56 Economy & Finance 24 Feeding the nestlings The Young Entrepreneurs Aid Scheme will soon start receiving applications 26 Courting the rich Bank of China wants to attract more mainland high-net-worth individuals to use its private banking service
Politics 36 Bureaucracy snowballs The public sector has expanded non-stop since the handover 40 Time is money Government delays in inking contracts for public works are hurting contractors 44 Strategy-lite tragedy A new book criticises Portugal’s lack of strategy during the Macau handover negotiations
Greater China 48 Poisoned gifts Lavish spending by the former head of Hong Kong’s graft-buster is taking a toll on the agency’s reputation 52 Generation gap The mainland has 61 million “left-behind” children, whose parents have joined the mass migration to cities 54 High-level endorsement Home-grown fashion label Exception de Mixmind has its “Jason Wu moment” JULY 2013
Property 56 Tipping point A new study shows the average household cannot afford to buy a home in the private market 60 Commuter class More Macau people are moving to Zhuhai in search of cheaper housing
Gaming 66 Hey, big spender Premium mass-market play in Macau is a growing phenomenon 72 Race to the middle Galaxy Macau adds new offerings to its gaming floor 74 What’s in a name? Marketing experts say gaming companies can add value to their brands by using the name ‘Cotai’ 78 Done deal The government approves co-op sale of rights for Sands China’s Four Seasons apartment hotel tower 81 Big blind Guangdong Group introduces a poker brand to tap into VIP clientele with a love for the game 84 Uncle Sam is watching A U.S. panel debates money laundering risks in Macau 86 Changing up Development on Hengqin Island starts to take shape and gaming analysts are bullish
Photo: Luís Almoster
88 Female of the species Gambling addiction among women worries experts 91 Mainland insight The Polytechnic Institute launches a postdoctoral centre on gaming 92 Great expectations Casino resorts’ customer satisfaction thrives on the back of higher expectations, a study finds 93 Vietnam’s Grand opening Ho Tram Strip’s first resort opens on July 26 98 Asian nightmare Caesars’ prospects for expansion into Asia have been dealt a major blow
Hospitality 100 Red tape slashed Hospitality experts applaud a government move to make licensing easier 102 Adding spice More Indian restaurants are opening to meet growing demand 105 Endangered flavour The economic boom is threatening the survival of Macanese cuisine
Business 109 Feet first Sports store Be-1 is considering more outlets 112 Business transcendent Nirvana Day Spa expands to Taipa and Coloane JULY 2013
Photo: Luís Almoster
102 Telecom 114 Black broadcasts down The government has been ordered to shut down public antenna companies
Human Resources 116 Office shopping More people are opting to work from coffee shops
Arts & Culture 118 Architectural artistry Andre Lui warns of the risks of economic development in his latest installation
Opinion 14 From the publisher’s desk Paulo A. Azevedo 16 Editorial Emanuel Graça 33 Let light shine Gustavo Cavaliere 46 The Gini escapes Keith Morrison 51 China’s cold eye on hot money Zhang Monan 55 China’s stealth wars Brahma Chellaney 65 Coloane’s requiem José I. Duarte 111 Generation next André Ribeiro 126 Science, heal thyself Arturo Casadevall and Ferric C. Fang
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email@example.com PAULO A. AZEVEDO FOUNDER AND PUBLISHER
from the publisher’s
desk STRANGE JUSTICE
ust after the handover, anyone with common sense was shocked by the decision to reduce the number of judges in the Court of Final Appeal from five to three. The decision crushed any likelihood of appealing a judgment from the trio of judges because the city’s top court could no longer consider an appeal against a veredict from its only existing judges. Despite the awkward decision, a few visionary magistrates were quick to applaud it. Others believed such a bootlicking-like response was undeserved. The facts have proven the less optimistic observers were correct. During the first trial of former Secretary for Transport and Public Works Ao Man Long, an inexperienced politician but rapacious collector of financial reward and broken laws – there are plenty of people yet to be held accountable for their participation in this, by the way –, the Court of Final Appeal
To prevent a third party from denouncing a case of domestic violence based on “family harmony” is a fallacy, irresponsible and, above all, an act of unacceptable cowardice JULY 2013
was publicly confronted for the first time with the impossibility of an appeal. The law states that the city’s top officials are trialled in first instance by the Court of Final Appeal. It means top officials can only stand trial once and, for better or worse, no appeal is possible. That was in 2007. The impossibility of appealing judgments involving top officials was seen as damaging to the city’s legal system. Again, magistrates said things were fine as they were. Now there are demands from the judiciary to revise the city’s legal framework, offering the opportunity of an appeal for top officials. Bearing in mind that the Court of Final Appeal has just three judges, the solution being proposed is for the appeals to be sent to a lower court. Five years ago, the idea would have been considered sacrilege. Such are the times in modern Macau.
A SHARED RESPONSIBILITY
t is completely inexplicable that Macau considers domestic violence a semi-public crime for the sake of upholding family harmony. The main difference between a semipublic crime and a public crime is in who may file the complaint. A semi-public offence cannot be prosecuted unless the complaint is filed by the aggrieved party. Anyone can report a public crime. The community is all too aware that some victims of domestic violence, women and children particularly, are hesitant to report an attack, regardless of how severe or perverse. There is often a situation of complete dependency, even at a psychological level – not to mention on a material level – which ties the victims to the aggressor.
To prevent a third party from denouncing a case of domestic violence based on “family harmony” is a fallacy, irresponsible and, above all, an act of unacceptable cowardice. Macau will never achieve harmony by ignoring domestic violence and torture, or by protecting ill-intentioned and ill-formed individuals. Society should especially pay close attention to the sexual abuse of minors. The government must find the courage to change the status quo, instead of throwing sand into the faces of the people, through explanations so debased that not even the most cowardly perpetrators of domestic violence or sexual predators could offer them up.
firstname.lastname@example.org EMANUEL GRAÇA EDITOR-IN-CHIEF
TIME TO GO, LAU
The list of Lau Si Io’s failures is long. It extends from the confused public bus system to delays in major public construction projects, including the permanent ferry terminal in Taipa and the light railway transit system
au Si Io is living on borrowed time as the Secretary for Transport and Public Works. Mr Lau has been able to survive failure after failure thanks to the support offered by Chief Executive Fernando Chui Sai On, but he should be long gone. Last month offered a reminder, with several events further tainting Mr Lau’s leadership. A decision by the Court of Second Instance that ordered the government stop unlicensed public antenna companies from illegally relaying cable television signals was a blow to Mr Lau’s credibility. Apparently, he did not see it coming, despite legal advice and precedent. Let us not be naïve. The government’s approach has all along been to turn a blind eye towards the operations of the antenna companies. It was a strategy decided at the highest echelons and the legal risk was apparent to all. With that modus operandi now overruled by the court, the secretary handling the issue should take the blame. The court has discredited his leadership and his prior efforts to find a solution did not bear fruit.
Litany of failure
Also last month, heavy rain caused floods and the city descended into chaos. It highlighted poor urban planning and the need for upgrades to the city’s infrastructure. Just a month before, Mr Chui demanded Mr Lau take action. Meanwhile, at the Legislative Assembly last month, Mr Lau told members the government could do nothing to protect Coloane from rapacious development because it did not have the legal tools. He failed to add that the government had promised the necessary legal tools since his predecessor Ao Man Long was jailed in 2006 for corruption and fraud on a staggering scale. The bills were delivered to the Legislative Assembly only earlier this year and members now face a race against
time to approve them by next month. If not, a new assembly will be in place come September and the legislative process must start again. During the Coloane debate, Mr Lau also failed to mention that the government has other tools to preserve Macau’s “green lung”. In extremis, it can consider the expropriation of land in the public’s interest. The list of his failures is long. It extends from the confused public bus system to delays in major public construction projects, including the permanent ferry terminal in Taipa and the light railway transit system. He did not meet last year’s deadline to have 19,000 public housing flats ready – a promise made in 2007. It is a political challenge to replace Mr Lau. He was the “fireman” selected to control wildfires ignited by Ao’s downfall. We know now his appointment was a poor decision. If he remains at his post, the misguided voices supporting Ao for his ability to get things done will grow louder. I hope Mr Chui has the strength to fire him.
A guiding light Father Lancelote Rodrigues passed away last month. I did not have the opportunity to meet him but his work with the poor and underprivileged deserves recognition and everyone’s appreciation. His life story is admirable, matching a period in time that is now difficult to imagine, when refugees from Shanghai and Harbin, and later from Vietnam, fled to Macau to escape political repression and war. Father Rodrigues worked relentlessly to resettle and provide for them. At the age of 89, Macau has lost one of its leading moral guides. Rest in peace.
Editorial Council Paulo A. Azevedo, Emanuel Graça, Tiago Azevedo, José I. Duarte, Mandy Kuok Founder and Publisher Paulo A. Azevedo VOL.1 Nº111
Editor-in-Chief Emanuel Graça email@example.com
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Photography António Mil-Homens, António Leong, Carmo Correia, Greg Mansfield, Gonçalo Lobo Pinheiro, John Si, Luís Almoster, Manuel Cardoso, MSP Agency, Agencies Illustration G. Fox, Rui Rasquinho
Regular Contributors André Ribeiro, 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
Letters to the editor
Contributing Editors Cherry Lee, Christina Yang Ting Yan, Cláudia Aranda, Dennis Ferreira, Derek Proctor (Bangkok), Filipa Queiroz, Hélder Beja, João Ferreira da Silva, João Francisco Pinto, José Carlos Matias, Kahon Chan, Kim Lyon, Lois Iwase, Luciana Leitão, Mandy Wong, Mary Ann Benitez, Michael Grimes, Sara Farr, Sara Silva Moreira, Sofia Jesus, Tracy Ma, Xi Chen, Yuci Tai
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: email@example.com JULY 2013
IN THE NEWS
UNIQUE LIST FOR BUSINESS IN INDIRECT ELECTIONS
Minimum wage may reach MOP30 per hour The government will launch a public consultation in September The Secretary for Economy and Finance Francis Tam Pak Yuen said last month that the city’s statutory minimum wage is likely to be set somewhere between MOP23 (US$3) and MOP30 per hour. The government had previously proposed that the minimum salary should be between MOP23 to MOP28. Mr Tam said that the government would begin drafting the minimum wage bill this month. It will then solicit
public opinion on the topic in September, Mr Tam added. The goal is to have the bill ready to be submitted to the Legislative Assembly by year-end. The minimum wage will only cover cleaners and security guards. At present only employees of the government’s security and cleaning contractors are entitled to a minimum wage, currently set at MOP26.
The indirectly elected seats representing the business sector will not be contested in the upcoming September elections for the Legislative Assembly. The Union of Macau Business Interests collected the support of 86 percent of the associations that make up the business functional constituency. The group is fielding sitting assembly members Ho Iat Seng, Kou Hoi In, Cheang Chi Keong and José Chui Sai Peng. The first three were already elected in representation of the business sector in the 2009. Mr Chui is currently a government-appointed assembly member. He replaces Fong Chi Keong on the ticket, who decided not to run for re-election.
UNEMPLOYMENT RATE HITS NEW RECORD LOW
NEW FACES AT THE LIAISON OFFICE
Macau’s unemployment rate dropped to a new all-time low, the latest official data shows. The jobless rate for March-May fell by 0.1 percentage points from the previous period, to 1.8 percent. This figure is the lowest since the service began collecting data on unemployment in 1992. Between March and May, there were only 6,400 jobless people in Macau.
The Liaison Office of the Central Government in Macau has two new vice-directors: Chen Sixi and Qiu Hong. They were officially appointed last month. Meanwhile, three vice-directors – Xu Ze, Li Benjun and Gao Yan – have been recalled to Beijing. Mr Xu has been appointed for a second stint as a deputy director of the State Council’s Hong Kong and Macau Affairs Office.
CYBERCRIME ON THE RISE
Florinda Chan cleared from “gravegate” case
Facts on Figures
But the government has preventively suspended IACM president Raymond Tam The Court of Final Appeal last month cleared the Secretary for Administration and Justice Florinda Chan from any wrongdoing in a case related with the so-called “gravegate” affair. After a pre-trial hearing, the court concluded there was insufficient evidence to show that Ms Chan had falsified documents or abused her position, as claimed by Paulina Alves. Only the Court of Final Appeal can trial Macau’s principal officials. Ms Alves was fighting the decision by Ms Chan to reject her request for a long-term lease of a cemetery plot in which to bury her deceased brother. The “cemeterygate” case involves the perpetual lease of cemetery plots in 2001 to a legal advisor of Ms Chan. Ms Alves first exposed the affair. Despite Ms Chan’s acquittal, “cemeterygate” claimed its first two victims last month: Chief Executive Fernando Chui Sai On preventively suspended Raymond Tam Vai Man from his position as Civic and Municipal Affairs Bureau president, along with vice-president Lei Wai Nong. The suspension decision was made after an internal administrative probe preliminarily concluded that the two officials “violated civil servants’ discipline”. The probe is still on-going and no more details were provided. Previously, the Court of First Instance had confirmed that Mr Tam and Mr Lei, along with two other bureau workers, had been charged with disobedience for having taken too long to deliver documents related to the “cemeterygate” probe to the Public Prosecutions Office.
The insurance industry business volume in 2012, measured in terms of gross premium. It was up 23.8 percent year-on-year
The total value of gross claims in 2012, representing an increase of 16.7 percent in comparison with 2011
The annual increase in the number of new insurance products approved by the Monetary Authority, reaching 80 in 2012
THE INSURANCE INDUSTRY POSTED A REMARKABLE PERFORMANCE LAST YEAR. BOTH LIFE AND NON-LIFE SECTORS RECORDED DOUBLE-DIGIT GROWTH RATES IN GROSS PREMIUMS
The share of the life sector in the overall insurance industry business volume in 2012
The number of existing insurers in Macau. Of these, 11 are life insurers and 12 are non-life insurers
The year-on-year increase in the number of authorised insurance intermediaries, to 3,364. This includes insurance agents, salesmen and brokers
The Public Prosecutions Office handled 78 cybercrime cases in the first five months of this year, it said in a press release. That represents an increase of 35 cases year-onyear. One of the cases involved 17 people accused of using computer equipment to scam several casinos here, the Public Prosecutors Office said.
PROFITS UP FOR BANKS
Macau’s banks are having a strong 2013 so far. Their operating results for the first four months of the year are up by 33.5 percent year-onyear. According to data from the Monetary Authority, the city’s banks posted an operating profit of MOP2.3 billion (US$287.5 million) for the period between January and April, up from the MOP1.7 billion recorded one year before.
Inflation slow downed in May, data from the Statistics and Census Service shows. In May, the Composite Consumer Price Index, Macau’s main gauge for inflation, increased by 4.84 percent year-on-year. That was the lowest rate since February 2011, when it was at 4.7 percent. For the 12 months ended May, the average Composite Consumer Price Index increased by 5.59 percent from the preceding period.
IN THE NEWS MACAU MORE COMPETITIVE Macau is the 13th most competitive place in Greater China, according to an annual ranking published by the China Institute of City Competitiveness. The territory rose three positions in comparison with last year’s ranking. The ranking was led by Guangdong province, followed by Jiangsu and Shandong. Hong Kong slid from second to fifth spot.
MOODY’S KEEPS GOVT’S ‘AA3’ RATING
Reolian goes to court over subsidy hike The company says the government owes it close to MOP37 million Public bus operator Reolian Public Transport Co Ltd announced last month it would go to courts to get the government to fulfil the subsidy hike it announced last year. The company claims it is already owed MOP36.6 million (US$4.6 million) for the period between June 2012 and April this year. “Reolian was left without any other alternative but to initiate judicial proceedings,” the company said in a press statement. In June 2012 the government approved a 23.3 percent increase in the subsidy it pays the three public bus
LUK FOOK WANTS TO OPEN MORE OUTLETS IN MACAU
Hong Kong-based jewellery retailer Luk Fook Holdings (International) Ltd has said that it wants to open more stores in Macau. The city remains one of its key markets and the company will “further expand” here. Luk Fook opened its “largest flagship store worldwide” at Circle Square last month. Luk Fook has 10 stores in Macau. JULY 2013
operators. The hike was eventually suspended amid public outcry over poor service quality. That hike “is a contractual calculation made to compensate operator costs inflation,” Reolian said. The two other public bus operators, Transmac – Transportes Urbanos de Macau SARL and TCM – Sociedade de Transportes Colectivos de Macau SARL, were granted raises in April, back-dated to January 2013. The Transport Bureau said in a statement that any subsidy hike would be subject to service quality improvements.
Moody’s Investors Service announced last month that it is keeping its Aa3 issuer rating for the Macau government. That is three levels below the top grade. Despite the Macau government being the only government rated by Moody’s that has no debt, the rating agency says its score reflects the city’s high dependence on the gaming sector. Macau’s economy “remains vulnerable to external shocks in the form of fewer tourists visiting” the city as well as competition in the gaming sector from other Asian destinations, Moody’s said.
NAM KWONG INAUGURATES FIRST NATURAL GAS CENTRE The city’s sole natural gas distributor, Nam Kwong Natural Gas Company Ltd, inaugurated last month its first natural gas distribution centre, located in Cotai. Nam Kwong has already started laying natural gas pipelines in Taipa. For now, only the Seac Pai Van public housing complex in Coloane is already being supplied with natural gas. The company and the government are in talks over the construction of the natural gas network for the peninsula.
Investment in securities reaches new high The investment by Macau residents in equity securities rose by 24.2 percent in 2012 At the end of last year, the investment by Macau residents in securities amounted to MOP261.8 billion (US$32.7 billion) at current market value. The figure, which includes investment from individuals, the government and other legal entities, but excludes Macau’s foreign exchange reserves, was up by an impressive 54.8 percent year-on-year. The number is included in the 2012 Coordinated Portfolio Investment Survey, jointly conducted by the Monetary Authority and the Statistics and Census Service, which was
released last month. It is the highest value since the inception of the survey in 2002. Equity securities, long-term debt securities and short-term debt securities were valued at MOP133.0 billion, MOP117.5 billion and MOP11.3 billion respectively. In comparison with 2011, investment in equity securities, of which mutual funds and investment trust units accounted for MOP19.9 billion, soared by 24.2 percent. The biggest jump took place in long-term debt securities, up by 116.5 percent yearon-year.
NEW ELECTRICITY TARIFF COULD BE INTRODUCED WITHIN 2013
Macau could get a progressive electricity tariff within this year, according to the head of the Office for the Development of the Energy Sector, Arnaldo Santos. With the new system, large industrial and commercial enterprises, including big hotels and casino resorts, may pay more for their electricity. Officials suggest the scheme is aimed at encouraging the concept of ‘use less, save more’.
IPIM OPENS OFFICE IN FUZHOU
The Macau Trade and Investment Promotion Institute (IPIM) just opened a liaison office in Fuzhou, in Fujian province. This is the institute’s fifth office in the mainland. Jackson Chang, president of the institute, said in a press statement that this could strengthen bilateral ties between Macau and Fujian, as well as provide consultation and support for Macau businesses eyeing to invest in that province.
MACAU GETS EUROPEAN CHAMBER OF COMMERCE
The Macau European Chamber of Commerce was officially established last month. The platform brings together the Macau delegation of the Portuguese Chinese Chamber of Commerce and Industry, the France Macau Business Association, the British Business Association of Macau, the German Macau Business Association, the Macau-Romania Chamber of Commerce and the Irish Chamber of Commerce of Macau. Each will have two representatives on the board of the new chamber.
GOVT LAUNCHES SUBSIDY FOR FASHION DESIGNERS
The Cultural Affairs Bureau is launching a subsidy programme for fashion designers. Candidates can apply until August 16. The eight finalists will be granted subsidies, up to a maximum of MOP150,000 (US$18,750) each. “The objective is to support the production of fashion design samples and promotional catalogues,” the bureau said in a press release.
Economy & Finance
BY SARA FARR
he governmentâ€™s Young Entrepreneurs Aid Scheme will soon begin taking loan applications. The scheme offers interest-free loans of up to MOP300,000 (US$37,500) for young people to start their own businesses, but some businesspeople say the loans are too little. Entrepreneurs aged between 21 and 44 are eligible for a loan for eight years, with repayments starting after 18 months. The government will begin taking applications later this month or early next month. But not every young entrepreneur is leaping at the chance. JULY 2013
25 Isabella Choi is a young fashion designer who has her own brand, Nega C. Ms Choi says the scheme is good, especially for creative industries. “Because, sometimes, being creative can be costly, the plan can provide a better cash position for starting or expanding a business.” She says the drawback is that if the scheme succeeds, it will help create a lot of new businesses that in turn may cause rents to rise and competition to intensify. Ms Choi is eligible for the scheme but says she is not yet ready to apply. She intends to wait for a suitable time to expand her business, given that the government is offering only loans, not grants. She wishes to avoid “unnecessary spending, which can lead to future worry about bankruptcy”. Macau Chain Stores and Franchise Association president Wong Ian Man is also a fan of the scheme. He says it could help more young entrepreneurs to open franchise businesses, which require considerable initial capital. However, the scheme also has its critics. The administrator of the Macau Small and Medium Enterprises Association, Kenneth Lei Chi Leong, acknowledges the benefit of giving entrepreneurs start-up capital, but he says: “If young new business starters have only a capital incentive, without thorough planning and a good business idea, MOP300,000 will be spent very fast.” “In today’s environment, I think MOP300,000 is not enough to start a new business.” It would be insufficient to cover costs such as rent, wages and marketing, he says.
Horses for courses Ms Choi says MOP300,000 would barely be enough to start up a “very small boutique” in the fashion business but only on a tight budget. Most of the money would be spent on renting premises and renovating them, she says. For a fashion designer, the money could help cover design, production, promotion and exhibition costs for two fashion seasons, she says. The cost of setting up a business can vary considerably. It depends on the sort of business it is, where it is, how many people it employs, what facilities it requires and the sort of advertising it needs. People in personal services or consulting estimate that an enterprise
in their industries requires start-up financing of between MOP500,000 and MOP800,000. Shopkeepers estimate that the initial capital needed to open a shop is anything from MOP500,000 to MOP1 million. Restaurateurs estimate that a small restaurant requires initial capital of MOP1 million to MOP1.5 million. Mr Lei says the entrepreneurs most likely to make use of the loan scheme will borrow to start up information technology or “innovative” businesses that do not require premises in highrent commercial districts. Few entrepreneurs will apply for loans, for one simple reason. “If the amount granted is over MOP100,000, the applicant must provide a loan guarantor,” Mr Lei says.
Isabella Choi, a young fashion designer, says the scheme is good, especially for creative industries
Young and small A spokesperson for Macau Economic Services told Macau Business that the Young Entrepreneurs Aid Scheme “aims to provide start-up loans to assist young Macau people who wish to establish their own first businesses... with the objectives of promoting the diversification and enhancing the competitiveness of the Macau economy”. The government has said that in granting loans, it will show no preference for any particular industries. A company already in existence must have been operating for less than two years to be eligible for a young entrepreneur’s loan. Macau Economic Services director Sou Tim Peng says the amount lent depends on the applicant’s business plan. “For a business proposal, we first consider the viability. Secondly, the amount of preparation the entrepreneur has done to put the plan into action and the entrepreneur’s grasp of the market,” he says. Mr Sou expects the committee that will assess the applications to take two to three weeks to decide on each one. The government will run the Young Entrepreneurs Aid Scheme in conjunction with its SME Aid Scheme. The decade-old aid scheme gives SMEs interest-free loans of up to MOP600,000 each. The Macau Economic Services spokesperson says that if a company takes a young entrepreneur’s loan and an SME loan, the combined amount cannot exceed MOP600,000. Ms Choi says it is good that an enterprise can make use of both schemes,
The administrator of the Macau SME Association, Kenneth Lei, says MOP300,000 “is not enough to start a new business”
Economic Services director Sou Tim Peng says the amount lent depends on the applicant’s business plan
Economy & Finance
but that applicants should have to prove that each loan is for a separate purpose within the business “so that the money can be spent wisely”. Chief Executive Fernando Chui Sai On announced the entrepreneurs aid scheme in November but the rules governing the scheme were cleared only last month. In announcing the scheme, Mr Chui indicated that the expression “young entrepreneur” would cover people between the ages of 21 and 35. But the government subsequently decided to raise the age limit to 44. “We made this change taking as a reference the experience of Hong Kong, Taiwan and the mainland,” says Executive Council spokesperson Leong Heng Teng. Hong Kong and the mainland regard an entrepreneur up to the age of 35 as “young”. Taiwan regards any entrepreneur up to the age of 45 as young. Mr Leong says the higher age limit “will allow the plan to be more flexible”. “We can see from the Commercial and Movable Goods Registry Office there are many young people launching their own businesses,” he says. But one of the problems they face is lack of capital, he says. Mr Leong says the committee that will assess the applications for loans will have up to seven members with “knowledge in the areas of youth and business”. One criticism of the scheme is that it just lends money. In Hong Kong, the attitude is that money is not everything. The government there also supports young entrepreneurs in other ways – by providing consultants, service and facilities, for example. JULY 2013
Photo: António Mil-Homens
Courting the rich Bank of China wants to attract more well-off mainlanders to use its private banking services BY CLÁUDIA ARANDA
acau is already a blockbuster destination for the mainland’s wealthy, who come here to gamble their fortunes at the city’s VIP baccarat tables. Now Bank of China Ltd’s Macau branch wants them to consider the city for a different type of play – financial investments. The bank wants to attract more mainland high-net-worth individuals to use its private banking service. “In the mainland, we have private banking as well, but as those individuals get richer, they want to put some of their assets elsewhere,” says Simon Lo Shing Hing, a business strategy specialist at
the Bank of China (Macau)’s private banking unit, with more than 25 years’ experience in Asia and Canada. “They do not want to put all their eggs in one basket. That’s why sometimes they invest overseas, and Macau is one of the choices.” The mainland represents a strong growth opportunity for banks. The World Wealth Report, released last month by Capgemini and RBC Wealth Management, says that last year the mainland had 643,000 high-net-worth individuals – those having investable assets of US$1 million (MOP8 million) or more – up by 14.3 percent year-on-year.
Economy & Finance
Photo: António Mil-Homens
Macau’s economic boom is also nurturing a group of high-net-worth individuals here, says Simon Lo, a business strategy specialist at the Bank of China (Macau)’s private banking unit
Some industry research estimates say the mainland will have around 2 million high-net-worth individuals by 2017, surpassing Japan as second in the world for number of wealthy people, just behind the United States. “Most foreign banks are able to draw business from the mainland, which is one of the fastest-growing markets,” says Mr Lo. “If we don’t go after the same market, we will lose out.”
Rapid growth Macau’s economic boom is also nurturing a group of high-net-worth individuJULY 2013
als here. The trend is not passing unnoticed by Bank of China (Macau). Its private banking services opened in March 2008. The goal was to tap into the bank’s strong customer base and business network. The Bank of China group was the first Chinese-funded bank to provide private banking services in the mainland, after some leading overseas banks. It opened its first private banking units in 2007, located in Beijing and Shanghai. At present, it has more than 30 domestic and overseas branches offering private banking services.
Macau’s gaming-led economic boom was one of the reasons why the Bank of China headquarters decided to establish a private banking unit here. “Bank of China was aware that the economic growth would be quite bullish in the next 10 to 20 years,” says Mr Lo. He says that the bank already offered wealth management services before. But the private banking unit made available a new set of financial tools for top customers. “When we started with our private banking unit, not many clients had experience investing in bonds,” Mr Lo says. “We had to educate the market and start building it up from scratch... but [now] we see more and more clients feeling comfortable with these investment vehicles”. Within five years, the bank has seen the number of private banking customers increase from a few hundred to a “low four-digit” figure. There are three main segments of customers: wealthy residents, businessmen from the Pearl River Delta region, and high-net-worth individuals from elsewhere in the mainland. Mr Lo says currently the majority of the customers come from here. “Macau is definitely our base.” The Macau-based clientele is a mix of first and second-generation rich, he says. They are mostly men in their fifties and sixties, and “quite conservative compared to other markets such as Hong Kong”. In comparison, mainland clients “are relatively more aggressive and willing to take more risk, as they are a bit younger in average age.” They are mostly first-generation businessmen.
Same language Macau is an increasingly attractive centre for mainland private banking clients.
Economy & Finance
They can borrow money at lower interest rates here to invest in the mainland, and they also have access to more advanced financial products, says Mr Lo. The city’s low taxes and transparent banking system are other competitive advantages. The Bank of China brand is also a positive factor, he adds. “The bank’s reputation is very good, particularly in the mainland... The clients know us, we speak the same language, and they know we can provide good services and products.” The bank’s private banking services include traditional investment tools, from stocks to bonds, foreign exchange and mutual funds, and also structured products. In addition, the bank offers consultancy services and advice on portfolio management. “In 2013, we were able to start providing private trust services, which enable high-net-worth individuals and families to think of succession planning, putting their family assets into a more structured financial position,” says Mr Lo. The bank also is looking to offer discretionary investment management. This means that, after having agreed on
Bank of China (Macau) offers three levels of individual banking services. Private banking is the top level, targeting clients with investable assets of MOP8 million or above the strategy to follow, clients delegate the day-to-day investment decisions relating to their portfolio to the bank.
Well-off clientele Bank of China (Macau) offers three levels of individual banking services. Private banking is the top level, targeting clients with investable assets of MOP8 million or above. The entry level for wealth management services is set at MOP1 million. Clients with financial assets of MOP2.5 million or more are eligible
for an intermediary-level scheme. Mr Lo says that all together the wealth management division holds accounts in the “low five-digit” range. The division has a team of 40 people. Bank of China opened its Macau branch in 1950. It is the city’s biggest bank with a market share of over 40 percent. Last year, it posted a profit of MOP2.41 billion, an increase of 30 percent over last year. “It has a very good business position here, a very solid retail banking base and a good customer base,” Mr Lo says. At the end of last year, the bank had 30 sub-branches and a workforce of more than 1,300 people. It held assets close to MOP350 billion and more than 620,000 accounts. The bank is one of Macau’s two note-issuing banks. The other is Banco Nacional Ultramarino. Mr Lo says that Bank of China (Macau) has been able to overcome the general “brain drain” caused by the explosive growth of the casino industry. He says it offers good benefits to its employees, financial assistance for additional training and good opportunities to move up the corporate ladder.
