WORD WARS VALENTE SPEAKS OUT ON LAS VEGAS SANDS
Growing pains Reshaping horizons for what?
MEET THE BOSS
Ted Chan on Altiraâ€™s high-end strategy GAINING STEAM
Gaming drives stellar GDP growth POSITIVE OUTLOOK
Robust sales set to continue ARTISTIC LICENSE
Patronage without getting a tax return
Creditors close in on disgraced Viva Macau
Macau MOP 35 Hong Kong HK$ 40 Mainland China RMB 35
81 Economy & Finance
24 Full steam ahead GDP to grow above 15 percent in 2010 26 Off note Investors complain about Octave Notes
34 Show me the money Viva Macau’s creditors try to get their money back
40 42 44
Great minds Govt sets up preparatory office to launch think tank People power Why listening to the people matters Catching up How is citizen engagement improving in Macau?
46 Market watch Sales of residential units going strong 52 Not-so-sweet sixteen Praia Grande Bay reclamation area put on hold (again)
54 Stretching, but for what? Looking at Macau’s newest land reclamation programme
60 No Limits Ted Chan talks about Altira and the future of City of Dreams
68 The billions race Gaming revenue keeps on piling in 70 Stock watch Sands, Wynn and Melco Crown announce quarterly results 74 Changing of the guard Sands China and Melco Crown make changes at the top 76 Not the Las Vegas way Neto Valente’s harsh words for Las Vegas Sands 79 Philippines pursues Pagcor privatisation Newly elected President Benigno Aquino sets his priorities
81 Fashion Your guide to indulgence August 2010
August july 2010
Photo: Luís Almoster |mspagency.org
98 No cheap trick Government targets illegal inns and zero-fee tours
103 Need for speed CTM prepares to launch fibre optic broadband service
Corporate Social Responsibility
Hit for hope Macau Business Charity Golf Tournament tees off this October Marching orders Get ready for the first TrailWalker hike
104 Electric dreams Electric motorcycles heading our way
Arts & Culture
108 111 112 116
Culture and cash A look into arts patronage in Macau Roll camera Entrepreneur wants to create cinema school Open house Visit the Mandarin’s House with Macau Business World of sound What’s on at this year’s International Music Festival
A sound bet Casino staff get the night First inter-chamber meet a hit Pearl River Delta chambers’ of commerce first get-together
39 Flights of fancy José I. Duarte 45 Who should safeguard financial stabilty? Robert J. Shiller 80 The life of a bookmaker Mark Dixon 101 Of MICE and men Keith Morrison 106 Taming finance in an age of austeristy Joseph E. Stiglitz 117 No pain, no gain! Ricardo Andorinho 121 The middle kingdom’s middle class Wellington K. K. Chan 126 Double-dip days Nouriel Roubini
Transparency project faces vast challenges THE ENORMOUS APPREHENSION SURROUNDING the proposal that will regulate legal support for public servants is understandable. The proposal aims to provide legal support, including fees, to any civil servant who feels his honour has been damaged. The concerns are felt strongly among the press, which fears its freedom will be reduced, operating as it does in a city where you need only the fingers on one hand to count the number of people that can guarantee it real independence. There will be mechanisms in place to control requests for assistance in order to make sure that any old reason will not be good enough for a public servant to take legal action against a member of the media. It is true, as the Secretary for Administration and Justice Florinda Chan says, that the Basic Law already stipulates freedom of expression in Macau until 2049. It is also true that the Press Law, which the government wants to change, already sets limits for freedom of expression. Plus, there are also legal mechanisms that do not allow the press to exceed its limits – common sense limits. There is always a need for concrete evidence before publishing any journalistic report, which prevents the press abusing its position.
Subjective and threatening But the subjectivity surrounding concepts such as honour and Macau’s lack of August 2010
administrative transparency – both of which have followed administrations around for the past 500 years – lead us to believe that this proposal will create nothing good. It is acceptable that a civil servant takes to the courts when he is a victim of aggression, for instance, while acting as a public agent, and that’s precisely what has happened with Judiciary Police agents and prison guards since 2006. But this proposed legislative initiative will create psychological intimidation for the press, as well as other forms of communication such as online forums and blogs, in a city where these enterprises are mostly run by small companies with meagre financial resources. Those companies will be particularly vulnerable when legal suits are made possible for extremely subjective concepts such as honour.
The first of my worries is the continual lack of respect from the administration’s agents. When he took up office, Chief Executive Fernando Chui Sai On promised more transparency. He also promised a system of spokespeople in several departments that would improve the speed and reliability with which the media could report. Clearly, this would allow for greater transparency and be an improvement for the wider community in Macau. This Herculean task is, and I dare to say
The proposal that will regulate legal support for public servants will create psychological intimidation for the press, as well as other forms of communication such as online forums and blogs, in a city where these enterprises are mostly run by small companies with meagre financial resources
it, doomed to fail. The government is not ready for it, as there are not enough competent people available to fill those posts. Worst of all, there are civil servants in the administration whose aim – it seems – is to undermine the Chief Executive’s promise, since greater transparency means less freedom to act. We have supported the spokesperson system from the beginning. The example of Alexis Tam Chon Weng is the most successful. It’s no secret that the Chief Executive’s chief of staff is a valuable asset. He is competent, outspoken, well educated and he should be the first to benefit from a system that facilitates and promotes administrative transparency. But to replicate his example seems to be harder than getting back the MOP200 million the government loaned to Viva Macau.
Checks and balances
More importantly, if we analyse similar laws from other countries, no other law gives so much without very strict limitations. In Portugal, for example, judicial support for civil servants is only provided when they are taken to court due to their actions in office, not the other way around. In Australia, there is assistance offered to employees as plaintiffs but the law clearly states “except in the case of actions for defamation”. What Ms Chan is trying to impose is a law where a civil servant is supported fully – and I understand that will include the highest ranking
officials – while the second party will need to pay their own costs. As Professor Larry So says, you don’t need to fire a gun; having a gun pointed to you is already enough intimidation. And what to say regarding the separation of powers, Executive, Legislative and Judicial? If the president of Macau’s High Court decides to use the judicial support system, he will need to request it from the Chief Executive. Members of the Legislative Assembly will have to run through the same process. Do we really need more examples to weaken the already fragile image of both judicial and legislative powers?
Plain as black and white
So readers can be sure that this talk of press freedom isn’t nonsense, here are a few hurdles we faced in putting together this edition of Macau Business. On Viva Macau, we asked the government what had guaranteed the loan. What we got was silence in return. We asked the Public Works department if they could confirm that the Macau Studio City land in Cotai was included on the list of unused real estate that the government has said it will take back for not being developed quickly enough. We received no substantive reply. Some of these questions even arise out of the government’s own laws and none are complicated. But the answers seldom come and it has been this way forever. Why? Because many in the administration are lazy? No doubt. Incompetent? For sure. But I fear it’s more than that. There are elements in society that will always block access to information because transparency is their No. 1 enemy. It is for these reasons we wish the best of luck to the spokespeople and press advisers system. It is also why this publication feels the proposal to regulate a civil servant’s legal redress – potentially against the press – represents a threat and not an opportunity. Lawmakers are already considering the proposal before the government has moved forward with the transparency project. I would not suggest for a moment that was the initial intention but the outcome certainly assists certain members of the government. August 2010
are for a glass of wine while tasting escargot and moules marinière? Aux Beaux Arts recreates the sophistication of a 1930s French brasserie at MGM MACAU, allowing diners to enjoy the delights of an elegant life. Situated on MGM MACAU’s Grande Praça, the restaurant features dark wood panelling, and cast iron coat and umbrella racks hang over the indoor tables. To complete the look and feel of the experience guests can enjoy authentic French cuisine at the thick wooden tables set with the charming French interior. The menu is a blend of wellknown favourites with innovative and contemporary creations. Alongside fresh and organic produce, a wine list with rare Old and New World wines caters to the most sophisticated gourmand’s tastes, and is matched by an incredible cheeseboard.
Chefs Antoine Perray and Elie Khalife – rising stars in the culinary arts – use the ﬁnest techniques to create the best of French cuisine for all customers. Born and raised in Normandy, Chef de Cuisine Perray comes to Macau via Paris, where he was formerly group executive chef
French charmer A relaxing environment combines with talented chefs with French ﬂair to create a brasserie perfect for an elegant meal or reﬁned drink for Murano Resorts’ renowned restaurants in Paris and Marrakech. Chef Perray began his career in the City of Light at the famous Alain Ducasse au Plaza Athénée, where he discovered chef Ducasse’s talent for creating gastronomic delights. His ﬁne-tuned talents in the kitchen have afforded him the opportunity to work with brothers Jacques and Laurent Pourcel, famous for their three Michelin star restaurant in Paris. He was also responsible for
opening the AmeriKlub restaurant in the Mediterranean town of Sète, an experience that showcased both his culinary and managerial skills, turning the restaurant into an award-winning destination for ﬁne cuisine. Chef Perray moved within the same hospitality group as
chef de partie at the Hotel Byblos Saint Tropez in the summer and the Hotel Byblos Courchevel in the winter, creating culinary experiences of the highest order for discerning international travellers. In his ﬁnal post before heading to Macau he returned to Alain Ducasse au Plaza Athénée as executive sous chef.
