raise your glass!
Alphorn time NOVEMBER 2012
WELL, IT’S COMPLEX Surprise, surprise: construction of the tunnel under the roundabout next to the Venetian Macao is running late. The latest estimate is that the tunnel, first announced in 2008, will open to traffic only by the third quarter of next year. The Infrastructure Development Office says the six-month delay is due to work on diverting underground pipes being “more complex” than originally expected. How is it possible that the government and the public utilities do not have a record of the underground pipe and cable networks, especially in Cotai, where they were laid just a few years ago? It sounds like a variant of the “dog ate my homework” excuse. It is not something we would like to hear again during construction of the light rail transit system, since most of the line will be elevated. Maybe the government will blame any delays on the “complex” utility pole network.
FLAMBOYANCE IN OVERDRIVE
The Portuguese news agency Lusa reported that Macau has over 500 “ultra-luxury” cars. We are talking about Bentleys, Ferraris, Maseratis and the like. The figure excludes the merely expensive conveyances such as Mercedes-Benzes, Audis, BMWs or Lexuses. More than 90 percent of the “ultra-luxury” rides are for private use, meaning they are not part of any casino or hotel fleet. There is roughly one for every 1,000 people here, which could be a world record. The 45 percent of households that do not even own a motorcycle should be impressed. Talk about a two-speed Macau.
Legislative Assembly vice-president Ho Iat Seng complained last month about the excessive power that the Executive Council now wields. Mr Ho knows what he is talking about. He was an Executive Council member for five years, until 2009. The 10-member council, contrary to what its name implies, has officially no executive function. It is simply the government’s top advisory body, albeit one in which business interests hold sway. From the perspective of the man in the street, the council works like a secret club where the city’s most powerful can exert their influence over the government. Not even the council’s agenda is made public – everything that happens during its meetings is confidential. Conspiracy theorists would argue the public is being led by a secret clique. Occasionally the council spokesperson announces that the members have finished discussing a bill and the government is sending it to the Legislative Assembly. The public – and media – are kept in the dark about the council’s role in policymaking, drafting legislation or in deciding on new public works. Officials say they are eager to make It is time for a change. ggoverning g more transparent. p g
UNWELCOME TO MACAU The government has proposed amendments to the law on imported labour that would make it even harder for non-resident workers to move between industries. Put simply, it tells, say, a Filipina domestic servant that she will never amount to much in Macau. Aside from being xenophobic, the policy is foolish. It wastes the potential of one-quarter of the city’s workforce. Elsewhere in the world, low-skilled immigrants often turn into eager entrepreneurs, compensating for their lack of formal qualifications with a desire to succeed. It helps boost economic growth and diversification in the countries where they choose to live. Here, officials think they can waste such creative potential and turn a blind eye to international standards for the rights of workers.
104 MICHAEL SPENCE NOBEL LAUREATE IN ECONOMICS AND PROFESSOR OF ECONOMICS, NEW YORK UNIVERSITY
Emerging-market resilience EMERGING ECONOMIES WILL REMAIN AN IMPORTANT GLOBAL GROWTH ENGINE ith most of the world focused on economic instability and anaemic growth in the advanced countries, developing countries, with the possible exception of China, have received relatively little attention. But, as a group, emergingmarket economies have been negatively affected by the recent downturn in developed countries. Can they rebound on their own? The major emerging economies were the world’s main growth engines following the eruption of the financial crisis in 2008 and, to some extent, they still are. But their resilience has always been a function of their ability to generate enough incremental aggregate demand to support their growth, without having to make up for a large loss of demand in developed countries. A combination of negligible (or even negative) growth in Europe and a significant growth slowdown in the United States has now created that loss, undermining emerging economies’ exports. Europe is a major export destination for many developing countries and is China’s largest foreign market. China, in turn, is a major market for final products, intermediate goods (including those used to produce finished exports) and commodities. The ripple effect from Europe’s stalling economy has thus spread rapidly to the rest of Asia and beyond. Moreover, not only is the tradable sector of Japan’s economy highly vulnerable to a slowdown in China, but the recent conflict over the Senkaku/Diaoyu Islands raises the prospect of economic decoupling. Apart from that, Japanese economic performance is set to remain weak, because the nontradable side is not a strong growth engine.
The key questions for the world economy today, then, are how significant the growth slowdown will be and how long it will last. With wise policy responses, the impact is likely to be relatively mild and short-lived. One key issue clouding the future is trade finance. European banks, traditionally a major source of trade finance, have pulled back dramatically, owing to capital-adequacy problems caused by sovereign-debt capital losses and, in some cases, losses from real estate lending. This vacuum could reduce trade flows even if demand were present. In Asia, especially, filling the vacuum with alternative financing mechanisms has become a high priority. In particular, although China’s tradable sector is highly exposed to developed economies, the central government is likely to accept some short-run slowdown, rather than adopting potentially distorting stimulus measures. Given the risk of reinflating asset bubbles, no one should expect a dramatic easing of credit of the type that followed the 2008 meltdown. An accelerated public investment programme that avoids low-return projects is not out of the question. But the best and most likely responses are those that accelerate domestic consumption growth by increasing household income, effectively deploy income from state-owned assets and strengthen the mainland’s social security systems in order to reduce precautionary saving. Indeed, these are all key components of China’s recently adopted 12th Five-Year Plan. Admittedly, China’s major systemic reforms await the country’s leadership transition, due to start this month. By most NOVEMBER 2012
accounts, the pace of reform directed at expanding the market side of the economy needs to pick up quickly to achieve the ambitious economic and social goals of the next five years. Some countries have bucked the global trend. Indonesia, for example, has experienced accelerating growth, with rising business and consumer confidence boosting investment to almost 33 percent of gross domestic product. Likewise, Brazil’s growth has been dented, but now looks set to recover. Moreover, overall economic performance in Brazil masks an important fact: growth rates have been substantially higher among the country’s poorer citizens and unemployment is declining. The aggregate growth rate does not capture this inclusiveness, and thus understates the pace of economic and social progress. The main challenge for Brazil is to increase its investment rate from 18 percent of GDP currently to closer to 25 percent, thereby sustaining rapid growth and economic diversification. Commodity dependence, even with the creation of considerable domestic value added, remains high.
Economic growth rates in other systemically large countries, including Turkey and Mexico, have risen as well, despite European and U.S. headwinds. Many African countries, too, are showing a broad pattern of sound macroeconomic fundamentals, durable growth acceleration, economic diversification and investor confidence. The outlook for India’s economy remains more uncertain. While growth slowed recently from very high rates – owing to a combination of exposure to developed-country weakness, internal loss of reform momentum and declining investor confidence – that trend appears to be reversing after recent decisive corrective moves by the government. The main question is whether India’s parliament will pass crucial legislation or remain paralysed by hyper-partisan, scandalfuelled infighting. Combining this general picture with more general developing-country trends – rising incomes, rapid growth in middle classes, expanding trade and investment flows, bilateral and regional free-trade agreements and a growing share of global GDP (roughly 50 percent) – these economies’ growth momentum should return relatively rapidly, over the next one to two years. Most of the downside risk to this scenario lies in the systemically important economies of Europe, the U.S. and China. To derail emerging economies’ growth momentum at this stage probably would require either an additional major demand shock from the advanced economies, or some kind of failure in China’s leadership transition that impedes systemic reform and affects the country’s growth. Notwithstanding low growth forecasts for the entire developed world, these systemic risks, taken individually and in combination, appear to be declining (though certainly not to the point that they can be dismissed). On balance, then, the multispeed growth patterns of the past decade are likely to continue. Even as the developed economies experience an extended period of below-trend growth, the emerging economies will remain an important growth engine.