In good hands The Ou Si Physical Medicine and Rehabilitation Centre offers a new approach to pain and injury treatment
uffering from severe back pain from long hours sitting at the computer? Still feeling the effects of a sports injury from last weekend’s tennis? The Ou Si Physical Medicine and Rehabilitation Centre, just opened in the city centre, may be your fix. With state-of-the-art facilities, the 300-square-metre clinic boasts an impressive array of services, by a highly qualified team. Physiatrist Isabel Tou, partner at Ou Si, says the centre offers all physical therapy specialities under the same roof, a distinctive feature in Macau. “Some clinics only provide one or two specialities. We are comprehensive, which allows us to provide better value and convenience for patients,” Ms Tou says. The clinic provides chronic pain management services and injury treatment. It also offers post-surgery, and spinal and extremity rehabilitation therapies. In addition, patients can enjoy traditional Chinese medicine treatments, balance training and elderly fall prevention programmes. Other services include custom foot orthotics and gait analysis, and sports rehabilitation. Hyaluronic acid injections for pain relief in knee arthritis cases and musculoskeletal ultrasound image exams for joint disorders are some of the special resources available. Quality of life The Ou Si centre aims to fill a gap in the city. “The healthcare system in Macau is very limited,” Ms Tou says. She adds the issue is more serious in the physical medicine
and rehabilitation field, with therapists, not trained doctors, running most of the few existing clinics. “Some of the differences between Ou Si and other clinics are that we have qualified doctors and we are able to perform specialised exams to check the patients’ tendons, muscles and bones,” she says. The centre is equipped with a range of physical medicine and rehabilitation equipment. These include top-of-the-line electro-therapy devices for pain relief, and lumbar traction machines for lower back problems. “Besides treatment using electronic devices, our patients always do some physical exercises,” Ms Tou says. “Machines are only for symptom relief and treatment. Afterwards, we have to strengthen the patient’s muscles, balance and fitness. We call it functional training, to improve the patient’s quality of life.” In addition, Ou Si clinic offers medical massages. After each treatment session ends, patients can also request a massage for muscular relaxation. Ms Tou says the focus is on providing each person with a programme that best meets his or her needs. The goal is to ensure patients can get their life back to normal as quickly and painlessly as possible.
Physical Medicine and Rehabilitation Centre ADDRESS: Avenida da Praia Grande, No 429, Centro Comercial Praia Grande, 6/F, Macau OPENING HOURS: Monday to Sunday, 10.30am – 7.30pm CONTACT: (+853) 2835 6989
Economy & Finance
Year-on-year change (%)
2012 GDP at current prices
MOP 348.2 billion
GDP in chained prices
MOP 324.4 billion
GDP per capita at current prices
GDP per capita in chained prices
Employment Oct - Dec 2012
18.0 9.9 13.9 6.1
Median monthly employment earnings
Employed population Labour force participation
11.1 4.0 percentage -0.8 points
Non-resident workers (end-balance)
Money and prices 2012-end Domestic loans to private sector MOP 190.0 billion Resident deposits
MOP 366.8 billion
Foreign exchange reserves
MOP 132.5 billion
Inflation rate (full year 2012)
MOP 94.7 billion MOP 84.9 billion
Year-on-year change (%)
-0.3 percentage points
External merchandise trade 2012
17.5 25.8 -percentage 0.3 points Year-on-year change (%)
Year-on-year change (%)
MOP 72.8 billion
Utility consumption 2012 Water Electricity
14.9 13.7 15.8 14.1
Gasoline Liquefied Petroleum Gas Natural Gas
Year-on-year change (%)
75.3 million m3 4,205 million kWh 87.1 million L 43,615 tons -- million m3
MOP 70.9 billion - MOP 62.8 billion
MOP 56.7 billion
9.1 5.2 percentage 0.1 points
Year-on-year change (%)
- Direct tax revenue from gaming MOP 107.0 billion
MOP 129.5 billion
17.1 13.9 --
18.0 10.8 ---
-0.2 percentage points
MOP 8.2 billion
Year-on-year change (%)
Exports Trade balance
Year-on-year change (%)
6.7 9.0 6.6 1.5 -100
Mar-May 2013 Mar-May 2013
Latest MOP 206.7 billion
Year-on-year change (%)
24.8 25.3 -1.1 percentage -1.9 points
Year-on-year change (%)
MOP 388.2 billion MOP 128.9 billion
MOP 3.1 billion MOP 25.6 billion - MOP 22.5 billion
Latest MOP 61.1 billion MOP 50.7 billion MOP 13.5 billion MOP 47.7 billion
17.0 12.3 -11.7 Year-on-year change (%)
20.7 15.1 -13.0 35.5 Year-on-year change (%)
24.1 million m3 4.6 1,198 million kWh 2.8 28.4 million L 5.1 16,192 tons -1.2 ---
Apr 2013 Apr 2013 Apr 2013 May 2013
Notes Jan-Apr 2013 Jan-Apr 2013 Jan-Apr 2013
Notes Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013
Notes Jan-Apr 2013 Jan-Apr 2013 Jan-Apr 2013 Jan-Apr 2013 Jan-Apr 2013
Transport and communications 2012-end Licensed vehicles - Automobiles - Motorcycles Mobile telephone users Internet services subscribers
217,335 101,712 115,623 1,613,457 231,582
Year-on-year change (%)
5.3 6.9 4.0 19.2 10.7
219,664 103,823 115,841 1,522,815 238,005
Year-on-year change (%)
5.3 7.3 3.5 6.6 10.7
Notes Apr 2013 Apr 2013 Apr 2013 Apr 2013 Apr 2013
Source: Statistics and Census Service and Financial Services Bureau
33 GUSTAVO CAVALIERE HOSPITALITY INDUSTRY EXPERT - firstname.lastname@example.org
Let light shine WOULD-BE ENTREPRENEURS OFTEN BLAME LACK OF TIME, MONEY, KNOW-HOW AND CONTACTS FOR POSTPONING THEIR DREAM PROJECTS – BUT THEY SHOULD LOOK INWARDS
ou know what the next big thing will be. You have spotted an untapped business opportunity or you have an idea that could easily be transformed into a multibillion-dollar industry. It is a no-brainer, you think. But, for whatever reason, you have yet to start working on its development. Believe it or not, you are not alone. Around you there are thousands of people with the same big dreams, each and every one with an amazing, unique business proposal that they think just cannot go wrong. They will talk about it for hours, with enthusiasm, showing they have studied the topic thoroughly. Still, those ideas, often matured for years, have never left the drawing board – just like yours. You may have a bunch of reasonable excuses for postponing your dream project. Maybe you lack the funding, the qualifications, contacts or time. Those thousands of others have the same excuses. What each of you lacks is faith in yourself. Most people never go beyond dreaming because they are not fully committed. Their enthusiasm is more for a different life than for building something new. Their shaky determination means any bump on the road is an insuperable obstacle, an excuse to quit and whine. They wish for the realisation of their dreams to be handed to them on a platter, with no obstacles to hurdle. Are you one of these people? Many people simply do not know how to deal with disappointment, so they keep procrastinating. After all, a good idea is always a good idea and can be picked up later, when the conditions are ripe, right? Wrong.
Precious treasure A common excuse for failing to pursue a dream is lack of time. People argue that between their work, their families and other aspects of their day-to-day lives, they cannot find enough time to develop a new project from scratch. This is a poor excuse. Have you not found the time to read this article? Did you not find the time yesterday to browse the Internet for videos? It comes down to discipline and to how badly you wish to see your dream come true. “Genius is one percent inspiration, 99 percent perspiration,” American inventor Thomas Edison famously said. Despite having married twice and having had six children, Edison was one of the most prolific inventors in history. Among his hundreds of inventions – some successful, some not – was the first commercially viable electrical light bulb, the commercial viability of which showed that he was also a businessman. People arguing they do not have enough time, often have too much of it on their hands. The problem is that they fail to make good use of their time. They waste it hesitating. How often do you read stories of people that changed their lives after a brush with death, or of people that overcame their handicap to achieve? Edison, for instance, had problems hearing from an early age.
In many cases, such people treasure their time. They invest it in things they believe will give them the highest return. Is that what you do with your time? Another common excuse for failing to pursue a dream is uncertainty about how to do it.
Faith and fear You have a great idea for a new Internet tool that will revolutionise the web. But you lack programming skills and have no idea where to start. You need to set up a company but know nothing about accounting or the law. Well, there was nobody around to tell Edison where to put the switch for his prototype light bulb. That is what happens with innovators: you make your way one step at a time. Sometimes this means taking one step back so you can take two steps forward. Don’t forget things were much harder when Edison was around. There was no Google, no online cooperation, no crowd funding. The biggest deterrent to pursuing a dream is fear. People fear that they will fall short of meeting their own expectations. Fear in itself is no bad thing. It keeps you sharp, keeps your feet on the ground, keeps you rational and prepares you for the worst. The tricky part is to ensure that your faith in yourself is stronger than your fear. All things considered, the formula for success is an easy one. To succeed in pursuing your dreams, you must have persistence. To persist in the pursuit, you must have confidence. To be confident, you must have faith in yourself. With that under your belt, you will find the rest – time, money, know-how, contacts, you name it – easy to come by. Could reading this column pull the trigger, or will procrastination, uncertainty and fear continue to hold you back? JULY 2013
Economic Trends by JosĂŠ I. Duarte Healthy appetite
GRAPH 1 - Doctors, nurses and hospital beds per 1,000 people Doctors
The rapid growth of the economy and population is raising concerns about the availability and quality of healthcare services GRAPH 1
The figures show a slow but sustained increase in the number of doctors, nurses and hospital beds. The figures are not remarkable by global standards, especially considering Macauâ€™s per capita gross domestic product. Higher numbers do not guarantee a quality service, but there is usually a strong correlation between the two.
2.8 2.6 2.4 2.2
2.0 1.8 2007
GRAPH 2 - Delivery of healthcare services Emergency services Primary care services
In-patient services Diagnostic examinations
Most of the indicators of the use of healthcare services are increasing in line with the growth of the population. Note that, owing to the wide variation in the data, this graph uses a logarithmic scale. Services to outpatients rose by 20 percent between 2008 and last year, while the use of emergency services rose by more than 40 percent. In this context, the small increase in the use of inpatient services, just 10 percent, is a surprise. GRAPH 3
The number of people working in healthcare reached almost 7,000 last year. About one-third were doctors, dentists or practitioners of Chinese traditional medicine. About one-third were nurses or medical technicians. The remainder were administrative or ancillary staff.
Number of instances
GRAPH 3 - Healthcare workforce last year
20% Dentists and odontologists Practitioners of Chinese traditional medicine
26% Medical technicians
GRAPH 4 - Air quality measurements last year Good
The official statistics on the environment are diverse, and it is hard to draw broad conclusions from the trends GRAPH 4
At all stations measuring air quality, the quality was classified as “good” for more than half of the days last year. In Rua do Campo, roadside air quality was “good” on 180 of the 333 days that measurements were taken – on the remaining days the measuring station was out of order. The air quality was classified as poor on just 25 days. In the densely populated north of the peninsula, only eight days of poor air quality were registered. These readings seem at odds with the widely held perception that air pollution is getting worse.
Number of days
(Rua do Campo)
(Northern district of the peninsula)
(Big Taipa Hill)
(Concordia Industrial Park)
GRAPH 5 - Average daily water consumption Total
Taipa and Coloane
Average daily consumption of water on Taipa and Coloane rose by 58 percent between 2008 and last year. This is broadly consistent with the growth in the population, in the number of visitors and in construction activity there in recent years. The figures for water consumption on the peninsula are harder to explain. The population, the number of visitors and construction activity grew there, too, yet the average daily consumption fell by more than 5 percent between 2008 and last year.
200,000 Cubic metres per day
The rise in the annual amount of solid waste generated between 2008 and last year seems small in the light of the growth in the population and the number of visitors in the same period. The figures suggest a decline in the amount of domestic rubbish generated per capita, for which there is no clear explanation. Conversely, a 43-percent increase in the amount of waste generated by businesses seems excessive, since the economy’s productive base grew at a much slower rate and its basic structure did not change.
GRAPH 6 - Solid waste generated Total
350,000 300,000 250,000
200,000 150,000 100,000 50,000 0 2008
Bureaucracy snowballs Headcount in the public sector has expanded by more than 40 percent since the handover and will swell further BY ALEXANDRA LAGES
acau has one public-sector worker for every 24 people. The number of civil servants has increased by more than 40 percent since the handover and growth is expected to continue as new government departments are set up and others expand. Despite the growth, public-sector workers make up just 4.2 percent of the population. On average, public-sector workers made up 4.4 percent of the population of the Asia-Pacific region between 2000 and 2008, and 10 percent of the population of the European Union, according to the International Monetary Fund. It is estimated that government employees made up 6.9 percent of the population of the United States at the end of last year. Official data shows Macau had 24,835 civil servants in March, 2.83 percent more than a year earlier, and over 2,300 other public-sector employees. The growth in the civil service is fuelled by rapid economic expansion. But a civil service trade union leader and other
WHERE THE WORKERS ARE Chief Executive’s Office Administration and Justice Economy and Finance Security Social Affairs and Culture Transport and Public Works Commission against Corruption Commission of Audit Legislative Assembly Public Prosecutions Office Courts Total
observers say the growth is also a sign of poor planning and government inefficiency. Macau Civil Servants Association president José Pereira Coutinho says the public-sector workforce is rapidly approaching 30,000. “The public administration structure is swelling. Despite efforts to establish a policy of egovernment, the bureaucracy continues to grow, which means there is still poor governance,” he says. Mr Coutinho, a directly elected member of the Legislative Assembly, criticises the government for failing to make the civil service leaner and better able to respond to the demands made upon it. Red tape is increasing and government services are becoming less efficient, he says. The size and budget of the civil service are increasing simply because the government can afford to increase them, Mr Coutinho adds. “The government has plenty of money and it falls into temptation to spend more and more.” Number 658 2,990 2,145 9,316 6,023 2,648 218 103 90 269 375 24,835
Pct 2.65% 12.04% 8.64% 37.51% 24.25% 10.66% 0.88% 0.41% 0.36% 1.08% 1.51% 100%
As at March 2013 Source: Public Administration and Civil Service Bureau
The government expects to spend MOP15.2 billion (US$1.9 billion) on the civil service this year, 16 percent more than last year.
Size matters Mr Coutinho says the civil service is poorly organised. “We have lots of cases of overlapping of duties, and workers that are doing the same job but hold different qualifications and earn different salaries.” Official data shows that Macau has almost 90 different bureaus and agencies. An associate professor in the University of Macau’s department of government and public administration, Philip Siu Yeung Fai, says the govern-
ment should increase the quality of the civil service rather than its quantity, employing more university-educated, formally-trained staff and fewer unqualified workers. “Most governments around the world are now trying to cut back on unskilled civil servants and trying to increase the number of those in the middle stratum, which includes professionals. That is probably the direction that the government here should go in,” Mr Siu says. The government has indeed been increasing its efforts to recruit more qualified staff. It introduced a centralised recruitment system in 2011 to boost efficiency.
Official data shows Macau had 24,835 civil servants in March, 2.83 percent more than a year earlier, and over 2,300 other publicsector employees
But Mr Siu says the government fails to plan for its manpower needs. “The present difficulty is: the civil service’s development is so rapid that a lot of times you feel the government is not really in great control of it, regarding its speed or direction.” The dean of the University of Saint Joseph’s school of leadership, management and government studies, Émilie Tran, accepts that the government needs to recruit more staff to cope with the city’s growth, but says better planning and management of human resources are required to stop resources being wasted. “The growth of the administration JULY 2013
reflects the development of Macau’s economy and society. However, you need to know in which areas you need to place these professionals,” Ms Tran says.
Expansion plans Some Legislative Assembly members say Macau has too many civil servants. Secretary for Public Administration and Justice Florinda Chan disputes the assertion, saying the proportion of people who are civil servants here is on a par with Hong Kong.
Macau Business asked the Public Administration and Civil Service Bureau how many new workers the government expected to recruit this year, but a spokesperson declined to answer. Between 2010 and last year, the spokesperson said the government created seven new departments within the civil service, with a combined workforce of 162. The spokesperson did not make clear how many of the 162 were new civil servants. The government transformed the
Maritime Administration into the Maritime and Water Affairs Bureau last month. Executive Council spokesperson Leong Heng Teng said the government had done so “to keep up with the rhythm of international maritime development”. The bureau will be allowed to recruit 27 more employees, taking its headcount to 302. The government also gave the Housing Bureau one more deputy director and two new departments last month. The bureau’s workforce will increase by
CIVIL SERVICE STAFF COSTS
CIVIL SERVICE HEADCOUNT 30,000
12 MOP billion
20,000 15,000 10,000
10 8 6 4
Source: Public Administration and Civil Service Bureau
Source: Macau government budgets
39 69 percent to 225 people to cope with what the government called an “increasing workload”.
Hurdles to progress University of Macau’s Mr Siu says the structure of the civil service should change to match the changing needs of the city as it develops. “Currently, it is not balanced and not solidly founded. You do not have a clear picture of what the targets are,” he says. “You do not have allocation of duties corresponding to the needs of the population. That is the weak point of the newly developed civil service units.” Mr Coutinho has repeatedly demanded that Chief Executive Fernando Chui Sai On relieve Ms Chan of the public administration and justice portfolio. Mr Coutinho accuses her of managing the city’s bureaucracy poorly. Mr Siu says the government should replace some officials in charge of the economy, frontline services to the public, housing, care of the elderly and education. But he acknowledges that the government is inclined to maintain the status quo. “Sometimes, the status quo is an obstacle to reform and progress,” he says. The more civil servants the government recruits, the more motor vehicles, mobile phones and computers it buys for them. Data collected by Portugueselanguage newspaper Jornal Tribuna de Macau indicate that the government owned more than 3,300 vehicles in 2010, almost 3,000 mobile phones and more than 28,500 computers. Macau Business asked the Public Administration and Civil Service Bureau for more recent figures. The bureau said it had none.
Living on the edge More than half of Macau’s civil servants have temporary contracts. Critics say the government should make their positions less precarious so it can retain the best of them. Of the 24,835 members of the civil service in March, only 10,040 people had permanent contracts, official data shows. Macau Civil Servants Association president José Pereira Coutinho says temporary contracts make civil servants less motivated. Mr Coutinho says the “outdated” amounts the government pays in allowances for housing and other things make civil servants on temporary contracts even more frustrated. The dean of the University of Saint Joseph’s school of leadership, management and government studies, Émilie Tran, says employees need some degree of job stability to make them feel that they belong. Ms Tran says methods of assessing staff performance should be improved and that the best staff should be rewarded with permanent contracts. An associate professor in the University of Macau’s department of government and public administration, Philip Siu Yeung Fai, says at least some core civil servants should have permanent contracts. “Some civil servants, especially professionals, should be recruited on a permanent basis. That would give more stability to the administration.” He says the government should consider two things when assessing a candidate for a permanent contract. “Whether their services are needed in the longer term – it apparently is not doing this; secondly, whether or not the government can afford it – and currently it can.”
A bit of advice On top of the regular bureaucracy, the government has 73 consultative bodies to advise it on a wide range of matters, the Public Administration and Civil Service Bureau says. The bureau does not say how many people are involved in these consultative bodies. The president of the Macau Civil Servants Association, José Pereira Coutinho, criticises the consultative bodies for “delaying the government’s decision-making”. Mr Coutinho says these bodies are also ineffective. An associate professor in the University of Macau’s department of government and public administration, Philip Siu Yeung Fai, says government weakness allows the profusion of consultative bodies. “Apparently, the government is none too autonomous in exercising its leadership, and is being infl uenced by a lot of forces and interest groups,” Mr Siu says. The dean of the University of Saint Joseph’s school of leadership, management and government studies, Émilie Tran, welcomes consultative bodies that advise the government. But Ms Tran says that in the interests of effi ciency and probity, the government should be less shy about asking for advice from other sources, including universities. Such advice would allow it to see things from different perspectives, she says.
bizintelligenceonline.com JULY 2013
Time is money Delays in signing public works contracts wear holes in the pockets of the contractors BY RAQUEL CARVALHO*
elays by the government in signing public works contracts are a common problem for companies in the construction business. Often a contract is signed months after the work has begun, and there are reports of contracts being signed only after the work is completed. The problem sounds minor but until a contract is signed the government cannot pay the contractor. Instead the company given the job must bear the costs. Some have even had to take out loans from banks just to keep the projects going. Companies in the construction business are demanding an end to these delays. Macau Institution of Engineers president Eddie Joe Wu Chou Kit says delays are common in signing several
sorts of contracts, including construction, design and supervision contracts. Mr Wu explains that the delays vary in length, but are usually six months on average. There have been delays in the signing of contracts awarded by the Lands, Public Works and Transport Bureau, the Infrastructure Development Office and the Transportation Infrastructure Office. All these departments come under Secretary for Transport and Public Works Lau Si Io. Tat Cheong Engineering & Construction Co Ltd director Lo Chi Cheong says his company, having been awarded some government contracts, had to wait more than six months to have them signed. “I am aware of cases where con-
tracts were signed one or two years after the work was completed. In our case, it has happened that we needed to wait for around eight months,” Mr Lo says.
Cash to burn Consulasia – Consultores de Engenharia e Gestão Lda, an engineering and inspection company, has similar problems, says its managing director, Helder Santos. “The government awards contracts by letter and we need to start working shortly after. The process of preparing the contracts only starts afterwards, with the submission of the required paperwork. We usually sign the contracts six or seven months later. In between, we are the ones coming up with the money and bearing all the expenses,” says Mr Santos.
Fernando Botelho, who heads FCB – Gabinete de Engenharia Lda, says it is the same for his company. Mr Botelho has been doing construction inspection jobs for the government for the past two years. “The average delay was over six months,” he says. Once the government has told a company that it has won a contract, it requires the contractor to submit a series of documents needed to draft the contract. Mr Botelho says it is common for a company to have to resubmit a document because the drafting takes so long that the previous version of the document submitted is so old that it is no longer valid. “Time passes, and often we are required to re-submit the same document a second or third time,” he says.
Macau Professional Services Ltd director Miguel Campina says: “Usually contracts are signed in the last week or even on the last day of the year, for bureaucratic reasons.” Mr Campina’s company provides architectural and engineering services. “I cannot recall ever signing a contract in the middle of the year. I am even aware of cases where the work was finished and there was still no contract signed,” he says. Examples of delays abound. Consulasia’s Mr Santos says a consortium that included his company won the contract to operate and maintain the Macau refuse incinerator in June 2009. The contract was signed in February 2010. “In this case, the operating costs were very high. It didn’t only include
staff,” he says. He estimates that the consortium had to spend between MOP20 million (US$2.5 million) and MOP30 million of its own money while waiting for the contract to be signed and the government to begin paying it.
Heavy boots Mr Santos says that in another case, it took the government about eight months to sign a contract that Consulasia won for the inspection of the construction of a public housing project. The company is still waiting for the government to sign contracts that it won last year. The government told FCB in January that it had won an inspection contract worth MOP2.3 million for a street renovation project on the peninsula. The JULY 2013
Lands, Public Works and Transport Bureau, which is in charge of the project, submitted the contract to the Financial Services Bureau for approval in May. FCB’s Mr Botelho says the company is still waiting for the government to sign the contract. It expects to finish the work by February. The company found itself in a complex predicament when it was in charge of the inspection of five construction projects on the University of Macau’s new campus on Hengqin Island. The government signed most of the contracts only after FCB had had boots on the ground for a year. “It was a period of great stress for us. We were working for around one year without being paid a single penny, with large teams made up of professionals from Macau and the mainland,” Mr Botelho says. “We lived in fear that any of our mainland associates might quit the project. We couldn’t accuse them of breaching the contract, because there was no contract. We would have been the ones obliged to pay any fines. We made a huge effort and faced big risks.” Altogether, it cost FCB more than MOP1 million a month to keep working on the five projects, he says.
Diminishing efficiency Government contracts usually say that if it is more than 90 days behind with payment, it must pay the contractor interest. If no contract has been signed, the government is not obliged to pay arrears. Companies say that even if the government has signed a contract and the contractor has begun issuing invoices, the government can still take longer than two months to cough up the money. Some companies have to borrow
from banks so they can do a job that the government has given them but not yet signed the contract for. “We’ve already had to do it,” says Mr Botelho. A company must change the way it manages its finances in those situations. “Without a signed contract, management must obviously be different,” notes Mr Campina. “Without that, we cannot get paid. It means companies need to invest the money themselves.” A contract signed on day one would better protect contractors, he says. “What if, for any reason, the government decided to quit the project and said the contractor was acting at its own risk? I am not aware of that ever happening, but there is that chance,” Mr Campina adds. “The company is working in precarious conditions. If something goes wrong, contractors may not be offered the contracts to sign.” The government also runs risks, he says. “If a contractor doesn’t meet a deadline, what tools does the government have to punish the company with?” Both parties have tacitly allowed the problem to fester, Mr Campina remarks. Something that should be an exception has become the rule. Mr Santos blames the bureaucracy. “People take too long reviewing the documents.” Things are getting worse, he says. “There are fewer contracts being signed than in 2004 to 2005, but there is a decrease in efficiency, and it is not clear why.”
Rules change Mr Campina says several government bureaus are to blame for the delays. “They are due to the excessive red tape and the lack of communication between departments, with no-one taking the blame.”
Outsourcing to excess The government often looks beyond Macau’s borders for technical consultants. But the managing director of Consulasia – Consultores de Engenharia e Gestão Lda, Helder Santos, says Macau has its own companies capable of acting as technical consultants. “Most consulting studies are outsourced to the mainland and Hong Kong. Now there is also a consulting firm from Taiwan,” Mr Santos says. He says most consulting contracts are awarded directly, rather than put out to tender. The government argues that Macau lacks the know-how. “But that way, the city will never gain it.” He wants Macau companies to have more opportunities. “And if they don’t have the professionals, they could hire from overseas, which would in turn allow Macau professionals to advance.” The failure to engage companies here as technical consultants “is a mistake by the government, and takes away development opportunities from the city’s professionals”, Mr Santos says. JULY 2013
Mr Wu says the government is aware of the problem. “We have already requested the departments involved to increase their efficiency,” he notes. “The Financial Services Bureau also has to process a lot of contracts.” The Financial Services Bureau says it is not responsible for the delays. “The process for construction and inspection contracts is conducted mainly by other bureaus. The Financial Services Bureau is only in charge of the legal certification of the contracts,” says a spokesperson for the bureau. The spokesperson adds that it takes the Financial Services Bureau up to 22
working days to process all relevant paperwork for a contract.
Struggle for survival Contractors have another big problem: a shortage of labour. “There is a lack of engineers and related professionals,” says Mr Wu. “Previously, projects had different dimensions and we had enough professionals. Nowadays, things are different. There are big projects, both public and private,” he adds. “The rules are also different. For instance, construction inspection companies need to have an engineer at the
construction site full-time.” Mr Santos says nobody answers advertisements seeking engineers or construction inspectors these days. The shortage of skilled labour means salaries have shot up, he stresses. “Salaries for some positions have tripled. Our costs in recent years have gone up exponentially. We are struggling to survive.” Companies in the construction industry complain that the requirements for public works contractors are too stringent. The requirements heavily favour engineers who are Macau residents, so contractors must make do with
the engineers they can get, even if their qualifications are not the most suitable. “There is no competition, so we often have to go along with who we can find,” says FCB’s Mr Botelho. He proposes that contractors be allowed to include junior engineers in the teams they put to work on public works contracts. Usually, engineers with at least five to eight years of experience are required. “To include junior engineers would allow them to learn and get more experience. That would help to train new talent.” *SPECIAL JORNAL TRIBUNA DE MACAU JULY 2013
Strategy-lite tragedy A new book criticises Portugal’s diplomatic failings during the Macau handover talks BY EMANUEL GRAÇA
lmost 14 years after the handover of Macau to the People’s Republic of China, a new book points to shortcomings in the way the Portuguese government managed the process. In “Portugal, China and the Macau Negotiations, 1986-1999”, an academic specialising in international relations, Carmen Amado Mendes, argues that “Portugal failed to protect their interests in a Portuguese presence in Macau” during the negotiations with Beijing. “The local bureaucracy was left with few qualified people with experience of the Portuguese system as places were filled with civil servants trained by Beijing. The Macanese [Macau’s Euroasian community] should have been supported more and given high posts in the administration prior to retrocession,” she writes. Drawing on sources from Portugal and elsewhere, and including interviews with the key participants, the book – one of the first written in English on the Macau handover – examines the strategies adopted by the Portuguese government during the negotiations. The verdict is critical of Lisbon. “The Portuguese civil society was not involved on the Macau question,” Ms Mendes writes. “Contrary to Hong Kong, in Macau there was no debate... or consultation of the people who would be most affected by its outcome.” The work, recently published by the Hong Kong University Press and presented in Macau last month, is based on Ms Mendes’ PhD dissertation, submitted to the University of London in 2004. She is currently a professor at Portugal’s University of Coimbra. Ms Mendes’ research concluded that
Carmen Amado Mendes
Lisbon’s main goal during the handover negotiations was “to ensure that Macau’s treatment was not worse than that of Hong Kong”.
Internal politics She says the process was asymmetrical from the start with the People’s Republic of China being the stronger player. “Portugal employed a low-key, nonconfrontational strategy in the Macau negotiations, allowing China to control the pace of the talks.” This strategy was in part the result of Portugal’s domestic political context. “Divisions amongst political leaders and poorly prepared negotiators resulted in a lack of resolve to get the best benefits for Macau and for Portugal,” Ms Mendes says.
“Rather than being treated as a unique and almost unprecedented diplomatic situation, the Macau transition was mostly used for political purposes, with the various actors with a stake in this question often showing a total lack of coordination”. Ms Mendes notes that in 1985, just after Lisbon and Beijing agreed to start talks on Macau, there was not a single Portuguese diplomat fluent in Mandarin and very few understood the details of Macau’s political background. The majority of the country’s diplomatic efforts were focused on its admission to the European Economic Community, now European Union, scheduled for 1986. “The Portuguese were very confused about how to deal with Macau – a
Establishment of official diplomatic ties between Portugal and the People’s Republic of China
Signing of the Sino-British Joint Declaration on the handover of Hong Kong
China and Portugal agree to start talks on the handover of Macau
45 small enclave without a sense of national identity,” Ms Mendes says. One reason for this was the longstanding debate over what the city’s sovereign status was. The Portuguese Constitution of 1976 reiterated that Macau was “territory under Portuguese administration”, not a colony. Ms Mendes argues in her book that Beijing already had de facto control of the territory long before the handover negotiations started. “For the Portuguese government the handover was more about withdrawal from the last remains of the empire than about Macau itself,” she writes, adding that the Portuguese presence here was “very weak”. That was accentuated by a domestic audience that was sensitive to decolonisation after the traumatic effects of the Portuguese surrender of colonies in Africa and East Timor during the 1970s.