A refined drink
For pre-dinner cocktails or a postdinner conversation, the ABA Bar is the perfect destination. Set in the property’s French courtyard, hallmark elements of European design create a sophisticated and elegant atmosphere. MGM MACAU’s two-storey, glass-encased wine cellar forms the back of the bar. Including Old and New World wines, as well as rare vintages and hard-to-ﬁnd varietals, the cellar complements the ABA Bar’s contemporary elegance. It is a wonderful place to relax and savour the moment, sipping a glass of the ﬁnest wine or one of MGM MACAU’s cocktails.
Emanuel Graça Editor-in-Chief
After the golden boom brought on by the liberalisation of the gaming industry, Macau has entered a new stage. In a crowed city such as ours, money itself is no longer enough
Recent riches have killed future planning WORSE THAN A GOVERNMENT WITH NO IDEAS, is a government with no ideas and a lot of money. Unfortunately, that’s where things seem to be heading in Macau. The situation started to get worrying during Edmund Ho Hau Wah’s last years as chief executive. Launching the cash handout and health care voucher programmes were clear signs that there was a lack of new ideas among Macau’s top leadership. An optimistic chap would say that was only natural. After all, for better or for worse, Mr Ho successfully led the Macau SAR through its first challenging years, ensuring a smooth transition. It was only natural that he should start to get tired. Nevertheless, literally throwing money at people seemed like the kind of cheap move someone such as Mr Ho, widely known for his capacity to bridge consensus and work out behind-thescenes solutions, wouldn’t do. Expectations were low when Fernando Chui Sai On was sworn in as the second chief executive. Based mostly on the team left by Mr Ho, his executive was initially regarded as a sign of continuity with the recent past. After a half-year at the helm, if Mr Chui has delivered positive signs in areas such as culture and healthcare, other areas – the economy, finance and property – seem to be affected by a deficit of new ideas. The guiding principle seems to be, if you don’t know what to do, just keep on delaying any action. There was worse to come last month when the government announced it had frozen all projects in the Praia Grande Bay reclamation area for another purpose that has not been made clear. It plans to ask the public for their opinion and build a “wall of ideas” – a juvenile sounding idea. Being elected by a small circle of people, maybe Mr Chui sees these consultations as ways of legitimising his power and decisions. It is not working. His consultations are not proper opinion polls and the way the government compiles its results is less than transparent. Please don’t misread these lines. We are not suggesting the government should stop listening to the people, quite the opposite. The government must listen to the public but
first it should put forward its own proposals and ideas. That is the difference between a manager and a leader. Some developers have waited for years to get the go-ahead in the Praia Grande Bay reclamation area, despite the fact that the government has never expressly told them “no”. Freezing everything and proposing no alternative emphasises that Mr Chui lacks strategic vision. Building “a harmonious society”, “Macau ruled by Macau’s people” or promoting the one country, two systems policy are empty slogans used repeatedly by Macau’s leadership. They are not political strategy in stricto sensu. What the territory lacks is strategic thinking. We have a set of new land reclamation projects coming but we are still deciding what to do with Praia Grande Bay that was finished almost 15 years ago. On the peninsula, we have had an empty building in Tap Seac Square for a couple of years already. It cost millions but the government was willing to spend more than MOP60 million on an exhibition hall just for the light railway project, in a remote area of the territory. We want to bring in more foreign tourists but we have no clear plan regarding the future of Macau’s aviation sector. These are just a few examples in areas essential to Macau’s development. The big losers are the people of Macau. As noted in a study from the Monetary Authority published last month, the bottlenecks in the economy that are created by a lack of strategy are the main reasons for rising inflation in Macau – not the yuan’s appreciation, as many would conveniently have us believe, including the Secretary for Finance and Economy. After the golden boom brought on by the liberalisation of the gaming industry, Macau has entered a new stage. In a crowed city such as ours, money itself is no longer enough. We need a strong leadership that sets a route for the future, not one that navigates according to where the wind blows at any moment. To the staff at Government Headquarters, please put your thinking hats on. August 2010
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TCM loses court case
Not for all More than 65,000 out of the central savings system
ore than 65,000 residents were not included in the final list of the central savings system, it was announced last month by the Social Security Fund. Those people were said not to have met the required conditions, it was claimed. However, close to 5,000 were still going through “double check” procedures and application reviews. Overall, a total of 294,565 residents were included in the central savings system. Since 2007, officials have been working on a so-called “double-tier social security system” which will entail a combination of an amended
form of the current old-age pension, and the new non-mandatory central savings scheme. At the launch of the central savings scheme, scheduled to take place this month, each eligible permanent resident aged 22 and over will be given an account with MOP10,000 in it from the government. But the main target is to persuade both employees and employers to make regular contributions to the employees’ scheme accounts, even although this will not be compulsory. The money accumulated in each account will only be retrievable after its owner reaches 65. For now, details on the return rate are unknown. The scheme is to be managed by the Social Security Fund, which also manages the current old-age pensions.
MOP600 million bet in Chinese medicine Macau will cooperate with Guangdong province in building a Chinese medicine industrial park on Hengqin Island, the spokesperson for the government, Alexis Tam Chon Weng said last month. The new industrial park will be located on Hengqin Island, which is a part of Guangdong’s Zhuhai city and is adjacent to Macau. The Guangdong provincial government has agreed to allocate half a square kilometre of land on the island for the industrial park and the funds will be provided by Macau, according to Tam. An estimated MOP600 million will be invested in the project, he said. Macau is keen to lead the structure because of “tax and incentive advantages in attracting outside investors,” said Tam. He added that Guangdong authorities are open to such a proposal. It is expected that the park will start its activities one year and a half after construction begins.
The Court of Second Instance has ruled in favour of the government regarding its decision to not accept TCM’s tender proposal for operating the new public bus services system. TCM filed a court case stating the government had not proceeded correctly by not accepting the company’s proposal, saying it was “four minutes late”. That happened on November 24, 2009. TCM has already stated it will appeal the court’s decision, according to Radio Macau. Earlier this month, the government announced it was negotiating with the two current public bus service concessionaires – TCM and Transmac – to extend their contracts beyond the current term, which finishes in midOctober. The extension would last for a period considered to be “appropriate”. The government is pushing for a contract extension after the current tender for the new public bus services was frozen due to TCM’s court case.
Air Macau expects profit in 2010 Air Macau’s vice-president, Yang Jianhua, said last month that the airline company would finally post a profit this year, following years of losses, the Macau Post Daily reported. Air Macau lost MOP257 million in 2009, down almost 40 percent on the MOP416 million it lost in 2008. Yang added that the company would later on announce a three to five-year plan for an expansion of its routes.
Three ferry routes permits cancelled Three out of 14 permits for ferry routes have been cancelled as operators were unable to meet the deadline, which ended on July 13. The director of the Maritime Administration, Susana Wong, said this happened due to logistical problems in the mainland. “The other destinations were not ready. Their terminals are not capable of receiving so many passengers,” she said. Chu Kong’s route between Pac On terminal and Zhuhai and Turbojet’s routes from the Outer Harbour to Zhuhai and Dongguan were among the revoked routes. If the ferry carriers wish to launch the routes later on, they will have to apply for a new permit.
Macau continues among the top 100 most competitive cities in the world
acau was ranked the 93rd most competitive city in the world, according to a survey report released last month by a top Chinese think-tank. In 2008, the territory was 98th, according to the global “Urban Competitiveness Report (2009-10)” released by the Chinese Academy of Social Sciences (CASS). Overall, six Chinese cities are among the top 100 most competitive cities in the world. Hong Kong, up one place from 11th, is the only Chinese city in the top 10 in
terms of global urban comprehensive competitiveness, according to the report. Beijing moved up nine places to 59th. Taipei was up three to 38, Shanghai was ranked 37, and Shenzhen fell two places to 71. The survey covers 500 cities around the world, and collects data on six indices including the scale of gross domestic product, GDP per capita, GDP per square kilometre, real GDP growth, number of international patents and multinational corporation index.