Generation next Safety first for new Dallara The Blade is back King of the Hill hunts No. 8 Civic duty Honda reports for WTCC mission
Two-speed Grand Prix BY Sérgio Fonseca
BY THE NUMBERS
The budget for this year’s Macau Grand Prix
Number of Grand Prix sponsors and partners
The total sponsorship revenue expected
Expected revenue from ticket sales
The amount SJM Holdings Ltd, this year’s title sponsor, is sponsoring the Grand Prix for
Estimated return rate for Macau’s economy for each MOP1 invested in the Grand Prix, including tangible and intangible returns
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most of the city’s petrol heads were busy discussing the line-up for the Grand Prix next year – the event’s 60th anniversary – the organising committee has made sure all eyes will first be focused on this year’s competition by fielding one of the strongest rosters ever. Expect big grids, famous drivers, dream cars, close racing and loads of uncertainty, plus a lot to see and do during the moments away from the Guia Circuit. Despite competition from Singapore, which hosts Formula One’s only night street race, the Macau Grand Prix is still the number one motor racing event in this part of the world. For a full week, a carnival of motorsport invades Macau. The world’s best drivers and riders descend on the city to take on the most challenging street circuit on Earth, in what is the only event to feature both car and motorcycle races sanctioned by the respective international federations. There will be seven major events, for all tastes: touring cars, GT cars, Formula Three single-seaters and motorbikes. To spice up things, the winners of all three of last year’s headline races are returning to defend their titles. It is a demonstration of how the Macau Grand Prix is revered by drivers and teams, and its impor-
tance to the international motor sport calendar. Unfortunately, this enthusiasm no longer touches the city’s best racing drivers and riders the same way. That is because new rules for government support, laid down last year, have burdened them with unexpected ballast. Macau racers are now obliged to finish their Grand Prix events on the dangerous Guia Circuit, no matter their final position, if they want to be eligible for official support for their campaigns abroad. Some learnt the new rules the hard way last year, after crashes that cost them their 2012 international season. Since private sponsorship is not easily found, many Macau racers are saying they will not risk it all during their Grand Prix races and instead protect their government support. This is a shame. There is true racing talent here but it is being tamed by these new rules. It has been 12 years since a Macau driver stood on the highest step of the podium after one of the Grand Prix’s main races. It is about time we celebrated another home victory. But until the rules for official sponsorship are changed again, the Macau Grand Prix will be an event that the city’s talent will have to take slowly and carefully if they hope to be rewarded.
Prize money for the Formula Three Grand Prix winner
Total number of drivers and riders expected
Prize money for the Motorcycle Grand Prix winner
Number of local drivers and riders expected
Number of racing events featured at the Macau Grand Prix, including touring cars, GT cars, Formula Three single-seaters and motorbikes
Number of countries and territories represented
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59TH MACAU GRAND PRIX
15th November 06:00 06:30 07:30 08:55 09:55 10:55 12:00 12:50 13:50
07:00 08:30 09:35 10:35 11:40 12:30 13:30 14:20
14:40 15:10 15:50 16:35 18:30*
07:00 08:15 09:00
13:05 13:55 14:35 15:25
13:35 14:15 15:05 16:15
T H U R S D AY
Circuit closed Circuit inspection Macau Motorcycle Grand Prix - Practice Hotel Fortuna Macau/Hong Kong Interport Race - Practice Suncity Group Macau Road Sport Challenge - Practice SJM Formula 3 Macau Grand Prix - Practice City of Dreams Macau GT Cup - Practice CTM Macau Touring Car Cup - Practice FIA WTCC - Guia Race of Macau - Presented by SJM - Testing SJM Formula 3 Macau Grand Prix - Qualifying Macau Motorcycle Grand Prix - Qualifying Circuit opened
16th November 06:00 06:30 07:30 08:30
15th to 18th November 2012
F R I D AY
Circuit closed Circuit inspection Macau Motorcycle Grand Prix - Qualifying FIA WTCC - Guia Race of Macau - Presented by SJM - Practice Hotel Fortuna Macau/Hong Kong Interport Race - Qualifying Suncity Group Macau Road Sport Challenge - Qualifying SJM Formula 3 Macau Grand Prix - Practice FIA WTCC - Guia Race of Macau - Presented by SJM - Practice CTM Macau Touring Car Cup - Qualifying City of Dreams Macau GT Cup - Qualifying SJM Formula 3 Macau Grand Prix - Qualifying FIA WTCC - Guia Race of Macau - Presented by SJM - Qualifying Circuit opened
17th November 06:00 06:30 07:30 08:20
07:00 07:50 09:20
11:20 12:50 14:00
12:20 13:10 14:50
15:30 16:30 18:30*
Circuit closed Circuit inspection Macau Motorcycle Grand Prix - Warm up Hotel Fortuna Macau/Hong Kong Interport Race - 10 laps Suncity Group Macau Road Sport Challenge - 10 laps CTM Macau Touring Car Cup - 12 laps City of Dreams Macau GT Cup - Qualifying SJM Formula 3 Macau Grand Prix - Qualification Race - 10 laps Macau Motorcycle Grand Prix - 15 laps Circuit opened
18th November 06:00 06:30 07:30 08:15
07:00 07:50 08:30
13:45 14:45 15:00 15:15 15:30 16:30 18:30*
Note: Organizer reserves the right to re-schedule the programme without prior notice. * If the circuit opens before the programmed time, it will be announced.
S AT U R D AY
S U N D AY
Circuit closed Circuit inspection City of Dreams Macau GT Cup â€“ Warm up FIA WTCC - Guia Race of Macau - Presented by SJM - Warm up City of Dreams Macau GT Cup - 12 laps FIA WTCC - Guia Race of Macau - Presented by SJM - Two races of 9 laps each with 15 minutes break between races Special event Lion dance SJM Formula 3 Macau Grand Prix - 15 laps Circuit opened
The Guia Circuit
D. Maria Bend
Ma ri Ben a d
(min width: 7M)
Grand stand A | B Start | Finish
GP Building Reservoir stand A | B
Solitude Esses Length: 6.2 km Minimum width: 7 metres at the Melco Hairpin
Maximum width: 14 metres at Avenida da Amizade
Mandarin Oriental Bend
S. Francisco Hill Bend
Characteristics: A street circuit with a combination of long, fast straights and sharply twisting corners. It is recognised as one of the most demanding circuits in the world. Formula 3 lap record: Edoardo Mortara, 2009, Dallara Volkswagen, 2:10.732 Motorcycle lap record: Stuart Easton, 2010, Kawasaki 1000cc, 2:23.616
WTCC lap record: Tiago Monteiro, 2009, SEAT León TDI, 2:32.076
Intense competition Juncadella eyes back-to-back victories in the Formula Three Macau Grand Prix but is up against a star-studded grid
Struggling for decent grids both in Europe and Japan, Formula Three has seen better days. But the Macau Grand Prix is an exception. The event is to Formula Three what Monaco is to Formula One. With a wealth of history, the Formula Three Macau Grand Prix is rightfully regarded as the culmination of each Formula Three international season. The event celebrates its 30th anniversary this year. Its legacy actually spans 59 years but it was only in 1983 that the race was first held specifically for Formula Three cars. That year, an up-andcoming young driver named Ayrton Senna won the competition, ahead of his promotion to Formula One and three world championship titles. Three-quarters of this year’s registered Formula One drivers have raced in Macau, including the present champion, Sebastian Vettel. In what is a true celebration of the sport, the organising committee has put together a superb line-up. The organisers have gathered on the same grid the best of Formula Three, together with important drivers from GP2, GP3 and World Series by Renault racing. Ready to challenge the ultra-competitive field is Daniel Juncadella. The Spanish driver for Prema Powerteam is set to defend the crown
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he won last year. Since 1983, only one man has managed back-toback victories in the Formula Three Macau Grand Prix – Edoardo Mortara in 2009 and 2010. Juncadella, fresh from being crowned Formula Three Euro Series and FIA European Formula Three champion, will face strong opposition, not least from within his own pit box. Italian teammate Raffaele Marciello will try to repeat in Macau his surprising dominance of the streets of Pau, in France, earlier this year. Prema Powerteam’s Mercedes-powered cars will go up against the Volkswagen-engined cars of Britain’s pace-setting Formula Three team, Carlin. Volkswagen is one of the most successful engine manufacturers in the history of the Formula Three Macau Grand Prix. Rivalry extended Carlin will field 2012 British Formula Three International Series champion Jack Harvey and 2011 British Formula Three International Series champion Felipe Nasr. Also racing in the Carlin colours will be new Red Bull protégé António Félix da Costa, William Buller, GP3 Series first runner-up Daniel Abt and Carlos Sainz, son of the former double World Rally champion of the same name. Fortec Motorsport was Carlin’s main challenger this year on British
FIVE TO WATCH Daniel
Juncadella is the man to beat, having won last year’s race. The Spanish driver, sponsored by the Astana group of state-owned companies in Kazakhstan, dominated Formula Three in Europe this season.
António Félix da Costa did not race Formula Three this season, but the Portuguese has been the junior driver in the spotlight for much of the year, winning races in both GP3 Series and Formula Renault 3.5. The latest Red Bull protégé has unfinished business in Macau, where he was hindered by mechanical problems last year.
Felipe Nasr hails from a country that breathes motor racing as much as it does football. The young Brazilian impressed last year on the Guia Circuit, finishing second. Now competing in GP2 Series racing, he wants to take revenge on Juncadella.