“PORTUGAL, CHINA AND THE MACAU NEGOTIATIONS, 1986-1999” Author: Carmen Amado Mendes Publisher: Hong Kong University Press Publication date: May Language: English Length: 172 pages Price: HK$275
Timing is everything When Beijing first approached Portugal about a handover, “Portuguese diplomats were confused and had no significant expertise on contemporary Macau, making it very difficult for the Portuguese government to delineate a coherent negotiating strategy”. The People’s Republic of China had clear goals. It saw Macau as part of a bigger plan for reunification with Taiwan under the “one country, two systems” formula.
Still, Portugal managed to obtain some concessions based upon Beijing’s worries about its international image and Taiwan. Ms Mendes says the Portuguese government was able to avoid the Macau handover occurring simultaneously with the Hong Kong handover, as Beijing wanted. The mainland made another concession, over the issue of nationality. It agreed to respect Portuguese passports, albeit described as “Portuguese travel documents”, carried by Macau’s Chinese residents. Chinese Nationality Law makes no provisions for dual nationality. The book says the Sino-Portuguese negotiations for the settlement of the Macau question were “highly influenced” by the process happening in the British colony of Hong Kong. Portugal wanted Macau to strike a deal that was comparable to what was evolving in Hong Kong. But Lisbon also argued that Macau was different because Beijing had accepted a Portuguese presence for centuries and there had never been a deadline for the return of any part of the city, unlike the New Territories in Hong Kong. Britain’s “main objective was to maintain the capitalist system in Hong Kong”, Ms Mendes writes. Portugal took advantage of that and “seemed more interested” in focusing its efforts on negotiating the continuity of Macau’s style of law and culture.
In her book, Carmen Amado Mendes argues that “Portugal failed to protect their interests in a Portuguese presence in Macau” during the negotiations with Beijing
Signature of the Sino-Portuguese Joint Declaration on the handover of Macau
Approval of the Basic Law, Macau’s mini-constitution
Handover of Hong Kong
Handover of Macau
46 KEITH MORRISON AUTHOR AND EDUCATIONIST - email@example.com
The Gini escapes WHILE MACAU STORMS THE HEIGHTS OF AFFLUENCE, THE CITY LACKS ANY MORAL IMPERATIVE acau lacks a moral imperative. While many sweat in the service of “homo economicus” and a few bask in the sunshine of profit, such morally bankrupt “rational selfinterest” does little but advance greed. In a connected world, it is profoundly irrational to allow greed to run so largely unchecked. The invisible hand of the market is a menace, not a friend, and the nonsensical theory that a rising tide created by free markets lifts all boats patently does not work in practice, the rising tide only enabling the rich to get richer. To put human life on a market footing is to cast caution to the wind of an uncaring, morally reckless, radical individualism, where my gain is your loss and whether you live or die only worries the rich if it is likely to make them poorer. The zero-sum society becomes the zero society. The wilfully blind, much-vaunted “wisdom of the market” is little more than a cover for the rich to get richer and the poor to get poorer. Look at economies around the world: while the banking crisis continues, the rich get richer. It is disgusting. We need to review our values. In doing so, “A Theory of Justice” by John Rawls is helpful, as he argues that it behoves us to go back to an “original position” behind a “veil of ignorance”.
Photos: Luís Almoster
We need to reconsider equality and social justice without the acquired biases and the arbitrary, chance privileges of birth or happenstance. Greed is learned. We are not born with it. It is not innate or in our DNA. Selfishness is not instinctive. It is an acquired trait. We learn from modelling our behaviour on that of those around us. We learn from examples.
Warning sign Look at Macau. What kind of a role model does it set for youth? What kind of moral imperative is it that builds a society and an economy almost exclusively on gambling and its derivatives, that is prepared to tolerate monstrous inflation while the fat cats get fatter, and has materialism and consumerism as its raison d’être? What kind of society is it that provokes demonstrations in the streets against inequality, and that responds to the greed of estate agents simply by making them take a written test? What kind of moral example is set by landlords jacking up rents unchecked or by property owners that applaud the rise in the price of a decent flat beyond the reach of the rising generation? In April, an important report on inequality surfaced here
47 almost unnoticed. The Macau Economic Association reported that the gap between Macau’s rich and poor had increased. It said that the city’s Gini coefficient, a measure of inequality of income, had increased to 0.4 in 2011 from an estimated 0.35 in 2008, approaching the international warning level. This was despite an increase of 58 percent in real terms in gross domestic product over the same period, and an increase of 55 percent in real terms in GDP per capita. The Gini coefficient indicates a relatively reasonable income gap if the number is between 0.3 and 0.4. A Gini coefficient between 0.4 and 0.5, however, indicates a large income gap. The Macau Economic Association’s estimate, based on the World Bank’s latest data, put Macau’s Gini index on a level similar to Turkey’s 0.4 and Burkina Faso’s 0.4, and show it to be worse than Cambodia’s 0.36, Indonesia’s 0.36, Ethiopia’s 0.34 and India’s 0.34.
Festering wound The “here today, gone tomorrow” mentality of Macau, like its food festival, firework festival and grand prix, buried this important report. It barely had its 15 minutes of fame. How is it that, in a city where GDP per head is the envy of the world, the solution to the problem of the poor is the deadbeat, last-chance-saloon option of building more public housing?
And then we had the Chief Executive turning up at the Legislative Assembly this year and apologising on behalf of a timorous, cowed government for failing to deliver even the public housing on time, as though the apology grants absolution. This year’s MOP8,000 (US$1,000) handout to permanent residents does almost nothing to attenuate Macau’s underlying social problems. While nobody will say “no thanks” to a cash handout, it simply allows the wound to fester. Instead of real redistribution of wealth, what we have is the poor getting the crumbs from the rich man’s table. Here we are, in the run-up to the Legislative Assembly elections in September, yet the silence on Macau’s moral direction is deafening. In a famous speech in 1948, Mahatma Gandhi inspired us to “recall the face of the poorest and the weakest man whom you may have seen and ask yourself, if the step you contemplate is going to be of any use to him. Will he gain anything by it? Will it restore him to a control over his own life and destiny?” Where is the voice of moral leadership in Macau’s government? Where is the white heat of the inspirational moral imperative in Macau’s leadership? No fire burns here, just congealed cold congee.
This year’s MOP8,000 (US$1,000) handout to permanent residents does almost nothing to attenuate Macau’s underlying social problems. While nobody will say “no thanks” to a cash handout, it simply allows the wound to fester. Instead of real redistribution of wealth, what we have is the poor getting the crumbs from the rich man’s table
Poisoned gifts Lavish spending by the former head of Hong Kong’s graft buster has dented the agency’s reputation BY MARY ANN BENITEZ*
he reputation of Hong Kong’s graft buster has been muddied by revelations that former Independent Commission Against Corruption commissioner Timothy Tong Hin-ming spent lavishly on wines and gifts for mainland officials during his five years at the helm. Mr Tong, now a member of the Chinese People’s Political Consultative Conference, is being investigated by the agency, known by its acronym ICAC. He is the first head of the agency to face a criminal probe in the commission’s 39year history. Hong Kong Chief Executive Leung Chun-ying has established an independent panel to examine Mr Tong’s entertainment expenses while a civil servant. The four-member panel will look over the rules for entertaining officials. The Legislative Council is also looking into the matter. Former ICAC officials, including
ex-deputy commissioner Tony Kwok Man-wai, say Mr Tong’s extravagance has damaged the agency’s reputation and credibility. “There has not been a single commissioner who acted like Mr Tong,” Mr Kwok said. His view is backed by politicians. Former chief secretary Anson Chan Fang On-sang says the “position of ICAC commissioner demands someone who has integrity. Mr Tong was obviously not the right person.” The Democratic Party’s Lam Cheuk-ting, who was an investigator for ICAC when Mr Tong was in charge, says he has “mixed feelings”. “Mr Tong’s own personal conduct is no reflection on the core values of other investigators,” he says.
Costs of business Mr Tong argues he did nothing to further his own interests and will take responsi-
bility if found guilty. His civil service career began in 1972 and included four years as Commissioner of Customs and Excise before the ICAC appointment. The inquiry will “not affect the international reputation of ICAC,” he says. “The single most important thing is to protect Hong Kong’s anticorruption practice.” The scandal ignited in April after the issue of a report into ICAC’s entertainment expenses. The Audit Commission found that two dinners in December 2011 during an international anti-bribery event hosted by ICAC had blown their permitted budget. At one dinner hosted by Mr Tong to entertain 110 international guests, the bill came to HK$1,045 (US$135) a plate, more than twice the limit of HK$450. The second dinner for 24 people two days earlier cost HK$532 a plate. It was later uncovered that Mr Tong
spent more than HK$724,000 on gifts, mainly for mainland officials. ICAC has since confirmed almost HK$758,000 was spent by Mr Tong on official visits. His spending was about triple the average amount spent by his three predecessors. Some 19 of 34 visits during Mr Tong’s tenure from 2007 to last year were to the mainland. Mr Tong also hosted lavish meals for top officials from the central government’s liaison office in Hong Kong. He admitted to occasionally taking friends to business gatherings. Now a member of the leading advisory body to the government in Beijing, Mr Tong says the expenses were not linked to the appointment. The director of the liaison office in Hong Kong Zhang Xiaoming says it is “very normal” for Mr Tong to have hosted receptions with his officials.
Calling time Mr Tong puts his higher entertainment bills down to an increase in visitors to the agency’s new headquarters, opened in 2007. Colleagues approved the spending, he says.
Timothy Tong Hin-ming argues he did nothing to further his own interests and will take responsibility if found guilty About 1,000 bottles of alcohol were acquired during his five years in charge, including 125 spirits, most of which were consumed. Mr Tong said buying different types of alcohol was necessary to meet different guests’ needs at functions. Current commissioner Simon Peh Yun-lu bought 137 bottles of wine but the practice has now been suspended. ICAC also has imposed stricter checks on official entertainment and gift expenses. Revised guidelines say visits should only be approved if “absolutely necessary” and that gifts or souvenirs should not be offered “as far as practicable”. The new guidelines recommend that officers invite only guests directly connected with the official business at hand, and that the number of attending officers
should not exceed the number of guests. Mr Tong was awarded the government’s Gold Bauhinia Star last year, in recognition of his “dedicated and distinguished service” to the government and community, “particularly in his capacity as the commissioner of the Independent Commission Against Corruption”. “He has made sterling contribution in upholding Hong Kong as a fair, just, stable and prosperous city through effective law enforcement, corruption prevention and education,” the government said at that time. It is ironic that Mr Tong is now defending himself against corruption allegations. * ASSISTANT NEWS EDITOR AT THE STANDARD IN HONG KONG
51 ZHANG MONAN FELLOW OF THE U.S.-BASED CHINA INFORMATION CENTRE
China’s cold eye on hot money S.A.F.E.’S NEW MEASURES ARE AN IMPORTANT STEP TOWARD IMPROVED MANAGEMENT OF CROSS-BORDER CAPITAL FLOWS
ith China feeling the pressure from large-scale inflows of short-term capital, the State Administration of Foreign Exchange (SAFE) issued a notice in early May outlining a set of measures aimed at controlling “hot money” and reducing external risks. Indeed, the new regulations are essential to managing the renminbi’s rapid appreciation and ensuring the accuracy of trade data. But will they be enough? A variety of data indicates the massive scale of the inflows. In the first quarter of this year, Chinese banks’ foreign-exchange purchases skyrocketed to a record RMB1.2 trillion (MOP1.6 trillion) – more than double last year’s total. Such purchases increased by some RMB294.3 billion from March to April, which was the fifth consecutive month of growth. Over the same period, China’s foreign-exchange reserves swelled by US$128 billion (MOP1.0 trillion), to US$3.4 trillion – the largest quarterly increase since 2011 and equal to the total rise in 2012. Given China’s US$43 billion trade surplus and US$30 billion in foreign investments during this period, capital inflows must have been a contributing factor. Furthermore, since the beginning of this year, Chinese banks’ valet foreign-exchange settlement (foreign-exchange purchases that designated banks make for their clients and themselves) has outstripped corresponding sales, resulting in a consistently large surplus – also an indication of increased capital inflows. The difference, which banks offset through transactions in the inter-bank currency market, has a significant impact on China’s foreign-exchange reserves, but is not equivalent to the net change in foreign-exchange reserves during the same period. According to SAFE, individuals and institutions exchanged US$152.2 billion in foreign currency for renminbi through Chinese banks in March, and purchased US$107.6 billion in foreign currency from financial institutions. As a result, the banks’ foreign-exchange surplus reached US$44.6 billion, rising 38 percent from February and marking the seventh consecutive month in which bank-to-client transactions created a surplus.
Immediate impact The consequences of abnormal capital flows into China are becoming increasingly apparent, particularly in foreignexchange markets. Despite slowing gross domestic product growth – currently only 7.7 percent annually – the renminbi has appreciated rapidly, reaching a record-high central parity of 6.2082 against the U.S. dollar at the beginning of May. With no sign of improved economic fundamentals, the renminbi’s rapid rise must be related to substantial foreigncurrency inflows. Since China’s current benchmark interest rate is higher than the comparable rate in the United States, individuals and institutions have an incentive to keep renminbi as assets and dollars as debt. The current round of monetary easing underway in many advanced countries, together with strong expectations of renminbi appreciation, are also fuelling currency speculation, placing further upward pressure on the exchange rate. The new SAFE regulations will attempt to curb this trend by imposing, for the first time, limits on net open positions held by Chinese banks with foreign-currency loan/deposit ratios (LDRs) exceeding 75 percent and by foreign banks with LDRs above
100 percent. A higher foreign-currency LDR will mean tighter restrictions on long renminbi positions. By providing an incentive for banks to hold more foreign-exchange deposits against their loans, the new rules will drive up the price of foreigncurrency loans, thereby deterring firms from using dollar loans to speculate on renminbi gains. Although the regulations did not take effect until June 1, their impact was felt immediately. The renminbi ended its upward trend against the U.S. dollar on May 6, closing at 6.1667, down 112 basis points from the previous trading day – the steepest decline since last December. On the same day, stricter controls on capital inflows caused the offshore renminbi to close at 6.1790 against the U.S. dollar, down 0.4 percent – the largest drop since January 2012. This suggests that the measures will succeed in stemming upward pressure on the renminbi.
Growing discrepancies At the same time, the new regulations aim to end many firms’ practice of channelling capital into China disguised as trade bills. By inflating export deals in order to move foreign currency – mostly U.S. dollars – into China, firms have evaded capital controls and distorted trade data. In order to transform the funds into renminbi outflows, the firms then increase the scale of renminbi settlements in cross-border trades. In March and April, cross-border renminbi trade settlement increased by RMB412.8 billion, up 57.6 percent year-on-year. The growing discrepancies between foreign-trade data and port data have cast doubt on the reliability of the former. Last year, China’s exports grew by roughly 6.2 percent, and container throughput completed at China’s above-scale ports increased by 6.8 percent year-on-year. By contrast, in the first quarter of this year, Chinese foreign trade increased to US$974.6 billion, reflecting a higher growth rate than in 2012, while Chinese ports completed 800 million tons of cargo throughput, representing a growth rate that was 4.2 percentage points lower than in the same period last year. In March, container traffic at China’s above-scale ports was 15.29 million TEUs (twenty-foot equivalent units), with month-on-month growth 1.7 percentage points slower than in the previous two months. Clearly, trade data are being inflated as companies carry out fake transactions to bring capital into the country. Firms know that as long as the hot money can reach mainland banks through Hong Kong, they can expect risk-free yields of more than 2 percent. Considering the renminbi’s recent appreciation, the rate of return could reach 3 to 4 percent. According to the new regulations, SAFE will issue a warning 10 days after finding that a firm’s capital flows do not match its physical shipments. Such firms will be more closely monitored for at least three months, until the relevant figures return to normal. One can only hope that these measures will be sufficient to bring China’s export data gradually back to reality. At a minimum, the new measures are an important step toward improved management of cross-border capital flows, which is bound to benefit China’s economic transformation and restructuring significantly. JULY 2013
Generation gap Children ‘left behind’ in the mainland’s rush to the cities BY CAROL HUANG*
ix-year-old Keke looks silently from a bare living room at her closest companion: a grandmother who resents having to raise her. Keke is one of the mainland’s 61 million “left-behind” children, whose parents have joined the mass migration to cities where they can earn higher wages – but cannot afford to keep a family. Instead they have to leave their children’s upbringing and safety in the hands of elderly, sometimes inattentive carers, many of them with poor health and meagre schooling. “I don’t really want to be raising her,” says Keke’s 60-year-old guardian, who declined to give her name.
“I have a lot of sicknesses and aches and pains but I still have to raise her. Sometimes when I get sick my whole body hurts, and nobody cares.” Keke goes to kindergarten and sometimes plays with neighbours in Zhuangshuzui, a village set among rice paddies and low hills. But she has few toys at home, where a scattering of stools stand near concrete walls, scuffed and covered with scribbles. “It’s really frustrating,” says her grandmother, adding the child’s parents are in Beijing. “But there’s no other way.”
Serious social issue Zhuangshuzui, in Hunan province, is
part of a belt across central and southern China where large numbers of children, sometimes more than 50 percent of them, are “left behind”, defined as living apart from one or both parents. Their plight was highlighted last year when five boys in Guizhou province – four of them living with a frail grandmother – died of carbon monoxide poisoning after burning charcoal to try to keep warm in winter. In the widespread attention that followed, some criticised the lack of supervision but many offered sympathy. Parents working far from home typically send money but can only afford to visit once a year. “The children’s abnormal
53 deaths reveal serious shortcomings in the world’s second-largest economy,” the official news agency Xinhua said at the time. For more than 20 years the central government has encouraged the rural poor to move to cities as a way to boost growth and lift living standards. The country now has 263 million migrant workers, and new leaders who took office this year have renewed the drive to urbanise. But while city wages are higher, so are their costs of living, exacerbated by a “hukou” residency system that bars Chinese from receiving benefits such as healthcare and schooling outside their registered hometown. Nearly half of left-behind children live with neither of their parents, the All-China Women’s Federation said in a report in May. Almost 70 percent of those stay with grandparents, the vast majority of whom have only a primary school education. A quarter have other guardians, and 7 percent survive on their own. “Because of their long-term separation from parents, familial affection is lacking and household education is weak,” the report said. “The quality of life, mental and physical health and surroundings of left-behind children are all inferior to those whose parents are looking after them.”
There are 61 million “left-behind” children in the mainland, whose parents have joined the mass migration to cities where they can earn higher wages – but cannot afford to keep a family
elder sister visits from university once a month. A sprightlier 86-year-old Wan Daizhen has more energy for the 14-year-old grandson she has raised for 13 years, but worries the boy would be better behaved with his parents. “He really misses them,” she says. “He doesn’t listen as much to what I say.” For 72-year-old Zheng Futao, the schoolwork of the 12-year-old grandson he has raised since infancy has long surpassed his ability to help. “First, second, third, fourth grade were okay. But not after he got to middle school, with biology, English,” he says. “Of the 26 letters of the alphabet I only know ‘C’.” * AFP NEWS AGENCY
Financial rewards But many families feel the financial rewards offered by the mainland’s economic boom means the price is worth paying. In Keke’s village, Xiong, who now works in property in Guangdong, laments the prime working years she spent raising her son and daughter at home as a lost opportunity. One set of grandparents were too frail to take them and another were already looking after others, she says. “Raising them was so tiring. If the grandparents had been able to take care of my kids, then I would have gone out a lot sooner.” But grandparents say they feel hampered as caretakers by poor health, limited schooling and a lack of authority. A couple surnamed Ouyang – both 83, hard of hearing and too weak to shuffle far beyond their front door – hardly interact with the preteen granddaughter in their care. Nobody cleans the house, the grandmother says, except when the JULY 2013
High-level endorsement In fashion, China gets its own first lady effect BY HELEN ROWE*
hen China’s new first lady Peng Liyuan, a glamorous former folk singer famous in her own right, chose home-grown fashion label Exception de Mixmind for her husband’s first overseas trip, speculation on Chinese social media went into overdrive. Was this Exception’s “Jason Wu moment”? people asked, referring to the young Taiwanese-Canadian designer who shot to fame after Michelle Obama dazzled at the first inaugural ball in an ivory one-shoulder Wu creation. Or would Mrs Peng’s championing of a domestic fashion label in the midst of a government “frugality” drive send a message to top officials’ wives to ditch the bling? For many labels such publicity is the stuff of marketing dreams. But in his first interview since Mrs Peng accompanied her husband President Xi Jinping to Russia in March, Exception founder Mao Jihong looks uncomfortable when the “first lady issue” is raised. Mrs Peng, a star in China for over three decades, has been wearing Exception for 12 years and some clothes were specially designed for her, Mr Mao says in an interview in Paris. And while the publicity surrounding her choice of an Exception double-breasted trench coat and leather handbag on her
Xi Jinping and Peng Liyuan in Russia JULY 2013
Russia trip was undoubtedly good for the brand, it has also been “lots of trouble”, he said. “We just want to do fashion quietly. We never do campaigns or advertising but after the first lady wore our clothes [in Russia] lots of people came looking for us,” he says. “We want to present the brand rather than use the first lady to make us famous. We never really wanted that.”
Work in progress The Exception story closely mirrors the short history of fashion design in modern-day mainland China. Graduating in 1991 from one of the mainland’s first fashion design courses, Mr Mao and his ex-wife Ma Ke set about offering an alternative to the drab, shapeless clothes they saw around them.
Peng Liyuan has been wearing Exception for 12 years, says brand founder Mao Jihong “We were among the earliest design students in the mainland. Back then clothing had no beauty and everybody was wearing the same thing like a uniform,” he says. Today their label, established in the early 1990s, has a “tiny” presence in the mainland of around 100 shops. Their designs concentrate on natural fabrics such as linen, silk and wool in styles that create a sense of “freedom”. “We wanted to define contemporary lifestyle in China with the brand and for people to discover the beauty and aesthetics of oriental philosophy through the designs,” Mr Mao says. The label’s first fashion show in 2004 was held in a derelict electric switch factory in Beijing. The factory no longer exists having long since been demolished to make way for a vast shopping mall. Mr Mao estimates that any one point around 40 shopping centres are under construction in each of the major cities in the mainland, such as Shanghai or Beijing. He is careful, however, to distance Exception from such rampant consumerism, describing its clients as people who “love culture and art and have their own aesthetic point of view”. But he predicts that even those with an entirely different mind-set can soon be expected to adopt a more sophisticated approach to fashion buying. “I think it is a process of development,” he says. Now plans are afoot to launch Exception in Europe after approaches from French department stores and buyers. “We are working on those international plans... Everything is under discussion,” Mr Mao says, adding however that the label was still very much a work in progress. “We have never defined ourselves as a successful brand and I think we haven’t reached that yet. We are still on the way.” * AFP NEWS AGENCY
55 BRAHMA CHELLANEY PROFESSOR OF STRATEGIC STUDIES AT THE NEW DELHI-BASED CENTRE FOR POLICY RESEARCH
China’s stealth wars CHINA IS WAGING STEALTH WARS AGAINST ITS ASIAN NEIGHBOURS THAT THREATEN TO DESTABILISE THE ENTIRE REGION
hina is subverting the status quo in the South and East China Seas, on its border with India and even concerning international riparian flows – all without firing a single shot. Just as it grabbed land across the Himalayas in the 1950s by launching furtive encroachments, China is waging stealth wars against its Asian neighbours that threaten to destabilise the entire region. The more economic power China has amassed, the greater its ambition to alter the territorial status quo has become. Throughout China’s recent rise from poverty to relative prosperity and global economic power, the fundamentals of its statecraft and strategic doctrine have remained largely unchanged. Since the era of Mao Zedong, China has adhered to the Zhou Dynasty military strategist Sun Tzu’s counsel: “subdue the enemy without any battle” by exploiting its weaknesses and camouflaging offense as defence. “All warfare,” Sun famously said, “is based on deception.” For more than two decades after Deng Xiaoping consolidated power over the Chinese Communist Party, China pursued a “good neighbour” policy in its relations with other Asian countries, enabling it to concentrate on economic development. As China accumulated economic and strategic clout, its neighbours benefited from its rapid gross domestic product growth, which spurred their own economies. But, at some point in the last decade, China’s leaders evidently decided that their country’s moment had finally arrived; its “peaceful rise” has since given way to a more assertive approach.
Geopolitical instability One of the first signs of this shift was China’s revival in 2006 of its long-dormant claim to Indian territory in Arunachal Pradesh. In a bid to broaden its “core interests”, China soon began to provoke territorial disputes with several of its neighbours. Last year, China formally staked a claim under the United Nations Convention on the Law of the Sea to more than 80 percent of the South China Sea. From employing its strong trade position to exploiting its near-monopoly on the global production of vital resources like rare-earth minerals, China has staked out a more domineering role in Asia. In fact, the more openly China has embraced market capitalism, the more nationalist it has become, encouraged by its leaders’ need for an alternative to Marxist dogma as a source of political legitimacy. Thus, territorial assertiveness has become intertwined with national renewal. China’s resource-driven stealth wars are becoming a leading cause of geopolitical instability in Asia. The instruments that China uses are diverse, including a new class of stealth warriors reared by paramilitary maritime agencies. And it has already had some victories. Last year, China effectively took control of the Scarborough Shoal, an area of the South China Sea that is also claimed by the Philippines and Taiwan, by deploying ships and erecting entry barriers that prohibit Filipino fishermen from accessing their traditional fishing preserve. China and the Philippines have been locked in a standoff ever since. Now the Philippines is faced with
a strategic Hobson’s choice: accept the new Chinese-dictated reality or risk an open war. China has also launched a stealth war in the East China Sea to assert territorial claims over the resource-rich Senkaku Islands (called the Diaoyu Islands in China), which Japan has controlled since 1895 (aside from a period of administration by the United States from 1945 to 1972). China’s opening gambit – to compel the international community to recognise the existence of a dispute – has been successful and portends further disturbance of the status quo.
Regional dilemma Likewise, China has been posing new challenges to India, ratcheting up strategic pressure on multiple flanks, including by reviving old territorial claims. Given that the countries share the world’s longest disputed land border, India is particularly vulnerable to direct military pressure from China. The largest territory that China seeks, Arunachal Pradesh, which it claims is part of Tibet, is almost three times the size of Taiwan. In recent years, China has repeatedly attempted to breach the Himalayan frontier stretching from resource-rich Arunachal Pradesh to the Ladakh region of Jammu and Kashmir – often successfully, given that the border is vast, inhospitable and difficult to patrol. China’s aim is to needle India – and possibly to push the Line of Actual Control southward. Indeed, in April, a platoon of Chinese troops stealthily crossed the Line of Actual Control at night in the Ladakh region, establishing a camp 19 kilometres inside Indian-held territory. China then embarked on coercive diplomacy, withdrawing its troops only after India destroyed a defensive line of fortifications. It also handed a lopsided draft agreement that seeks to freeze the belated, bumbling Indian build-up of border defences while preserving China’s capability to strike without warning. India has countered with its own draft accord designed specifically to prevent border flare-ups. But territory is not the only objective of China’s stealth wars; China is also seeking to disturb the status quo when it comes to riparian relations. Indeed, it has almost furtively initiated dam projects to reengineer cross-border river flows and increase its leverage over its neighbours. Asian countries – together with the U.S. – should be working to address Asia’s security deficit and establish regional norms. But China’s approach to statecraft, in which dominance and manipulation trump cooperation, is impeding such efforts. This presents the U.S., the region’s other leading actor, with a dilemma: watch as China gradually disrupts the status quo and weakens America’s allies and strategic partners, or respond and risk upsetting its relationship with China, the Asian country most integral to its interests. Either choice would have far-reaching consequences. Against this background, the only way to ensure peace and stability in Asia is to pursue a third option: inducing China to accept the status quo. That will require a new brand of statecraft based on mutually beneficial cooperation – not brinkmanship and deception. JULY 2013
BY ALEXANDRA LAGES
hinking about buying a home in Macau? Think again. A new study concludes that the average household has been priced out of the private market. For the average earner, the alternatives are to rent or buy subsidised housing. The study was performed by Jacqueline Tang Mui Wa, an estate agent and researcher at the University of Saint Joseph. She says Macau is now one of the least affordable places in the world to buy private housing. Ms Tang estimates that the median multiple for the private housing market, or the ratio of the median home price to the median annual household income, was 12.5 last year. The international convention is that an indicator of 5.1 or higher means housing is severely unaffordable. JULY 2013
In contrast, Macauâ€™s median multiple indicator for the subsidised housing market was 3.0 last year, Ms Tang says, which means subsidised housing is considered affordable. If Macau had been covered by the Annual Demographia International Housing Affordability Survey for this year, it would have had the least affordable private housing of any of nearly 340 major cities in the mainland, Australia, Britain, Canada, Ireland, New Zealand or the United States. Only in Hong Kong is private housing considered less affordable. Ms Tangâ€™s study found that in the past 10 years median monthly income per worker has increased rapidly but not rapidly enough to keep up with the rise in the price of housing. The average price per square metre of residential floor space was MOP98,187 (US$12,273) in May, a new record, official data shows. The price of housing has more than doubled in the past three years.
A new study performed by Jacqueline Tang, an estate agent and researcher at the University of Saint Joseph, concludes that Macau is now one of the least affordable places in the world to buy private housing
Photo: Luís Almoster
“Median monthly income increased about 2.5 times over the past decade to around MOP11,300 in 2012, but the average price of a home surged by nine times during the same period,” Ms Tang says. “Most units are unaffordable. Only public housing is very affordable, compared with the private market. That explains why people are asking for more public housing.”