Together to fight corruption
Macau’s Commission Against Corruption has agreed to set up a standing working group with its counterparts in mainland’s Guangdong province and Hong Kong, it was announced last month. The goal is to jointly map out long term strategies and objectives to strengthen tripartite cooperation on corruption prevention and education, Xinhua reported. The group comprises senior officials from CCAC, Guangdong People’s Procurator and Hong Kong’s Independent Commission Against Corruption. The three parties will also consider launching a new guidebook of prevention tips and advice to help strengthen anti-corruption work for cross-border businesses.
Macau will step up business, cultural and tourism co-operation with Huizhou, Shenzhen and Dongguan, the Chief Executive, Chui Sai On, said when he met with the leaders of these three places. Mr Chui visited Dongguang, Shenzhen and Huizhou with a highranking official delegation on July 6-7. He also said the draft of the “Guangdong-Macau Co-operation Framework Agreement” would be finished soon, and the Macau and Guangdong governments would jointly present the proposal to the central government. Since he took office in December 20, 2009, Chui Sai On has already visited the nine mainland cities included in the Pearl River Delta. The Pearl River Delta includes Hong Kong, Macau and part of Guangdong province (including the nine municipalities of Dongguan, Foshan, Guangzhou, Huizhou, Jiangmen, Shenzhen, Zhaoqing, Zhongshan and Zhuhai).
EU wants to increase co-operation with Macau The European Commission (EC) is encouraging Macau to participate in EC worldwide programmes, such as the Erasmus Mundus higher education programme. The two parties met last month in Brussels, for the ninth EC-Macau Joint Committee meeting. At the meeting, the European Commission and Macau authorities expressed their willingness to explore new areas of co-operation, such as environmental protection, academic and cultural exchanges as well as other trade and economic issues, according to a joint press release. The EC delegation also expressed a wish to see progress in bilateral dialogue on matters such as civil aviation and taxation of savings.
Photo: Luís Almoster |mspagency.org
The day after Hong Kong prepares for life after the tycoons by pEtEr briEGEr*
ong Kong’s billionaire tycoons enjoy a status close to royalty in Asia’s wealth-obsessed financial hub. The city’s richest man Li Ka-shing has the fame of a movie star, while the court case involving the will of eccentric pig-tailed billionaire Nina Wang Kung Yu-sum last year enthralled Hong Kong with its brew of sex, money and power. But Wang’s death in 2007 and the hospitalisation last year of casino tycoon Stanley Ho Hung Sun were a stark reminder that some of Hong Kong’s 40 richest tycoons synonymous with its post-war economic success - are in their twilight years. They will leave behind eye-popping fortunes worth more than US$130 billions (MOP1.04 trillion) and vast business empires that control everything from supermarkets and property development to ports and telecoms.
Who gets it?
“Hong Kong in this respect is very special,” said Henry Hirzel, managing director of wealth management for Asia-Pacific at Swiss bank UBS. “The question is can this mega-wealth be kept together?” That will depend on whether Hong Kong’s super-rich families descend into squabbles and bitter lawsuits once their entrepreneurial patriarchs die, analysts said. To avoid huge fights over their fortunes, many ageing tycoons create trusts leaving properties and other assets to specific family members. “But that doesn’t guarantee relatives won’t go to court August 2010
after their death,” said Jonathan Mok, a partner at blue-chip firm Mayer Brown JSM. There is also no guarantee that the tycoons’ offspring will have the interest or ability to run the business - less than 20 percent of first-generation companies survive by the thirdgeneration, Hirzel said. “This is a region of family businesses,” he said. “Some families do [succession planning] very well and others don’t... Most people leave their succession to chance.”
The Ho Empire
Stanley Ho Hung Sun, who controlled Macau’s gaming sector for four decades until it opened to foreign competition in 2002, has at least 17 children with four women - an extended family not entirely unique to some of Hong Kong’s wealthiest people. Two of Ho’s children, Pansy and Lawrence, run rival gambling concessions with overseas partners in Macau. Pansy Ho Chiu King also sits on the board of her father’s Shun Tak Holdings conglomerate along with siblings Daisy and Maisy Ho. The 89-year-old Ho - released from hospital in March after an eight-month stay - has long been embroiled in a bitter legal dispute with his estranged sister Winnie over control of his casino firm Sociedade de Jogos de Macau. Reports of his poor health sent shares in his casino firm tumbling. Li Ka-shing’s son Victor is deputy chairman of his father’s conglomerate Cheung Kong (Holdings), while the
billionaire’s other son Richard took a hit last year when a Hong Kong court scuppered his bid to privatise telecom giant PCCW, ruling that a shareholder vote on the deal was rigged.
A man’s world
Despite exceptions like Pansy Ho and her sisters, Hong Kong sons are most favoured to take over the family business, although the eldest doesn’t necessarily get the spoils, said author Joe Studwell. “Very, very occasionally a girl might be chosen over a boy if that boy is particularly incompetent,” said Studwell, whose “Asian Godfathers: Money and Power in Hong Kong and Southeast Asia” takes an inside look at the region’s super-rich. “So it is a best-male-gets-it deal. And fathers are pretty ruthless about bypassing elder sons who don’t cut it.” “Many patriarchs make the inheritance decision late, not least because not deciding gives them a lot of power over family members,” he added.
Big money fights
Nina Wang - once Asia’s richest woman, who controlled the Chinachem property empire - highlighted a key red flag for the tycoons: unclear wills. The long-running saga kicked off after Wang’s tycoon husband Teddy was kidnapped in 1990 and never seen again, sparking a nasty legal dispute between the wealthy woman and her father-in-law for control of the fortune. Both had competing wills, but the courts eventually sided with Nina, who died two years later. She, in turn, purportedly left two wills - both scant on details - which became the subject of another bitter legal battle between her family and Wang’s former lover, feng shui master Tony Chan Chu-chuen. Wang’s family prevailed in February, with the trial judge accusing Chan of proffering a fake will to get his hands on the multi-billion-dollar estate. Chan was arrested shortly after the judgment and then released on bail.
No will for will
Historically, Hong Kong’s wealthy have been reluctant to even draw up a will, although that tradition is changing, Mok said. “For many Chinese it is like a death omen -- they don’t like the thought of it,” he told AFP. “The older generation of Chinese were reluctant to have a will.” But the future of the tycoons’ businesses may depend most on how easily they loosen an iron grip on the day-to-day running of their companies to make way for a new generation of management. “Businesses that are dominated by personalities are harder to keep going across generations than ones which run on systems and structures,” Studwell said. “The big boss approach carries big risks.” * AFP
MB launches e-newsletter Expanding its presence across different multimedia platforms, Macau Business is excited to announce last month it launched a free email newsletter service with daily news updates from our newsroom. this new tool is designed to reach the people who are creating companies, building products or launching new ideas, and that need fresh and up-to-date information about Macau’s economy, gaming industry, property market and fi nancial services. It is especially designed to be easily read on smart phones. Interested parties can go to www.macaubusiness.com and sign up for it.
BNU appoints Artur Santos as CEO Artur santos has been appointed as the new CEO of Banco Nacional ultramarino (BNu), effective from August 1. He succeeds Herculano de sousa, who is retiring. For the past 11 years, Artur santos has been the deputy CEO of BNu. Herculano de Sousa will stay on the Board of BNU as a nonexecutive director. BNu has 14 branches in Macau and 430 employees. It is a wholly owned subsidiary of Portugal-based Caixa geral de Depósitos (CgD).
Macao Water gets new concession the government has granted a new concession contract to the Macao Water supply Company Limited as the sole provider of tap water to the territory. The 20-year concession contract came into effect last month. the Macao Water supply Company Limited was established in 1932. It is a subsidiary of Sino-French Holdings (Hong Kong) Limited, a joint venture between suez Environment and NWs Holdings Limited.
Cash to the people Last month, the government launched the 2010 “wealth sharing” scheme. According to the “wealth sharing” program, each local permanent and non-permanent resident will respectively receive MOP6,000 and MOP3,600, the same amount as last year. the “wealth sharing” program will cost the government some MOP3.38 billion and will benefi t a total of 593,000 people. Meanwhile, each local permanent resident will also receive a set of healthcare coupons amounting to MOP500. these coupons can only be used in local private medical institutions that are not funded by the government. According to the government, the 2010 edition of the program will cost MOP278 million and will benefi t a total of 555,000 people from next month until july 31, 2011.
Light-rail exhibition hall frozen the government has decided to freeze the plan to build a MOP60 million exhibition complex for the Macau Light Rail system (LRt), near the airport. the Chief Executive, Fernando Chui sai On, announced the decision last month, a couple of days after several lawmakers labelled the threestorey building as a waste of money As an alternative, Chui explained that the current LRt exhibition at the Macau science Centre would continue in order to improve the population’s knowledge about the project.