Marciello is a Ferrari Driver Academy starlet who dominated the street circuit of Pau this year on his first attempt. The Italian Formula One candidate will be competing in Macau with the same hardware as Juncadella. soil, and their rivalry will now extend to Macau. Fortec will enter four Dallara-Mercedes cars for the Formula Three Grand Prix. At the wheel will be Felix Serralles, Alex Lynn, Pipo Derani and Harry Tincknell, all of whom have won Formula Three races this season. This year’s Japanese entry is not as strong as in years gone by, with just three Japanese drivers. Still, Japan’s most prominent squad, Tom’s, will enter two Toyota-powered cars. Malaysian driver Jazeman Jaafar, who came close to winning this year’s British Formula Three title, will drive one. The other will be driven by Japanese driver Yuichi Nakayama, a regular winner in Japanese Formula Three. The line-up also includes former Zandvoort Masters of Formula Three winner Felix Rosenqvist, McLaren GT driver Alexander Sims and German Formula Three Cup champion Jimmy Eriksson. Macau’s only representative will be young Angolan Luis Sá Silva. The Macau resident will make his debut in the Formula Three Macau Grand Prix, having raced in Europe this season. But it will not be his first race on the Guia Circuit, having competed here in 2008 in the Formula BMW Pacific Series. The race: A 15-lap race on the Sunday, with a 10-lap qualifying race on the Saturday.
Felix Rosenqvist, the 2011 Zandvoort Masters of Formula Three winner, aimed to win here last year but failed to finish. The quiet Swede will certainly want to do better on his third attempt on his favourite circuit before he bids farewell to Formula Three.
WHAT'S NEW IN THE F3 GRAND PRIX The race is back to being a stand-alone event, having been on the Formula Three International Trophy calendar last year Bob Kettleboro will replace FIA Formula One World Championship race director Charlie Whitting as the race director here, because Whitting has Formula One commitments in Abu Dhabi
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Dallara sensation The Formula Three Macau Grand Prix ushers in a new generation of cars Every one of the cars on the grid in this year’s Formula Three Macau Grand Prix will be new-generation Dallara F312s, introduced only at the start of this season. Macau Grand Prix Committee coordinator João Manuel Costa Antunes says it is a particularly notable achievement, in view of the limited supply of the 2012 Dallara Formula Three chassis. Italian manufacturer Dallara Automobili says the new model meets Formula One safety standards and has a raft of money-saving features, in line with the new regulations laid down by the world governing body of motorsport, the FIA. The difference in appearance between the new cars and the F308s that have raced on
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Luis Sá Silva the Guia Circuit for the past four years is not extreme, but there are several upgrades. The car’s front is different, the new model having a higher monocoque, or body shell, and a raised nosecone. The rear end is also slightly different. Dallara’s engineers
reworked the rear suspension to enhance the F312’s performance. Every year we see spectacular crashes on the Guia Circuit from which drivers walk away unscathed. With front and rear crash boxes and rollover protection, modern Formula Three cars are extremely safe. The new FIA regulations further accentuate safety, making it compulsory for new chassis to have headrests and side intrusion protection, much like Formula One cars. Dallara’s new design also aims to help teams reduce running costs. It uses more durable materials, and the brakes, bodywork and gearbox are easier to deal with. Like previous models, the F312 can accommodate two-litre, four-cylinder engines made by MercedesBenz, Toyota, Nissan, Honda or Volkswagen. Angolan driver Luis Sá Silva says a new car always means new challenges for both drivers and engineers. “This is the first season with this car for everyone in the paddock. The engineers are still working on solutions to make it faster,” says Sá Silva, a long-term resident of Macau. Sá Silva has raced in an F312 this season and
A Kiwi on adrenaline New Zealand’s Richie Stanaway, out of this year’s Grand Prix due to injury, is full of praise for the Guia Circuit BY Jeff Heselwood
will drive one in this year’s Formula Three Macau Grand Prix. “The F312 has more downforce and weight. Not surprisingly, the F308 was faster on the straights but the F312 is quicker on corners,” he says. The new model also performs better in the rain, he says. But it has one drawback. “The car itself is now more physically demanding for drivers,” according to the Angolan driver.
come to the Formula Three Macau Grand Prix in the hope that a win – or at least a good showing – will fast-track them to Formula One. But one young talent who is sidelined this year, New Zealand’s Richie Stanaway, appreciates the event for its own sake. Stanaway, one of the Asia-Pacific region’s big hopes in single-seater motorsport, crashed at Spa-Francorchamps in Formula Renault 3.5 racing in June. The collision sent his car airborne. He sustained two fractured vertebrae and has been out of racing since, recovering at home. Stanaway debuted here last year, after winning the German Formula Three title with 13 victories. However, he did not finish. Roberto Merhi stalled at the start and Stanaway ploughed into him from behind. Despite his less-than-auspicious maiden appearance here, Stanaway praises the Guia Circuit. “It’s the best track I have ever driven on,” he says. “It’s not often you get to drive on the streets of a city, with buildings beside the track, a bit of elevation, going underneath bridges.” He stresses that the circuit’s unique charac-
teristics are also its biggest danger. “Obviously, if you get just half a metre offline, due to maybe too much speed or cold tyres, you get a feeling of concentration from the adrenaline you don’t get at other circuits,” he says. “It is a dangerous circuit but you need street circuits. I don’t think it’s any more dangerous than Singapore.” Stanaway, who is part of the Lotus F1 Team’s young driver programme, has his sights set on becoming a Formula One driver, but he admits that it will not be easy. “It’s very difficult because you need a lot of money behind you,” he says. “There is not a lot of money around in New Zealand. It’s difficult for a New Zealander to find the money to come and race over there.”
THE DALLARA F312 Manufacturer: Dallara Automobili (Italy) Engine: Two-litre, four-cylinder “stock block” Gearbox: Six-speed sequential Minimum weight: 550 kg, including driver Length: 4,351mm Width: 1,845mm Price: About MOP1 million (US$125,000) for a complete rolling chassis, without engine Stanaway at last year’s Macau Grand Prix
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Light blue wave
Chevrolet has dominated the WTCC season, and Rob Huff is only two races away from being sacred champion The
FIA World Touring Car Championship (WTCC) will again be decided on the Guia Circuit, which hosts the final two races of the season. The drivers’ title will be fought over between the three Chevrolet drivers: reigning champion Yvan Muller of France, with 349 points so far, Alain Menu of Switzerland with 355 points, and leader Robert Huff of Britain, with 390 points. Huff has a solid margin, although both Menu and Muller are still kept in contention by the numbers, because they now lie 35 and 41 points behind, with 55 still to be awarded. Muller and Huff are good teammates in the paddock and great rivals on the track. Their title fight started in Round One in Italy and has continued all season, with some hot moments and a few scratches. The Frenchman won the championship last year in Macau by a threepoint margin but the Briton is determined to make 2012 his year. Also worth keeping an eye on is Chevrolet’s other driver. Menu is a strong performer in Macau, where he has tasted victory before. Chevrolet has dominated the manufacturers’ championship for three years, but will bow out of the WTCC after this year’s Macau Grand Prix, the marketing men having decided the championship campaign it is not worth the money. The Chevys, prepared by Britain’s RML
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WTCC team, first entered the competition in 2005, when the maker re-launched the marque in Europe. Chevrolet’s team was the only factory team participating in this year’s WTCC season, and its walk in the park has been spoiled only a handful of times. Its drivers have bagged at least one victory in all of the events so far this season. Eight for luck The Macau Grand Prix will lay the foundations for a new era in the WTCC. A factory-supported Honda Civic will race here this year in preparation for next season. The Japanese manufacturer announced in July that it would run a pair of WTCC Hondas full-time in 2013. The cars will be prepared by Italian team JAS Motorsport. Former SEAT driver Tiago Monteiro and Gabriele Tarquini will be the drivers. Monteiro will drive the Honda here this year. Another novelty on the grid this year will be a pair of Ford Focus S2000 TCs run by British outfit Arena Motorsport. At the wheel will be former British Touring Car Championship stars James Nash and Tom Chilton. A record number of eight wild-card entries from Macau will try their luck in the WTCC season grand finale. Leading the home side is the 2000 Formula Three Macau Grand Prix winner, André Couto, once again driving a SEAT Léon WTCC by SUNRED Engineering for the Tuenti Racing Team. Hong Kong’s China Dragon Racing team will enter three Chevrolet Lacettis driven by Felipe Clemente Souza, Célio Alves Dias and Ng Kin Veng. Three other Macau drivers will race in normally aspirated BMW 320sis: Mak Ka Lok, Henry Ho Wai Kun and Jo Merszei. Eurico de Jesus, who had a place on the podium in the 2006 Macau Touring Car Cup, will make his WTCC debut in an ex-JAS Motorsport Honda Accord Euro R. The race: Two races of nine laps each on the Sunday, with a break of 15 minutes in between.