Cheaper to rent The 2011 census found that households with a mortgage made average monthly
repayments of MOP7,173. But almost one-quarter of households made a repayment of MOP10,000 or more. The median monthly mortgage payment almost doubled between 2001 and 2011. Official data shows that the proportion of households that owned their home has been shrinking since the handover, falling from 76.9 percent in 2001 to 70.8 percent in 2011. Ms Tang says households priced out of the private housing market should rent if they are ineligible for public housing or unwilling to apply for it. Her estimate is that it is cheaper to rent – the expected
monthly cost of owning a home being roughly double that of renting one, on average. The housing price-to-rent ratio also indicates that it is cheaper to rent. This is the ratio of the total cost of owning a home to the annual cost of renting a similar home. “The price-to-rent ratio theory says that if the outcome is over 15, you should go for renting. Our ratio is 41,” says Ms Tang. This is in spite of the median rent for housing having increased by 300 percent between 2001 and 2011. More and more people are opting JULY 2013
to rent. The proportion of households that rent rose by 5.5 percentage points to 24.5 percent between 2001 and 2011, according to census data.
value of a home worth MOP3.3 million. This means the buyer needs to come up with a downpayment of MOP1 million. The problem, Ms Tang says, is that the average household does not have these savings on hand. “On average, people here can save only about 17 to 19 percent of their total monthly income. This means it would take 10 to 20 years for a household just to save enough money for the downpayment.”
Impractical advice In her study, Ms Tang used several indicators of the affordability of private housing. They include the housing-expenditure-to-income ratio, which is the ratio of the median monthly mortgage payment to the median household income. Using data from last year, she estimates that, on average, households in private housing had to spend 47 percent of their income on their mortgages. This figure is well above the benchmark of 35 percent and close to the figure of 52 percent in Hong Kong. Ms Tang recommends that a threeperson household with a monthly income of MOP32,000 should avoid buying a home costing more than MOP3.6 million.
Think small In contrast, most households can afford to buy a home in subsidised housing. Ms Tang says that even though such homes are often criticised for being small and poorly built, many households have no other option. Public housing comprises housing for rent, and subsidised housing for sale at controlled prices, ranging from MOP500,000 to MOP1.4 million, depending on how big the home is and where it is. Ms Tang estimates that the
AVERAGE PRICE OF A HOME IN MACAU MOP 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000
Source: Statistics and Census Service
However it is a recommendation that could be hard to follow. Financial Services Bureau data shows that 57 percent of the 5,200-plus homes sold in the first four months of this year cost at least MOP4 million. One of the government’s measures to cool the residential property market also makes it hard to follow her recommendation. “It is very difficult to buy a house because of the loan-to-value ratios,” Ms Tang says. For instance, the government allows a bank to lend a homebuyer who is a Macau resident up to 70 percent of the JULY 2013
average household would have to spend 14 percent of its income on mortgage payments for a subsidised flat. But not everyone meets the requirements for subsidised housing. An eligible applicant must be a Macau resident. If the applicant belongs to a household of two or more people, the household’s combined income must be between MOP12,210 and MOP44,479 a month and have no more than MOP1.34 million in net assets. There was a stock of slightly more than 200,000 homes at the end of last year. The data in Ms Tang’s study in-
“On average, people here can save only about 17 to 19 percent of their total monthly income. This means it would take 10 to 20 years for a household just to save enough money for the downpayment,” says Jacqueline Tang
Photo: Luís Almoster
Photo: Luís Almoster
dicates that about 18 percent were in public housing complexes. There were 8,138 homes in public housing for rent and 27,920 homes in subsidised housing. Ms Tang says the price of private housing will continue to rise because new private housing is in short supply. For the next three years, annual demand for housing will exceed supply by 4,500 homes, she forecasts.
Outside the box Her research found that the problem started after 2000, when the supply of new housing fell behind growth in the
population. The imbalance, combined with the economic boom and low interest rates, pushed up prices. Ms Tang suggests the government build more subsidised housing to meet the demand for affordable homes. The owners of subsidised housing, once they have held on to their homes for the required 16 years, should be allowed to only sell them to people on the waiting list for subsidised housing, she says. “It is important the government keeps the public housing stock out of the private market.” Ms Tang argues that the govern-
ment should pay people direct subsidies for housing. She says that it should make it less lucrative for outsiders to invest in housing here by further reducing the proportion of the value of a home that banks are allowed to lend them, and by making them pay higher rates of interest on their mortgages. Keeping the border open around the clock would help to “decentralise the population to neighbouring areas, such has Hengqin Island and Zhuhai, where property prices are about onefourth or one-third of those in Macau,” Ms Tang says. JULY 2013
Property commute, it is worth living in Zhuhai. The cheaper housing there makes up for the trouble of crossing the border every day. Property agents say more and more Macau people are moving to Zhuhai or investing in real estate there, as the prices are lower and the investment opportunities more attractive. Property developers in Zhuhai are eagerly wooing potential buyers in Macau. Some developers have showrooms here and arrange for potential buyers to visit their projects. Ms Chan is a Macau resident but she grew up in the mainland. She began working in Macau four years ago but found housing here unaffordable and moved to Zhuhai. Ms Chan and a friend who also works in Macau jointly rent a flat with an area of about 35 square metres. The building they live in is old, which means the rent is just RMB1,200 (MOP1,560) a month, which the flatmates split evenly. “For RMB600 in Macau I can’t rent anything, not even just one bedroom,” Ms Chan says. “Now I live in an apartment with a balcony and I have lots of places to relax around the building.”
Comforts of home
Commuter class A new breed of commuter says the benefit of cheaper housing in Zhuhai far outweighs any inconvenience BY ALEXANDRA LAGES AND MANDY KUOK
very day, Green Chan spends almost one hour getting to the Gongbei border crossing from her apartment in Zhuhai. It then takes her another hour to pass through immigration and enter Macau. She works here as a clerk. Yoyo Lam also lives in Zhuhai, but closer to the border than Ms Chan. Even so, Ms Lam wastes a lot of time each day crossing the border to get to her work in Macau, she says. She is an administrative assistant. Swallow Xu and Morgan Velautham also live in Zhuhai and work in Macau. Both find crossing the border time-consuming, but their working hours mean they can avoid the morning rush hour, unlike Ms Chan and Ms Lam. All say that despite the time it takes to
The most recent official data on housing rents in Macau is from 2011, when the average home cost MOP4,169 (US$521) a month to rent. NAPE was the most expensive place to live, the average rent there being MOP15,241. The latest market data shows rents are often above MOP110 per square metre of floor space. Ms Lam was born in Macau but she lived in the mainland until she returned here to finish high school. She is now working here while she studies at university. Her flat in Zhuhai has an area of 45 square metres and was built more than 10 years ago. She pays RMB1,300 a month in rent. “I live in Zhuhai just because prices in Macau are very expensive,” she says. Ms Lam has several friends from Macau who also live in Zhuhai. One bought a flat of about 60 square metres for RMB400,000. “Macau’s apartments are too expensive. For me it is very difficult to buy or rent. Now more and more Macau people live in Zhuhai,” Ms Lam says. Mr Velautham found a brand-new flat in Zhuhai for which he pays a rent “similar” to what he paid for a place in Macau 20 years ago, when he moved here from Malaysia. He has been living in Zhuhai for 18 months. He says he is quite
61 happy with his new life over the border. “I had to move from my home [in Macau] and I couldn’t find anything that would be reasonable,” Mr Velautham says. “Right now, everything in Macau is skyrocketing, especially housing costs, whether you are buying or renting.” He rents a studio flat in Zhuhai. “It’s brand new, located in a nice and secure area, with a swimming pool. There are seven or eight blocks, together with a park and a lot of green,” he says. The market rent is about RMB1,900 a month. He says a family can rent a new two-bedroom flat in Zhuhai for RMB2,500 to RMB3,500 a month.
Time and space Mr Velautham runs a music shop on the peninsula, where he also teaches music. His home is four stops by bus from
to leave. After 20 years in Macau, she decided it was time to try Zhuhai. “It is possible to buy a quality property for RMB15,000 to RMB20,000 per square metre. For two years, as the central government is trying to curb the bubble, prices have been quite stable,” she says. The average price per square metre of residential space in Macau stood at a record MOP98,187 in May. Ms Xu says the quality of life is different in Zhuhai. “There you have the space. With one-third of the money you need in Macau, you can buy a much better home in Zhuhai, with good management, a pool, a clubhouse, and very well equipped.” Her flat has four rooms and a view of the river.
Border patrol It takes Ms Xu 10 minutes to get to the Gongbei border crossing by taxi, or 20
that prices there will increase steadily by 5 percent to 10 percent annually but not by much more, in view of measures taken by Beijing to curb property speculation. A specialist in real estate economics at the University of Macau, Jenny Huang Bihong, forecasts that more people will move from Macau to Zhuhai as long as the big difference between housing prices in each place persists. Ms Huang says housing prices in Macau are unlikely to fall by much in the near future. “At current prices, it is becoming more and more difficult for young people to buy or even rent a home in Macau. So quite a lot of them choose to live in Zhuhai,” she says. But Ms Huang notes the time it takes to commute deters many Macau people from moving to Zhuhai. Ms Lam hopes the Gongbei border
The director of the Macau General Association of Real Estate, Vincent Ip, says housing prices are 50 to 66 percent lower in Zhuhai than in Macau the Gongbei border crossing. Getting to work is a slog. “I need to wake up two hours before because of the human traffic at the border,” he says. He opens his shop at 2pm from Wednesday to Sunday. He returns to Zhuhai after he closes at 7pm. It takes him 45 minutes, on average, to cross the border. Some of Mr Velautham’s friends have also moved to Zhuhai. Some bought flats, while others rent there. “I don’t see lots of differences in terms of lifestyle. Having lived here, knowing the Chinese culture and speaking Cantonese, which is widely spoken in Zhuhai, I feel quite comfortable,” he says. Ms Xu’s landlord ended the lease on her home in Macau last year and told her
to 30 minutes by bus. She is a freelance translator. She needs to come to Macau only once a week. “From my home to my office, it takes 45 minutes. Compared with many big cities, that is tolerable,” she says. The director of the Macau General Association of Real Estate, Vincent Ip Kin Wa, says housing prices are 50 percent to 66 percent lower in Zhuhai than in Macau. Mr Ip says an increasing number of Macau people are buying homes there for various purposes, including investment and holidays. He says that in anticipation of the completion of the Hong Kong-ZhuhaiMacau Bridge in 2016, more people are looking for opportunities to invest in real estate in Zhuhai. He forecasts
crossing will soon be open around the clock. At present, it is closed from midnight to 7am. “I also wish the Zhuhai government would set up a special lane for Macau residents crossing the border,” she says. “Then Macau residents wouldn’t need to wait so long because of the mainland tourists.” Mr Ip of the Macau General Association of Real Estate doubts that the border will be open around the clock in the near future. He says it would require a lot of manpower on both sides. There is some good news however. Last month, some of the new facilities at the expanded Gongbei border opened, increasing the capacity of the city’s busiest entry point. JULY 2013
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Property Statistics Year-on-year change (%)
2,558 2,443 100 15 1,592 1,526 49 17
Building units completed - Residential - Commercial and offices - Industrial and others Building units started - Residential - Commercial and offices - Industrial and others
84.4 122.3 -56.7 -73.7 -26.3 -25.7 -43.0 -15.0
Transactions (1) 25,419 16,917 7,175 9,742
Total units transacted - Residential - New building - Old building Resident buyers (as percentage of total buyers)
Resident buyers (as percentage of total buyers) - Parking spaces - Industrial and others Total value of total units transacted (2)
n/a 5,122 408
MOP100.9 billion MOP74.2 billion
- Residential - New building
- Old building
MOP25.5 billion MOP19.0
- Commercial and offices
- Parking spaces
- Industrial and others
-2.1 -9.6 -0.8 -18.5
-2.9 34.8 93.1
MOP13.3 billion MOP10.2 billion MOP7.7 billion MOP2.5 billion MOP1.8 billion MOP0.6 billion MOP0.7 billion
Year-on-year change (%)
Under MOP1 million MOP1 million to MOP1.9 million MOP2 million to MOP2.9 million MOP3 million to MOP3.9 million MOP4 million or above
Year-on-year change (%)
- Macau Peninsula
6.8 8.4 -0.5 -5.0
Jan-Apr 2013 Jan-Apr 2013 Jan-Apr 2013 Jan-Apr 2013
Apr 2013 Apr 2013 Apr 2013 percentage points
Apr 2013 Apr 2013 Apr 2013
31.0 23.6 26.2 16.3 33.3 151.5 139.8
Apr 2013 Apr 2013 Apr 2013 Apr 2013 Apr 2013 Apr 2013 Apr 2013
-49.7 -59.1 -18.2 -25.8 27.7
72 144 247 175 1,010
Average transaction price of residential units (3) Dec 2012
Year-on-year change (%)
-45.5 -27.1 -4.8 17.8 42.0
1,466 3,372 3,011 2,141 6,927
Transaction price of residential units (1) 2012
93.4 542 56
32.3 26.1 17.8 45.9 49.7 22.8 120.6
n/a -26.6 19.0
Year-on-year change (%)
2,423 1,648 904 744 percentage
400.0 525.0 226.7 -75.0 213.2 351.5 -26.7 20.0
-8.0 -1.5 -7.8 3.7
- Commercial and offices
275 225 49 1 166 149 11 6
Year-on-year change (%)
Year-on-year change (%)
Notes Apr 2013 Apr 2013 Apr 2013 Apr 2013 Apr 2013
Month-on-month change (%)
Latest MOP98,187 /m
MOP83,294 /m2 MOP97,599 /m
14.9 15.7 8.5 1.1
Notes May 2013 May 2013 May 2013 May 2013
(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 JULY 2013
Source: Statistics and Census Service and Financial Services Bureau
Construction - private sector
Property | Market Watch
Notable residential property transactions - 27/05 to 23/06, 2013 District
Source: Ricacorp (Macau) Properties Ltd
Floor area (sq. ft)
Sale price (HK$)
Price per sq.ft. (HK$)
One Oasis Cotai South
Block 7, M/F, unit B
Block 2, M/F, unit A
Block 7, M/F, unit D
Block 7, M/F, unit D
Block 2, M/F, unit C
Block 1, M/F, unit A
Block 1, M/F, unit A
Block 9, M/F, unit C
Block 3, M/F, unit S
Villa de Mer
Block 5, M/F, unit B
Block 9, M/F, unit C
Block 9, H/F, unit C
Block 3, M/F, unit G
Villa de Mer
Block 4, H/F, unit B
Villa de Mer
Block 4, H/D, unit B
Block 3, M/F, unit G
Block 2, M/F, unit D
Block 2, M/F, unit D
Block 29, M/F, unit B
Block 9, H/F, unit D
Block 9, H/F, unit D
Block 14, M/F, unit F
M/F, unit C
Block 2, H/F, unit M
Block 2, H/F, unit M
Block 2, M/F, unit K
Villa de Mer
Block 5, M/F, unit G
Villa de Mer
Block 4, M/F, unit F
Villa de Mer
Block 4, L/F, unit D
Villa de Mer
Block 4, L/F, unit D
Block 1, L/F, unit K
Villa de Mer
Block 5, H/F, unit F
Note: L/F - Low floor; M/F - Middle floor; H/F - High floor
Notable residential property rentals - 27/05 to 23/06, 2013
Source: Ricacorp (Macau) Properties Ltd
Floor area (sq. ft)
Block 6, M/F, unit B
Block 1, M/F, unit E
Block 7, M/F, unit G
Rent price (HK$)
Price per sq.ft. (HK$) 23.43
Block 6, L/F, unit Z
Block 6, M/F, unit Y
Block 7, M/F, unit D
Block 4, H/F, unit B
Block 9, M/F, unit B
Block 6, M/F, unit E
Block 15, M/F, unit F
Block 6, L/F, unit F
Block 14, M/F, unit F
Block 4, H/F, unit D
Note: L/F - Low floor; M/F - Middle floor; H/F - High floor
65 JOSÉ I. DUARTE ECONOMIST, MACAU BUSINESS SENIOR ANALYST - email@example.com
Coloane’s requiem IT IS NO SURPRISE THAT THE DESTRUCTION OF MACAU’S “GREEN LUNG” IS ONLY GETTING STARTED ebate in the Legislative Assembly last month covered a subject intensely felt by the community: the preservation, or not, of Coloane. Called to discuss a matter of public interest, the meeting failed to live up to expectations. On the contrary, a number of speeches at the meeting revealed that not everyone took the debate seriously and the threats to the island may be far greater than anticipated. That Coloane’s future has become a hot topic is unsurprising. Macau has endured many transgressions to its public spaces, including growing traffic chaos, destruction of green areas, rising pollution, infrastructure degradation, appropriation of public areas for private use, urban sprawl and undue pressure from interest groups. The result is an appreciable deterioration of the quality of life. Coloane was – I guess the past tense is correct, unfortunately – the last space where a fragment of nature and peace could be enjoyed. Not anymore.
A poor example The beginning of the end took place several years ago, although few would have noticed it. After a visit to Coloane by the previous Chief Executive, there were reports that some had demanded their share of the proceeds of the real estate bonanza taking place elsewhere in Macau. These things seldom happen by chance. Later, a chunk of the reclaimed land that became the Concordia Industrial Park was discreetly set aside for the construction of luxury flats. In a bout of (revealing?) prudishness, the area was christened “Cotai South”. People less sensitive to rhetorical distractions and more attentive to the facts would be forgiven for thinking that an incursion into Coloane had started. Meanwhile, some previously abandoned blocks of land were cleared and signs identifying public property popped up in several places. Subsequently, came the Seac Pai Van public housing project. Carrying out
Coloane was – I guess the past tense is correct, unfortunately – the last space where a fragment of nature and peace could be enjoyed. Not anymore far more construction than any sensible housing policy or social reality could support, in a most improbable location, it created a perfect precedent. The government’s recklessness was the end of the opening gambit and the start of the game for real. Before the facts could be fully comprehended, the director of the Lands, Public Works and Transport Bureau was declaring to the media that the absence of planning regulations meant the government would be powerless to oppose the construction of a 100-metrehigh tower in Coloane, should someone want to build a tower there. Obligingly, only days later, a building company boss declared there was no reason for anyone to oppose a high rise in Coloane because if the government could wreck the island, others could too. You could almost see it coming.
More to come In the meantime, a summary of the environment last year by the Statistics and Census Service has been published.
Although few will bother to examine it carefully, it shows a more than six-fold increase in the processing capacity of the Coloane wastewater treatment plant. That brings its capacity almost on par with the wastewater treatment plant on the peninsula. From that detail some may infer that the community is yet to see the full extent of Coloane’s development. Clearly, the scene is set. In this context, what might be expected from debate in the Legislative Assembly on Colane’s future? Not much. The fact that those responsible for the absence of laws justify their inaction and complacency by that very absence, is hardly surprising anymore. It just underlines how much the present political arrangements, rife with conflicts of interest, are dysfunctional. All debates at the assembly should be of public interest. Too often they seem to be driven by greed, casual arguments and empty gestures. It is hardly a surprise that debate there fails to fire the public’s interest. JULY 2013
BY MUHAMMAD COHEN
PHOTOS BY LUĂ?S ALMOSTER
remium mass-market play in Macau is a growing phenomenon, and everyone wants a piece of the action. That is about all that gaming operators and experts agree on about the customer segment driving gaming revenue expansion. Mass-market revenue growth is leading Macau to record heights. Last year, and again so far this year, mass market growth has been greater than VIP growth, not just in percentage figures but in real money terms, official data shows. Premium mass-market players, the top five percent of the mass market, account for at least half of all massmarket revenue, some estimates say. There are no official figures on premium mass gaming revenue.
“Premium mass market has existed for a long time. It’s one of the most lucrative parts of the market,” Galaxy Entertainment Group Ltd chief financial officer Robert Drake says. Galaxy Entertainment opened a new high limits gaming area at Galaxy Macau last month – it is the casino resort’s fifth. The move came “in response to increasing demand from the premium mass segment market,” the company said in a press statement (read more on page 72). Premium customers yield high margins because they don’t require casinos to pay commissions to junket operators or to offer cash rebates, credit and free wagers, Mr Drake explains. Instead, premium mass customers receive “comps”, complimentary or discounted services on accommodation, food and beverage, and entertainment. This is far less costly for casino operators than junket commissions. “We’re all fighting for that business,” Mr Drake adds. There are many reasons why the premium mass market is worth fighting for. “It’s one segment that’s still relatively untapped,” says Mary Mendoza, managing director of Macau-based casino marketing firm Platinum Ltd. She adds that until recently, casinos operators didn’t properly recognise and reward these players. “Premium players are loyal to the casino, not to the junket operator. They are also more profitable to the casino in the long term,” says Andrew Klebanow, principal of casino
market research firm Gaming Market Advisors. “Premium player growth is a factor of players understanding the benefits of being loyal to the casino rather than the junket operator. It is a phenomenon of a maturing market,” he says. “Premium customers are make or break,” contends Chris Wieners, managing director of Hogo Digital Ltd, a digital marketing firm. “They offer the potential for high levels of loyalty combined with high spends and profitability. On the flip side, it is much easier to lose, and feel the loss of, a single premium customer,” says Mr Wieners, a former director of digital media at Sands China Ltd.
Three for the money Casino-hotel Ponte 16 senior vice president for casino operations Larry Ho tells Macau Business of three main catalysts driving premium mass market growth. “First, Beijing paying closer attention to curbing the hot money brought in by VIP customers, would drive them to play at premium mass where they may hide themselves from being identified. Second, there are high-roller customers who don’t like the environment of VIP rooms, but demand a cosy environment with a high quality of service. Third, casino
Premium mass-market players, the top five percent of the mass market, account for at least half of all mass-market revenue, some estimates say
Premium buy-in? Last year, as Macau’s VIP revenues stagnated and mainland officials pledged to fight corruption, the premium mass market came to the forefront as a more profitable, more politically correct segment. Premium mass market seems like a very convenient rosy scenario for publicly listed casino companies to offer shareholders and analysts. The companies’ lack of detail about the segment – most Macau operators declined Macau Business inquiries for this article – deepens suspicions. Experts contend the premium mass market surge is a genuine movement, not a mirage. “Premium visitor growth is a real phenomenon,” Gaming Market Advisors principal Andrew Klebanow says. “Premium mass players always existed, but it’s become a trendy technical term,” Platinum Ltd managing director Mary Mendoza says. “That particular niche market is being segmented into a more specific tier that would resonate with a marketing strategy of a casino operator.” Ricardo Siu Chi Sen, a gaming expert at the University of Macau, says gross gaming revenue figures show the premium mass-market segment is real. “One other piece of evidence could be the rising EBITDA [earnings before interest, taxes, depreciation and amortisation] as reported by casino operators recently,” he says. Some properties in the pipeline are already being tailored to
cater to the premium mass market. The upcoming phases three and four of Galaxy Macau “will be principally targeted at premium mass guests,” project owner Galaxy Entertainment Group Ltd said in its 2012 annual report. “Louis XIII is a new boutique property based on the premium mass market concept,” Union Gaming Research Macau managing partner Grant Govertsen says of the proposed casino with projected betting minimums of HK$5,000 (US$645). “The pool is deep enough to support a property for that customer profile.” Hogo Digital Ltd managing director Chris Wieners says there is potential to expand the pool further by moving more mass-market customers up the ladder. “I don’t think any property in Macau has really perfected the up-sell, regardless of the customer or the channel,” he says. “A lot of the operations are still quite fragmented in their middle management thinking, resulting in an inability to develop really unique programmes that could amount to some serious incremental revenue increases from the existing market.”
Some casinos give top premium mass players rebates on their betting, albeit at much lower rates than VIP players receive operators are accelerating development of the premium mass market because the net profit is remarkably higher than in the VIP market.” Premium mass players may in fact be VIP players that have moved to dealing directly with the casino, although the mix also includes mass-market players moving up the ladder and new customers. “A big driver has been infrastructure,” Galaxy Entertainment vice president for investor relations Peter Caveny says. “You get more high spenders because you have more trains, more planes coming here.” “Macau’s premium customers are tending to be mainlanders who are retired, but who own significant assets in the form of real estate, usually owning one or more properties, or consumers in their forties and fifties who work in mid-senior level management positions,” says Ben Cavender, associate principal of China Market Research Group, a Shanghai market intelligence firm. He estimates up to 200 million mainland residents fit both the demographic and income profiles.
Hard to define The main thing however is not how much money these people have but how much they gamble. “You might think they’re all spending US$50,000 [MOP400,000] every visit, but they’re not,” Mr Drake says. It is more like a “few” thousand U.S. dollars per visit, the Galaxy executive says. Ponte 16’s Mr Ho says a premium mass player’s daily bet total starts from HK$100,000 (US$12,900) and may approach HK$1 million. Marketing consultant Ms Mendoza says some casinos may also classify frequent players, particu-
larly young ones, as premium mass players, even if they are betting as little as HK$3,500 per hand. “The definition of a premium mass player is different at L’Arc than at, say, StarWorld,” Asia Pacific Gaming Consultancy (Macau) Ltd president and chief executive Ciaran Carruthers says. “At a smaller property, it may be an average daily theoretical loss of U$5,000 and above. The more they play, the higher the incentive levels,” he says. Some casinos give top premium mass players rebates on their betting, albeit at much lower rates than VIP players receive. “City of Dreams is credited with it, but premium mass market has always been there. Wynn Macau has always done well with those players as well,” says Mr Carruthers, a former casino executive at Galaxy Entertainment. “City of Dreams, our flagship integrated casino resort, has reinforced its position as the dominant premium massmarket property in Macau,” Melco Crown Entertainment Ltd said in a statement to Macau Business. “Our diverse range of premium leisure and entertainment offerings creates the premium envelope for the gaming activities to fit into.”
Big game hunting Like other casinos, City of Dreams has been raising minimum bets at live tables. A tour of casino floors around town indicates that the HK$/MOP100 bet is an endangered species, especially for baccarat. “Casinos have pricing power to increase betting minimums,” says Praveen Choudhary, head of Asian gaming research at investment bank Morgan Stanley. JULY 2013
The reinvestment rate for premium mass players – the amount the operator spends on comps and other promotions – is around 15 percent of gaming revenue “If I want to gamble HK$100, I can’t. I have to go to a machine [electronic gaming terminal]. Casinos have removed the lower end of customers [from the live tables]. You keep the same number of people coming to Macau but they spend more money,” Mr Choudhary notes. “Macau has been in a real sweet spot, able to choose who they let bet” on live gaming tables, he says. “Table caps and 95 percent hotel occupancy give it that power.” The Gaming Inspection and Coordination Bureau, the city’s gaming regulator, reportedly wants tables with maximum payouts of HK$300,000 or more classified as VIP tables, even if they are located on the mass gaming floor. Operators and analysts say that is a bookkeeping matter, not a substantive issue. A bureau official did not respond to an inquiry from Macau Business on this topic. Higher minimum bets are part of a wider trend of maximising yield per customer due to capacity constraints, JP Morgan Securities (Asia Pacific) Ltd regional head of gaming and lodging research Kenneth Fong says. “Operators have trouble getting dealers and the table cap constrains the number of tables. So they need more revenue per customer in order to grow.” Mr Fong estimates a high yield customer’s annual gaming losses at MOP300,000 to MOP800,000. “Operators are showing higher profitability because of premium mass,” he stresses. JULY 2013
Premium mass players are more profitable than VIPs because the casino doesn’t return up to half of gaming revenue to them or their junket promoters in the form of rebates or profit share. Instead, the so-called “reinvestment rate” for premium mass players – the amount the operator spends on comps and other promotions – is around 15 percent of gaming revenue, Mr Fong says. The reinvestment rate for regular mass players is just 3 to 5 percent of gaming revenue, so the casino operator keeps more of what they bet. However the actual net profits are greater from premium mass players because their betting volumes are much higher. “The cost is higher but in revenue terms the casino will net more, three to five times more. So productivity-wise, they will make up for it with greater volume,” Mr Fong explains.
Many happy returns The real driving force for premium mass-market growth is not the casino operators, but the players. “Players have become more sophisticated,” Platinum’s Ms Mendoza says. “In the past two years, there’s been growth in the maturity of the market. But Macau is still in the initial stage of market development, so there’s vast opportunities,” she says. “Premium visitor growth is a fundamental outgrowth of
player development,” Gaming Market Advisors’ Mr Klebanow says. “Many premium mass players are mass-market players who are moving up a casino rewards programme ladder. They have discovered the aspirational elements of the casino rewards programme – complimentary fine dining, suites, other benefits – and are learning that by concentrating play at one casino rather than playing at multiple properties, they can achieve premium tier status and avail themselves of a particular casino’s player reward programme benefits,” he explains. “Premium tier customers receive a variety of benefits that fall under the player reinvestment umbrella,” Mr Klebanow says. “They receive complimentary lodging in the casino’s best suites. They enjoy dining for free in the casino’s best restaurants. They receive invitations to special events and shows,” he says. “In other words, they are treated like kings. A VIP customer gets what the junket operator gives him.” Ms Mendoza questions whether Macau casinos’ treatment of premium mass customers has evolved to the level Mr Klebanow describes. “Rewards are generic. There’s definitely a lack of customer specific rewards,” she says. “But premium mass players aren’t necessarily looking for that at this point. So operators are setting the standards,” the Macau-based consultant adds. “Players in Asia are not as demanding as players in the United States... Most players are happy with a cup of noodles.”
Whether premium mass players need to use loyalty cards to get benefits depends on whom you talk to. “The increased importance of the premium mass market in Macau is directly correlated to the increased acceptance and usage of player reward programme cards,” Gaming Market Advisors principal Andrew Klebanow contends. “Quite simply, a casino cannot properly evaluate a player’s gaming worth and determine the appropriate amount that it can reinvest in that player without accurate data. That data is gathered through the casino’s player rewards programme.” According to Mr Klebanow, more than half of Macau’s mass market gaming revenue now comes from players using reward programme cards, known as carded play. “As in all gaming markets, as the market matures, customers become more educated and they discover the benefits of participating in player reward programmes,” he adds. “They allow the casino to track their wagering volume and, in exchange, are extended additional benefits.” Platinum Ltd managing director Mary Mendoza says that for comping, “play has to be carded because of casino corporate policy and procedure”. Premium mass customers “don’t have to be a card member to get comps,” casino-hotel Ponte 16 senior vice president for casino operations Larry Ho says. Mr Ho explains some mass premium players are former VIP punters trying to play with greater anonymity, and carded play wouldn’t fit that goal. “Rewards for premium mass-market players are not based on carded play,” Asia Pacific Gaming president and chief executive Ciaran Carruthers agrees. “Loyalty and promotions staff on the floor identify the players.” Whatever the system, Hogo Digital Ltd managing director Chris Wieners notes that a lot of properties “are working hard to offer the most ‘personalised’ levels of service, the best rewards systems and exclusive levels of recognition.” That can pose challenges, he warns. “These customers have grown used to this recognition to the point that virtually all properties have the same value offer, on paper. Retaining these customers will have to rely more so on the host-customer relationship, both in and outside of Macau.”