Trade deficit widens
The value of Macau’s total merchandise exports for May 2010 decreased by 9.2 percent year-on-year to MOP518 million. The value of total merchandise imports amounted to MOP3.42 billion, up by 20.1 percent year-on-year, according to official data. In the first five months of 2010, total value of merchandise exports fell by 7.6 percent year-on-year to MOP3.03 billion; meanwhile, total value of merchandise imports grew by 19.3 percent to MOP16.79 billion. The trade deficit from January to May 2010 widened by 27.4 percent yearon-year to MOP13.76 billion; the exports/ imports ratio went down by 5.3 percentage points year-on-year to 18.0 percent.
Surplus on the rise
Photo: Luís Almoster |mspagency.org
Macau registered a budget surplus of MOP26.6 billion in the first half of 2010, with direct taxes from gaming increasing 63 percent year-on-year. The surplus represents a yearon-year growth of 116.8 percent. Direct taxes from gaming in the first half of 2010 totalled MOP30 billion, representing 85 percent of the public finance revenue between January and June, provisional data from the Finance Services Bureau shows. In the first half of 2010, the government’s total revenue rose 39.1 percent year-on-year to MOP35.6 billion. Meanwhile, the government’s total expenditure dropped 33 percent, to MOP8.9 billion.
Slight drop in deposits Construction workers earning less... The average daily wage of construction workers in Macau was MOP507 in the second quarter of 2010, down by 4.2 percent quarter-to-quarter, according to official data. The average daily wage of skilled and semiskilled workers (MOP537) fell by 5.1 percent, while that of unskilled workers (MOP340) registered an increase of 8.6 percent. Among the skilled and semi-skilled workers, plant operators (MOP667) were earning higher average wages.
... And materials more expensive In the second quarter of 2010, the price index of construction materials for residential buildings rose by 4.5 percent quarter-to-quarter. Compared with the same quarter of 2009, the price index of construction materials for residential buildings registered an increase of 14.0 percent. For instance, the average price of spiral and round reinforcing steel bars increased by 15.5 percent quarter-to-quarter to MOP4,882 per tonne, and that of Portland cement rose by 4.5 percent to MOP653 per tonne. However, the average price of concrete registered a decrease of 2.2 percent to MOP308 per cubic metre. August 2010
As deposits with banks dropped and loans witnessed an increase in May, the loan-to-deposit ratio rose from a month earlier. According to statistics released by the Monetary Authority of Macau, total deposits with the banking sector dropped 0.7 percent from the previous month to MOP297.9 billion. The shares of MOP and HKD in total deposits were 22.2 percent and 46.8 percent respectively. Domestic loans to the private sector expanded 2.0 percent in May to MOP108.4 billion. Meanwhile, external loans grew 1.2 percent to MOP109.3 billion. Due to the decline in deposits and increase in loans, the loan-to-deposit ratio was 73.1 percent, up 1.7 percentage points.
Forex reserves increasing
Photo: Luís Almoster |mspagency.org
The Monetary Authority of Macau announced that the preliminary estimate of Macau SAR’s foreign exchange reserves amounted to MOP163.7 billion at the end of June 2010. The reserves rose by 3.4 percent from MOP158.3 billion for the previous month. When compared with a year earlier, the reserves increased by MOP21.8 billion or 15.3 percent. Macau’s foreign exchange reserves at end-June 2010 represented 32 times the currency in circulation.
Unemployment rate heads south
The unemployment rate for April-June 2010 was 2.8 percent and the underemployment rate was 1.9 percent, down by 0.1 and 0.2 percentage points respectively over the previous period (March-May 2010), according to official data. The number of unemployed decreased by about 300 from the previous period to 9,300. As the summer holiday approached, the number of fresh labour force entrants saw an increase, accounting for 7.5 percent of the unemployed, up by 2.1 percentage points over the previous period. The total labour force was 326,000 in April-June 2010 and the labour force participation rate stood at 71.6 percent, with the employed population increasing by about 1,000 over the previous period to 317,000.
More than 10,000 families waiting for social housing More than 10,000 households have qualified for social housing to date, according to figures released last month by the government. Of those, 5,500 households were already on the waiting list, while the rest are new applicants from the latest round of social housing applications, held in the last quarter of 2009. The government has pledged to build a total of 19,000 public housing units over a five-year period ending in 2012, including social housing – for rent – and economic housing – for sale at subsidised prices. Many analysts are sceptical as to whether it will be able to do so.
Electricity shock Macau’s total consumption of electricity increased by 4.9 percent to 967.6 million kWh in the second quarter of 2010 yearon-year, official figures say. Most of this electricity - 79.1 percent - was imported, a year-on-year increase of 64.7 percent. The local generation of electricity dropped by 58.6 percent.
Consumers’ satisfaction goes down The latest results of a Macau Consumer Satisfaction Index released yesterday indicate that people’s satisfaction towards shopping in the territory has decreased. The annual study, already in its fourth year, indicated that local consumer satisfaction towards shopping scored just 69.1 out of 100, which is the lowest since 2007. The index is organized by the Institute for Sustainable Development of the Macau University of Science and Technology. A total of 888 local residents were successfully interviewed in the survey concerning their recent experiences of shopping, mainly for clothes and footwear, and dining in Macau and in Zhuhai. Although the index for shopping in Macau dropped, it is still higher than in Zhuhai (63.2). Macau also beat the neighbouring city regarding dining: 68.9 versus 66.2, respectively.
Economy & Finance
Full steam ahead Unprecedented gambling receipts will push Macau’s real GDP growth over 15 percent this year, fuelling job creation and inflation by Emanuel Graça
fter growing 1.3 percent last year — against the odds and in spite of the global economic crisis — Macau’s GDP is forecast to record a two-digit increase this year, according to the latest projections by the Monetary Authority of Macau. In last month’s Monetary and
Financial Stability Review the authority said that “in view of the low year-earlier comparison basis and the affluently large growth of gaming receipts in the first two quarters of 2010, the local economy should experience a strong double-digit expansion in the first half of the year. “The growing pace of gaming re-
Inflation up this half, says Tam
ecretary for Economy and Finance Francis Tam Pak Yuen has warned of an increase in the rate of inflation in the second half of the year. Mr Tam said the yuan’s appreciation is likely to affect the prices of daily necessities imported from the mainland. The government will follow economic developments closely and Mr Tam reiterated a previous commitment to adopt measures to ease the effect of price rises on residents – particularly disadvantaged groups. He said the government would move in a “timely” manner but only once the inflation rate reached three percent. Any trigger to act would not be based on the monthly composite Consumer Price Index (CPI) but on a 12-month average of the index. Compared to June last year, the CPI in June was up 2.68 percent. The average composite CPI for the first half year of this year was 2.09 percent higher than during the same period last year. However, across the 12-month-period to the end of June, the average composite CPI was up just 0.97 percent compared to the corresponding period. August 2010
ceipts could slow in the second half, while the gradual increase in investment spending will add force to economic growth. As a result, the real GDP growth is expected to exceed 15 percent for the whole of 2010.”
Investment spending is also likely to help boost this year’s GDP. It “has been a drag on the local economy in the last two years, but its impact on Macau’s GDP growth should shift to positive in the next six months”, the authority said. The greatly improved performance of the tourism industry and the rosy outlook for the city’s major gaming operators has kick-started the resumption of large-scale construction projects, the report said. Spending on infrastructure from the public purse is also moving the rate of GDP growth. “Public investment in infrastructure projects is expected to gather momentum in the second half of 2010, in relation to the first phase of construction of the SAR light rail transit system,
25 the planned increase in the supply of public housing, and the construction of the Zhuhai-Hong Kong-Macau Bridge,” the report says. Public revenue, in large part derived from taxes on the gaming industry, will continue to “register satisfactory growth”, the report says. The government’s fiscal account surplus is expected to remain stable at more than MOP20 billion for the year.
Photo: Luís Almoster |mspagency.org
More jobs, price hikes
Yuan not to blame for inflation A
new study has rubbished the idea that it is an appreciating yuan driving inflation in Macau. The report written by the Monetary Authority of Macau’s Isabel Choy instead lays the blame on domestic factors. Using quarterly data from 1998 to 2009, the study concluded that the inflationary impact of exchange rate appreciation was relatively limited. “As our findings suggest, Macau’s inflation cannot be largely attributed to external factors, particularly in the latest up cycle,” says Ms Choy, a staffer in the agency’s Research and Statistics Department. It is domestic factors that are “likely to exert considerable influence on domestic price developments in the medium to long term”. The study suggests labour shortages and infrastructure bottlenecks are more important causes of inflation. “Effective means of containing inflation should incorporate long-term solutions for infrastructure bottlenecks and labour market tightness,” the report says.