FIVE TO WATCH Yvan Muller,
the threetime WTCC champion, has been breaking records with Chevrolet. He may say goodbye to the WTCC after the Macau Grand Prix. If so, he is sure to want to do it in style by bagging a new drivers’ title, but that won’t be easy.
Robert Huff, after narrowly missing out on the drivers’ title last year to Chevrolet teammate Yvan Muller, is eyeing revenge. Huff is always a strong contender in Macau. He won both races here last year and is on a mission to repeat the result.
the 2009 WTCC champion, has been the biggest challenger to Chevrolet’s dominance this season. The Italian’s hopes of a good result in Macau rest largely on SEAT’s new 1.6 turbo engine proving to be competitive on the Guia Circuit.
Tiago Monteiro’s brandnew Honda Civic WTCC will attract a lot of attention. The Portuguese driver will be collecting data to help prepare the car for next season, but everyone is curious to see how the Honda performs on a street circuit. André Couto
is the local hero and will have the crowd on his side. Couto has been unlucky in the past two years on the Guia Circuit, not finishing any race, but he is the only Macau driver that can match the pacesetters.
WHAT'S NEW IN THE WTCC "GUIA RACE" The starting grid for Race Two is determined by the results of the second element of qualifying, with the 10 fastest drivers lined up in reverse order The Chevrolet Cruze 1.6T cars have been allocated a minimum weight of 1,180 kg and the BMW 320 TC cars a minimum weight of 1,160 kg, compared with 1,150 kg for other models that took part in last year’s WTCC season
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Civic pride Honda will join the WTCC full-time next year, with Tiago Monteiro and Gabriele Tarquini at the wheel BY Jeff Heselwood The new Honda Civic WTCC at Suzuka
full-time entry of a factory-supported Honda team will be one of the biggest novelties of the FIA World Touring Car Championship (WTCC) season next year. But what can the Japanese manufacturer bring to the competition? “Although Honda is not putting any pressure on us, we would like to achieve some good results, and our true goal is winning the first race in 2013,” says team principal Alessandro Mariani. “But we must take into account that we have a brand new car ... and that the championship is very competitive.” The Italian JAS Motorsport team is preparing the Honda Civic WTCC cars. The drivers will be Tiago Monteiro, who joined the WTCC in 2007, and 2009 WTCC champion Gabriele Tarquini. “We have two great drivers,” says Mariani. “I know we have built a very advanced car, and Honda’s reputation in engine expertise is second to none. “We have all the right ingredients. We just need to be patient and take the time to mix them in the best way.” Monteiro’s team in this year’s WTCC season released him so the Portuguese could drive the Honda Civic in the last three events this
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year, including the WTCC Macau Grand Prix. “I am obviously very excited about this unique opportunity,” Monteiro says. “These are tough times in motorsport and there are not many car manufacturers ready to launch factory programmes. To be chosen by Honda is a big boost for my ambitions.” The car’s debut in competition was on home soil last month, at the Suzuka circuit. Much to do Monteiro finished both races in 10th and was later promoted to ninth in Race One, after Aleksei Dudukalo incurred a 30-second penalty. It was the first time in WTCC history that a model built by a debutant manufacturer had made it
onto the scoreboard on its maiden appearance. “We are still learning and every time we try to find a better setup,” says Monteiro. Civic WTCC Development chief engineer Daisuke Horiuchi says there is still “so much more for us to work on and improve”. Tarquini will start racing in a Civic next year, although he has already tested one. The Italian previously raced for Honda in the British, German and European touring car series. “I was very proud that Honda called me back,” Tarquini says. “Honda is one of the most important brands in the automotive industry and, of course, in motorsport. They have achieved countless victories in all major categories.”
WTCC RETURNS IN 2013 The Guia Circuit will host the finale of the World Touring Car Championship (WTCC) again next year. The event is tentatively scheduled for the weekend of November 16 and 17. The WTCC 2013 calendar has 13 events, including a stage in Shanghai. The season will begin in March in Spain. The world governing body of motorsport, the FIA, and Eurosport Events Ltd have also renewed their commercial rights agreement for the WTCC. The new contract will last for five years, until December 2017. Television audiences for WTCC events have been growing at double-digit rates this year.
drivers Darryl O’Young and Charles Ng Ka-ki have been pitting their skills against the likes of Yvan Muller, Rob Huff and Gabriele Tarquini this season in the FIA World Touring Car Championship (WTCC) 2012 season. O’Young returned to Bamboo Engineering for the final three rounds of the championship. The 32-year-old left Special Tuning Racing, where he drove a SEAT León, before the Suzuka stage and is now driving for Richard Coleman’s Chevrolet Cruze squad. O’Young says he was happy to return to the team that he raced Lacetti and Cruze cars for in his first two years in the WTCC, finishing fourth in the independents’ trophy contest in 2010 and sixth last year. The Cruze that O’Young will race in Macau has already been driven by Pasquale di Sabatino, Robb Holland and Michel Nykjaer, the latter winning the independents’ class in the stage at Curitiba in Brazil. O’Young began racing in North America, winning the 1996 Canadian Northwest Karting Gold Cup. In 2000, he was the winner of the Canadian Karting Championship, Formula C. He began competing in the Porsche Carrera Cup Asia in 2004 and was third in the series, with three wins, in 2005. He went on to take the title in 2006 with seven wins. In 2008 he took the Porsche Carrera Cup Asia title once again and won the Macau GT Cup race in a Porsche GT3. Ng has had an interesting maiden season in the WTCC in his Liqui Moly Team Engstler BMW 320 TC. He has already made clear that his number one goal next year is to again compete in the WTCC season in its entirety. Ng also started his racing career in North America, competing in the Skip Barber Mazdaspeed Challenge in 2008. He won the Mazdaspeed Challenge title the following year, and won one round of the USA Formula Drift Pro-Am Championship. In 2010, Ng won the Asian Touring Car Championship in a Honda Integra DC5. Last year he raced in selected rounds of the WTCC at the wheel of a BMW, and occasionally in the USA Formula Drift Pro-Am Championship.
Two drivers from across the delta, Darryl O’Young and Charles Ng Ka-ki, have been racing all season in the WTCC Charles Ng Ka-ki
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As talented as ever Mike Trimby’s departure from the Macau Motorcycle Grand Prix has not diminished the quality of the grid Longstanding promoter and organiser Mike Trimby announced last year that, after 34 years, he would no longer be involved in bringing the world’s best road racers to the Macau Motorcycle Grand Prix. Trimby’s announcement created shockwaves in the paddock, where many forecast trouble for the event. Judging by this year’s entry list, the forecasts seem incorrect. Assisted by former MotoGP race director Paul Butler, the Macau
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Grand Prix Committee has attracted a grid for the 46th race that appears to be every bit as good as in years gone by, and none the weaker for Trimby’s departure. To increase the appeal and competitiveness of the event and attract yet more talented riders to the Guia Circuit, the prize money has been increased and the conditions of entry have been made uniform. The winner will take home HK$28,000 (US$3,613) this year, 40 percent more than last year. British Superbike veteran Michael “The Blade” Rutter, who made history last year by winning the Macau Motorcycle Grand Prix for a record seventh time, is back – despite having hinted last year that Trimby’s departure would keep him away. Rutter and his fellow-countryman, John McGuinness, will ride SMT Racing Honda 1000cc machines. Martin Jessopp, who impressed with his second-place finish last year, will return on a Ducati 1200cc. The 27-year-old has been contesting the FIM Supersport World Championship this season.
MOTORCYCLEGP The absence of Ian Hutchinson and Jeremy Toye may leave space on the podium for another Briton, Gary Johnson. Johnson has exchanged last year’s Suzuki for a Honda tuned by Quattro Plant Motorsports. Flying the flag Joining them will be a host of riders from 13 countries. This is one of the most obvious changes since the Trimby era. Trimby was often criticised for anglicising the race. This year’s race is full of newcomers from a variety of countries, such as Japan’s Yoshinari Matsushita, Brazil’s Rafael Paschoalin and Italy’s Stefano Bonetti. Portuguese rider Luis Carreira, who was fourth in 2008, is also back after missing last year’s race because of injury. João Fernandes, on a BMW, and Sou Sio Hong, on a Honda, will again be flying the flag for Macau. Neither Fernandes nor Sou qualified in last year’s event, and thus were not eligible for government support for the 2012 international season. So neither has been near a track much this year, and just making it onto the grid on the Saturday afternoon will be their immediate concern. For the third consecutive year the Macau Motorcycle Grand Prix will be the final opportunity to score points for the Duke Road Race Rankings. The Duke Road Race Rankings is the only contest that takes into account season-long performance in the world’s top road-racing events. The race: a 15-lap event on the Saturday.