Model city Premium mass market represents an important source of both volume and profit for casinos in Singapore, which has extremely limited junket play. Singapore demonstrates how much further Macau can develop its premium mass potential. “The market for premium mass here is different, compared to Macau,” Marina Bay Sands vice president for premium mass marketing Anne Chen tells Macau Business. Marina Bay Sands casino resort is owned by Las Vegas Sands Corp, parent company of Macau operator Sands China Ltd. “We are building our regional premium mass sales teams and networks to develop this segment,” says Ms Chen. “We discuss premium mass with sister properties, but due to market variations, what works for Macau, for example, may or may not work for Singapore – and vice versa. Naturally, the Southeast Asia market is important for us, as well as China,” she adds. JULY 2013
Race to the middle Galaxy Macau’s latest gaming offerings are aimed squarely at both ends of the mass market alaxy Entertainment Group Ltd has ramped up its gaming offering at the Galaxy Macau casino resort. It has opened a fifth high-limit area at its flagship property and installed a stadium-style, multi-terminal electronic table facility. Galaxy Entertainment is hoping to build both aspects of its offering to mass-market gamblers: the big-betting premium player, and the low-stakes punter looking for a gambling experience with a croupier. Gross gaming revenue for the massmarket segment reached MOP27.5 billion (US$3.4 billion) in the first quarter of this year, a 27-percent increase over the same period last year. Since the fourth quarter of 2011, mass-market revenue has grown at a faster rate than revenue from VIP gaming. High rollers still contribute twothirds of gaming revenue. Galaxy Macau’s high-limit areas target premium mass-market players. These comprise the two upper tiers of the Galaxy Privilege Club, Galaxy Entertainment’s loyalty programme, the company says. The casino has four other high-limit areas: three areas with live tables and a slot-machine zone. The new fifth venue, the Pavilion Club, “was launched in response to increasing demand from the growing
Blockbuster budget for part two Galaxy Entertainment Group Ltd has increased the budget for the second phase of Galaxy Macau by HK$3.6 billion (US$464 million), an increase of 22.5 percent. Galaxy Entertainment’s deputy chairman Francis Lui Yiu Tung said the increase would pay for additional project elements. The overall budget now stands at HK$19.6 billion. Work began on the second phase last year and is due to finish in 2015. Up to 500 live gaming tables will be added by the extension. JULY 2013
Galaxy Macau’s new high-limit area “was launched in response to increasing demand from the growing premium mass-market segment,” says deputy COO Gabe Hunterton premium mass-market segment for more private, exclusive access, gaming rooms where gamers could enjoy their gaming experience without the crowds,” says Galaxy Macau’s deputy chief operating officer Gabe Hunterton. The venue has been designed by casino architect Paul Steelman. It includes a main hall of about 370 square metres and two private gaming rooms. Mr Hunterton says it is “more exclusive than other high-limit areas of the casino”. Galaxy Entertainment has been working hard to boost revenue from premium mass-market gamblers. “Novelties such as table-side food service for our high-limit patrons have already demonstrated our innovation,” he says.
Electronic attraction Galaxy Macau’s new Golden Touch stadium-style multi-terminal electronic table game installation targets a different audience. It boasts 150 betting terminals, combining electronic betting and bet settlement with games dealt by
live dealers. Games include baccarat, sic bo and roulette. This type of installation gives casinos a chance to cater for punters who have been priced out of placing bets at a live table by rising minimum bets, but prefer table games over slot machines. Gaming operators are increasingly finding multi-terminal electronic table games an interesting proposition. They allow an increase in the volume wagered on each hand, even with minimum bets that are smaller than at a traditional table, and more hands to be played since settlements are handled electronically. “We fully expect the new gaming experience offered by our Golden Touch facility will meet the needs of players preferring a more private, but still live, table game, and will help us drive incremental play from new players, plus extend the duration of play for existing electronic players,” says Mr Hunterton. The facility has been open to the public since the beginning of last month and it “has been a resounding success”, he says.
Civic group wants Edmund Ho investigated Move comes after a U.S. court ruled in favour of Richard Suen in case against Las Vegas Sands Civic group Macau Conscience filed last month a complaint to the Public Prosecutions Office against former Chief Executive Edmund Ho Hau Wah. The group wants Mr Ho to be investigated regarding his role in the liberalisation of the gaming industry in 2002, when he was the head of the government. The group’s complaint comes on the heels of a decision by a U.S. court in May, which ordered Las Vegas Sands Corp to pay US$101.6 million (MOP813 million) to Hong Kong businessman Richard Suen. Mr Suen won the trial regarding his claims that he had helped the casino operator to obtain a gaming licence in Macau. He alleged that he arranged a series of meetings in Beijing in July 2001 between Las Vegas Sands executives and high-level Chinese officials. Las Vegas Sands is the parent company of Macau-based casino operator Sands China Ltd. Macau Conscience says that if Beijing interfered in the gaming licence granting process in Macau, then Mr Ho should be investigated. Mr Ho is currently vice chairman of the National Committee of the Chinese People’s Political Consultative Conference, the country’s top political advisory body.
MACAU LEGEND CUTS IPO SIZE Macau-based casino company Macau Legend Development Ltd cut its initial public offer shares to 934.8 million from an earlier 2.05 billion. The company priced the offer at HK$2.35 (US$0.30) a share, valuing the IPO at HK$2.04 billion. The company said the current market conditions had changed. Trading started this month. Macau Legend, headed by David Chow Kam Fai, was previously looking to raise up to US$786 million (MOP6.3 billion) through its IPO on the Hong Kong Stock Exchange.
CHINA STATE INKS CONTRACT FOR MGM COTAI MGM China Holdings Ltd has inked a MOP10.8-billion (US$1.35 billion) contract with the China State Construction Engineering group as the main contractor of its Cotai project. The deal was signed last month. Construction works are anticipated to start on or around January 2014 and to be completed by April 2016.
REGULATOR REJECTS HK$1.3-MILLION SLOT CLAIM The Gaming Inspection and Coordination Bureau rejected last month a claim by a woman who said she was owed HK$1.3 million (US$168,000) from a slot machine at Sands Macao casino, run by Sands China Ltd. Casino records showed the woman won a total of 43 jackpots, each of HK$31,000, in just 22 minutes. But the regulator investigation concluded this was “statistically impossible” and could only be explained by a malfunction. In this situation, the operator is not obliged to pay the jackpots, but the player is entitled to compensation. Sands China said it had already reached “an accommodation acceptable to the patron”. The amount was not disclosed.
Photo: LuĂs Almoster
t is not every day that you see two of Macau’s casino operators go toe-to-toe in court. But Sands China Ltd and Melco Crown Entertainment Ltd have been engaged in a string of legal tussles over the trademark registration of names of goods or services that use the words “Cotai” or “Cotai Strip”. Marketing experts say gaming companies can add value to their brands by using the name of the Cotai area. They say that as the area becomes better and better known around the world as Macau’s main gaming and entertainment district, its name makes the casinos there more conspicuous. A casino marketing specialist at the University of Macau, Glenn McCartney, says any-
thing that is easily recognisable by the public adds value to a brand. The name of the Cotai area is an example and the name could add even greater value as time goes by. Mr McCartney says all present and future casino resorts in Cotai are committed to building up their brands. “Integrated resorts are working a lot, using all the tools and techniques to build brand awareness.” A trader has the exclusive right to use a name of its own devising for a product or service only if the name is registered as a trademark. According to the Economic Services Bureau website, Las Vegas Sands Corp, the parent company of Sands China, registered the name “Cotai Strip” as a trademark in 2005.
According to the Economic Services Bureau website, Las Vegas Sands Corp, the parent company of Sands China, registered the name “Cotai Strip” as a trademark in 2005 JULY 2013
The company has the exclusive right to use the trademark in several sorts of business, including gaming, until 2019. Since it opened Venetian Macao in 2007, Sands China and Las Vegas Sands have been using the word “Cotai” in names of other goods and services that they have sought to register as trademarks. Melco Crown went to court to challenge the registration of these names as trademarks – successfully.
“Integrated resorts are working a lot, using all the tools and techniques to build brand awareness,” says casino marketing specialist Glenn McCartney
“Any association with the word ‘Cotai’ has great significance, from a marketing perspective,” says branding specialist Desmond Lam Chee Shiong
Application blizzard The Court of Second Instance has sided with Melco Crown in six cases. Between March and May, it rejected the registration as trademarks of the names “Cotai Strip CotaiShuttle”, “Cotai Strip CotaiTicketing”, “Cotai Strip CotaiExpo”, “Cotai Strip CotaiArena” and “Cotai Strip CotaiTravel”. The court held that each of the names that the Sands companies tried to register referred simply to a certain area – Cotai – and to a generic product or service – shuttle buses, ticketing etcetera – and so failed to distinguish the goods and services that the Sands companies offered from those of their competitors. Running together the first syllables of Coloane and Taipa gave Cotai its name, while Macau was still under Portuguese administration. The area is on land reclaimed from the sea between the two islands. Several other court cases are pending. Any trader that wishes to register a trademark to use in different goods or services categories must register each separately. Sands companies are pressing on regardless, with attempts to register other names containing the word “Cotai” as trademarks. Las Vegas Sands promotes its casino resorts in Cotai on a website with the address www.cotaistrip.com.mo. Las Vegas Sands applied in March to register the name Cotai Strip Macao as a trademark, according to the Economic Services Bureau website. The website shows that since 2005 the bureau has received over 570 applications to register as trademarks names containing the word “Cotai”. Las Vegas Sands or subsidiaries of Sands China made more than 300 of the applications and most were granted.
Mine, all mine Sands China was the first gaming company in Cotai. Company chairman Sheldon Adelson has repeatedly asserted JULY 2013
Casino marketing expert Amy So Siu Ian says that, if well done, the use of a variety of brand names can project various kinds of images to suit various kinds of customers
77 cialist Desmond Lam Chee Shiong says the future of Macau’s gaming industry lies in Cotai. The area also has a growing reputation worldwide as a place for leisure activities of other kinds. “Any association with the word ‘Cotai’ has great significance, from a marketing perspective,” Mr Lam says. The question is whether Sands China uses the name of the Cotai area too much. Recently the company has been using umbrella brands to group together its casino resorts in Cotai – Venetian Macao, Sands Cotai Central and the Four Seasons. For general purposes, it refers to these resorts as the Cotai Strip Resorts. For the purposes of meetings and conventions, it now refers to them as the Cotai Strip Macao, having previously referred to them as Sands Co-
tai Macao. It refers to the shops in the resorts as Shoppes Cotai. Mr Lam says it is problematic for a company to have too many sub-brands with the same brand associations in the same market. “Your sub-brands are essentially competitors with each other, hence cannibalising each other. This may also affect the perception of guests.” The head of the University of Macau’s bachelor degree programme in hospitality and gaming management, Amy So Siu Ian, says using several similar brand names can confuse consumers. But she acknowledges that, if well done, the use of a variety of brand names can project various kinds of images to suit various kinds of customers. Sands China Ltd declined interview requests for this report.
Photo: Luís Almoster
that the transformation of the area into an international gaming and entertainment centre was the result of his vision. “It all began with a vision that started with a reclaimed area of sand and mud,” Mr Adelson said last year. “People said it couldn’t be done. But we have shown that nothing is impossible.” All six casino operators now have projects in Cotai. Sands China, Melco Crown and Galaxy Entertainment Group Ltd already operate casino resorts there. None of the casino operators apart from Sands China have branding strategies that focus on the word “Cotai”. But all except MGM China Holdings Ltd have registered trademarks containing the word, the Economic Services Bureau website shows. University of Macau branding spe-
Photos: LuĂs Almoster
Done deal The government approves the sale of rights to flats in the Four Seasons apartment hotel tower BY LUCIANA LEITÃO
fter years of waiting, gaming operator Sands China Ltd obtained permission from the government last month to sell rights to flats in its Four Seasons Macao apartment hotel tower in Cotai through a share-issuing cooperative scheme. Buyers will not own the flats but hold shares in the cooperative that owns the serviced apartments – shares that carry the right to use the flats. It is unclear when Sands China will begin marketing the flats. The Four Seasons apartments have been empty since they were completed in 2008 and renovations may be needed. The Four Seasons hotel chain, which manages the neighbouring Four Seasons Hotel Macao, will service the flats. The deal breaks new ground for Macau. It will be the first offering of rights to flats in a big property owned by a share-issuing cooperative – an arrangement that is common in places like New York City. Union Gaming Research estimates that Sands China could net HK$6 billion (US$753 million) from the sale, implying a price of HK$10,000 a square foot. The research house estimates that the Four Seasons contains up to 300 flats. “We believe the natural buyers could be premium mass and VIP customers, which can be viewed as a notable driver of these segments for Sands China on a longer-term basis,” it says. Wells Fargo Securities says Sands China could receive up to US$1 billion (MOP8 billion) from the sale. In a note written by analyst Cameron McKnight, Wells Fargo says Sands China and its parent company, Las Vegas Sands Corp, could use the proceeds to pay a bigger dividend to its shareholders. Sands China chairman Sheldon Adelson said the Four Seasons apartments would “provide visitors from surrounding countries the opportunity to own a tourism product which will allow them to utilise the full facilities of
the Cotai Strip more frequently and for longer periods of time”.
Moneyed enclave University of Macau real estate specialist Rose Lai Neng expects the sale of rights to the flats to have little effect on the health of the property market. Shareissuing cooperatives are “different” and unknown to the typical investor. “Companies providing housing for their staff or investors buying for leasing” will probably show most interest, she says. Ms Lai says one concern is how the sale will look in the eyes of the law. Investors may find loopholes in the scheme, she cautions. Serviced apartments are rare in Macau. In 2010, Shun Tak Holdings Ltd and Hongkong Land Ltd began offering 92 serviced apartments in One Central. Ocean Gardens also has serviced apartments. Midland Realty (Macau) Ltd chief executive Ronald Cheung Yat Fai says the sale of rights to the Four Seasons flats will not faze the market. “It’s for a niche,” he says. Few Macau residents will invest because they will find the idea of shareissuing cooperatives difficult to adjust to, but the sale may set a precedent, Mr Cheung says. “Other gaming operators may change their hotel rooms into serviced apartments.” They would do so, he says, in order to sell them. People in the gaming business say this is unlikely, unless the casino operator is in urgent need of liquidity. They say gaming operators need rooms for casino patrons and that the city has a shortage of rooms.
Resale restriction Melco Crown Entertainment Ltd had a four-star apartment hotel tower in the original plan for its City of Dreams project but it was never built. Melco Crown’s annual report for last year says the company has agreed with the JULY 2013
A troubling development
Once it has cashed in on the serviced apartments, Sands China may then try to sell its shopping malls in Cotai government that it should build another five-star hotel instead. Mr Cheung is worried that share-issuing cooperative schemes may allow buyers to avoid taxes on real estate, including the special stamp duty, levied on the resale of residential, commercial and office property within two years of purchase. It is unclear if the special stamp duty would apply to the resale of shares in cooperatives, he says. An assistant professor of business economics at the University of Macau, Henry Lei Chun Kwok, says most of those interested in the Four Seasons flats will be speculators. Shareissuing cooperative schemes may be liable to abuse as gaming operators could use them to turn their hotel projects into money, he notes. “If tight controls are imposed, I speculate that it may not bring about significant impacts on the local property market.” The government says it will place restrictions on the sale of rights to the Four Seasons apartJULY 2013
ments, with each sale subject to government approval and with some inventory in the apartment hotel tower made available for bookings. The Lands, Public Works and Transport Bureau says the share-issuing cooperative scheme prevents the Four Seasons apartments from reaching the open market. The body says the apartment hotel tower will be subject to the regulations that apply to hotels. Sands China has declared that its sale of rights to flats has no speculative intent, the bureau told Macau Business. Once it has cashed in on the serviced apartments, Sands China may then try to sell its shopping malls in Cotai. Mr Adelson has mooted the idea several times. “That is our fundamental business model. We get our money back from the sale of non-core business assets,” he said in 2010. Contacted by Macau Business, Sands China declined to clarify the details of the sale of rights to the Four Seasons flats.
Sands China Ltd officials first mooted the idea of selling flats in the Four Seasons apartment hotel tower in 2007. The undertaking has been politically charged from the start. In October 2008, the government approved the separation of Sands China’s Four Seasons apartment hotel tower from the other parts of its Four Seasons complex. It was the fi rst step towards selling rights to the serviced apartments through a cooperative scheme. At the time, Sands China chairman Sheldon Adelson said his company had presold 65 flats, almost 22 percent, that would be sold for more than US$1,700 (MOP13,600) a square foot on average. About two-thirds of the flats were headed to buyers from outside the Greater China region. SJM Holdings Ltd chairman Stanley Ho Hung Sun was a vocal opponent. In 2009, Mr Ho accused Sands China of twisting the deals it had made with the government to improve its bottom line. Sands China’s parent company, Las Vegas Sands Corp, had been hit hard by the international financial crisis. Mr Ho said the sale of the Four Seasons apartments would be “unfair competition” for developers. In April 2010, former Sands China’s chief executive Steve Jacobs announced the company could have government approval to go ahead with the sale within that year. “We believe there is ample interest from high net worth individuals from the mainland, Korea, Vietnam and Japan,” he said. Less than two months later, Mr Adelson said he had an agreement with former Macau Chief Executive Edmund Ho Hau Wah that would see the flats sold. Mr Ho stepped down as chief executive in December 2009.
“He made a commitment to us that, if we started Parcels Five and Six [Sands Cotai Central] and if we did an initial public offering, then for sure we could sell,” Mr Adelson said. Secretary for Transport and Public Works Lau Si Io told reporters the matter had yet to be decided. Sands China fired Mr Jacobs soon after and Mr Jacobs sued the company. He alleged in court documents that Mr Adelson had told him to “use improper ‘leverage’ against senior government officials” to get permission to sell the Four Seasons apartments. Mr Jacobs also alleged that Mr Adelson had ordered him to “threaten to withhold Sands China business from prominent Chinese banks unless they agreed to use influence” to press the government to allow the sale. A deal seemed close last year. Sands China announced in June last year that it had withdrawn a lawsuit intended to reverse the government’s denial of the company’s request for Parcels Seven and Eight in Cotai. This magazine’s sister publication, Business Daily, reported that, in exchange for dropping the case, Sands China would be given permission to sell rights to the flats through a share-issuing cooperative scheme. Days later, emails exchanged in 2009 by Sands China legal adviser Leonel Alves and Mr Jacobs were leaked, putting the deal in doubt. The emails spoke of requests from “someone high-ranking in Beijing” for payment for helping Sands China obtain government permission to sell the Four Seasons apartments.
Waiting for the wave
Guangdong Group introduces a new poker brand to tap into an emerging VIP clientele with a love for the game BY EMANUEL GRAÇA
igh-stakes poker is the next big thing for top junket operator Guangdong Group (Macau) Ltd. Formerly called Neptune (Macau) Ltd and mostly involved in VIP baccarat, the company has introduced a new poker brand and may even seek its own high-stakes poker room in the long term. “We want to build a brand as strong as the World Series of Poker or
PokerStars,” says Guangdong Group chief executive Winnie Wong. “We can see there is a real potential in Asia, especially in Macau.” Ms Wong says the Macau Billionaire Poker brand is aimed at high rollers, not mass-market gamblers. Guangdong Group organised the Guangdong Ltd Asia Millions at City of Dreams last month in partnership with poker powerhouse PokerStars Macau.
Guangdong Group (Macau) Ltd is waiting for the next wave of development in Cotai to open new VIP rooms. Chief executive Winnie Wong confirms there are on-going discussions with gaming operators about their new Cotai projects. “Definitely, we will enlarge our footprint in Cotai,” she says. The junket operator, one of Macau’s biggest, says acquiring smaller operators is not on the horizon in the short term. After consolidating two VIP rooms last month, Guangdong Group now controls 14 VIP rooms with about 220 gaming tables. It has a footprint both on the peninsula and in Cotai, and agreements with all six gaming concessionaires. Ms Wong says diverse coverage was a strategic decision that helps the company cater to the tastes of VIP patrons. It also gives VIP players the chance to change venues when they are down on their luck, without changing junket. Despite the fuss surrounding premium mass-market players, Ms Wong is not worried about VIP players downgrading in search of greater anonymity. “I think that happens but, at the same time, we see some premium customers migrating to VIP. It is a very fluid market. One cannot retain customers forever.”
Photo: António Mil-Homens
She says new VIP patrons continue to arrive but will not provide an estimate or details. The greatest detail she is prepared to offer about the industry is that growth is “healthy”. Ms Wong does not disclose data on the overall size of Guangdong Group’s client database or their average bet size. Nor is she prepared to talk about VIP clients defaulting on their loans. The ratio, she says, “is not too worrying”. Guangdong Group has around 1,000 employees. Ms Wong is critical of media reports that depict the junket business as shady, linked to money laundering and corrupt mainland officials. “The regulations are very strict and no one can do anything illegal and sustain business,” she says. Ms Wong joined the Guangdong Group one year ago, after having worked for CTM – Macau Telecom Co Ltd. Under her leadership, the junket operator has become more visible as a corporate citizen. “We want to be better everyday,” she says. “Projecting a positive image is a by-product.” Ms Wong says there are no plans for Guangdong to go public any time soon. This year, the company expects its growth to be in line with the overall gaming industry. “This will be a year for consolidation,” she says. JULY 2013
Photo: António Mil-Homens
The main event had a HK$1-million (US$129,000) buy-in and attracted a field of 71 players, including a number of global poker stars. About half of the field were new to Guangdong Group, says Ms Wong. The main event featured a prize pool of HK$119.4 million. The winner, German poker professional Niklas Heinecker, took home HK$34.6 million. Guangdong Group used the event to launch Macau Billionaire Poker and plans to organise more HK$1-million buy-in tournaments each year. “We will also have other smaller events being done more regularly,” Ms Wong says. The first tournament will probably feature a smaller buy-in and take place later this year. High-stakes cash poker games bringing together the world’s best players and Asian tycoons are nothing new to Macau. Since at least 2010 there have been several reports of games at StarWorld’s Poker King Club, which is backed by junket operator Suncity Group.
Teamwork planned Despite the interest in poker, Ms Wong says there are no plans to introduce poker tables in Guangdong Group’s VIP rooms. “That is not in line with our key business.” Instead, Macau Billionaire Poker may seek its own poker room in the long run, she says. JULY 2013
“Because our customers are usually very rich people, when they mention a poker tournament, they are not talking about just another tournament. They want to have it really high stakes and make it really exciting,” says Winnie Wong
The venue would offer high-stakes cash games to the general public and is not designed to compete directly against the PokerStars Macau room at City of Dreams. “We have a very good relationship with PokerStars and we want to cooperate with them to run regular tournaments,” Ms Wong says. “Mass poker games are not our interest... it doesn’t have synergies with our existing business.” Opening a poker room may prove to be a challenging experience. The cap on the number of live gaming tables means casino operators are not keen to replace traditionally popular baccarat tables for less profitable poker units. Guangdong Group will seek to establish the Macau Billionaire Poker brand in Greater China initially, and then throughout the rest of Asia. The new brand will not have an online gaming presence, which is a gaming frontier that is not regulated in Macau. “We want to have a very positive brand, nothing in grey areas. Online gaming is too risky,” says Ms Wong. Guangdong Group’s interest in high-stakes poker has evolved after seeing the number of VIP baccarat patrons taking an interest in the game. “Because our customers are usually very rich people, when they mention a poker tournament, they are not talking about just another tournament. They want to have it really high stakes and make it really exciting.”
Show-off thrill Last year, the group organised the Macau High Stakes Challenge. It had a HK$2 million buy-in and featured international poker stars. Ms Wong says the goal was “to add to the level of excitement, to let players compete with worldclass pros”. The first outing showed there was “huge” potential in high stakes poker on a regional level, she says. “We organised the first tournament mainly for the purpose of fulfilling customers’ needs. The second one was done with much more planning.” So far, both tournaments have been run at a loss. “With the business in an infant stage, we want to build a brand rather than make money. In the two tournaments that we have done, charity was the key element,” says Ms Wong. Guangdong Group donated 10 percent of the administrative fees from the
83 Guangdong Ltd Asia Millions, about HK$613,000, to the Macau Daily Readers Charity Fund. One difference between running a high-stakes poker tournament and a VIP room is that there is no credit to players. “Players bring the money. We need to have all the money in the cage before we can run the tournament. The person who wins receives the cheque immediately,” says Ms Wong. She says poker is attractive to VIP patrons because it is a game that includes a component of skill. Baccarat is purely a game of chance. Poker gives customers a sense of satisfaction and achievement. “They can actually demonstrate skill, how intelligent they are.” The nature of the game also entices high rollers, Ms Wong says. “Baccarat is a game where clients make and lose big money in a very short period of time. It is like a rollercoaster. Poker is a bit different. You will have ups and downs for an extended period, but it is the one who persists the most, the most patient, most skilful that will be the final winner.”
Guangdong Group organised the Guangdong Ltd Asia Millions at City of Dreams last month in partnership with poker powerhouse PokerStars Macau
Uncle Sam is watching U.S. panel probes Macau money laundering risks BY TONY BATT*
he three U.S. casino companies operating in Macau pay for the travel costs of Nevada regulators to frequently monitor their activities here, and gaming agents have seen scant evidence of the influence of organised crime, the chairman of the Nevada Gaming Control Board told a congressional commission last month. “That’s probably the first time that’s ever been said publicly by the chairman of the [Nevada] Gaming Control Board. However, the expenses are fairly large for those companies to comply with what we’re doing,” said A.G. Burnett, chairman of the Nevada Gaming Control Board. Mr Burnett did not specify how much money regulators’ trips to Macau cost but said they are frequent. He testified at a hearing by the U.S.-China Economic and Security Review Commission. The commission prepares a report each year on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China. Members of the commission expressed concern that Macau’s swift emergence as the most lucrative gambling market in the world could make it a money laundering haven for enemies of the United States. Some of the seven commission members who attended last month’s hearing seemed sceptical of Mr Burnett’s claim that robust anti-money laundering procedures are in place at Macau casinos and are effective.
Westernisation of Macau “Speaking strictly as a Nevada regulator, who regulates casinos that do business in Macau, we have not seen any organised crime occur with our Nevada gaming licensees,” Mr Burnett said. However, he acknowledged there is vulnerability “whereby illegitimate money enters the system possibly through VIP rooms outside of the casinos’ purview.” “That was indeed the case prior to Nevada licensees coming into Macau, JULY 2013
and it is my testimony today that that is changing somewhat,” Mr Burnett said. Macau’s gaming economy is still largely dependent on VIP rooms and junket promoters; however, Nevada licensees in Macau are “required to conduct due diligence with those VIP room operators because they are essentially, what we would deem, lessees or tenants to the gaming operation,” Mr Burnett said. Las Vegas Sands Corp, MGM Resorts International and Wynn Resorts Ltd are the three Nevada gaming licensees with operations in Macau. “What’s happening now is essentially what I would call – and this is my own personal opinion – a Westernisation of the gaming element in Macau,” he said. This is because Nevada casinos doing business in Macau realise their conduct there could impact their licences in Nevada, according to Mr Burnett. “We have had full transparency with those licensees as they have gone into that jurisdiction and worked to create a gaming climate that’s compliant not only with our regulations but regulations of other federal agencies,” he said.
Dirty money Commissioner Michael Wessel challenged Mr Burnett’s claims of transparency. “Where you see transparency, I see more opacity,” Mr Wessel told Mr Burnett.
“It appears to me that there is so much slipping through the cracks,” he said. “This is dirty money that’s happening in an American house, an American casino operator. They may not be the one operating a specific VIP room, but it’s happening under their roof. If we’re aware of it, they’re aware of it.” Mr Wessel also criticised the alleged continued association of triads, or organised crime groups, with casinos in Macau. “As you know, there are triad activities that are bad. However, there are triad activities that are good,” Mr Burnett told Mr Wessel. “There are a lot of philanthropic activities related to some of the triads,” he said. “In fact, I see that you are on the board of directors for Goodyear Tire. If Goodyear Tire did business in China in any capacity, theoretically, Goodyear Tire probably touched a triadrelated organisation — be it a laundromat, be it some philanthropy service or be it some actual triad group that might be attempting to conduct some illegal activities. And that’s the case in Macau.” Mr Burnett said he was not condoning triads, but being a member at the lowest level of a triad is “like being a member of the Elks Club [a leading fraternal order in the U.S.].” *GAMBLINGCOMPLIANCE
CASINO REVENUE TO GROW 14 PCT IN 2013: BARCLAYS
Barclays Research forecasts Macauâ€™s casino gross gaming revenue will grow 14 percent this year, it said last month. The investment bank expects growth to accelerate starting from 2015-16, based on increasing penetration of non-Guangdong visitors, improved infrastructure, new casino launches and new nongaming offerings.
DEUTSCHE BANK CUTS MACAU ESTIMATES
Deutsche Bank has revised downward its estimates for the Macau gaming industry. Analyst Karen Tang said in a note to clients that gross gaming revenue growth will likely accelerate from 14 percent in the first five months of 2013 to 20 percent in the next three to four months, on a low base. However, Ms Tang cut her fourth-quarter growth estimate from 16 percent to 12 percent, and the 2014 growth forecast from 11 percent to 8 percent.
ALEX CHIENG WINS APPT MACAU SEASON 7
Alex Chieng was the winner of the Asia Pacific Poker Tour (APPT) Macau Season 7, held last month. The 33-year-old was awarded HK$2.2 million (US$283,000) and became the first ever player from the mainland to win a main event in the APPT, organiser PokerStars said. The HK$25,000 buy-in, four-day main event boasted 388 entrants.
Jockey Club continues in the red Several non-casino gaming operators announced their results for 2012 last month The Macau Horse Racing Company Ltd, which runs the Macau Jockey Club, continued posting losses in 2012. According to the companyâ€™s annual report, published last month in the Official Gazette, the company reported losses of MOP57.7 million (US$7.2 million) for last year. That is a much worse performance than in 2011, when the company reported a loss of MOP17.8 million. In the opposite direction, Macau Slot Co Ltd reported a profit of MOP80.7 million for last year, up by 47 percent year-on-year. Macau Slot holds a de facto
monopoly on non-racing sports betting in the territory, including football and basketball. The Macau (Yut Yuen) Canidrome Co Ltd also reported its 2012 results last month. The company, which holds the monopoly for betting on greyhound racing, recorded a profit of MOP85 million, according to estimates based on the financial data disclosed. Sociedade de Lotarias Wing Hing Lda, which has the monopoly on Chinese lotteries here, posted a profit of MOP1.7 million.