Macau’s de facto central bank says the resumption of building on the Cotai Strip in addition to further expansion of hotels and tourism facilities will create more jobs, leading to a further decline in the unemployment rate to below 3.0 percent. As the market turns favourably on the supply side, employment earnings should also record a moderate rise. The breakneck growth rate does have one significant downside. The report predicts the inflation rate will rise by between “3.0–4.0 percent for the whole of 2010”. Inflationary pressures will mount “primarily due to the strong rebound of the domestic economy under little idle productive capacity”, it says. “In addition, import prices are likely to trend upwards.”
Property outlook mixed
Although interest rates are likely to stay at low levels for the rest of the year due to the fragile recovery in the United States, the authority is cautious on the outlook for the property market. “Following a strong rebound in the past six months, the local property market has turned rather quiet since the middle of 2010,” it says. “The change in sentiment might reflect market consolidation after large gains and expectations of government actions on stabilising a heating-up market. In particular, the increased supply of public housing and reclaimed land should help inhibit demand in the near term”. Yet there are other fundamentals that may support the market, including the improving economic outlook, job prospects, higher inflation, low interest rates and rising population. The report says the near-term outlook for the asset market “is expected to remain mixed”. August 2010
Economy & Finance
Local investors in Morgan Stanley’s derivative-linked Octave Notes say they were misled by ICBC and want action from the monetary authority
dozen local investors in Octave Notes derivative-linked notes have accused the Macau branch of the Industrial and Commercial Bank of China (ICBC) of giving them misleading information. Octave Notes, issued by Morgan Stanley through shell company Victoria Peak International Finance, bought into synthetic collateralised debt obligations and have plunged in value since the collapse of global financial companies such as Lehman Brothers. But a group representative who bought her notes in 2007 said the investors had been led to believe by ICBC’s local branch that Octave Notes were connected with the Chinese state and therefore a sound investment. The product’s name in Chinese means “Smart Bond”. The investors say they received letters in March informing them that Series 21 and 22 Octave Notes had suffered a sharp drop in value. By then, Victoria Peak International Finance had predicted that investors would “lose all or substantially all of their principal investment”. Many of the 22 series of Octave Notes have seen their valAugust 2010
Photo: Luís Almoster |mspagency.org
ue dwindle to zero in the turmoil of the global financial crisis. Others are worth less than one percent of their original value. According to the Monetary Authority of Macau (AMCM), 270 local investors bought Octave Notes, investing MOP119 million in total. About MOP1.1 million-worth of these notes were Series 21 and MOP17.76 million-worth were Series 22.
Lack of regulation
The aggrieved investors, who petitioned the government last month, accuse the monetary authority of doing a poor job of supervising the financial sector and of handling their complaints, some of which were filed almost 10 months ago. The authority said it had received 27 complaints by July 26, involving a total investment of MOP15.78 million in Series 21 and 22 notes. After receiving the complaints, the authority said it had requested the bank involved to make inquiries, respond to the complainants and submit investigation reports containing their findings. “At the same time, apart from its own follow-up and investigation, AMCM maintains close contact with overseas regulators handling similar cases,” the authority said. The authority has met with representatives from the distributing banks and told them to take the follow-up on the cases seriously. At a meeting on July 19, the distributing banks indicated they would speed up the process, learning from methods used by banks outside Macau. Since the Lehman Brothers minibonds affair, the authority has drafted guidelines for the provision and distribution of financial products but the document has not been promulgated yet.
by José I. Duarte
Output and expenditure 2009 (in MOP) GDP current Consumption Investment
Trade balance: goods Trade balance: services GDP constant (2002)
million million million million million million million
- 2.4 5.7 - 39.0 12.6 - 5.1 9.1 - 2.4
Latest (in MOP)
47,402 10,703 4,353 2,562 - 11,381 41,164 42,234
24.4 4.5 - 37.0 - 3.9 27.0 50.0 30.1
26.2 9.9 - 0.9 9.9 2.8 --
million million million million million million million
Q1 Q1 Q1 Q1 Q1 Q1
Money and prices 2009 M1 (in MOP) M2 (in MOP) Credit (in MOP) Deposits (in MOP) IPC/Inﬂation rate(*) AMCM base
212,153 million 101,064 million 207,247 million 101.40 base - 2008 0.50 %
23.8 11.8 10.1 11.8 1.16 --
31,795.7 million 216,852.3 million 101,279.2 million 211,790.3 million 104.1 base - 2008 0.50 %
April April April May May, var
Population/Labour force 2009 Population Labour force Median wage rate (in MOP) Unemployment
- 1.3 - 1.5 6.3 - 0.1
542,200 329,200 8,500 3.0 %
542,400 323,300 9,000 2.9 %
- 0.7 - 3.0 4.7 - 0.6
Q1 Q1 Q1 April, var
228,874 Finished 1,406,242 Cement (Apparent consumption) 276,710 Transactions/Commercial (in MOP) 2,976 Transaction/Residential (in MOP) 21,517
m2 m2 tons million million
- 57.1 40.7 - 56.9 - 1.9 - 27.7
3,682 258,760 19,714 491.6 4,281
m2 m2 tons million million
364.1 - 17.7 - 12.9 162 270
May May May May
Gaming 2009 Gross revenue (in MOP) Casinos Tables Machines
120,383 33 4,770 14,363
9.6 2 18.7 21.1
17,165 33 4,828 14,659
93.4 0 1.2 2.0
June Q1, var, ytd Q2, ytd Q2, ytd
21,753,000 Average expenditure (in MOP) 1,616 Average stay 1.10 days Hotel rooms 19,259 Occupation rate 71.60 % Average Hotel stay 1.50 nights Visitors
- 5.1 - 6.5 -9.8 -2.9 0.6
2,098,000 1,783 1.52 days 19,573 79.0 % 1.50 nights
31.8 8.9 0.13 11.4 9.9 - 0.02
%var - % change on homologous period; var - absolute variation; ytd - % change, year-to-date; x - discontinuous series APRIL 2010 (*) Important note: The inﬂation base period has changed ( New base: April 2008 to March 2009 = 100) August 2010
Q1 Q1 May Q1 May, var
sources: DsEC (Direcção dos serviços de Estátística e Censos), AMCM (Autoridade Monetária e Cambial de Macau), DICj (Direcção de Inspecção e Coordenação de jogos)
169,343 41,601 31,580 13,739 - 39,274 121,695 169,342
Economic Trends by José I. Duarte introduction
taBle 1 - total and green areas Total Area
35 30 25 20 15
since 2004, Macau’s economy and population have grown quickly. An often-ignored dimension of that growth is the geographical one. that is, the city has also grown physically. the possible impacts that growth has had on the environment have received little attention, nor have they been subjected to a proper analysis. In this fi rst look, we discuss some relevant indicators to see if there are identifi able changes or emerging patterns.
Green areas and water
taBle 2 - total and Green areas, annual variation VarArea (ha)
The fi rst dimension of Macau’s growth is spatial. the city’s area has increased by about one quarter in the past decade, following in the footsteps of a long line of land reclamation projects. One interesting question relates to the availability of green areas, usually an indicator of urban and environmental quality. On face value, the available fi gures (Table 1) seem to show improvements, both in absolute terms and per capita. A second look highlights some issues. By converting areas from square kilometres to hectares we come up with a measure that is somewhat easier to visualise. As a reference, a hectare is roughly equivalent to the area of one football fi eld and a square kilometre is about the area of 100 football fi elds. After their conversion, the fi gures raise additional questions. tABLE 2
taBle 3 - Water consumption Business
80,000,000 70,000,000 60,000,000 50,000,000
In table 2, we see the changes on a year-on-year basis. First, the increases in total area and green area seem somewhat unrelated. Second, the stated and signifi cant changes to the city’s green area, in absolute terms, seem diffi cult to associate with the daily experience of the average resident. there is also a break in the data for 2005. It seems estimates were not possible due to construction activities, an explanation hard to accept! Finally, on face value, there are doubts about the consistency in the measurement criteria. tABLE 3
For water consumption, the results do not yield remarkable trends. that is, there are no obviously noticeable changes in the patterns of consumption of either households or government, and the increase in business consumption is noticeable during periods of greater construction intensity, as would be expected.