FIVE TO WATCH Michael Rutter
is very serious about what he does, and when “The Blade” is on the Guia Circuit, all bets are on him. Last year, he became the rider with the most victories in Macau – seven. This will be his 18th visit.
Martin Jessop was last year’s big surprise, finishing second. But he has had two injuries this season, including a broken collarbone incurred in May’s North West 200. Jessop will ride a Ducati 1200cc for Rider’s Motorcycles.com.
John McGuinness, the 2001 winner, perhaps no longer has the zip to take first place again, but his experience and steady pace could be enough to put him on the podium. He recently won the 2012 Joey Dunlop TT Championship Trophy.
Lee Johnston is a Northern Irish rider who made headlines when he finished second in the first Superstock race at the North West 200 in May. He went on to perform well in the Isle of Man TT and the Ulster Grand Prix events. A newcomer to Macau, he is racing for the RPM Performance team, riding a Ducati 1200. Connor Cummins, from the Isle of Man, is a road-racing specialist. Like Jessop, he was injured in the North West 200 this year. Cummins will arrive here without many laps on a track under his belt this season, but he knows the Guia Circuit well, having come second here in 2009. He will be riding a Tyco Suzuki 1000cc.
WHAT'S NEW IN THE MOTORCYCLE GRAND PRIX A three-column grid, as in MotoGP, will be used instead of a four-column grid, the purpose being to stretch the pack as the riders head into the fast left-hander at the reservoir, and to allow safer passage through the fast right Mandarin Oriental Bend A team trophy will be up for grabs this year, and teams of two riders will be eligible to enter the competition – to be won by the team that accumulates the fewest points awarded on an inverse scale
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The Blade’s still sharp Michael Rutter is already the Guia Circuit’s undisputed supremo on two wheels and he is back for more glory BY Jeff Heselwood
rider Ron Haslam’s record of six victories in the Macau Motorcycle Grand Prix was finally beaten last year when fellow-Briton Michael “The Blade” Rutter achieved an elusive seventh win after five failed attempts. Rutter is returning this year to the Guia Circuit, aiming to add to his tally of wins. “It’s a pity I could not keep the record but Michael deserves it after all this time,” says Haslam. Haslam never lost a race here. His winning streak started in 1981 and ended in
1987. He only missed the 1984 event. “I am pleased to have finally beaten Ron’s record,” says Rutter. “I used to watch him as a kid but, in a way, I feel sorry for him.” “One day, though, someone else will come along and beat my total.” Rutter names two riders to watch closely in Macau in future: Macau 2008, 2009 and 2010 winner Stuart Easton, who also holds the Guia lap record, and last year’s first runner-up, Martin Jessopp. Asked why it took him so long to get his
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seventh victory here, Rutter says: “In the last few years the bike was not up to it.” The 40-year old Briton has been racing on two wheels for over two decades. Rutter’s first full season in racing was in the British Superbike Championship in 1993. He finished eighth. He made his debut in World Superbikes that year. He first stood on a World Superbike podium in 1997. In 1999 he tried the 500cc MotoGP series, without a great deal of success. He returned to British circuit racing the following year on a private Yamaha. He later rode for the factory Honda team in the British Superbike Championship for two years. He was second in 2004 and third in 2005. Rutter excels on road courses. He has achieved several victories and other podium finishes in Northern Ireland’s legendary North West 200 and in the Isle of Man TT races. Rutter’s first visit here was in 1994 but he did not finish the race that year. This year’s race will be his 18th on the Guia Circuit. “Macau is unique and everyone is so good: the organisers, the crowd, the other riders,” he says. He acknowledges that there is risk involved in street racing, whether in Macau or elsewhere. “All circuits are dangerous ... We give it 100 percent when the visor comes down and although we’ve lost a lot of friends, we don’t think about it when we are racing. We all do it because we love it.”
Show-off to showcase The Macau GT Cup continues to gain importance, as this year’s list of top-level entries shows Although
you still need to be rolling in money to buy a latest-generation GT3 car, the Macau GT Cup is no longer the rich man’s race it was when it debuted in 2008. The event has matured and this year’s list of entries contains many of the best sports car specialists in Asia and from further afield. The race is also becoming a showcase in Asia for carmakers to show off their latest products. Two-time Formula Three Macau Grand Prix winner Edoardo Mortara is back to defend his 2011 Macau GT Cup title. Last year the Italian beat 2009 and 2010 race winner Keita Sawa by an impressive margin of 6.47 seconds.
Mortara returns in an R8 LMS, with the support of Audi. Sawa is also back on the Guia Circuit. He will drive a Porsche 911 GT3 R for Hong Kong team LKM Racing instead of his usual Lamborghini. Mortara’s biggest headache will probably be 2010 Virgin Racing Formula One driver Lucas di Grassi, who clinched first in the Formula Three Macau Grand Prix in 2005. Di Grassi is making his debut in the Macau GT Cup in a Ferrari 458 GT3. Talented Frenchman Romain Dumas is another likely contender. Dumas will be driving a Porsche 911 GT3 R.
The dominant driver in this season’s Porsche Carrera Cup Asia, Alex Imperatori, will be competing in the Macau GT Cup for the first time, driving a Team Starchase Porsche 911 GT3 R. The 2011 Porsche Carrera Cup Asia firstrunner up and 2008 Asia SuperCar Challenge champion, Rodolfo Ávila, is Macau’s biggest hope in this race. Hong Kong’s Team Jebsen has reduced its participation in the Macau Grand Prix, so the hometown hope will be driving a Porsche 911 GT3 Cup prepared by Asia Racing Team. The other Macau entries are karting regular Diana Rosario, the only female driver in the GT Cup, behind the wheel of a Ferrari F430, and Keith Vong, in a Porsche 911 GT3 Cup. The Macau GT Cup is the final round of the 2012 GT Asia Series. Championship leader Mok Weng Sun, driving a Ferrari F458 GT3, has an 11-point advantage. He will battle it out for the title with the mainland’s rising star, Li Zhicong, in a Porsche 911 GT3 R prepared by Asia Racing Team. Up for grabs are 20 points. The race: A 12-lap race on the Sunday.
FIVE TO WATCH Edoardo Mortara was last year’s winner of the Macau GT Cup
Lucas di Grassi took the 2005 Formula Three Macau Grand Prix title
Romain Dumas won the 2010 Le Mans 24 Hours race
Keita Sawa had Macau GT Cup victories in 2009 and 2010 Danny Watts was the 2006 Porsche Carrera Cup Asia Macau race winner
WHAT'S NEW IN THE GT CUP One warm-up session has been added to the schedule, on the Sunday morning Entrants from abroad are accepted only in the GT3 class if they are not competing in the 2012 GT Asia Series
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McLaren pioneer Danny Watts keeps his faith in McLaren as he vies for his maiden victory in the Macau GT Cup BY Jeff Heselwood
Guia Circuit favourite Danny Watts is returning to the Macau GT Cup, this time hoping to snatch victory. The British driver finished third last year. He is again racing in a McLaren MP4-12C GT3, after giving the model its Asian competition debut at last year’s Macau GT Cup. “Macau is never easy but I am confident we can do it this year,” says Watts. “I have won in other categories here in Macau and it will be great if I can do it for McLaren.” Watts won the 2006 Macau round of the Porsche Carrera Cup Asia. He has finished on the podium in the Macau GT Cup since his debut in 2008 but has never won the race. On a grid filled mostly with Ferraris and Porsches, there will be only three McLaren MP4-12C GT3s. Powered by a 3.8-litre, twin-turbo V8 engine, the car is very responsive, says Watts. “There is virtually no turbo lag,” he says. The McLaren “is an easy car to drive, even round Macau, as it has very few inbuilt faults”, he says. “The engine is now smoother and
very powerful, which will help considerably out of tight corners on the Guia Circuit. I am confident we can deal with Macau’s unique characteristics.” Watts’ strong performance last year in the McLaren helped attract more buyers in this part of the world to the road version of the MP412C GT3. The car boasts a top speed of 330km per hour, going from zero to 100kph in 3.3 seconds. The basic price of the road version is HK$3.9 million (US$503,000) but the range of options that will push the bill up is immense. “We have received overwhelming feedback on the MP4-12C since we started taking pre-orders, and delivery of the super-sports car is lined up until 2013,” says Max Cheng, general manager of McLaren Hong Kong. “We are looking for more allocations and are expecting to show the cars in a variety of options to satisfy customers’ needs.” Mr Cheng says the average price paid, including options, is around HK$4.4 million. One owner paid HK$5.3 million for his McLaren MP412C GT3, including HK$1.4 million spent on options.