Changing up Construction work on Hengqin Island is starting to take shape and gaming analysts are bullish
he biggest news for the gaming sector this year is likely to come from outside Macau. When the Chimelong Ocean Resort opens later this year, it is expected to test the hypothesis that Hengqin will deal a favourable hand to Macau’s casinos. Investment bank Citi calls Hengqin Island “Macau’s ace in the hole for future growth”. Analysts led by Anil Daswani wrote in May that Hengqin’s development “could eliminate key obstacles and power the next phase of Macau’s growth” as a top global gaming, leisure and meetings and conventions centre. “While this is a long-term story, we believe the potential is significantly underappreciated by the market.” Citi is not alone. Many international gaming analysts see a completed Hengqin as a driver for the casino sector, providing more gamblers while also helping to solve some bottlenecks in Macau’s tourism offering. The vision is that Hengqin’s crowds and infrastructure will attract more middle-class families to visit Macau and increase the time they stay. They will, in turn, fuel the profitable mass market gaming segment in Cotai. Fitch Ratings’ senior director Michael Paladino says Hengqin’s development and infrastructure improvements in Macau “could ultimately result in a 50-50 revenue split” between the mass market and the VIP segments in the casino sector. Mr Paladino leads the agency’s gaming, lodging and leisure division. VIP revenue accounted for 67.8 percent of casino gross
gaming revenue in the first quarter of this year. Its share has been dropping since the second quarter of 2011, when it peaked at 74 percent.
Space invaders The scheduled opening of the Chimelong Ocean Resort in September – just before the National Day Golden Week holiday – is pivotal. It is expected to improve the supply of nongaming entertainment, making Macau a more compelling family destination. Once complete, the park is forecast to welcome more than 20 million visitors a year. Citi analysts say that could help push the annual number of mainland visitors to Macau above the 20-million mark, versus the 16.9 million recorded last year. The park will feature the mainland’s biggest hotel, a manmade beach and the biggest aquarium in the world. It will also include the highest ferris wheel and the longest roller coaster. The development will cost more than RMB20 billion (MOP26 billion) and will be developed in stages. Separated from Cotai by a narrow channel, Hengqin is one of the mainland’s pilot reform areas. The governments of Guangdong, Zhuhai and Macau are its main supporters. The 106-square-km island is three times larger than Macau. However, much of its area is set aside under preservation efforts. Hengqin has about 28 square km of land available for development, according to Citi. That is just slightly less than
87 Macau’s overall size. The silver lining is that about 90 percent is undeveloped. The land is designated for industrial, office, housing and tourism projects. The new campus of the University of Macau is located there. That means Hengqin can provide the land necessary to alleviate Macau’s hotel room shortage. The city has only 28,100 hotel rooms compared to an average of 78,300 daily visitors. Two thirds of the supply is located in five-star hotels. Citi says Hengqin could provide more economical rooms and help reroute mainland tourist flows. Most tourists enter and leave Macau at the congested Border Gate checkpoint. But Hengqin’s development, and simplified immigration procedures designed to shorten the commute between Macau and the island, could shift more mainland tourists to the existing, but currently under-used, Lotus Bridge checkpoint.
Chimelong Hengqin Bay Hotel
Window to Macau Several Macau-based casino operators have shown an interest in investing in non-gaming projects in Hengqin, but only casino investor David Chow Kam Fai has gone ahead. U.S.-based Las Vegas Sands Corp, the parent company of Sands China Ltd, was one of the first operators to signal an interest. Reports from 2006 mention a project to build a
Hengqin can provide the land necessary to alleviate Macau’s hotel room shortage. The city has only 28,100 rooms compared to an average of 78,300 daily visitors 5.8-square-km mega resort complex, with hotels, golf courses and a marina on the island. The idea was dropped. Galaxy Entertainment Group Ltd says it will continue to assess possible investment opportunities. Deputy chairman Francis Lui Yiu Tung told Reuters last month that the development of Hengqin Island would be a game changer. Reuters says Galaxy Entertainment is looking at potential investments such as sports stadiums, golf courses and a marina to complement its casinos here. Mr Chow won December’s bid for a land parcel reserved for Macau enterprises on Hengqin. He paid RMB250 million for a 30,000-square-metre plot next to the border checkpoint that will be connected to the Guangzhou-Zhuhai Intercity Railway. Mr Chow is the chief executive of Macau Legend Development Ltd, which owns the Macau Fisherman’s Wharf theme park and the Landmark Macau hotel on the peninsula. The company runs two casinos on those premises, by arrangement with gaming concessionaire SJM Holdings Ltd. Earlier this year, Mr Chow told Macau Business he wanted to use his piece of land as a shop window for Macau. He is planning to build a plaza and commercial centre with a Portuguese theme on the land, to lure more mainland tourists to the city. “Hengqin has a lot of land and it is very close by. If we can use it to build resorts, good entertainment areas and shopping centres, it will be supporting Macau,” he said. JULY 2013
Female of the species JULY 2013
When women are trapped by a gambling addiction, stereotypes and family values hinder their treatment BY SARA FARR
couple gets into an argument over the wife’s gambling addiction and debt – which originated in her efforts to pay off her husband’s own gambling debt. The argument gets so heated that the wife smashes a glass bottle on the floor and uses her 18-month-old son as a broom to sweep up the shards. This is not the wife’s first such episode of unstable behaviour. During another heated argument with her husband, this time over the phone, she began to sever the gas pipe and demanded that he leave work and come home, otherwise she would set fire to their home with the children inside.
Gambling with youth Social workers warn that problem gambling is increasing among young adults. It is increasing in spite of the government having raised the minimum age for admittance to or employment by casinos from 18 to 21. At a community centre run by the Macau Industrial Evangelistic Fellowship, one 17-year-old and several university students regularly attend counselling sessions for problem gamblers. Specialists say that student problem gamblers, like women problem gamblers, are often emotionally insecure and therefore more prone to gambling addiction. “Nowadays, teenagers do not know how to take responsibility,” says Rev. Jimmy Tan Tien Kok, the gambling counsellor in charge of the community centre. Mr Tan says some students that are problem gamblers become suicidal if their boyfriend or girlfriend threatens to leave them. Young adult problem gamblers, like women problem gamblers, threaten to do irrational things, almost as if emotionally blackmailing their partners, he says. “At this rate, we will have no more future generations,” Mr Tan says.
chines. Then she graduated to the tables. “I liked playing baccarat. My addiction became a real problem in 2009,” Amy says. After losing so much money that she cannot remember the exact amount, she decided the best thing to do was to get a job as a croupier, learn to play the game and win back the money. During the course of her addiction she borrowed money from a loan shark. She racked up more debt than she could handle, burning through about MOP400,000 (US$50,000) plus interest. Amy is now is divorced. She lives with her 18-year-old son but their relationship is strained and he refuses to speak to her.
The story, related to Macau Business by a social worker, is one from a growing collection as more women become addicted to gambling. A female addict is often regarded as a disgrace to the family. Specialists say treating female pathological gamblers is more complicated because they can be driven by strong emotions. Amy (not her real name) is a 39-year-old who lost her first husband in 2005. She married again shortly afterwards, but found herself bored at home, so began going to casinos. At first, Amy played only the slot ma-
It was not until late in 2011 that Amy sought help. “When I told my family about my gambling addiction and debt, they wanted to send me back to the mainland to live in our small village,” she says. Her husband stood by her while she started treatment and agreed to continue to support her and her son, but only if they divorced. Amy has had help since October and the couple were divorced in February. A specialist in gambling behaviour at the University of Macau, Desmond Lam Chee Shiong, says most problem gamblers are men, but women problem gamblers present special difficulties. “Some studies cite the fact that women are more emotionally attached, less educated, and gamble often because of social influence,” Mr Lam says. It means women are more prone to becoming pathological gamblers because it is harder to kick the habit, he says. Research shows that women are of-
ten less able to repay debts because they lack wealth or family status. “Understanding is the basic step towards prevention,” Mr Lam says. The Social Welfare Bureau surveyed the behaviour of Macau women that gamble last month. It has yet to publish the results. The bureau performed the survey after 14 social-work groups that deal with gambling addicts reported that about one-third of people seeking their help last year were women. The number of cases these facilities dealt with, whether men or women, increased by 3.5 percent last year to 149.
Family divide Mr Lam says each problem or pathological gambler adversely affects the lives of between three and 14 people around them. “The impact on society as a whole is quite great.” Researchers at the University of Macau have found that the proportion of residents here that gamble in casinos or slot machine parlours or bet on sports, dropped from a peak of 67.9 percent in 2003 to 55.9 percent in 2010. Of the residents surveyed in 2010, 2.8 percent were considered pathological gamblers and 2.8 percent problem gamblers. More female addicts than ever before are now seeking help. But social workers say the number of people that seek help is still a small fraction of the number that keep their problem or addiction hidden. Rev. Jimmy Tan Tien Kok is a gambling counsellor in charge of a community centre run by the Macau Industrial Evangelistic Fellowship. About 40 percent of people seeking help are women – many are croupiers. He says most are JULY 2013
emotionally insecure and too scared to ask for help from their families because they do not want to bring shame on themselves. “There is this belief amongst the Chinese that if a woman gambles and brings problems to her and her husband’s family, she is a disgrace and should be punished for it. The family loses face,” Mr Tan says. In contrast, if a husband, son, father or brother finds himself in debt, it is the family’s obligation to help, he says.
Expensive thrill At the community centre, men and women are separated for group counselling sessions. Mr Tan says this is be-
cause women find it hard to talk about their problems in front of men, for fear of scorn. Eight out of 10 women that seek help at the community centre are divorced. “I feel that our society still views female problem gamblers more negatively, basically because of our traditional view that women should stay at home and take care of the family,” the University of Macau’s Mr Lam says. “Men that gamble as a way to earn money are regarded as almost acceptable, while women are regarded as gambling away the housekeeping money and failing to take care of their kids and family.” It is generally acknowledged that women gamble because they are bored.
“Frustrated married women seek excitement and entertainment and gambling becomes an easy way to get those thrills, especially when they are easily accessible to them, as is the case in Macau,” Mr Lam says. Mr Tan says gambling is a form of escape from ordinary life for many, but it often leads to debt, family conflict and other social problems. These problems, in turn, increase their urge to escape, and drive them back to the casinos. He says the government’s annual cash handout contributes to the problem. Many problem gamblers seeking help at his centre use the money to gamble. “They usually gamble half of the money and keep the other half. But when they lose the first half, they usually use the rest to go back and gamble some more,” Mr Tan says.
Sick temptation In one case, gambling the cash handout spiralled into a MOP180,000 debt, he says. The government has responsible gambling campaigns and a hotline for problem gamblers, but they are insufficient to solve the problem, social workers say. “If you had a no-gambling campaign, that would send out the message that gambling is wrong. But as it is, the message is: ‘Gamble, but be responsible.’ And most people do not know what that means,” Mr Tan says. He says Singapore and South Korea are places that know how to better deal with problem gambling. South Koreans are banned from all but one of their country’s casinos. Singaporeans must pay an annual levy to enter the casinos in their country. “We can go round and round in circles about what the government should do. The fact is that prevention measures and education, as well as selfawareness, play an important part,” says the University of Macau’s Mr Lam. “Research also shows that cutting off pathological gamblers’ sources of funds can have a real impact.” Mr Tan says it is easy to control Hong Kong women that are gambling addicts. Relatives can take away their identity cards or passports so they cannot get into Macau. Here, it is all too easy for women to indulge their addiction. “With over 30 casinos in Macau, the temptation is too high.” JULY 2013
Mainland insight The Polytechnic Institute launches a postdoctoral centre on gaming in partnership with Sun Yat-sen University BY LUCIANA LEITÃO
he Macau Polytechnic Institute has established a postdoctoral research centre to research gaming and further the understanding of the industry. The Centre for Innovation and Application in the Gaming Industry, launched last month, is a partnership with Guangdong’s Sun Yat-sen University. This is the latest step in the cooperation between the two institutions, after establishing a centre for gaming studies in 2010. Despite the fact that casino gambling is illegal in the mainland, Polytechnic Institute president Lei Heong Iok says mainland academics may offer new perspectives on the industry here. And there are many areas deserving of further research, including gaming-related laws and legal frameworks, he says. The Polytechnic Institute cannot offer its own postgraduate programmes because it is not a fully fledged university. But it runs programmes jointly with universities in the mainland, Hong Kong and elsewhere that lead to Master’s or doctorate degrees. There are two confirmed research-
ers from the mainland coming to take part in postdoctoral programmes at the centre. The Polytechnic Institute hopes to enlarge the team. Carlos Siu Lam, a gaming expert at the Polytechnic Institute, says recruiting researchers from top mainland universities to study the city’s gaming industry will help draft a “more timely and balanced view of the future development of Macau”. Mr Siu says the postdoctoral researchers will provide a fresh perspective on the research of the gaming industry. “Local researchers tend to do research from the viewpoint of Macau.” The contribution of mainland scholars is valuable, considering the dependency of the casinos on the mainland. “We would like to have some of their input, some of their ideas, so we can come up with more realistic models, and not something originating purely from our own viewpoint,” says Mr Siu.
First mover He says candidates are selected through Sun Yat-sen University, in cooperation with the Polytechnic Institute. About
20 applicants have already been interviewed. “We chose those from better universities and from areas in which there is research development,” Mr Siu notes. He says it is too early to say what the main areas of research of the postdoctoral centre will be. Ji Chunli, a researcher specialising in marketing strategy and enterprise management, started his programme at the centre last month. He was the first to arrive, from Tianjin’s Nankai University, the alma mater of former premier Zhou Enlai. The coordination of the gaming industry with other industries will be the initial focus of his research. He says there are several misconceptions about Macau’s casino industry in the mainland. Many people think gaming, prostitution and drugs run hand in hand, Mr Ju explains. Yet he says the gaming sector has brought “harmony and prosperity to the territory”. It has also fuelled the growth of industries in the service and tourism sectors. He aims to develop a business model of how gaming operators can extend their range of activities, connecting Macau with the mainland, and gaming with other sectors. Mr Ji sees the ties between Macau and the mainland developing further. “The mainland needs Macau and Macau needs the mainland,” he says. “The mainland is going to provide many tourists to Macau.” Mr Ji says Macau’s economy is facing several challenges because of its dependency on gaming. Economic diversification is a must, making use of the city’s resources and positioning, but first research is needed on the path to follow. Only after collecting scientific and objective data does he believe it will be possible to define an “optimal” level of diversification, or identify a path to diversification through industries related to the gaming sector or other unrelated businesses. JULY 2013
Great expectations Casino resorts’ customer satisfaction thrives on the back of higher expectations, research finds BY SARA FARR
asinos have to do more than just satisfy their customers if they want to lead the pack in Macau, a new study has found. The analysis by two academics from the Institute for Tourism Studies found it was important to create – and meet – high expectations. That is one of the reasons why casino resorts are winning the race against traditional casinos, say authors Anthony Wong Ip Kin and Leonardo Dioko. The researchers looked at the role of consumer expectations in measures of levels of satisfaction. They found expectations enhance satisfaction by moderating the relationships between customer satisfaction, perceived performance and perceived value. Customers who visited casino resorts had higher expectations and said they received better service and value compared to visitors at traditional casinos. Casino resort clients reported higher satisfaction levels, claimed they were more loyal and were less likely to complain about poor service, says the report published in last month’s edition of Tourism Management journal. “With a variety of entertainment and service offerings, integrated casinos
are able to attract millions of visitors; even though customers have higher expectations, when these service providers are able to fulfil their needs and meet their expectations, customer satisfaction surges,” the report says. “In contrast, when the services and values offered by traditional casinos are able to meet customer expectations, their level of customer satisfaction is much lower than their integrated casino counterparts, even though customers generally have lower expectations with these providers.”
Clear a path The report says it is poor strategy to lower expectations and then deliver better-than-expected service and value in the hope of delighting customers. Instead, casino operators should be clear in communicating the advantages of their properties and strive to meet the propositions. The report’s authors advise casino management to create “unambiguous expectations”. “Casino managers should clearly inform consumers about their chances of winning, how casino games are played,
the amounts of winning bets, various services available for specific types of gamblers and the entertainment and food options offered, because many of the customers are first-time visitors,” they say. Mr Wong and Mr Dioko say it is particularly important that Macau’s casinos take heed, since many mainland customers have no prior experience with casino gambling or exposure to casino advertisements. Both are banned on the mainland. The researchers interviewed more than 700 tourists, mostly from the mainland, between 2009 and 2011. Only tourists who visited a casino during their trip were surveyed. Tourists were asked to rate their initial expectations, perceived performance, perceived service value and overall satisfaction of their experience. They were also asked if they would recommend the experience or return to the casino on another visit or if they would complain. The researchers defined customer expectations as a tourist’s predisposition for a casino’s expected overall service performance, service reliability and accuracy, and ability to meet their needs. Perceived performance was defined as a tourist’s actual evaluation of the same features. Perceived value was measured by evaluations of the level of service quality relative to price, geographic convenience and overall attractiveness of a casino. “Our findings seem to suggest that casino patrons are seeking experience from integrated Vegas-like casinos with an assortment of entertainment, shopping and dining options,” the report says. The authors argue that this helps build a case for the city’s six gaming operators, which are currently investing in new or expanded multi-billion dollar casino resorts in Cotai that will increase non-gaming options.
Vietnam’s Grand opening Ho Tram Strip’s first resort opens July 26 with no international brand and many nagging issues BY MUHAMMAD COHEN
ietnam’s first casino resort, The Grand – Ho Tram Strip, will open for business this month, developer Asian Coast Development (Canada) Ltd announced in June. But for the Ho Tram Strip project, even good news comes with baggage spotlighting the challenges it faces. The Grand’s opening, scheduled for July 26, was delayed from March due to the project lacking Vietnamese government approval for its amended investment certificate that includes its gaming licence. The delay led U.S.-based MGM International Resorts to pull out of its contract to operate the resort. When the amended investment certificate was issued in April, Asian Coast Development didn’t have an experienced hospitality man-
ager or a recognised brand to operate the resort – and it still doesn’t. “MGM took its logo, but left behind a tremendous team of seasoned handpicked managers who then built an enthusiastic team of just under 2,000 staff,” Ho Tram Project Co Ltd general director Colin Pine says. Ho Tram Project Co is a Vietnam-based, wholly owned subsidiary of Vancouver-headquartered Asian Coast Development. “We looked at all options and were in the enviable position of having various operators approach us to take over various aspects of the property,” Mr Pine says. “However, when we stepped back and looked at all The Grand had to offer, the team that MGM had recruited on our behalf, we saw that we had everything we needed JULY 2013
to really make this project happen.” Ho Tram Project Co has kept staff on its payroll since the cancelled March opening. “We have run extensive training workshops, refining their skills in all of their areas,” Mr Pine tells Macau Business. “We have run various team building programmes as well and ensuring that all is in readiness for our opening.” Just after receiving its investment certificate, Asian Coast Development placed chief executive Lloyd Nathan on administrative leave. Mr Nathan has filed a lawsuit for breach of contract. His suit claims the company offered him rich incentives to continue working with the Vietnamese authorities to obtain the investment certificate, then sidelined him to avoid paying up (see box). Asian Coast Devel-
When complete, The Grand will comprise two towers
opment chairman Robert Wolfe is now acting as CEO, the company says.
Indochina beach The Grand will launch with 541 five-star rooms, three swimming pools, 10 bars and restaurants, a spa and luxury
retail shops on a beachfront overlooking the South China Sea. The casino will have 35 mass-market tables, six VIP tables, all denominated in U.S. dollars, and 614 gaming machine positions. The project is believed to have cost about US$500
million (MOP4 billion). “The Grand utterly sells itself,” Mr Pine says. “The lobby, the gaming areas, the pools, the beach and the food and beverage offering are all stunning. Everyone who enters the place is amazed by it.”
Meanwhile, across the Pacific... I
The big trick will be getting people to enter. Vietnamese nationals – unless they also hold a foreign passport – cannot play in the casino, though they are welcome at other facilities of the property. Several international gaming companies – including Las Vegas Sands Corp, the parent company of Macau-based Sands China Ltd – have shown interest in Vietnam, contingent on allowing local citizens to play. “I think Ho Tram is going to be very challenged,” Union Gaming Research Macau managing partner Grant Govertsen says. “Without the ability for locals to gamble, I don’t think the return profile will be sufficient to generate enough interest in more development,” he argues. “The target market for our casino focuses on both foreign-passport holders residing in Vietnam or those foreign-passport holders that regularly visit Vietnam, as well as guests in the region that are looking for the combination of the excitement and energy of a world-class casino set in a beautiful natural environment,” Mr Pine says. “Further afield again, we are looking at Russia and Eastern Europe, which saw huge growth in inbound tourism to Vietnam in the past year.”
Road to Ba Ria-Vung Tau There is also the matter of location. The Ho Tram Strip is located
in Ba Ria-Vung Tau province, 130 kilometres south of Ho Chi Minh City’s international airport. Improvements to the road connecting the two places are on the cards but incomplete. “Ultimately, we believe the resort can be successful,” Well Fargo Securities equity research director Cameron McKnight says. “However, in the near term, access and infrastructure still need development, which could weigh on the willingness of inbound tourists and VIPs to stay at Ho Tram. We understand other properties in the region that are closer to airports and infrastructure are doing very healthy inbound VIP business,” Mr McKnight notes. “VIP players will form a significant target market for us, and we have an amazing private gaming area set aside for them,” Mr Pine says. He adds that the VIP area will “rapidly expand” from the initial six to 55 tables. Ho Tram Project Co wouldn’t reveal which junket operators it plans to work with or the commissions it will pay. Phased introduction of additional gaming tables suggests that Vietnamese authorities are demanding further progress on the project to allow more tables. However, court papers in Mr Nathan’s suit indicate the amended investment certificate allows the full allotment of tables when the first tower opens.
n May, Ho Tram Strip developer Asian Coast Development (Canada) Ltd’s chief executive Lloyd Nathan filed a lawsuit against the company and top executives of its investors, majority-owner Harbinger Capital Partners LLC and Pinnacle Entertainment Inc. Mr Nathan was placed on administrative leave in April, within 48 hours of the Ho Tram development receiving the vital investment certificate from the Vietnamese government. The lawsuit complaint states that Asian Coast Development presented Mr Nathan with a letter stating the company believes he “engaged in conduct that constitutes grounds for termination” without specifying the conduct, and has refused Mr Nathan’s requests for clarification. While on administrative leave, Mr Nathan, who served as MGM Resort International’s global gaming unit president before joining Asian Coast Development in 2010, receives his salary but has no involvement in the Ho Tram project. The suit, filed in New York, says Mr Nathan tried to resign from Asian Coast Development last year amid deteriorating support from ownership. The company allegedly offered him heavy incentives to stay on, in order to avoid a management change while the Vietnamese government deliberated reissuing the Ho Tram project investment certificate. Incentives included a 4 percent equity stake in Asian Coast Development and a US$9 million (MOP72 million) payment upon opening of the first phase of the Ho Tram resort by June 30. Even after MGM International Resorts cancelled its contract to manage the resort, Mr Nathan presented financing options that would have allowed the resort to open by June 30, the complaint states. “The resort should already be open,” a source with knowledge of the situation who requested anonymity tells Macau Business. “The beds are made.” The source notes the current scheduled July 26 resort opening is after Mr Nathan’s bonus target date, and believes the administrative leave is a prelude to firing him once the spotlight on Ho Tram dims. Asian Coast Development, Harbinger and Mr Nathan declined Macau Business’ inquiries to elaborate on the situation. JULY 2013
Mr Pine declined to specify reasons for the phased introduction. “We do not face any constraints to opening the further amenities which are outlined in our investment certificate, and these will all come on line in the next few months,” he asserted. “I don’t think Ho Tram will have a measureable impact on Macau or any of the other regional gaming destinations,” Mr Govertsen says. “It is a single asset in a difficult to reach location, and as such is unlikely to be a major draw for VIP players. Ho Tram will, for sure, generate some level of VIP [business], potentially via junkets that might even be based in Macau.” Mr McKnight, who is based in New York, says he expects players will be a combination of overseas
Vietnamese, some tourists, inbound VIPs and resident foreign workers. “We believe new supply such as Ho Tram is likely to be complementary and don’t think it will cannibalise other markets in the region, such as the Philippines or Macau.”
Grand scheme The Grand is the first of up to five resorts with a total investment of US$4 billion planned for Asian Coast Development’s 168 hectare Ho Tram site that includes 2.2 kilometres of beachfront and borders on a protected forest area. A second tower for The Grand with 559 additional rooms broke ground last October, with completion scheduled for June 2015. The Bluffs, a golf course designed by Greg Norman, is expected to be ready for selected guests
late this year and to open officially early next year. U.S. regional casino operator Pinnacle Entertainment Inc invested US$95 million in Asian Coast Development in 2011, and agreed to manage Ho Tram’s second integrated resort, projected to open in 2017, under a new “Asia-facing” brand to be developed with Asian Coast Development. Pinnacle, which is listed on the New York Stock Exchange, stumped up more cash last year, giving it about one quarter of the company. In March, Pinnacle announced a US$25 million write down of its investment. In its first quarter earnings report filed with U.S. authorities in May, Pinnacle announced it had written off the remaining US$92 million of its Asian Coast Development stake.
The Grand is the first of up to five resorts with a total investment of US$4 billion planned for Asian Coast Development’s 168 hectare Ho Tram site that includes 2.2 kilometres of beachfront and borders on a protected forest area
Pinnacle, along with Asian Coast Development majority owner Harbinger Capital Partners LLC, declined Macau Business’ request to comment on the opening of the resort. However, Pinnacle says its investment write down does not affect its ownership interest or board representation in Asian Coast Development. “This continues to be a very fluid situation,” Pinnacle CEO Anthony Sanfilippo warned during the company’s May earnings conference call. He added that Pinnacle’s biggest opportunity now is not Ho Tram, but its US$2.8 billion acquisition of Ameristar Casinos Inc, another U.S. regional casino operator, expected to be completed this year. “This investment [in Asian Coast Development] clearly has not played out as we had expected,” Pinnacle’s chief financial officer Carlos Ruisanchez said during the call. Mr Ruisanchez cited numerous “material uncertainties” that prompted the write down and challenge the project’s viability. “We believe Pinnacle remains committed to the project, [even] though its investment has been written down,” Wells Fargo’s Mr McKnight says. Mr Nathan’s complaint says that Pinnacle and Harbinger differed over how and how much to fund Ho Tram. The suit also contends Asian Coast Development thwarted Mr Nathan’s efforts to bring new financing to the project. “Funding is an on-going process with any project of this size and scale,” Mr Pine says. “However this is not anticipated to be an issue for our second tower,” he adds. “We think the timing of the remaining build out will be contingent on the initial results and ramp up of the first phase,” Mr McKnight says.
Philippine casinos performing well Regulator says the industry is on the right path to reaching US$2.5 billion by year-end The performance of the Philippine casino industry in 2013 is so far meeting expectations, says Cristino Naguiat, the chairman and chief executive of state-owned Philippine Amusement and Gaming Corp, known as Pagcor. Pagcor operates 13 casinos in the Philippines and is also the country’s regulator. “I’m certain that the first five months of the year has
GENTING PLANS FACELIFT FOR MALAYSIAN CASINO
Genting Malaysia Bhd is planning a 3-billion ringgit (MOP7.6 billion) facelift for its 42-year-old Genting Highlands casino resort, located in Malaysia. The move is part of plans to double the earnings from the property, which is facing increased regional competition. Plans should be finalised by year-end.
been higher compared to the same period last year,” Mr Naguiat said. He estimates that the country’s gaming revenue will reach US$2.5 billion (MOP20 billion) this year, up from US$2 billion in 2012. “The bulk of that growth will basically come from Solaire Resort and Casino,” inaugurated in March, Mr Naguiat told reporters.
LAS VEGAS SANDS APPOINTS NEW EXECUTIVE
Las Vegas Sands Corp announced that UBS Investment Bank executive Grant Chum will join the company as senior vice president of global gaming strategy starting next month. Mr Chum, who resides in Hong Kong, will continue to be based in Asia. Meanwhile, executive vice president and chief financial officer Kenneth Kay will leave effective July 31. The company didn’t give a reason. Las Vegas Sands is the parent of Sands China Ltd.
JAPAN MAY LEGALISE CASINOS THIS YEAR
A bill legalising casinos in Japan is expected to be passed by yearend, Morgan Stanley says in a report issued last month. “Japan is the closest it has ever been to passing a bill legalising casinos,” analysts Praveen Choudhary and Mia Nagasaka wrote. They say the first land-based casinos could open in 2019-20 at earliest. Several international casino operators have already expressed interest in Japan.
Asian nightmare Incheon snub prolongs Caesars’ struggle to find a foothold in Asia aesars Entertainment Corp’s prospects for expansion into Asia have been dealt a major blow after South Korea rejected its preliminary application to develop an integrated resort in Incheon. South Korea’s Ministry of Culture, Sports and Tourism last month “declined” an application by a three-party consortium led by debt-laden Caesars, partner Indonesia’s Lippo Group said in a statement to the Hong Kong Stock Exchange. Later the ministry told reporters it had also rejected an application by Universal Entertainment Corp, the pachinko giant controlled by Kazuo Okada. The Caesars-led consortium, registered as LOCZ Korea Corp, said it was “surprised and disappointed” by the ministry’s decision to decline its preliminary application. “The consortium believes that its application met the requirements of the Enforcement Decree and not only would the proposed project bring significant benefits to Korea in terms of job creation, economic growth, tourism generation and MICE industry development, it would also help the development of Midan City in Yeongjong Island,” said spokeswoman Nicolle Kuritsky. “We are presently evaluating options on this investment,” she added. Ms Kuritsky declined to identify the reasons for the rejection.
Dim prospects Preliminary approval for the Caesars consortium’s application would have provided the Las Vegas-based company with a significant boost in morale, a door into Asia and momentum for expansion into other potentially lucrative Asian markets, as it labours under US$24 billion (US$192 billion) in debt back home. Lippo’s statement noted that the consortium has 90 days to file an appeal. The consortium “is discussing with its advisers as to the appropriate course of actions”. “There is no certainty as to whether the appeal will be made or the project will proceed,” it added. JULY 2013
Caesars is struggling to find a foothold in Asia, having decided last year to sell the golf course it owns in Cotai Several global gaming operators including Las Vegas Sands Corp have marked Incheon as a vanguard location for foreign-invested integrated resorts. Caesars, which holds a 40-percent share in the LOCZ Korea venture, previously said the US$500 million project would feature a foreigner-only casino with 100 gaming tables and 150 slot machines as well as hotels and serviced apartments. Lippo holds a 20-percent stake in the venture and its Singaporean unit Overseas Union Enterprise Ltd holds the remaining 40 percent. Overseas Union Enterprise’s projects include the Meritus Hotel & Resorts brand, as well as upmarket residential and business office projects in Singapore.