40,000,000 30,000,000 20,000,000 10,000,000 0 2004
29 solid waste and recycling
taBle 4 - solid Waste
3,500,000 3,000,000 2,500,000 2,000,000 1,500,000
the generation of solid waste is a common by-product of most economic activities. Construction is closely correlated with waste production and the jump in the amount of waste generated from 2005 is not surprising (table 4). throughout the period, the amount of waste generated by business dwarfs that produced by both government and households, whose patterns of rubbish generation seem stable. tABLE 5
1,000,000 500,000 0 2004
taBle 5 - solid waste, growth index Households
600 500 400
that much can be seen in table 5, where we have ignored government activities, which are mostly insignifi cant in this analysis, and have separated building or construction activities from other business activities. the growth indices using 2004 as the base year, show the enormous contribution to waste production that the building sector makes. In the case of other businesses and households, the growth registered is actually below what might be expected, bearing in mind the recent growth in population and disposable income. In the case of households, waste production seems to be decreasing, a fact that, should future fi gures confi rm it, suggests behavioural changes. tABLE 6
300 200 100 0 2004
taBle 6 - recycling Paper
The fi nal table shows the changes in recycling activities. they show a generally sustained increase in the quantities of the three types of materials recycled: paper, metal and plastic. the increase in the volume of paper recycled is remarkable and would suggest the need for deeper scrutiny. It is important to note that recycled materials represent a small percentage of the total waste generated, illustrated by the fact that this table is in kilograms and the other tables are measured in tonnes. Most of the waste is either sent to landfi ll, incinerated or unaccounted for.
300,000 250,000 200,000 150,000 100,000 50,000 0 2004
gIVINg TO gET
Chinese New Year gathering with the elderly at Bambu
Improving lives that are blighted is the goal of the Sands China Ltd community outreach programme. The volunteer work by the company’s staff gives real meaning to the words “community” and “responsibility”
31 hildren, the elderly and the physically and mentally vulnerable are usually society’s most marginalised groups and have the most to gain from assistance. It is these groups that are supported by volunteers from Sands China Ltd. Through years of engaging society’s most vulnerable, Sands China has created a long list of community outreach events, such as Chinese New Year parties for the elderly, Mother’s Day celebrations for single-parent families, gifts to community centres for Children’s Day, and children’s Christmas parties. These events run in tandem with programmes that benefit orphans and the mentally handicapped, as well as character-building programmes such as children’s summer camps and days out at The Venetian venues such as Qube and the Manchester United Experience. Without the support of Sands China team members who get involved – often on their own time – there would be no meaningful community outreach. While the company encourages community spirit, it is the team members who roll up their sleeves. The Sands China Care Ambassadors became a formal group last year. Among the dozens of projects they undertake is One Day Volunteer, in which Sands´ employees join the Macau Youth Volunteers Association to socialise with mentally handicapped children and their families, clean the houses of the live-alone elderly and visit elderly care centres.
A natural Sands´ employee Rafaela Sanchez works for the company’s marketing operations department and has been involved in volunteer work since last September. “We receive assignments from our Care Ambassadors whether from internally published information or emails and, after checking my availability, in terms of my working schedule or shifts, I join the activities,” she says. “Most of the time I end up picking my free time, mostly my vacations, to volunteer, so that I can focus entirely on my assignment.” Ms Sanchez embraced volunteer work at university and said joining the Sands’ programme was a natural progression. “I was really used to being engaged in these types of activities, so when I saw the ‘come and join us’ sign I was well aware of the next step to take, that is: helping others,” she says.
Love’s paycheque If you’re wondering if it is worth giving your time to other people, love has its own paycheque. “Last year, after the Sichuan earthquake disaster, Sands China donated funds to some schools. Children from those schools sent our Care Ambassadors thank-you letters and the volunteer team replied to each and every single one of those letters,” Ms Sanchez says.
“I’ve written to a little schoolgirl and got my reply just a few weeks ago. She told me how lucky she was being able to survive the earthquake and that her hard work at school has been rewarded by the teachers with a school prize. “She also told me she would be one of the 99 children being invited to attend the first anniversary celebration of the Sands China Care Ambassador Program in Macau.” [see story in these pages]. It’s a very touching letter to read and it’s the best paycheque for the time I’ve spent.”
Giving to learn The 200-strong team of ambassadors from The Venetian Macao, Sands Macao and The Plaza Macao contributed about 614 hours of community service last year. The sacrifice of 14 volunteers within the group has been recognised with special awards from the Macau Youth Volunteer Association and the Voluntary Social Services Association of Macau. “There is a Chinese saying - the giver is more rewarding than the receiver,” says Sands China finance department staffer Christine Chong. “I’ve learn throughout my volunteer work that every step of the way is worthwhile, for you always end up learning something about others and something about yourself.”
Always room for more After a few years of being an ambassador, Ms Chong’s main focus within the group is spreading the word to get more people involved. “My main focus right now is to get more people involved in the volunteer programme within our own company. It’s really a matter of pride to know that Sands China is doing the best it can in Macau,” she says. “As a company, we donate the most hours and activities to corporate social responsibility, but there’s still a long way ahead of all of us.” Corporate social responsibility tends to be an afterthought for many in Macau’s business sector but the results of the Sands programme show how rewarding volunteering can be. “I was one of the top ten people awarded for my social responsibility work in Macau,” says Ms Chong. “Because of that distinction, I went to Singapore where I had the chance to exchange experiences and knowledge with other corporate social responsibility teams. Macau’s corporate social responsibility might not yet be as popular as in other places but luckily Sands China has been deeply involved since the beginning.”
The elder students group from the Sichuan Education Support Program are having fun at Manchester United Experience
One year of helping
The younger students group from the Sichuan Education Support Program are playing slides at Qube
ver one hundred Sands China Ltd employee volunteers celebrated their first anniversary in the Sands China Care Ambassador Program last month at The Venetian Macao-Resort-Hotel. Since its launch, the ambassadors have participated in ten community activities and performed more than 614 hours of community service. Five Sands China Care Ambassador Service Awards were presented at the anniversary dinner to ambassadors who have performed the most number of community service hours. These ambassadors participated in the countless community activities including a Children’s Day Gift Distribution, Chinese New Year House Cleaning for the Elderly, the Sichuan Education Support Program, a dinner buffet with a visually impaired group and many more. Sands China Ltd acting chief executive officer, Mr Michael Leven congratulated the ambassadors’ efforts to date saying, “your efforts and commitment have not gone unnoticed and I look forward to seeing our number of ambassadors grow, and the amount of time that
The younger students group from the Sichuan Education Support Program are playing foosball at Qube
33 we give to volunteerism increase as we reach further into the communities where we live and work. “When we first launched the Sands China Care Ambassadors program last year, there was an initial enrolment of 120 volunteers from The Venetian Macao, Sands Macao and The Plaza Macao combined, all participating in the ‘One Day Volunteer’ kick-off event.”
Ninety-nine students from the Sichuan Education Support Program joined the Ambassadors for the anniversary dinner on July 28 “While the activities have been varied, the ambassadors have shared a common objective for each: caring for lives that are often challenged. For this, and for their embodiment of the spirit of greatness and passion, they are to be congratulated.” Ninety-nine students from the Sichuan Education Support Program joined the ambassadors for the anniversary dinner. The Sichuan Education Support Program enables students left stricken by the 2008 Sichuan earthquake to complete their education, becoming better citizens, able to give back to their community and help Sichuan province re-build for a brighter future. Sands China Ltd. hosted the students at the dinner, with some students amongst the two hundred recipients of a sizable donation from the company that will see their education costs covered.
Flowering partnership he Fuhong Society of Macau is a non-profit organisation founded seven years ago that has benefitted from their relationship with Sands China. The group’s service centre, Pou Choi Centre of Fuhong Society of Macau, provides occupational skills development, training and employment services to the mentally handicapped. The centre’s mission is help members realise their potential and integrate more fully into society. The society’s Hong Ieng Centre provides life skills training for more severely handicapped people. “Since 2006, we’ve managed to build strong cooperation with Sands China,” says the society’s director Jennifer Chau Wai I. “Through our relationship with companies such as this, we realised how we could learn new approaches to our social work, to be more financially independent and less reliant on exterior donations. At the same time, we’ve been able to involve the people who suffer from mental illnesses and make them feel they
have a role in society, allowing them to give in return for what they’re getting.”
Learn and diversify The organisation has branched out from its social work and started developing a commercial and marketing concern that provides an important base for its nonprofit mission. “This knowledge has allowed us to create the Rainbow Flower brand,” she said. “We’ve created some handcraft products, and we have learnt and afterwards taught the packaging methods. So we have a brand for special festivals and special occasion products, such as Christmas, Easter and weddings.” The group’s product lines have in turn captured the attention of the companies it works with and led to a unique bond between the social workers and the marketing teams. “The social work is never enough, just like any company area is never enough all by itself,” she says. “There has to be interdependent work from every area in a company to make it work and, at the end of the day, from all society. And that’s what we are trying to do, become interdependent with society.”