More than a paint job The Macau Road Sport Challenge is set to show just what tuned cars can do on the Guia Circuit The
Macau Road Sport Challenge is the race to follow if you are a dedicated car tuner. The event was added to the Macau Grand Prix programme in 2008 and the standard of competition and the quality of the cars have been improving ever since. Most drivers come from the Pearl River Delta. They drive a wide variety of marques, ranging from Subaru to BMW to Lotus. In 2010, the event was overshadowed by too many crashes, but it ran smoothly last year. Last year’s winner, Philip Yau Wing-choi, will not defend his title, since he has moved on to the Macau Touring Car Cup. Macau’s Sun Tit Fan was third in this year’s Roadsport competition of the Macau Touring Car Series but he remains the favourite for the Road Sport Challenge. Sun, the winner of the 2008 and 2009 events, drives one of the most powerful cars in the paddock, a Mitsubishi EVO9. His biggest opponent is likely to be Japan’s Tatsuya Tanigawa. Tanigawa has unfinished business here, and his Mazda RX-8 is a strong car. Among the established Hong Kong drivers, look out for Alan Chan Suihoo and Samuel Hsieh. Much attention will probably be focused on the controversial Han Han, considered the mainland’s most popular blogger, who will debut in Macau driving a Subaru Impreza STI. The race: A 10-lap race on the Saturday.
FIVE TO WATCH Sun Tit Fan won the Macau Road Sport Challenge in 2008 and 2009
Tatsuya Tanigawa was the first runner-up in last year’s race
Alan Chan Sui-hoo took the 2012 Hong Kong Roadsport championship
Un Wai Kai is the 2012 Macau Touring Car Series Roadsport champion Nattavude Charoensukhawatana had pole position at the start of last year’s race
WHAT'S NEW IN THE ROAD SPORT CHALLENGE The popular Nissan GTR R35 has been prohibited from racing
Titans clash Asia’s leading touring car drivers will battle it out in the Macau Touring Car Cup
in 1991, the Macau Touring Car Cup race is one of the oldest in the Macau Grand Prix programme. There are more than 30 entries this year, each with one thing in common: proven credentials acquired in recognised championships in Asia. In view of the quality of the field, many say a first place is as valuable as winning a 10-round Asian championship. It is fair to say that the Macau Touring Car Cup defines the best Asian touring car driver of the year. Since the introduction of the FIA S2000 rules, a grid that was usually full of Hondas now has more variety, with the arrival of some BMWs, Chevrolets and Toyotas. Most of last year’s drivers are set to return and will be joined by plenty of newcomers and some grand, old-timers on a comeback tour. Several Macau drivers have moved on to the World Touring Car Championship Macau Grand Prix, so the chances of a home victory are slimmer. Still, Macau heroes Leong Ian Veng and Jerónimo Badaraco have the skills to pull off a surprise. More probable, however, is a fierce fight among the Hong Kong talent: Eric Kwong Hoi-fung, Paul Poon Tak-chun and Samson Fung Man-wai. Fung won last year’s Macau Touring Car Cup. Also worth keeping an eye on is last year’s Macau Road Sport Challenge winner, Philip Yau Wing-choi. Former Hong Kong Touring Car Championship winner Kenneth Lau Chi-yung and his long-time teammate, Michael Choi Koonmeng may also play a part in the battle for the podium. The race: A 12-lap race on the Saturday.
FIVE TO WATCH Paul Poon Tak-chun won the 2010 Macau Touring Car Cup
Eric Kwong Hoi-fung took the 2012 Hong Kong Touring Car Championship title
WHAT'S NEW IN THE TOURING CAR CUP
Leong Ian Veng is the winner of the 2012 AAMC Challenge series
Philip Yau Wing-choi won Several returning competitors have changed their cars, including Macau’s Jerónimo Badaraco, who will race this year in a Honda Accord CL7 instead of the Integra DC5 he drove last year
the 2011 Macau Road Sport Challenge
Jerónimo Badaraco was the first runner-up in the 2012 AAMC Challenge series
Sibling rivalry Macau’s best N2000 class drivers face their Hong Kong counterparts in the Interport Race for trans-Delta glory The
Macau-Hong Kong Interport Race is a showdown between talent from Macau and Hong Kong. The event puts the best Macau Touring Car Series N2000 class drivers head-to-head with the best Hong Kong Touring Car Championship N2000 class drivers, in a breathtaking 10-lap sprint. The excitement generated by the Interport Race is relentless. The winners and losers are often separated by the most miniscule of margins. The precursor to this event was introduced in 1958 and the race has since evolved, so it is no longer for Macau drivers only and no longer run over 30 laps. Gone too are the days when better-funded Hong Kong drivers dominated the event. Macau drivers have won every race since 2008, when it was first run in its present form. The race is for FIA Group N 2000cc cars. Most drivers pick a Honda Integra DC5 for
the simple reason that it is probably the best car in this class. Last year’s winner, Chou Keng Kuan, and the 2010 champion, Álvaro Mourato, will extend in the Macau Touring Car Series to the Guia Circuit their rivalry. They put on a fine show last year, when Mourato came in 0.201 of a second behind Chou. The race: A 10-lap race on the Saturday.
FIVE TO WATCH Chou Keng Kuan (Macau) won the Macau-Hong Kong Interport Race in 2007, 2008 and last year Álvaro Mourato (Macau) was the 2010 race winner
Billy Lo Kai-fung (Hong Kong) came in third in last year’s edition Sunny Wong Yat-shing (Hong Kong) is the 2012 Hong Kong Touring Car Championship N2000 titleholder
Wong Wan Long (Macau) was last year’s Macau Touring Car Series N2000 champion
this city holds the biggest carnival of motorsport in this part of the world, the Macau Grand Prix. Macau also has the best go-karting facility in the region, on Coloane, which held the season finale of this year’s CIK-FIA World Karting Championship. But the city has difficulty in developing new talent for car racing. Since 2008, nobody has represented Macau in any important single-seater championship abroad. From 2009 until last year, 40-year oldveteran Michael Ho Hon Keong was alone in flying the Macau flag in the Formula Three Macau Grand Prix. He has now retired and the only Macau resident in the race this year is Luís Sá Silva, who represents Angola. The government has long supported motor racing but new sponsorship rules introduced last year are a turn for the worse, drivers say. Drivers must now finish their races in the Macau Grand Prix to be eligible for government support to compete abroad in the following season. The government has declined to change the sponsorship rules again, despite criticism. “Most of the people have no idea how much it costs to race at this level,” says Macau driver Rodolfo Ávila, who raced in British Formula Three in 2006 and for part of 2007. “When I was racing Formula Three in Europe, we needed a MOP10million [US$1.25 million] budget to race for the top. This kind of budget is very hard to generate in Macau. Without government support we will never see a Macau driver in Formula One or even close,” Ávila says. Isaías do Rosário, a former driver and founding member of the Automobile General Association of Macao-China, has long warned about the lack of junior talent being nurtured here. “The emergence of new drivers depends on many factors. But today’s distribution of government support doesn’t help beginners,” Rosário says. Observers say that since the end of the Formula BMW Pacific series, in 2010, there has been no race in the Macau Grand Prix programme suitable for a young gun aiming to shoot up the motorsport ladder. “When you’re done in go-karting, what do you do next?” says Ávila. “Single-seaters: Formula Renault, Formula Pilota or Formula BMW. Then, next you start thinking about Formula Three. You’re not going to do touring car races first. There is a path.” One in a thousand Malaysia and Thailand have programmes to spot and develop new talent. In Japan, the car manufacturers manage their own development programmes for junior drivers. Frenchman Philippe Descombes is manager of Asia Racing Team, which was founded in Macau
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fresh blood The city’s motorsport legacy is not inspiring enough talented young drivers
HOMETOWN HEROES Macau has 57 drivers and riders entered in the 2012 Macau Grand Prix but just two have international reputations: André Couto and Rodolfo Ávila. Both are Portuguese but have lived here since they were youngsters.