Caesars is struggling to find a foothold in Asia, having decided last year to sell the golf course it owns in Cotai, after being unable to find a way to enter the Macau gaming market. The company has expressed interest in entering any future Japanese casino market, while company officials earlier this year visited Kinmen, a Taiwan-controlled island that is entitled to operate casinos with the passage of a local referendum. However, with Japan’s push for casino legislation by year-end in the balance amid political instability and rival gaming bills, and with Kinmen officials reluctant to commit to a plebiscite, Caesars’ prospects in the region appear dim for the foreseeable future. For Universal, meanwhile, the apparent rejection of its application is perhaps a bitterer blow, as Mr Okada attempts to set up his own integrated resort foothold in Asia. The former Wynn Resorts Ltd financier and vice chairman, and his companies, are being investigated in the United States and the Philippines for alleged corruption in the procurement of land and a provisional gaming licence at Entertainment City GAMBLINGCOMPLIANCE near Manila.
Casino gaming 2012 MOP 304.1 billion
Gross gaming revenue
5,485 16,585 35 casinos
Gaming tables Slot machines Number of casinos
Market share per casino operator* 2012 SJM Holdings Ltd Galaxy Entertainment Group Ltd Sands China Ltd Wynn Macau Ltd Melco Crown Entertainment Ltd MGM China Holdings Ltd
27% 19% 19% 12% 14% 10%
Year-on-year change (%)
13.5 3.5 3.3 1 casino
MOP 28.3 billion
21.1 9.7 1.9 1 casino
5,749 16,406 35 casinos
Year-on-year change (%)
-2 3 3 -2 -1 --
Year-on-year change (%)
percentage points percentage points percentage points percentage points percentage point
25% 19% 21% 10% 15% 11%
2 ---2 1 --
Notes Jun 2013 Mar 2013 Mar 2013 Mar 2013
Notes Jun 2013 Jun 2013 Jun 2013
percentage points percentage points
Jun 2013 Jun 2013 Jun 2013
Gross revenue from casino games Roulette Blackjack VIP Baccarat Baccarat
MOP892 million MOP2,950 million MOP210,850 million MOP66,251 million
Mahjong Slot machines 3-Card Poker Fish-Prawn-Crab
MOP203 million MOP13,244 million MOP211 million MOP22 million
3-Card Baccarat Game
Texas Holdem Poker
Lucky Wheel Live Multi Game
MOP35 million MOP895 million
Fortune 3 Card Poker
Year-on-year change (%)
13.9 8.8 7.5 36.1 18.0 16.2 -23.7 190.0 15.9 10.5 -56.9 23.5 -9.3 4.3 0.0 187.8 12.5 8.8 46.1
Latest MOP268 million MOP795 million MOP57,815 million MOP20,016 million MOP62 million MOP1,553 million MOP22 million MOP45 million MOP3,572 billion MOP52 million MOP4 million MOP93 million MOP13 million MOP74 million MOP10 million MOP323 million MOP415 million MOP63 million MOP87 million
Year-on-year change (%)
82.3 14.2 9.8 32.3 -4.6 14.7 -15.4 -11.8 8.0 -5.5 -33.3 2.2 -56.7 -25.0 132.4 19.9 -11.3 112.2
Notes Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013
Gross revenue from other gaming activities 2012 Greyhound Racing
Sports Betting - Football
Sports Betting - Basketball
Year-on-year change (%)
-31.0 -19.1 --61.1 15.5 29.1
Latest MOP46 million MOP121 million MOP1 million MOP0.0013 million MOP101 million MOP46 million
Year-on-year change (%)
-14.8 37.5 -50.0 550.0 -1.0 27.8
* Figures are rounded to the nearest unit, therefore they may not add exactly to 100 percent
Notes Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013
Source: Gaming Inspection and Coordination Bureau and industry sources
BY LUCIANA LEITĂƒO
rom this month, there is less red tape for new businesses setting up in the hospitality sector, with the government simplifying the licensing process. The Macau Government Tourist Office says the government has simplified the procedures for obtaining licences for hotels, guesthouses, restaurants, bars, nightclubs, saunas, massage parlours, karaoke lounges and health clubs. It said the government had â€œprofoundlyâ€? reduced the number of documents that applicants must produce, and done away with the duplication of tasks performed by more than one department. Authorities on the industry applaud the move. They say it will allow more small or medium enterprises to venture into the hospitality business. But some fear that the faster procedures will mean loose enforcement of standards. JULY 2013
101 Other government departments taking part in the simplification drive are the Lands, Public Works and Transport Bureau, the Fire Services Bureau, the Health Bureau, the Civic and Municipal Affairs Bureau and the Environmental Protection Bureau. At the core of the simplification drive is cancelling the requirement for applicants to submit the same design plans – fire safety, electricity facilities, water supply and drainage, etcetera – to both the tourist office and the Lands, Public Works and Transport Bureau for separate approvals. Applicants are now just required to submit those plans to the Lands, Public Works and Transport Bureau, which will follow-up with the other relevant government departments for approval. A spokesperson for the tourist office told Macau Business this would avoid duplication of tasks, and reduce the number of documents applicants must submit by “some hundreds”. For larger properties, the reduction could relate to “over a thousand” documents. The government announced the simplification drive less than two months after Hong Kong-listed Rosedale Hotel Holdings Ltd said it was selling the three-star Oriental Dynasty Hotel on the peninsula. The company had applied for a hotel licence in October 2006 and had still been waiting for one when it decided to sell up. The tourist office told this magazine’s sister-publication, Business Daily, the authorities had not granted a licence “because of the many amendments made to the hotel design” and “more importantly, because the applicant was inactive in following up its application”. Macau has 66 licensed hotels and 33 licensed guesthouses.
Lawyered up The director of the Tourism Research Centre at the Institute for Tourism Studies, Leonardo Dioko, says less red tape is “always good for business”. Making obtaining a licence “less of an obstacle” will benefit investors in the hospitality industry, he says. Mr Dioko says the problem the simplification drive is meant to solve is not the rules that applicants for licences must comply with, but the confusing procedures. The primary obstacle is the “lack of coordination and communication” between the government departments involved in each licensing process. There is “a natural tendency for different government departments not to be cooperative” with each other, Mr Dioko says. The simplification drive shows that the government is at last aware that it could be more efficient, he adds. Mr Dioko says size matters. “If it is a huge restaurant or hotel, then you have to check the safety equipment. Infrastructure must be thoroughly checked.” But Mr Dioko says smaller businesses suffer most from red tape because they do not have large teams of lawyers and consultants helping them. “A one-stop process will benefit more SMEs.” The simplification drive may have benefits for government departments, too, Mr Dioko notes. There is currently a “huge backlog” of applications for licences, and the simpler procedures for obtaining licences may allow government departments to handle the applications more efficiently. Mr Dioko says however, that the quality and safety of the goods and services supplied by the businesses that the government licenses must not be jeopardised in the name of simpler
procedures. He hopes the standards required for licensing will be “as rigorous, if not even more rigorous, than in the past”.
Twelve-month test The tourist office said corners would not be cut. The simplification drive “will not influence the threshold of licence approval”, it said. An instructor in hotel management at the Institute for Tourism Studies, George Choi Hon Keung, says simpler procedures will benefit small businesses most of all. “International hotel chains or large operators may have sufficient resources to apply for a licence, but for a small business, simpler procedures will help a lot,” Mr Choi says. Luís Herédia is a consultant for San You Development Co Ltd, the developer of the Residencia complex in Areia Preta, where the company intends to open a hotel. He welcomes the simplification drive. “It is not a big change. The government only wanted to simplify the procedures, not change any rules,” Mr Herédia says. Officials briefed him and other industry professionals on the simpler procedures last month. He says an applicant for a hotel licence will no longer need to submit as many copies of certain documents as before. Mr Herédia says a faster response by the government to applications will prevent delays and reduce the need for changes in projects. “Having a lesser volume of copies and files might help,” he says. The hotel he is helping to establish has yet to apply for a licence. It aims to open within 12 months. Mr Herédia says he is hopeful that a simpler licensing procedure will help the hotel to meet its deadline. JULY 2013
Adding spice Diners are appreciating the many new Indian restaurants opening up to cater for the needs of tourists BY LUCIANA LEITÃO
t was 30 years ago that the first Indian restaurant opened in Macau. Today, there are around a dozen, some opened as recently as this year, to serve residents and a growing tourist influx from India. The first Indian restaurant was opened in 1983 by Aruna Jha. Ms Jha says she has seen big growth in business and changing demographics. Initially, her customers were mostly people living in Macau. In recent years the surge in visitor arrivals from India means tourists have become a significant part of the business. Official data shows the number of tourists from India in the first five months of this year reached more than 62,000 people, marginally down year-on-year but an increase of 77 percent in comparison with the same period in 2009. That was a landmark year. Venetian Macao hosted the International Indian Film Academy Awards – the “Indian Oscars” – that produced a surge in Indian tourists. The city has since hosted other high-profile television and cinema awards ceremonies from India. The 2011 Bollywood movie “Double Dhamaal” had scenes shot here. This month, Venetian Macao again hosts the Indian academy awards in the year that the sub-continent’s film industry is celebrating its 100th anniversary. Gaming liberalisation and the opening of several casino resorts have also helped to attract more Indian tourists. Gambling is banned in most of India. Tourist Office director Maria Helena de Senna Fernandes has earmarked India as one major inbound market she wants to nurture.
Direct flights “After Sands Macao, Venetian and all the big casino properties opened, and also after the Bollywood awards, the number of Indian visitors grew. Now, they come in groups for honeymoon, family and business trips,” Ms Jha says. She has three restaurants – one in Taipa and two on the peninsula – and an outlet in Sands Cotai Central’s food court. “They are close to hotels, so customers can come and go,” Ms Jha says. She is considering opening a fifth outlet, probably in Cotai. Ms Jha says that Indian tour groups are now a big driver of profit for her restaurants. Some groups can number 300 people. JULY 2013
“More and more Indians are coming here for the casinos, but Macau is also a nice relaxing place. People come to see the House of Dancing Water show,” she says. Ms Jha notes however that business has not posted banner growth rates every year. Last year, it was “a little bit down”. She blames the drop in the number of available flights between India and Hong Kong, as two carriers stopped their connections – Air India eventually resumed flights, while Kingfisher Airlines folded. Last year, Macau welcomed around 151,000 Indian tourists, down by 11.1 percent in year-on-year terms. There are no direct flights between Macau and India. Macau International Airport Co Ltd and low-cost Indian carrier SpiceJet have been in talks about opening a direct route.
Photos: Luís Almoster
Some casino resorts are including Indian restaurants in their food and beverage sections to cater to this segment of visitors. Earlier this year, Venetian Macao opened its first Indian restaurant, Golden Peacock, seating 169 guests
Unlike mainland tourists, who like to taste different foods while visiting Macau, Indian tourists face limitations. Their dietary options are heavily restricted by religion and culture. “Indians must eat Indian food. Some are vegetarian and are a bit afraid to have Chinese food,” Ms Jha says. At her restaurants, she serves North Indian cuisine. She has not tried to adjust flavours to suit the local palate, but her restaurants can offer different dishes to suit different requests, she says.
Range of tastes “I can serve Malaysians, Indonesian people and I also have Jain food for Indians who don’t eat potatoes, garlic, onion and other kinds of root vegetables.” JULY 2013
Hospitality He says customers from the mainland and Hong Kong make up about 70 percent of business, with the remainder come from India, Macau and elsewhere. Receiving about 160 customers a day, Mr Batra says Spice Garden is popular throughout the year. Indians favour the holiday season from mid-May until mid-July. To increase traffic, Mr Batra says the restaurant hosts regular promotions. It also works closely with international travel agencies to bring more customers from its target markets: India, the mainland and Hong Kong. Gagan Sethi, co-owner of Indian Spice restaurant in NAPE, says competition is becoming fiercer, as casino resorts open their own Indian outlets. That, he says, reduces profit margins. Indian Spice has an outlet in Venetian Macao’s food court.
Since most Indian tourists travel in tours, meals are booked well ahead, offering time for Ms Jha to accommodate special requests. Every now and then, Ms Jha goes to India to update her contacts with the country’s travel agencies and ensure a constant flow of clients. Some casino resorts are including Indian restaurants in their food and beverage sections to cater to this segment of visitors. Earlier this year, Venetian Macao opened its first Indian restaurant. When Galaxy Macau opened in 2011, it already had an Indian restaurant. “The number of customers has increased at a rate of 15 to 20 percent each quarter,” says Spice Garden manager Deepak Batra. JULY 2013
Unlike mainland tourists, who like to taste different foods while visiting Macau, Indian tourists face limitations. Their dietary options are heavily restricted by religion and culture
“Our primary competition sources are major hotels that are bundling up Indian meal packages with the room stays without any additional cost,” Mr Sethi says. “Our restaurant has taken a hit due to that.” Indian Spice is trying to fight back by coming up with “alternative deals”, he says. Mr Sethi says another problem hurting smaller Indian restaurants is the “rising rents” for outlets. The “bread and butter” of Indian Spice are clients coming from India. Residents help the business “sail through during the off-peak season.” Mr Sethi says he has recorded a “slight dip” in Indian visitors so far this year. He blames it on expensive flight fares between India and Hong Kong. Specialising in North Indian cuisine, Jain food and dishes from Gujarat state, Mr Sethi says Indian Spice also accepts special orders. He says family visitors come mostly between May and July, and October and December. Customers coming to meetings and conventions mostly come between August and October. At Venetian Macao, many of the clients going to Indian Spice’s outlet report that they prefer to stay at the casino resort “due to its glamorous image”, which has been built up by hosting high-profile Indian events. Mr Sethi says those properties provide Indian visitors a “one-stop shop for everything” and most simply avoid going elsewhere.
Endangered flavour Macanese cuisine, the world’s first fusion food, is under threat igh real estate prices have turned up the heat on Macanese cuisine, with several restaurants shuttered. “Macanese cuisine restaurants are almost all closing down because they were small family businesses and the owners were not able to cope with the rental increases,” says Luís Machado, who heads the Macanese Gastronomy Association. “Real estate is killing Macanese cuisine”. After more than 30 years in the same location, authentic Macanese restaurant “Riquexó” closed down last year, amid growing competition from other outlets and shrinking profits. The owners decided to sell the property and cash in. “Riquexó”, Portuguese for rickshaw, reopened this year after requests from regular customers. The new venue is smaller, located in an alley, a stone’s throw from its previous location. The business is run by Aida Jesus and her family. Ms Jesus, aged 97, is the dean of Macanese cuisine. Macanese is the term for the city’s Eurasian population with ancestral ties to Portugal, the mainland or Portugal’s former colonial outposts, such as Goa
and Malacca. The Macanese have a distinct social and cultural identity, cuisine and creole language called Patuá. Last year, Macanese cuisine was included in the city’s official intangible cultural heritage list, alongside theatre plays in Patuá. The final goal is to have both included by the United Nations Educational, Scientific and Cultural Organisation (UNESCO) on its list of intangible cultural heritage.
Mouth to hand There are no historical records on the origin of Macanese cuisine. Mr Machado says it was born with the arrival of the Portuguese in what eventually became Macau. “Macanese cuisine is quite peculiar,” he says. “It is a fusion cuisine, likely the first fusion cuisine in the world.” Over the centuries, Macanese cuisine blended Southern Chinese and Portuguese flavours, with exotic new ingredients brought by Portuguese sailors. The result is a mix of influences from Europe, Latin America, Africa, India, Southeast Asia and China. The Macanese Gastronomy Associa-
tion was formally established in 2007. Mr Machado says the goal is to “promote historical research, namely of ancient recipes, and the preservation and promotion of this heritage cuisine.” Aside from sky-high rents, Mr Machado says the survival of Macanese cuisine is endangered by age, as recipes are lost as older chefs pass away. Recipes were traditionally passed down orally from mother to daughter, and there are few written down. “We have tried to promote the publishing of recipe books and we have a webpage to promote ancient recipes,” Mr Machado says. The association would also like to host Macanese cuisine courses but does not have a headquarters building. “There is an increasing number of youngsters interested in Macanese cuisine,” Mr Machado says. The Macanese Gastronomy Association has more than 150 active members and the city’s hospitality industry is also supporting the association. The Four Seasons Hotel Macao is holding a Macanese food festival until July 8. LUSA NEWS AGENCY/MACAU BUSINESS
Visitor arrivals Year-on-year change (%)
2012 Total - Same-day visitors - Overnight visitors Average length of stay
11,817,35 6,126,218 5,691,087 1.0 day
0.3 -3.8 5.0 --
28,082,292 14,504,994 13,577,298 1.0 day
Year-on-year change (%)
3.0 -0.4 6.9 --
Notes Jan-May 2013 Jan-May 2013 Jan-May 2013 May 2013
Visitors by place of residence Year-on-year change (%)
2012 Asia - Mainland - Guangdong - Fujian - Zhejiang - Hunan - Beijing - Shanghai - Tianjin - Chongqing Individual visit scheme - Hong Kong - Taiwan - Japan - South Korea - Others America Europe Oceania Others
27,356,924 16,902,499 7,929,668 811,288 620,196 587,904 326,469 505,280 127,635 194,420 7,131,904 7,081,153 1,072,052 395,989 444,773 1,460,458 306,521 262,692 129,165 26,990
Year-on-year change (%)
11,522,433 7,441,687 3,326,478 310,506 246,662 237,714 150,986 230,427 48,827 88,905
-3.3 -13.0 7.7 10.2 3.7 7.2 26.9 12.9 8.2 -6.6 -11.8 0.0 11.5 -4.6 -1.3 4.3 0.9 8.6
3.2 8.0 -1.0 -10.5 1.7 2.9 7.5 13.6 -4.0 9.8 11.1 -3.9 -7.8 -30.5 4.1 -1.0 -7.3 4.3 -7.1 -8.4
3,166,198 2,803,049 382,183 119,187 192,563 583,764 118,722 112,399 53,339 10,412
Notes Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013 Jan-May 2013
Hotels Hotel and guest-house rooms Hotel guests Hotel average occupancy rate Average length of stay
26,069 9,541,397 83.1 1.40 nights
16.6 10.8 -1.0 -0.1
percentage point nights
Year-on-year change (%)
28,111 3,421,831 79.9 1.4 nights
16.1 16.1 percentage -3.0 points -0.1 nights
Notes Apr 2013 Jan-Apr 2013 Jan-Apr 2013 Apr 2013
Visitor expenditure Year-on-year change (%)
2011 Total spending (excluding gaming) MOP 45.3 billion - Non-shopping spending - Shopping spending Per-capita spending
MOP 22.9 billion
22.4 MOP 1,619 MOP
20 23 16 7
Latest MOP 14.5 billion MOP 7.2 billion MOP 7.2 billion MOP 2,046
Year-on-year change (%)
10 13 7 8
Notes Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013 Jan-Mar 2013
Source: Statistics and Census Service
Year-on-year change (%)
MGTO UNVEILS NEW WEBSITE CAM LAUNCHES The Macau Government Tourist Office has officially unveiled its brand-new website. It can be viewed in 15 languages ranging from Traditional Chinese, Simplified Chinese, Portuguese, English, Russian, Arabic and several Asian and European languages. The office said in a statement that the new website is aimed at diversifying the tourism markets for Macau.
LINK SERVICE AT GONGBEI BORDER
The Macau International Airport Co Ltd (CAM) launched last month a new express link service at the Gongbei border. The service allows passengers coming from or going to the mainland to bypass Macau passport controls and customs. A similar service already exists between the airport and Hengqin Island.
NEW AIR AGREEMENT INKED WITH THE PHILIPPINES
Macau and the Philippines have inked a new air services agreement. According to Philippine media, the new deal increases the seat entitlements between Manila and Macau from 3,500 a week to 4,500 a week. The new agreement also calls for unlimited seats between Macau and all international airports in the Philippines except Manila. Under the previous agreement, seat entitlements between Macau and other points outside Manila were limited to 10,000 seats.
No hotel gets top green award For the first time, two-star hotels and below also participated in the â€œGreen Hotel Awardâ€? Nine hotels have received prizes in the 2012 edition of the Macau Green Hotel Award, the Environmental Protection Bureau announced last month. However, none received the top prize. But for the first time, two-star properties also participated and one was distinguished. This award was first launched in 2007 and has been designed to promote the importance of environmental management within the sector. The awards are divided into two groups: three-star properties or above; and twostar hotels or below.
For the three-stars or above group, there are three prizes: gold, silver and bronze. Sands Macao, Grand Lisboa and the Guia Hotel were awarded silver prizes, while MGM Macau, Grand Waldo, Riviera Macau, Golden Dragon and Taipa Square received bronze awards. In the two-star hotels or below category, the only winner was the East Asia hotel. The Environmental Protection Bureau, with the support of several local trade associations, organises the award. The prize is valid for a period of three years.
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World Brand Congress Taj Lands End, Mumbai, India World Brand Congress co-ordination office 402, Savoy Chambers, Dattatraya Road, Santacruz Jn., Santacruz (W), Mumbai - 400 054, Maharashtra, India (91) 22 2660 3124 (91) 22 2660 2500 www.worldbrandcongress.com email@example.com 17th – 20 th
Macao International Trade & Investment Fair Venetian Macao-Resort-Hotel, Macau Macao Trade and Investment Promotion Institute 367, Avenida Praia Grande, Edf. Keng Ou, 3rd floor, Macau (853) 2882 8711 (853 2882 8722 www.mif.com.mo firstname.lastname@example.org
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Photos: Nuno Calçada Bastos
Sio Chi Hun
Sports store Be-1 is one of the city’s most successful retailers BY MANDY KUOK
nyone shopping for sports shoes has almost certainly made a purchase from one of the shops in Avenida do Conselheiro Ferreira de Almeida, near Tap Seac Square, and probably from a Be-1 (Holdings) Ltd outlet. Home-grown Be-1 operates 14 sports stores, three of them newly opened this year, selling international branded goods. Most of the outlets are part of the Be-1 chain, but the company also trades under two other names. Be-1 also runs the city’s only New Balance shop. Be-1 director Sio Chi Hun says it is company strategy to put most of its outlets in Avenida do Conselheiro Ferreira de Almeida. The goal is to create critical mass and offer plenty of options, so that the area becomes the first choice for people looking for sportswear. But each Be-1 shop has its own character so they
do not cannibalise each other’s business, he says. The company is considering more outlets elsewhere. The aim is to be closer to the increasing number of people that live and work outside the city centre. Be-1 already has a foothold on Taipa. Mr Sio says profit has been rising steadily, despite increasing competition. Growth rates of 10 percent or above around the middle of the last decade have given way in recent years to growth rates of less than 10 percent, but the base for comparison is now much larger, he says. Data from the Statistics and Census Service show that the value of retail sales of clothes for adults and shoes was MOP1.8 billion (US$225 million) in the first quarter of this year, 16 percent more than a year earlier. Mr Sio says most Be-1 customers
buy sports outfits not because they are sporting types, but because sports gear has become fashionable casual wear. And they are the target consumer for an increasing number of international sports gear brands.
Changed game Be-1 has a strong customer base among Macau residents and its shops are also popular with mainland tourists. The company is a family business. Mr Sio says it sprang from roots put down in the 1970s when his father opened a shoe repair shop. The family gradually turned from repairing shoes to selling them. The first Be-1 shop opened in 1989. The economic reforms and political changes in the mainland during the 1990s brought new business opportunities JULY 2013
for Be-1. The company engaged in wholesale distribution of sports shoes in the mainland, where international brands were not readily available. At its peak, Be-1 had 16 shops selling all sorts of men’s and women’s sportswear, shoes and other sports gear. But the economic downturn that followed the Asian financial crisis in 1997 meant the company found it hard to get stock on credit, forcing the closure of some outlets in a wider restructuring. Be-1 reduced its exposure to the mainland market and focused on selling sports shoes in Macau. The liberalisation of the gaming market and associated economic boom improved consumers’ purchasing power and has proven to be a game changer for Be-1. The introduction of the individual visit scheme meant an increase in the number of tourists from the mainland and a further increase in profit, Mr Sio says. Under the scheme, introduced in 2003, mainlanders from selected cities are allowed visas to travel to Macau as individuals rather than as members of tour groups. Be-1 is struggling to find suitable staff however. Mr Sio says that when the first new casinos opened after the liberalisation of the gaming market, 90 percent of his staff applied for jobs there. The drain was such that the members of the Sio family had to assume front-line roles just to keep the doors open. The company also took on part-time staff.
Home-grown Be-1 operates 14 sports stores, three of them newly opened this year
Hard to retain Mr Sio says that although the labour shortage has eased, demand for retail workers is still high. University students and young graduates are unwilling to work as sales assistants, even part-time, because the pay is lower than in other industries and the workload heavy, he says. At the end of last year there were 3,100 vacancies in the retail sector, meaning 13.4 percent of positions in the industry were unfilled, data from the Statistics and Census Service shows. The average monthly pay for a full-time sales assistant was MOP10,230. Be-1 also finds it hard to fill positions in middle management, Mr Sio says, as few employees stay long enough to be promoted. The retail industry’s employee turnover rate is 7.8 percent, according to official estimates. To retain workers, Be-1 tries to give them a pleasant environment to work in, he says. The solution to these labour probJULY 2013
lems could be to import more workers. Mr Sio dismisses the notion that imported workers steal jobs from Macau people. He says retailing businesses do their best to employ residents, but that few are willing to work in the industry. Mr Sio is in favour of allowing non-residents studying at universities in Macau to work part-time here. Many countries allow non-residents studying at their universities to work part-time, but Macau does not. If the labour shortage persists, retail industry employees will have to work longer hours to cope with the increased
workload, Mr Sio says. This will mean worse customer service, he warns. High rents for shop premises are another problem plaguing retailing. Mr Sio says there is insufficient commercial space in Macau, especially in prime shopping areas. This scarcity, coupled with the arrival in the market of big retailers from elsewhere that have deep pockets, has pushed rents up to astronomical levels. The result is that many home-grown businesses have been priced out of the main shopping areas, Mr Sio says. Be-1 is one of the few survivors.
111 ANDRÉ RIBEIRO CONSULTANT AND EXECUTIVE COACH - email@example.com
Generation next MANY HEADS OF FAMILY BUSINESSES FAIL TO ARRANGE THEIR SUCCESSION
he Macau economy is thronged by family businesses of all shapes and sizes: from Stanley Ho Hung Sun’s megaempire, spreading from casinos to property to transport, to the small noodle shop around the corner. But most heads of family businesses fail to properly plan who should succeed them when – for whatever reason – they depart. Succession planning is not an easy business anywhere in the world. In Chinese culture, the subject is often taboo, as it is associated with death. Customers and partners of family businesses may resist changes at the top. Business and personal relationships are closely intertwined in Chinese culture, and trust in the new head of a business is not automatic. Often, the most daunting task is to convince the heads of family businesses of the need for succession planning. The head of a business may be reluctant to relax their grip on power after years of hard work building up the company. They may also fear that arranging the succession will cause conflict among members of their families. But that is an equally good reason for having a proper succession plan – one that takes effect gradually, properly grooming the next generation to take over while allowing the older generation to ease itself out. Often, the bigger the family, the greater the number of claimants to a stake in the business and the more difficult it is to arrange the succession. That is why more and more family businesses around the world opt to hire help from outside the family. A consultant can help in two main ways. They can propose their own arrangement for the succession or they can coach the claimants to stakes in the business so each family member can negotiate an arrangement that is acceptable for all. Accepting an arrangement proposed by outsiders is often the quickest solution to the problem. But whether the solution works or not depends on the members of the family jockeying for the top position. This solution is usually more successful when the next generation agree to the appointment of a chief executive from outside the family, while they themselves settle for nonexecutive roles.
Sibling rivalry Coaching takes longer but can lead to a more widely acceptable outcome where there is conflict between potential successors in the family. Coaching was the solution chosen by a large wine company in the north of Spain, owned by one of the country’s wealthiest families. In 2006, the 60-year-old head of the business wished to arrange for the reins to be passed to his two sons, who were
Succession planning is not an easy business anywhere in the world. In Chinese culture, the subject is often taboo, as it is associated with death
both in their thirties. Rivalry and distrust between the sons complicated matters. The sons rarely spoke, even about important business matters. This harmed the business and endangered the succession. A decision on a property on which MOP30 million (US$3.8 million) depended had stalled because the sons would not sit down to discuss it. The relationships among the family members involved in the business were complex, the parts that each played in the family and the parts that each played in the business were entangled. This was noticeable at family gatherings, where business was often discussed. The father was regarded more as the head of the business than the head of the family. The personal interests of the members of the family were mixed up with their business interests. This interfered with the performance of other directors of the company, its employees and the business as a whole.