Community visit to Fuhong Society
Illustrations: Rui Rasquinho
Show me the money
The government has launched attempts to get back MOP200 million it lent defunct airline Viva Macau and is willing to sue by Luciana Leit達o
ow do you collect a big debt from a company that is no longer operating and that has very few, if any, known assets? That is the question the government is facing as it tries to get back a MOP200 million loan it made to defunct budget airline Viva Macau through the Industrial and Commercial Development Fund. The loan, disbursed in instalments between 2008 and last year, was meant
to help the company face the problems caused by the global financial crisis. The government grounded Viva Macau in March because it was seemingly unable to pay its fuel bills. In April, the Civil Aviation Authority of Macau revoked its operating certificate. According to the loan contract, Viva Macau had to pay back an initial instalment of MOP40 million by July 1. The company missed that deadline. A Macau
Business source said Viva Macau had replied to a government letter demanding the first instalment, saying that there would be a creditorsâ€™ meeting in September. Other media outlets have reported that Viva Macau did not reply to the letter. If Viva Macau misses a second deadline the government will sue, Macau Economic Services (DSE) spokesperson Cecilia Luk told Macau Business. Ms
Luk said the fund’s committee gave the loan’s guarantors another 30 days to pay on July 5. She did not identify the guarantors. “It is not appropriate to disclose the information of the guarantors as we have not yet pursued judicial proceedings against Viva Macau and the guarantors,” she said. In response to a written enquiry from legislator Paul Chan Wai Chi about Viva Macau last month, president of the Civil Aviation Authority Simon Chan Weng Hong said the airline was obliged to guarantee the repayment of the loan. By law, the government may demand payment from any guarantors. In early April, the chairman of Viva Macau, prominent local businessman Ngan In Leng, gave assurances that the government loan was “backed up by shareholders”. Previously, Mr Ngan said he had an over “20 percent” stake in the low cost airline company.
Pay up, or else
Ms Luk said the extra 30 days given to the guarantors began the moment they received the letter pushing back the deadline. Viva Macau guarantors ac-
“It is not appropriate to disclose the information of the guarantors as we have not yet pursued judicial proceedings against Viva Macau and the guarantors,” says a DSE spokesperson knowledged receiving the letter on July 9, according to her. If they fail to pay the first instalment on time, she said the government “will pursue judicial proceedings against Viva Macau and the guarantors.” The Court of First Instance has informed the government about the creditors’ meeting on September 13-14, which will be attended by a fund representative. “Whatever happens, we will attempt to retrieve the money granted according to the terms of the loan,” Ms Luk said. The second instalment is due on September 1. Media reports have claimed the Consumer Council received 2,418 com-
plaints from people affected by the Viva Macau’s collapse. About one third of the complainants are from Macau, with the remainder from the mainland, Hong Kong, Singapore, Vietnam, Indonesia, Korea, Japan, the Philippines, Australia, France, Germany and the United States. A Consumer Council spokesman told Macau Business that the court had allowed it to attend the creditors’ meeting as an observer. The council has written to the complainants reminding them to submit the necessary documents to the court. Viva Macau’s problems began in late March when a payment dispute with its fuel supplier, the Nam Kwong Group, led to the cancellation of flights. The aviation authority then revoked Viva Macau’s operating certificate. Viva Macau unsuccessfully asked the courts to suspend the administrative decision and remain on the ground. Viva Macau was controlled by MKW Capital Management, an international private equity fund. Among the airline’s investors were the nephew and late brother of former Chief Executive Edmund Ho Hau Wah.
Who owes who? A
source close to the wrestle to resurrect Viva Macau has claimed that Nam Kwong, the sole provider of fuel at Macau International Airport, is in debt to Viva Macau and not viceversa. The source told Macau Business that Viva Macau’s investors had already paid the company’s debts to Nam Kwong - handing over more money than necessary. The accepted version of Viva Macau’s demise is that it began on March 27, when Nam Kwong Group declined to fuel Viva Macau planes, claiming it was owed money from as far back as 2008. On that day, a Saturday, flights to Tokyo and Jakarta failed to depart on time. The two flights, plus another to Ho Chi Minh City, eventually took off at the government’s expense. Two other flights scheduled for that day and five scheduled for the next day were cancelled. The airline has since been grounded.
Pay to play
The source told Macau Business that Nam Kwong demanded Viva Macau pay for its fuel in advance on that day. Viva Macau investors signed personal cheques worth MOP600,000 but Nam Kwong refused the airline fuel, insisting on payment for the full outstanding amount. The following day, Viva Macau investors paid up, signing a cheque for more than the MOP13 million outstanding, the source said. Nam Kwong then insisted the transaction be con-
A source told Macau Business that Viva Macau’s investors had already paid the company’s debts to Nam Kwong - handing over more money than necessary firmed by a notary, they added. Viva Macau’s planes stayed on the tarmac, even though Nam Kwong accepted the money. Macau Business has tried to confirm these details with Nam Kwong, but general manager Choi Kin said legal proceedings were underway and that “it was not convenient to comment at this point”. Over the weekend of Viva Macau’s demise, 4,739 passengers had their flights cancelled by the airline. At the time, Viva Macau chief executive Reg
Macdonald, said: “We apologise for any inconvenience to all the affected passengers, due to the impossibility of reaching an agreement with the sole provider of gas in Macau.” After the event, Mr Choi told reporters his company had been supporting Viva Macau “against commercial logic” since 2008 to uphold Macau’s reputation as a tourist destination. He said Viva Macau had violated the terms of its contract, so Nam Kwong had to cut off its fuel supply. August 2010
Photo: Luís Almoster |mspagency.org
Defunct budget airline Viva Macau has more than 10,000 creditors but only about 1,400 are entitled to attend a creditors’ meeting to decide the company’s fate, according to the latest information
ore than 1,400 individual investors and representatives of business entities are entitled so far to be present at a creditors’ meeting on September 13 and 14 to decide the future of grounded airline Viva Macau. They will discuss bankruptcy or a deal to resurrect the airline. But do they really have a choice? As it faces bankruptcy, Viva Macau has had to present a list of creditors, with the amount each is owed. Just 514 creditors have been named. But this does not mean that only these 514 parties will be represented. The law allows creditors omitted from Viva Macau’s list to make their claims 15 days before the meeting, so they have until the end of this month to reserve their seats. Many creditors have made their claims in court, some without realising if they are already on the Viva Macau list. A source familiar with the matter said
at least 800 more persons or companies would be invited to the meeting, joining those on Viva Macau’s list, giving a total closer to 1,400. But the real number of creditors is thought to be more than 10,000, according to the source. To prepare for the meeting, a judge will add up all the claims. This is no easy task. Some claims have been duplicated, having been made both by travel agencies and by individual passengers.
What will happen at the meeting? The law says that 10 days before the meeting, the debtor may present an agreement with the creditors in which the debtor proposes to reduce or modify part or all of the debt. The debtor may also ask for a moratorium, which postpones the deadline for repaying the debt. Any agreement must be approved by the majority of the creditors with the power to
Monopoly’s money A
ir Macau is absent from the list of creditors acknowledged by Viva Macau and the courts have yet to entertain any claim by Air Macau for the recovery of debt owed by the budget airline. Air Macau has regained its monopoly, having revoked the sub-concession agreement under which it allowed Viva Macau to operate. The agreement said any dispute between the two companies should be taken to arbitration. So when Air Macau took its claim to court, the judge ruled that it should be decided by arbitration, sources told Macau Business. By the time the judge delivered the ruling, the deadline for inclusion in Viva Macau’s list of creditors had passed and August 2010
vote, and the majority must hold at least 75 percent of the total debt. Alternatively, the creditors may allow the debtor to stay in business and set terms for repayment of the debt. Could Viva Macau escape bankruptcy? Our source says the chances are slim, given that the blue card work permits for crew have been revoked and that Viva Macau leased its planes. The probable outcome, according to the source, is that Viva Macau will be declared bankrupt and it will have to liquidate its assets to repay its creditors. The law says judicial expenses must be paid first, then employees and, finally, the creditors, who each receive a pro rata share of the remaining proceeds. Would creditors get anything? Hardly anything at all, our source said, because the airline has no assets. Its planes were leased and its landlord is taking action to evict the company from its premises.
Air Macau could not be included on it. Air Macau has yet to make another attempt to make its claim in court. However, the law says a creditor can still make a claim after a debtor is declared bankrupt. Air Macau said it was “internally following up” the matter. Air Macau has said Viva Macau owes it more than US$3 million (MOP24 million) in interest and for being allowed to operate the sub-concession. Viva Macau has not acknowledged any such debt. The president of the executive board of Air Macau, Zheng Yan, told the Macau Daily Times that his company was trying to solve the problem through legal action, and that it had already asked the courts to allow it to take part in the forthcoming creditors’ meeting. He added that Air Macau has no plans to operate the routes once flown by Viva Macau.