The driver: Couto will again make a one-off appearance in the FIA World Touring Car Championship (WTCC) in its Macau Grand Prix season finale. He will drive a SEAT Leon 1.6T. His best in the Macau WTCC event was seventh in Race Two in 2006. Couto is a regular in the Japanese Super GT Series, and was the last Macau driver to win the Formula Three Macau Grand Prix, in 2000. His car: “Compared to the Chevrolet or the BMW, the SEAT engine needs more power, but at the same time the handling of the car is very good,” Couto says. His attitude: “I always believe that it is possible to win. But let’s be realistic: our result will be according to the budget and the material we have at our disposal. On top of that we – the Macau drivers – have to finish the race, so we have to balance the priorities like never before.”
André Couto The driver: Avila made his bid for the Macau GT Cup last year in a 2012 Porsche 911 GT3 R run by Hong Kong’s Team Jebsen. The model had never before been raced anywhere in the world. This year he will drive for Zhuhai’s Asia Racing Team, which he works for as a driver coach. Avila will be behind the wheel of a Porsche 911 GT3 Cup. His car: “It is the same model I have been racing in the past three seasons in the Porsche Carrera Cup Asia, so I know it well. However, with limited overtaking opportunities on the Guia Circuit, and against the FIA GT3 spec cars, in the straight lines I will definitely miss the 500 horsepower of the 911 GT3 R I drove last year,” Avila says. His attitude: “The Guia Circuit doesn’t give you room for mistakes. To finish first, first you must finish. It will be impossible to match the pace of the frontrunners, but I believe I have a good chance between the GTM-class cars. A top-ten overall result is within our reach.”
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Macau has its own touring car championship, organised by the Automobile General Association Macao-China (AAMC). This year’s Macau Touring Car Series comprised two double rounds and was raced in April and May on the Guangdong International Circuit. More than 50 drivers took part, in three categories. The AAMC Challenge was open to cars in the FIA S2000 and National S2000 class. Leong Ian Veng was the champion, finishing ahead of his teammate, Jerónimo Badaraco. In the category for N2000-class cars, also known as the beginners’ class, Chou Keng Kuan took the title, beating Álvaro Mourato. In the almost-anything-goes Roadsport category, Un Wai Kai and Lei Kit Meng finished with an equal number of points, but Un won the trophy.
and is based in Zhuhai, and is one of the most successful single-seater teams in Asia. He says there is no secret to nurturing new talent. “One of the best models came from the ElfWinfield Racing School in France, 20 years ago. The fastest drivers on each course at the racing school were asked to return in the autumn to establish the fastest driver of the year. The two fastest were each given a full budget to race the following year in Formula Renault,” Mr Descombes says. “If they were fast enough, they would be retained and go to Formula Three and then Formula 3000, and eventually they would get a drive in Formula One, creating a generation of top French drivers in the 1980s and early 1990s.”
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Karting is a customary starting point for young drivers. “The whole problem starts here,” says 2000 Formula Three Macau Grand Prix winner André Couto. “There is no junior karting championship in Macau.” He says the government and other bodies associated with motorsport need to promote racing better. “You have to bring the sport to schools, make use of the well-known local drivers and show the youth what it is all about.” That is what happens in Japan, where Couto drives. “In Super GT, where I race, they open the paddock to the families. There is also a kids’
pit walk. From those 1,000 children that visit the paddock, perhaps one will want to be a racing driver one day.” One problem is that motorsport is notoriously expensive. “Most of the motor racing practitioners in the region have a stable outside professional career and fund their racing activities with their own money,” says Porsche Carrera Cup Asia and Thailand Supercar race engineer Duarte Alves. Mr Alves says there is a need to make private sponsorship more attractive to companies, opening the way for talented drivers that are not able to finance their own careers. “In England, for example, companies get fiscal benefits from sponsorship,” he says.
An aura of greatness Teddy Yip’s extraordinary life hits the bookshelves BY Jeff Heselwood
Dental health and motorsport racing are unlikely partners, but not for long-time Macau Grand Prix enthusiast Philip Newsome. The Hong Kong dentist is a leading authority on the event and has written a number of works on it, including seminal reading “The Macau Grand Prix: 50 Years of Motor Sport”. Now he has produced the long-awaited biography of Theodore “Teddy” Yip, one of the original supporters of the Grand Prix, as well as an Indy team owner and Formula One entrant. The book is named “Teddy Yip: From Macau to the World and Back”. No individual has played a greater role in the development of the Macau Grand Prix, nor has been so widely known for his charisma, charm, tenacity and honour. As a driver, owner of the fabled Theodore Racing Team, and as a supporter, Yip played a major role in making the Grand Prix the internationally-recognised motorsport event it is today.
He passed away in 2003, at the age of 90, but there are many around the world that knew and admired him. For the biography, Newsome spoke to many of these friends and acquaintances – in the United States, Europe and, of course, in Macau. He says it was a labour of love to write this book. “It was fascinating talking to so many people that knew Teddy and reminiscing with them on his numerous racing exploits around the world.” Yip was born in Indonesia but lived most of his life in Macau and Hong Kong. He built up one of Hong Kong’s largest rice-importing companies and later become a close business partner of Stanley Ho Hung Sun. One of the bends on the Guia Circuit is named after Yip – “Teddy Yip Bend” – at the location of his house. His garden parties there during the Grand Prix were legendary. Racing spirit Teddy was a racing driver himself in his youth – he was third in Macau in a Jaguar in 1963 – but it was as an entrant that he became better known. His Theodore Racing Team competed in F5000 in both the United States and England. Yip’s first foray into Formula One came in 1974, when he provided backing for Mo Nunn’s infant Ensign team. In 1981, he entered Formula One with Frenchman Patrick Tambay and Switzerland’s Marc Surer. Tambay scored the team’s one and only point of the year at Long Beach, the opening round of the 1981 world championship. Money, though, was tight and the team was merged with Mo Nunn’s Ensign outfit. In 1983, Ayrton Senna took a Theodore Racing Ralt RT3 car to victory in the Macau
Grand Prix, the first year the race was run to Formula 3 regulations. Other notable drivers to race under Yip’s Theodore banner include Indianapolis winner Gil de Ferran, former Formula One world champion Mika Hakkinen and Formula One driver Eddie Irvine. In 1989, Teddy Yip and Mazda Motors Hong Kong teamed up to bring 16 of the world’s top drivers to Macau. The goal was to re-enact the 1978 “Race of Giants”, a one-off event that had been organised to celebrate the Macau Grand Prix’s 25th anniversary. Hong Kong’s Bob Harper, ably assisted by Yip, brought to Macau several racing legends, including Formula One champions Jack Brabham, Phil Hill and Denny Hulme. The 1989 event was to be called the “Teddy Yip Mazda Race of Champions” and all drivers were to compete in identical Mazda MX-5 sports cars. Two Formula One world champions, namely Alan Jones and Denny Hulme, four Indy 500 winners, and several touring car legends took part in the unique event. “It was a great event and Teddy was superb, organising all the hospitality, both before and afterwards at the prize-giving,” recalls Ian Skeggs, at the time the chief executive of Mazda Hong Kong. Geoff Lees eventually won the race. This would be one of the latest major contributions by Yip to the Macau Grand Prix, as he reduced his involvement in motor racing sponsorship in the late 1980s.
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The Guia curse In 1991, Mercedes-Benz pulled out all the stops to achieve glory at the Guia Race but missed out on first place BY Jeff Heselwood
years ago, Mercedes-Benz wanted at all costs to conquer the Guia Race, the predecessor of what is today the Macau stage of the FIA World Touring Car Championship. To achieve that, the Stuttgart outfit sent four German Touring Car Masters (DTM) cars and four of its top drivers: German’s Klaus Ludwig, Denmark’s Kurt Thiim, Portuguese Ni Amorim and German lady racer Ellen Lohr. Mercedes’ plan was simple: to master the Guia Circuit, with all the team driving AMG Mercedes 190 E cars, able to reach speeds in the region of 275 kph on the Guia Circuit. Three-time Le Mans 24-Hours winner Ludwig was the star and was
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expected to dominate the race, while Amorim was set to be the home hero in the then-Portuguese enclave of Macau. Lohr was probably the most successful female driver of her time and Thiim had won the DTM championship in 1986. Things eventually didn’t go Mercedes’ way. Of the massive four-way assault on the Guia Circuit by the German manufacturer, only two podiums resulted: Thiim in second and Ludwig in third, both behind former Formula One driver Emanuele Pirro, in a BMW. These were Mercedes’ first and only podiums in the Guia Race. The mighty Mercedes still returned the following year, in a touring car thriller with four factory Mercedes and three BMWs all determined to claim victory. Although Mercedes driver Bernd Schneider took pole position with Ludwig alongside, Pirro made it back-toback victories, with BMW teammates Joachim Winkelhock and Roberto Ravaglia in second and third respectively. Among the Mercedes, only Ni Amorim made it to the finish line, taking fourth place. Mercedes never did win the prestigious Guia Race and did not reappear in Macau.