Happy ending To start the process, both sons were coached individually. They were given exercises in communication, management and leadership, which included role-playing. Within a couple of months, the sons had consented to being coached together, at first once a week and later more frequently. The family decided to have all of the company’s directors coached. They were taught how to communicate effectively, think strategically and look for operational improvement. The coaching sessions included training in organisational and leadership development. The business responsibilities of the sons were progressively increased and adjusted. Direct and clear communication dispelled rumour and intrigue. It allowed important business decisions to be made, from decisions on new investments to decisions on reorganisation of the management. Several arrangements for the succession were contemplated: hiring a chief executive from outside; making one of the company’s own managers chief executive; dividing the business into two so that each son would be in charge of his own part; having the sons take turns as chief executive for a year at a time; or picking one son as the chief executive. The family agreed that one son would become chief executive and the other chairman. The father retired but continues to attend board meetings. It was a happy ending to a long saga. It took one year of coaching. It needed the full support of all stakeholders to succeed – and the full support of all stakeholders cannot always be counted on. Still, this case study shows that there is no reason to fear that succession planning will be disruptive, even when the process is delicate. Delaying succession planning is not an option for the heads of family businesses. Succession planning should begin at once, with a view to sustaining the business and making it a success in the long run. The more planning that is done today, the better the prospects for the family and the business alike. JULY 2013
Nirvana Day Spa expands to Taipa and Coloane to avoid high rents in the city centre BY ALEXANDRA LAGES
he city centre is increasingly packed with tourists. The traffic jams are worsening, parking cars is close to impossible and noise pollution is a growing irritation. All are incentives for Nirvana Day Spa Ltd to expand to Taipa and Coloane in its search for tranquillity – and lower rents. Almost nine years after it inaugurated its first spa, just a stone’s throw from Senado Square, the company recently opened two more spas, one in Taipa and the other on Coloane. Nirvana Day Spa already had a spa in Taipa at the Nova Taipa complex, exclusively for residents with an appointment. Nirvana Day Spa managing director Cristina Lobo says demand for spa services is increasing. But rents in the city centre make it hard to expand on the peninsula. “The business is growing but
profitability is decreasing. Rents have increased a lot and are absorbing our profits,” Mrs Lobo told Macau Business. She says monthly profit in summer, when demand for spa services peaks, dropped by up to MOP70,000 (US$8,750) in 2012, in comparison with two years before, because of higher operating costs. Mrs Lobo is reconsidering the renewal of the lease on the outlet on the city centre. That would make Nirvana Day Spa the latest in a long list of home-grown businesses that have had to close or move out of the peninsula’s main commercial area because of high rents and competition from international chains. “I cannot afford any new rent increases to continue in this location. That was why I opened a new spa in Ocean Gardens. In the new location,
prices are not that high, compared with other residential areas in Taipa,” Mrs Lobo says. The government’s labour policy is also hampering business expansion by making it difficult to import suitably skilled workers, Mrs Lobo says. She has managed to double Nirvana Day Spa’s staff to 10, but she says: “I had to do things gradually.”
Change needed Mrs Lobo says it now takes longer than ever to get official approval to import therapists. “If companies don’t have the financial capacity to keep the business open while waiting for staff quotas to be approved, they die shortly after birth.” Mrs Lobo wants the government to change its policy to help small and medium enterprises. “I got a subsidy from the government for renovation work and
Nirvana Day Spa managing director Cristina Lobo says demand for spa services is increasing. But rents in the city centre make it hard to expand on the peninsula
113 working capital but it was only enough to do some renovations,” she says. She has focused her efforts on the new spa in Ocean Gardens, which had its soft opening in April. “With the development of Taipa, most of our clientele live or work there. I thought it was a good time to open a facility there,” she says. Mrs Lobo says the new spa allows her company to expand, since the spa on the peninsula has fulfilled its potential. “The new spa will enable the company to divert clientele to Taipa and accommodate more people.” She describes the new spa’s location as “very convenient”. It is in the Ocean Garden Plaza shopping mall and has free parking. The surroundings, being residential, are “very quiet”, she says. The new spa has three treatment rooms for one customer at a time and one treatment room for two customers at a time. Mrs Lobo is investing more in manicure and pedicure services because of high demand.
Mid-market leader In May, Nirvana Day Spa began operating the spa facilities in the Westin Resort Macau on Coloane. The facilities had been closed for some time. “It is important for a five-star hotel to have a spa,” Mrs Lobo says. About 80 percent of Nirvana Day Spa’s customers are residents, half of them Chinese. But the company is getting more and more tourists, most from Japan or Hong Kong. “A lot are return clients,” Mrs Lobo says. She says Nirvana Day Spa is the leader among mid-market spa companies here. “If you consider the supply of spas in Macau, most of them are in hotels and their price range is totally different from ours. They have their own clientele who, I suppose, are casino gamblers.” Even so, Nirvana Day Spa gets “lots of referrals” from hotels, Mrs Lobo says. “Their guests are not willing to pay so much for a massage.” Competition in Nirvana Day Spa’s market segment is scarce. Mrs Lobo says there is only one other day spa business here offering a range of services similar to her company’s. Nirvana Day Spa’s range of services includes massage treatments, waxing, manicures and pedicures. JULY 2013
Black broadcasts down The government pledges to shut down public antenna companies but keep the small screen glowing
Cable TV has for years been fighting for,” Ms Lam said. In a joint written statement, the six public antenna companies named in the judgement expressed their respect for the Court of Second Instance’s ruling but voiced their displeasure.
ost Macau families might soon be without television as the government counts down the 90 days it has until it must prevent unlicensed public antenna companies from illegally relaying cable television signals. A judgement handed down last month by the Court of Second Instance sided with Macau Cable TV Ltd, and also ordered six public antenna companies to cease operation. The decision was final and overturned a previous ruling by the Court of First Instance. Macau Cable TV has been the city’s
sole legal broadcaster of cable television services since 1999. Its bottom line has been ravaged by competition from cheaper antenna companies that bootleg television signals. Macau Cable TV first posted a profit in 2010. Last year, it recorded a profit of MOP13.3 million (US$1.7 million), up by 129 percent in year-on-year terms. The court judgement was welcomed by Macau Cable TV chief executive Angela Lam In Nie, who says she is confident the government will enforce the order. “The judgement has finally done justice in what Macau
MTEL gets fixed-line licence Locally incorporated MTEL Telecommunication Co Ltd has received a fixed-line telecommunications licence. The licence was granted last month and is valid until the end of 2021. The company is obliged to start operations within 18 months. MTEL plans to invest MOP777 million (US$97.1 million) in its first five years of operation to lay a fibre-optic cable network. MTEL was the sole company in the bidding for the opening up of the fixed-line telecommunications market in March last year. The company has yet to identify its shareholders. CTM – Macau Telecom Co Ltd meanwhile had its fixed-line telecommunications licence extended until the end of 2021. The company, recently acquired by Citic Telecom International Holdings Ltd, plans to invest MOP494 million between now and 2017 to improve its services. JULY 2013
The government has not yet made public any solution that would keep television on the air but Chief Executive Fernando Chui Sai On says the government will comply with the ruling. Officials are apparently working on a solution that would not greatly affect the community. The Bureau of Telecommunications Regulation has been meeting with Macau Cable TV, the unlicensed public antenna companies and grassroots representatives from the General Union of Neighbourhood Associations, commonly known as the Kai Fong. The bureau says it is looking for ways for Macau Cable TV and the unlicensed public antenna companies to cooperate. The Public Utilities Concern Association has called for the government to find a solution that ensures households can still watch television programmes at a reasonable cost. Directly elected member of the Legislative Assembly Au Kam San petitioned the government to redeem Macau Cable TV’s concession contract. The telecommunications regulation bureau says it will break the monopoly when the current contract expires next year. Unlicensed public antenna companies charge a rental fee of about MOP30 a month to retransmit content from around the region to households, using unlicensed cable networks and usually without authorisation from the copyright holders. The cheap price means the unlicensed services are popular, with most homes receiving television signals in this way, a practice that has been tacitly allowed by the government. Most households now face a television blackout unless they install their own private antennas to receive freeto-air channels or subscribe to Macau Cable TV.
OU TN OW
Office shopping Setting up office in coffee shops and restaurants is quite a trend for the modern worker BY CLÁUDIA ARANDA
growing tribe of entrepreneurs, freelancers and parttimers are using coffee shops and fast food restaurants as their workplace – a trend the businesses seem happy to encourage. Working from cafés is nothing new in the West. Coffee houses have always been associated with industry and business deals. An Internet search finds a myriad of pages on the topic, containing tips ranging from what to wear to how far to sit from the door. British novelist J.K. Rowling wrote her first novel in a café. Macau is playing catch-up and the trend is developing in tandem with the city’s legion of white-collar workers who are selfemployed, have flexible working hours or who lack an office. Establishments ranging from branches of international food and drink chains to home-grown coffee shops are popular. Among young insurance or property salespeople, it is a normal environment for meeting clients. Some small companies hold weekly meetings in coffee shops. Branches of McDonald’s are probably the most popular quasi-office spaces. The restaurants do not typically have free wireless Internet access or electrical sockets, making them less than ideal for laptops, tablets or smartphones. Even so, their appeal is broad.
“I come here because it is comfortable and relaxing. I can eat and work at the same time,” says 23-year-old Ellen Ho. Ms Ho is a schoolteacher and goes to McDonald’s to correct English homework. She has studied at McDonald’s restaurants or worked out of them since she was a middle-school student. Staff at other restaurants would ask her to leave soon after she finished her meal, Ms Ho says. McDonald’s staff let her linger. Ms Ho says she prefers working from home or at school when her workload is heavier or more demanding. She has access to a fast Internet connection and proper office equipment at school.
Keep it brief Kisley Chang is a 26-year-old financial planner selling insurance and wealth management products for a big insurance company. He usually arranges to meet his customers at a McDonald’s or branch of Café E.S. Kimo because they are conveniently located and cheap. Most of the 27 McDonald’s here are close to schools or residential areas. Altogether the restaurants draw more than 1 million customers a month, three-quarters of them residents of Macau.
117 The developmental licensee of McDonald’s Corp here is McMac Co Ltd. McMac managing director Michelle Ho says her company is aware that many people use its restaurants to work from. “Apart from students, we have other customers, mainly insurance agents,” Ms Ho says. “We do notice that people use our stores to conduct meetings and interviews.” She says this non-traditional customer tends to frequent McDonald’s restaurants in the city centre. The company has no inclination to shoo them away. They tend not to linger too long. And, after all, they give McDonald’s business. “They are our customers. They just choose to conduct their business there,” Ms Ho says. Her reservations are few. “They are not all as nice as the students, who usually buy a whole meal, but people will buy a drink or a snack.”
The third-placers The Starbucks chain of coffee shops markets itself as a “third place”, between work and home. Expatriates favour Starbucks as places to work out of, but higher prices make them less appealing to students. And the size of a Starbucks and their furnishings make it is hard to find empty seats, especially for a group. But Starbucks are usually conveniently situated and they definitely have an appeal. Music and comfort entice students John Lei, 15, and Yoyo Lio, 16, there to study. They feel that the atmosphere helps them focus, despite the busy environment and background chat. Their hunch may be correct. Research last year by three academics in the United States found that ambient noise affects creative thought. Their study concluded that getting out of the comfort zone and into a relatively noisy environment, such as a café, may lead to abstract thinking, generating creative ideas. Hong Kong’s Pacific Coffee chain has eight branches here, but they tend not to be situated in places that are convenient to work from. Most are in universities or casinos, and one is at the Kiang Wu Hospital. Neither Starbucks nor Pacific Coffee offer free wireless or electrical sockets as a rule, but a Starbucks spokesperson said it intends to have Wi-Fi in its branches in the future.
Drop in, turn on Ms Ho of McMac says Wi-Fi is unnecessary at McDonald’s restaurants here. “Local customers are already widely using smartphones and tablets with Internet access,” she says. Her company may think again “should there be customer demand”. McDonald’s branches in the city’s casino resorts are the exception. “Our customers may enjoy free Wi-Fi provided by the respective property,” Ms Ho says. Pacific Coffee has personal computers connected to the Internet that may be used in 15-minute blocks. A Pacific Coffee spokesperson said time was limited to ensure customer demand was met. The hesitation of the big international chains gives the minnows of the coffee shop business the opportunity to lure in customers by offering free wireless Internet access – especially those coffee shops with plenty of seats. “The Internet is a service which is expected to be provided, just like washrooms and clean towels,” says Stephen
Branches of McDonald’s are probably the most popular quasi-office spaces. The restaurants do not typically have free wireless Internet access or electrical sockets, making them less than ideal for laptops, tablets or smartphones. Even so, their appeal is broad
Anderson, the founder and managing director of the Cathedral Cafe, near Senado Square. A visiting web developer from Chicago, 28-year-old Chad Jewsbury, says he often has work to do when travelling, so he searches for coffee shops with Internet access. In Macau, he found CuppaCoffee. Cristiana Figueiredo is the founder and managing director of bakery and pastry company Nata Lda, which owns CuppaCoffee. Ms Figueiredo says the coffee shop is popular among expats who need a place to work from, and university students looking for somewhere to study. “The Internet is part of the package we offer, which includes much more than a cup of coffee,” she says. While it may be trendy, working out of a café is not a perfect solution for everyone. Research by facilities management and business support services company Regus Plc found that people in Hong Kong cite the lack of privacy, the vulnerability of their belongings and the absence of office equipment as the three biggest drawbacks. JULY 2013
Arts & Culture
Photos: António Mil-Homens
ARCHITECTURAL ANDRE LUI CONTINUES TO WARN OF THE RISKS OF ECONOMIC BY ALEXANDRA LAGES
ndre Lui Chak Keong is running late after a meeting with the Lands, Public Works and Transport Bureau. He apologises as he arrives at the Macau Museum of Art to visit his latest artwork. After spending almost three hours debating architectural regulations and projects, he switches topic to the arts – themes he sees as the same. Mr Lui is a Macau-born architect and artist, with a number of solo exhibitions to his credit here and in Portugal. His new installation “Urban Nomadic” is a wake-up call that questions how economic development is altering quality of life in the city. When he accepted the museum’s invitation to create a piece of art that could fit into a space 2.3 metres wide and 3 metres high, Mr Lui says he immediately thought of the cramped living areas that some apartments offer. “With the city’s rapid economic development, rents and property prices have increased so much that many people have problems coping,” he says. Many have no other option but to move into smaller spaces. In “Urban Nomadic”, Mr Lui created what he dubs JULY 2013
“a minimum space for living”. The installation features pieces that are fitted with wheels and can be taken apart or assembled for different purposes, as well as artificial green areas. Despite its small size, the area is enough for a bedroom, a kitchen and a living room, interchangeably. Nothing is static. A bench becomes a cupboard, a table is transformed into a bed or a wardrobe. Mr Lui visits the installation weekly and changes the setting. He drew inspiration for the work from roadside food stalls, with their moveable tools and equipment, integrated into a basic, mobile frame. Each component is easily deployed or moved, depending on the need.
Mobile population “Urban Nomadic” is a far cry away from trying to be a commercially viable solution to maximise space in a small apartment or to make it more multi-functional. “This installation is aimed at making the audience think about development and quality of life,” Mr Lui says. “Maybe our lifestyle is changing.” Living in tight spaces is nothing new. Hong Kong is infamous for “cage homes”, small, poorly ventilated wire mesh cages, just big enough to fit a thin mattress. In Macau, unskilled workers often share small apartments, converted into dorms, in the most basic conditions.
DEVELOPMENT IN HIS LATEST INSTALLATION Mr Lui says living conditions will deteriorate greatly within 10 to 15 years, the product of a fast growing population, booming economy and increasing integration into the Pearl River Delta region. The result is people will move constantly through different cities, living a nomadic lifestyle, he says. “With the regional integration, [our lifestyle] will become more flexible and also movable. I tried to make something that is also changeable and movable. Any chair, sofa or box stand can be changed.” Every item in the installation has a purpose. “We have less gardens and green areas. That was why I added the artificial greeneries.” Installations are Mr Lui’s favoured form of art. “I use installation as a language to express my concerns towards society. If I used traditional paintings, it would be difficult to express my message so well,” he says.
Gondola ride In 2007, his work “Macau’s Gondola”, in partnership with
his brother Lui Chak Hong, was selected by the government to represent Macau at the Venice Biennale International Art Exhibition. The installation was a critical appraisal of Macau’s development. It was shown in the same year the first casino resort opened, the Venetian Macao. The artwork blended a Venetian-style gondola with reproductions of decorative elements from the A-Má Temple and the Ruins of St Paul’s. “In 2007, when we created ‘Macau’s Gondola’, we were starting to feel the globalisation and the effects of American investment in Macau. I still have the same type of concerns.” His experiences led Mr Lui to debate the impact of development on identity and culture through art. He got lost wandering around the city when he returned to Macau after graduating in architecture from Portugal in 1999. Many of his reference points had vanished. The same thing happened in 2006, after he finished a post-graduate programme on heritage in Paris. JULY 2013
Arts & Culture
“The development [of the city] has been very fast. This city has four centuries of history and identity. It is important to preserve it,” he says. “Otherwise, facing the Greater China region, someday we will lose our identity. We are very small.” Mr Lui wants the government to implement a long-term urban planning strategy that preserves the city’s identity and history. It is unclear what the government’s plans for the future are. “Singapore and Hong Kong have long-term strategic development planning for up to 30 years ahead. We need to have a vision for our development. We cannot solve problems just when they emerge without looking at the future,” he says. Mr Lui is also experimenting with painting, photography and video. He is currently exploring watercolour painting in an effort to connect with his Chinese roots.
On human scale Most of Mr Lui’s artistic references are European. “I’m trying to find my Chinese identity. I have Chinese roots but my nationality is Portuguese. I’m trying to find my cultural identity,” he says. As part of that process, Mr Lui began working on a series of watercolour paintings using the Lou Lim Iok Garden as a theme in 2008. The design of Chinese gardens is full of traditional philosophic meanings about people, nature and the universe, he says. He picked the Lou Lim Iok Garden because it “is a very unique Chinese garden in Macau and even in this area of Southern China”. Born in 1971, the arts have been part of Mr Lui’s life since childhood. He learnt watercolour panting from Lai Ieng, and used to join him for outdoor painting sessions on the city’s streets or at the Mandarin’s House. At that time, the Mandarin’s House was in ruins. It aroused JULY 2013
Mr Lui’s curiosity and led to an interest in architecture. In Portugal, he worked for the late Portuguese architect Manuel Vicente, who was in charge of several seminal projects here. Mr Lui also participated in the construction of the 8-metre-tall Lotus Sculpture, located near one of the entrances to the Guia Tunnel. Portuguese sculptor Domingos Soares Branco designed the project. Mr Lui says Mr Branco is one of his main artistic references and museums a source of inspiration. “I used to go frequently to museums when I was in Europe.” With a specialisation in heritage, Mr Lui is critical of what has been done to preserve Macau’s history. He says heritage preservation here is too much connected to tourism. “It should not be only about that, but also about culture, identity and history,” Mr Lui says, urging the government to invest more in education. He says being a full time artist is not an option. The lack of a mature art market here makes it “very difficult”. Mr Lui opened is own architecture studio in 2006, but that never meant art became a secondary hobby. “For me, architecture is art. Michelangelo was both an artist and an architect. Lately, we see architecture more as a technical activity or more related to construction. “We need to think more about arts [within architecture], besides just its functional aspect or regulations. We also have to integrate culture and historic values.”
DEVILISH GOOD TIMES “Angels and Demons” was this year’s theme for the annual British Business Association Ball, held last month at StarWorld hotelcasino. Robbie Williams’ “Angels”, voted in 2005 as the “Best Song of the past 25 years” at the U.K. music industry’s Brit Awards, inspired the organisers. To spice things up, demons were added to the mix. The result was a sold-out night, with 260 guests showing that angels can have demoniac fun!
Andy Fullard and Kelvin Lou Stephen Anderson and Ian Farnsworth
Audrey and Margaret Stow
Elise van Stolk
Guy and Vicky Lesquoy
Trevor Martin, Lynn Jacobson and Dale Martin
Eileen Stow and Andrew Hirst
Mafalda Melo with Konstantin and Gala Bessmertny
Stephen and Ligia Cartwright JULY 2013
NOW FOR SOMETHING DIFFERENT Macau Business hosted a party last month to celebrate its ninth anniversary. Although the birthday actually took place in May, we delayed the celebrations to do a ‘two-in-one’ special event: celebrating another great year and joining artist James Chu Cheok Son for the opening of his 2013 solo exhibition “Backyard”. The party took place at the gallery of Art For All Society, a not-for-profit group headed by Mr Chu that promotes artistic talent. The event included the auctioning of four artworks by Mr Chu, with the proceeds going to the Macau chapter of Orbis, a non-governmental organisation dedicated to preventing and treating blindness worldwide, and Anima – Society for the Protection of Animals. Over 150 guests joined us, including readers, subscribers and partners. The party included a raffle draw thanks to the support of our great partners. Our special thanks to: Melco Crown; Conrad Macao; Wynn Macau; MGM Macau; Four Seasons Hotel Macao; Galaxy Entertainment Group; Industrial and Commercial Bank of China; Grand Lapa; Mandarin Oriental; Westin Resort Macau; Sofitel at Ponte 16; Palatium Fine Wines; and Tosti.
The Macau Business team and James Chu
Raymond Lo and Anabela Barros
José I. Duarte, Rebecca Choi and Jane Tsai
Ana Chaves and Beth Doherty
Rogério Beltrão Coelho, Cecília Jorge, Alexandra Lages and Manuel Variz
José Drummond and Fortes Pakeong Sequeira JULY 2013
Mimi Chan and Paulo Rego
Clara Brito and Yves Sonolet
Moments 123 Photos: Gonçalo Lobo Pinheiro
This shot goes to Facebook!
A great crowd
Paulo A. Azevedo and Vivian Lo
Frederico and Margarida Rato with Pedro Cortés and Emanuel Graça
Margarida Luz and Henrique Silva
Raquel Dias and Ana Telo Mexia
Audience appreciates James Chu’s works
Luís Melo and Rafael Gama
José Braz Gomes and Pedro Cardoso
Alice Kok receives the Sands Cotai Central prize from James Chu JULY 2013
Crystal Liu wins one of the main prizes, a City of Dreams package, given by Paulo A. Azevedo
On behalf of Wynn Macau, Beth Doherty presents Benito Almer Banato with the main prize â€“ a Wynn Experience package
Annie Lao gives Zoe Sou the Sofitel award
Keira Lee presents the Grand Lapa prize to a lucky guest
James Chu presents the MGM prize to a lucky guest
Greg Mansfield presents the Sands Cotai prize to Nicole Chan
Sarah Farr was the lucky winner of the Galaxy Entertainment prize, presented by Nini Liu
Raquel Dias presents one of the ICBC UnionPay Prepaid Card prizes to Eduardo Severino
Yeats receives a Mandarin Oriental prize from Grace Tong
Annie Lao takes home a Mandarin Oriental prize, presented by Grace Tong JULY 2013
Ada Chan presents the Westin Macau prize to a lucky guest
Rita Amorim receives the Four Seasons prize from her husband, JosĂŠ Reis
PADDLING KINGS Several Macau-based gaming and hospitality operators once again participated in the annual Macau International Dragon Boat Races, held at the Nam Van Lake Nautical Centre last month. A total of 136 local and foreign teams took part in the competition. The big winner was the Indonesia National Team, which won the 500-metre Open category, repeating last yearâ€™s victory.
The Sheraton Macao team during practice
Antonio Ramirez officiates the blessing ceremony for Sands Chinaâ€™s teams
The Galaxy Entertainment cheer squad
Chief Executive Fernando Chui Sai On presides over the award presentation ceremony to the Indonesia National Team
Paddlers warm up
The Hong Kong SAR team in action
126 ARTURO CASADEVALL PROFESSOR OF MICROBIOLOGY AND IMMUNOLOGY AT ALBERT EINSTEIN COLLEGE OF MEDICINE, NEW YORK
FERRIC C. FANG PROFESSOR OF LABORATORY MEDICINE AND MICROBIOLOGY AT UNIVERSITY OF WASHINGTON SCHOOL OF MEDICINE, SEATTLE
Science, heal thyself THE SCIENTIFIC ENTERPRISE IS UNDER THREAT FROM BOTH EXTERNAL AND INTERNAL FORCES
cience may be humankind’s greatest success as a species. Thanks to the scientific revolution that began in the 17th century, humans today enjoy instant communication, rapid transportation, a rich and diverse diet, and effective prevention and treatment for once-fatal illnesses. Moreover, science is humanity’s best hope for addressing such existential threats as climate change, emerging pathogens, extraterrestrial bolides and a burgeoning population. But the scientific enterprise is under threat from both external and internal forces. Now the scientific community must use its capacity for self-correction – based on new information, discoveries, experiences and ideas (the stuff of scientific progress for centuries) – to address these threats. A major hindrance to scientific progress is the increasing scarcity of research funding – a trend that has been exacerbated by the global economic crisis. Uncertain funding prospects not only discourage scientists from pursuing risky or undirected lines of research that could lead to crucial discoveries; they also make it more difficult to recruit the best and brightest for scientific careers, especially given the extensive training and specialisation that such careers require.
Reduce misinformation Furthermore, leaders from across the political spectrum are questioning scientifically-established principles – such as anthropogenic climate change, evolution and the benefits of vaccination – with no scientific basis. At best, such statements serve as a distraction from important issues; at worst, they distort public policy. Although such threats are outside of scientists’ direct control, improved communication with political leaders and the public could help to reduce misinformation and bolster confidence in science. But the field’s credibility is also being undermined from within, by the growing prevalence of scientific misconduct – reflected in a recent spate of retracted scientific publications – and an increasingly unbalanced scientific workforce that faces perverse incentives. Although the vast majority of scientists adhere to the highest standards of integrity, the corrosive effects of dishonest or irreproducible research on science’s credibility cannot be ignored. The problems are rooted in the field’s incentive structure – a winner-take-all system in which grants, prizes and other rewards go to those who publish first. While this competitive mentality is not new in science – the 17th-century mathematicians Isaac Newton and Gottfried Leibniz spent more than a decade fighting bitterly for credit for the discovery of calculus – it has intensified to the point that it is impeding progress. Indeed, scientists today are engaged in a hypercompetitive race for funding and prestigious publications that has disconnected their goals from those of the public that they serve. Last year, for example, when C. Glenn Begley and Lee Ellis sought to reproduce 53 “landmark” preclinical cancer studies, they discovered that nearly 90 percent of the findings could not JULY 2013
be reproduced. While the researchers who originally published those studies may have profited from increased funding and recognition, the patients who need new cancer treatments gained nothing. Moreover, this winner-take-all system fails to account for the fact that scientific work is largely carried out by research teams rather than individuals. As a result, the scientific workforce is beginning to resemble a pyramid scheme: unfair, inefficient and unsustainable.
Prudent strategy The incentives associated with the winner-take-all system encourage cheating – ranging from questionable practices and ethical lapses to outright misconduct. This threatens to create a vicious cycle in which misconduct and sloppy research are rewarded, undermining both the scientific process and its credibility. The problems are clear. But addressing them requires a prudent strategy that accounts for the structural fragility of the scientific enterprise, in which scientists must complete extensive training, regulation can easily stifle creativity and funding limitations can substantially delay progress. Because of this fragility, few countries have been able to establish highly productive scientific enterprises, even though scientific innovation and technological breakthroughs are crucial to a country’s productivity, economic growth and influence. Given the challenges implicit in establishing and maintaining a robust scientific sector, reform efforts must be undertaken carefully. At the same time, the reforms must be comprehensive, addressing methodological, cultural and structural issues. Methodological reforms should include revised training requirements that allow for less specialisation, together with improved training in probability and statistics. Scientific culture must be reformed to abandon longstanding practices, such as those that determine how credit is assigned. And structural reforms aimed at balancing the scientific workforce and stabilising funding are crucial. Some reforms should be fairly easy to implement. For example, it would not be difficult to win support for improving education in the ethical aspects of scientific research. But other important reforms, such as creating alternatives to the winnertake-all incentive system, will present enormous challenges. An effective reform strategy should employ the tools of science – specifically, data collection and analysis. More data are needed to understand workforce imbalances, the peer review system and how the economics of the scientific enterprise influence scientists’ behaviour. Science has been studied by sociologists, historians and philosophers, but rarely by scientists themselves. Now, with perverse incentives undermining their credibility and hampering research, scientists must take matters into their own hands. Applying the scientific method to the problems of science could be scientists’ best hope for regaining public confidence and reinvigorating the quest for transformative discoveries.
SNARL FOR THE CAMERA
The government is installing surveillance cameras at several bus stops. The aim is to prevent motorists from parking in bus lay-bys, which makes it harder for buses to pick up and drop off passengers. Any improvement to the city’s bus services is welcome. But those cameras should also be used to detect buses that fail to pull into bus lay-bys, so the drivers can be fined. More often than not, buses just stop in the roadway, blocking the traffic. In a congested city like ours, that is a recipe for chaos.
As anyone who regularly flies from Beijing to Macau would know, delays are common. But a delay on an Air Macau flight last month was uniquely surprising. The Philadelphia Orchestra, which had been touring the mainland, was moving on to Macau. A handful of musicians took an early-bird flight from Beijing but were stuck on the tarmac for six hours, owing to heavy rain. To entertain their fellow passengers, some of the orchestra’s string players gave an impromptu performance of Dvorak’s “String Quartet No 12”. The video of the mini-concert has gone viral. First-class in-flight entertainment.
PUFF OF SMOKE
The world turned its attention to whistleblower Edward Snowden when he went to ground in Hong Kong. Mr Snowden leaked top-secret information about the Prism programme, used by the United States to eavesdrop on telecommunications. In Macau’s gaming industry, there seems to be one person who would like to have his own private Prism programme: Sands China Ltd chairman Sheldon Adelson. In January Mr Adelson asked a U.S. court to force a Wall Street Journal reporter in Hong Kong, Kate O’Keeffe, to provide phone and email records of communications with Steve Jacobs, the former chief executive of Sands China. Mr Adelson is entangled in several legal disputes with Mr Jacobs and suspects that after Mr Jacobs was dismissed in 2010, he leaked information about the company to Ms O’Keeffe. In a victory for freedom of the press, a judge has denied Mr Adelson’s request. But, just to be safe, Frozen Spy is using smoke signals to contact our Deep Throats, although it is unlikely that anybody will bother to keep a record of our communications. A bonus is that communication will be clearer than any conversation had over the city’s mobile phone networks.
DON’T TELL THE VOTERS
The Legislative Assembly last month turned down a motion for a debate on the idea of making it easier for non-residents studying at Macau universities to work here after they graduate. Several members said the idea was worth discussing, just not yet. They argued that it was a touchy subject, easily distorted by rabble-rousers eager to keep or win seats in the assembly in September’s elections. Frozen Spy is puzzled. Are assembly members saying they should not debate a hot political issue because the city’s hottest political moment is drawing near? If making it easier for non-resident students to work here after they graduate is so divisive, should we not be allowed to hear the opinion of each assembly member, especially those running for re-election? It seems that some members think that the less they air their opinions, the better. What do they have to hide?
IN DEX Aristocrat
Galaxy Entertainment Group
Page 83 & 94
Macau Cultural Centre
Macau Post Office
Mandarin Oriental Macau
Pages 15 & 17
Ou Si Centre
Sport Development Bureau
Zung Fu Motors â€“ Mercedes
To advertise call 28331258 or email us at firstname.lastname@example.org Go to www.macaubusiness.com/advertising for media kit JULY 2013
Published on Jul 1, 2013
Macau Business, a 132-page monthly magazine is De Ficção Multimedia Projects’ flagship publication. Launched in May 2004, focuses on Macau’s...