Green racing New motor racing series for electric cars to start in 2014 Electric cars
are becoming common in many cities. And now they are entering the motorsport arena too. There are plans for a new motor racing series, designed exclusively for electric cars and sanctioned by the FIA, motorsport’s governing body. The new championship, known as Formula E, is due to debut in 2014. Formula E Holdings Ltd, a consortium of international investors led by London-based entrepreneur Enrique Bañuelos, will run the championship. The consortium is expected to invest up MOP500 million (US$62.5 million) in launching the new competition. Demonstration runs will start next year. Formula E’s first season is expected to have 10 teams and 20 drivers. “This spectacular series will offer both entertainment and a new opportunity to share the FIA values and objectives of clean energy, mobility and sustainability,” says FIA’s president, Jean Todt. The championship also aims to “become the framework for research and development around the electric car, a key element for the future of our cities,” says Alejandro Agag, who is the chief executive of Formula E Holdings and a GP2 team owner. Macau on the calendar? Formula E is targeting to attract Formula One teams to join the competition. So far, McLaren Formula One team is the only one to publicly express interest in the series. The organisers aim to introduce a different racing model from Formula One, with new features to create extra fuss. Qualifying will be done in a playoff format with two cars racing each other at a time. Races will take place on city-centre circuits around the world. To reduce spending and condense the action, each round will last just one day. Races will last one hour and, because the batteries can only last up to 20 minutes, drivers won’t stop to change tires or batteries – they will change cars instead! Another key difference in races will be the noise – Formula E cars are silent. Some of the proposed locations for the new
series include Rio de Janeiro, Mexico City, Los Angeles, Cape Town, as well as Hong Kong, Shanghai and Beijing. Macau is a potential candidate to host a Formula E round. “Macau is a very interesting possibility for us, but not on the Grand Prix weekend,” Agag tells Macau Business. The 6.2-kilometre Guia Circuit “is too long”, he says, noting that Formula E tracks will be only up to three kilometres long. “Macau is a place with a lot of tradition in mo-
torsport, having all the infrastructure and experience necessary to run an event like this,” he adds. “Our track team is looking for potential places in Hong Kong to organize a race, which are not easy to find. We have not yet talked with the local authorities, as we haven’t talked with the Macau authorities. Of course due to the proximity, it won’t make sense to have a venue in Macau and another in Hong Kong”, says Agag.
THE FORMULEC EF01 The Formula E teams will be offered an evolution of a prototype vehicle by Formulec, a French maker of electric racing cars, to compete in the 2014 championship. Teams can also choose to have their own cars, provided they are FIA homologated. Formulec’s EF01 prototype has a maximum speed of 250kph and accelerates from zero to 100kph in three seconds. The car, including driver and batteries, has a minimum weight of 780kg, similar to that of a Formula One car with a full tank of fuel. The 2005 Macau Grand Prix Formula 3 winner Lucas Di Grassi has been appointed as the official development driver of the Formula E championship.
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A love affair The mainland’s luxury car boom is fuelling a passion for speed among wealthy Chinese While
growth in the mainland’s automobile market is slowing down, luxury car purchases remain torrid. Even if there are signs of saturation, luxury brands are still forecasting to post better-thanaverage results in the mainland over the next five years. To boost brand awareness, several high-end manufacturers such as Porsche and Ferrari are using exclusive racing series to showcase their products. Experts say Chinese strongly associate car racing with positive values. German automaker Porsche was the first to understand the benefits of motor racing in the mainland, launching the Porsche Carrera Cup Asia in 2003. “Porsche Carrera Cup Asia is a series all over Asia, but now having a very strong focus on China because we feel that it is still very important that the people understand the position of motorsport and that this is the core of our brand value,” Carsten Balmes, director of marketing for Porsche (China) Motors Ltd, told Macau Business earlier this year.
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With the support of its local dealerships, Porsche has managed to run the only series in Asia that mixes professional racing drivers and amateurs, all of them driving the same car. “Back in 2009, when I decided to move to Porsche Carrera Cup Asia, we were just three or four drivers battling for the win. Now we have seven to eight drivers that can win. Porsche continues to raise the bar and this is good,” says Macau driver Rodolfo Ávila. He races for Team Jebsen, the motorsport arm of the group that runs Porsche’s dealerships in Macau and Hong Kong. “Even the amateur drivers enjoy sharing the paddock and the racetrack with the best,” Ávila says. Full throttle Ferrari was the second luxury carmaker to launch a single-brand racing series in Asia, but also with a strong focus in the mainland, already one of its top markets. Managed and coordinated by the Italian marque, the Ferrari Challenge Trofeo Pirelli – Asia Pacific debuted last year. The competition visits the Formula One circuits around the region. This year, Ferrari managed to get a slot at the Singapore Grand Prix. The Ferrari Challenge Trofeo Pirelli also includes one leg in Europe, where the drivers from each regional championship compete together for the world title. Following three successful seasons in Europe, the Lamborghini Blancpain Super Trofeo Championship was launched in Asia this year.
PITSTOP So far so good, the championship has been able to congregate very respectable grids, with serious support from local dealerships. In 2011, Lamborghini posted a 70 percent year-on-year jump in sales in the mainland. In Macau, over 10 units were sold last year. While Porsche, Ferrari and Lamborghini have experience organising their own racing series in Europe and the United States, this is not the case for Audi. The German carmaker this year launched its first ever one-make cup, the Audi LMS Cup, choosing the mainland to do so. Audi delivered over 300,000 cars there last year, making the mainland its largest market worldwide. The R8 LMS GT3 cars used for the inaugural season are full FIA GT3specificiation and identical to the one in which Italian Edoardo Mortara raced to thunderous victory in last year’s Macau GT Cup.
“With the Audi R8 LMS Cup, Audi transfers its leading role in China’s premium car market to the race track, and along with it all the glamour, excitement and emotion of this fantastic sport,” says director of Audi Sport customer racing China, Rene Koneberg. Although motorsport is still in its infancy in the mainland, the onemake cups are proving popular among wealthy amateur drivers. “These championships are very customer-orientated. Most participants are aware that the reason they don’t win isn’t because of the differences in the car setup or the money they spend,” says Ávila, who is also a driver coach at Zhuhai-based Asia Racing Team. “They love their cars, the motor racing atmosphere and racing, but during the race weekends they want to concentrate on learning and improving their skills,” he says.
THE ONE-MAKE CUPS
Porsche Carrera Cup Asia
Ferrari Challenge Trofeo Pirelli – Asia Pacific
Car: Porsche 911 GT3 Cup Price of the car: MOP1.59 million Rounds: 11 races across Asia Drivers: Pros and amateurs What makes it different: The most serious one-make series in Asia
Car: Ferrari 458 Challenge Price of the car: MOP2.3 million Rounds: 9 races across Asia, plus two in Europe Drivers: Gentlemen drivers What makes it different: One international race in Europe
Lamborghini Trofeo Asia
Audi LMS Cup
Car: Lamborghini Gallardo Super Trofeo Price of the car: MOP2.16 million Rounds: 12 races across Asia Drivers: Gentlemen drivers mainly What makes it different: The possibility of having two drivers per car
Car: Audi R8 LMS Cup Price of the car: MOP2.57 million Rounds: 10 races in the mainland Drivers: Pros and amateurs What makes it different: A pure GT3 car
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Adrenaline pumping Whether you love the smell of burning tyres or not, the Macau Grand Prix is an electrifying event. For four days, a unique atmosphere takes over the entire city, bringing to the Guia Circuit thousands of petrol-heads, gorgeous pit-girls and some of the worldâ€™s fastest drivers and riders.
IN DEX Ao Grama
Galaxy Entertainment Group
Pages 19 & 23
Macau Cultural Centre
Macau Post Office
Morton’s The Steakhouse
Sports Development Bureau
Zung Fu Motors – Mercedes
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Published on Nov 1, 2012
Macau Business, a 132-page monthly magazine is De Ficção Multimedia Projects’ flagship publication. Launched in May 2004, focuses on Macau’s...