José I. Duarte Economist, Macau Business Senior Analyst - email@example.com
Flights of fancy Mired in red ink and seemingly without a path to profit, the question has to be asked: What next, Air Macau? As the summer season proceeds, many of our readers are likely to have travelled somewhere or be preparing to travel. In most instances, that will mean air travel. It goes without saying that, reasonably and as much as possible, most people would prefer to leave from Macau. The limited number of destinations served directly naturally puts a limit on such wishes. But what about those destinations that are directly accessible from our airport? Then a new set of issues may come to the fore. Let us, for the sake of argument, assume that you, the reader, wants to go, say to Beijing. What could be more convenient than popping into our airport and getting onto a direct flight? If your organisation is paying for your ticket – or you are mostly insensitive to cost considerations – there’s not much you have to worry about. Flying out of Macau you will be. Otherwise, if you shop around, you will quickly find that using neighbouring airports will save you quite some money. It is not unusual, in both Zhuhai and Hong Kong, to find flight prices that are half the price of what you pay in Macau. Now that’s puzzling – or, I argue, should be.
On borrowed time
It has always been a common perception that Macau airport and its “flag-carrier” airline lived on borrowed time. Their basic business model, so to speak, was a very straightforward one: to benefit from the interdiction of direct flights between Taiwan and the mainland. As everybody was aware, that situation might not last forever. A critical issue was, and has always been, how to operate, if not survive, when direct flights were allowed. That time, as everybody knows, has come. And it shows in the decline of flights to our airport, most notably – surprise, surprise – from Taiwan and the mainland. Remember, the first and very symbolic direct flight took place in mid-2008. The previous year (2007 was the last full year before direct flights started), those two destinations accounted for about 80 percent of traffic at the airport. If we compare the number of flights made in 2007 and last year, we see figures have dropped by 35 percent for flights from Taiwan and 45 percent for flights from the mainland. Let’s underline it. A drop in demand of this intensity from the two major “customers” would be deemed catastrophic in any line of business and would require emergency action. Unfortunately, specific data for Air Macau are not easily available, since after last year’s “crisis” the operational data have been removed from the company’s website.
Results defy gravity
Given these trends, the authorities and airline seem strangely calm. And any measures to counter further degradation of the situation have not resulted, as far as one can see, in any significant change in the major trends. For one, the data for the first quarter suggest, at most, a
stabilisation of the figures in what concerns the mainland (which is probably attributable to the new role now performed by Air China in the administration of the local airline) and a continued decrease in the number of flights to and from Taiwan. The results continue, neatly stuck in the red. This is a feature that, it should be noted, started well before any direct flights between the two sides of the Strait. The company has been posting losses since 2005 and reached 2008 with the staggering figure of MOP600 million of accumulated losses, which at the time represented 1.5 times its stock. In that year alone, losses were bigger than the company’s stock. The capital reduction and shareholders changes that took place have changed the picture slightly. Last year, losses were reduced even in the face of notably lower revenues. But even then, taking into account the reduction in the company’s stock from MOP400 to MOP200 million, the net loss for the year was bigger than the stockholders’ equity. Air Macau is defying gravity in more sense than one.
So the issue persists: what’s next? How does the combination of the (persistently) dire financial situation and the expected development of the main regional markets affect the business strategies and pricing models of the company? How do we explain the surprising, to say the least, insensitivity to competitor’s prices in easily accessible airports nearby? Is Air Macau to become just a nominally independent branch of Air China, a regional feeder of its hub nodes? What’s the business model, as it were, in the current circumstances? To complicate matters, both the airport’s management and the airline are supposed to be the providers of a public service. And legitimate doubts can be raised about the actual contents of the “public service” they are providing (some might say that in the case of the airport management that is an original sin – but it’s beyond our purpose here to go that far). Further, the present context seems neatly unsuitable to the current developments and, therefore, clearly unsustainable. Some questions can also be asked of the government. In what measure is the current institutional and business arrangement promoting the public interest, somehow defined? Is there any alternative strategy being designed or, however discretely, implemented? Is there a vision for the development of the airline industry and related activities? Is there a purpose to the apparent passivity? Other questions could be put forward. None are really new. None, or such is the common feeling, have ever been properly addressed by the relevant public and private agents. To get an answer to any of the questions that are formulated above would be a start, if not already a step forward, in a discussion that the longer it takes to get started, the more expensive it is likely to prove for the public finances. August 2010
The government says it’s not wasteful to create a new body to prepare for the launch of a policy research office which is already under fire, but former officials and legislators say it is rampant bureaucracy by Kahon Chan
he Macau government has set up an office to guide the establishment of a new policy research think tank. According to Chief Executive Dispatch No. 200/2010, the Preparatory Office for the Policy Research Office’s term will last for one year. The preparatory office will be terminated once the Policy Research Office is up and running. The Policy Research Office will be Macau’s new think tank to help Chief Executive Fernando Chui Sai On’s team to adopt a more “scientific” decision-making style by evaluating, drafting and following up on public policies. It will launch studies in several fields, including politics, law, the economy, culture, social issues and foreign cooperation.
The decision to create another government body ahead of the think tank’s creation has been greeted with criticism by academics and lawmakers. Besides that, there is already a chorus of criticism about the likely effectiveness of the new think tank once it begins operating. A former adviser to the government questioned the effectiveness of setting up any form of internal think tank, while an academic at the University of Macau said the government was engaging in window dressing, leaving the real problems unsolved. Lawmaker António Ng Kuok Cheong went one step further, saying it was an example of Parkinson’s Law, which says the amount of work expands to fill the time available for its completion. The lawmaker’s
argument is that bureaucracies tend to generate more bureaucracy over time to justify their own existence.
On the inside
A former adviser to the first Chief Executive Edmund Ho Hau Wah said in March that it was difficult for independent think tanks to survive in Macau. Mr Leng Xia said while the new Chief Executive tries to keep his promise of “scientific governance” there are already questions about the effectiveness of the policy research office. To make the think tank work, Mr Leng said it needed to recruit researchers from a variety of backgrounds who could act independently and give different points of view. He stressed the need for young academics in their 30s who have studied abroad to fill its roles, noting that many of the senior academics working for the government had served in their positions for more than a decade. Mr Leng acknowledged it would be hard for out-of-the-box ideas to emerge if the office was part of the government. “I am not too optimistic about it,” he said. “Once it becomes an exclusive tool of the chief executive, it cannot work
41 like a [independent] think tank.” Mr Leng said there was no need for a preparatory office. “It is too much ‘formalism’. Macau is so small,” he said. “Subjects for policy research are not very abundant or complicated; three to five regular researchers would be sufficient. It does not take an office to set it up.”
Mr Leng co-founded the Macau Policy Research Institute in 1998 and assisted in drafting Mr Ho’s first two policy addresses. He said the core researchers at the institute left for Hong Kong in 2002, partly because they felt the government did not have enough respect for their independent advice as intellectuals and instead wanted only “technical support” in drafting policy. Political analyst and academic at the University of Macau Eilo Yu Wing Yat thinks the present Research Centre for Sustainable Development Strategies (Ceeds) should be made to serve as the government’s central policy office. For years, Ceeds has supported government policymaking by collecting data, making consultations, providing suggestions, conducting research and examining proposals.
Old problem, same solution
In Mr Yu’s opinion, creating another government body is just duplicating resources. “It is the same problem with administrative reform in Macau,” he said. “When an existing structure fails to deliver the desired result, the government prefers to tackle it by setting up a new one.
No duplication, says government
he government says “there will be no duplication of efforts” between its proposed policy research office and Ceeds, an existing policy body. “It [the policy research office] will be a high-level think tank and we will recruit specialists, if necessary, from outside Macau,” said government spokesman Alexis Tam Chon Weng. He said at the end of Ceed’s current mandate in December the Macau Foundation would take over its structure and coordinator Daniel Tse Chi Wai would step down. Staff would be retained but would focus only on “basic subjects” related to quality of life and the economy, Mr Tam said. Academic Mi Jian has been selected as the main consultant of the policy body’s precursor, the preparatory office. The former dean of the Macau Science and Technology University’s law faculty said the policy research office would probably have four specialist groups, looking at politics, the economy, society and culture. Mr Mi said each group should have no more than six people, including three specialists, technical experts and administrative staff. He added the think tank will not launch public consultations but will manly conduct research on specific topics in compliance with the instructions of the Chief Executive.
“The mentality is still the old one and the old problem is not tackled. More careful thinking is needed.” Like Mr Leng, Mr Yu thinks setting-up a preparatory office is unusual and unnecessary, and suspects that it is meant simply to demonstrate the importance that the government attaches to “scientific governance”. Outspoken lawmaker Mr Ng is sceptical of the proposed set-up. On his Facebook page he says it is proof of Parkinson’s Law. He argues the new policy research office’s mission overlaps that of Ceeds.
The think tank does have some supporters. Lawmaker Dominic Sio Chi Wai
stressed the government’s determination to establish a new policy research office and change priorities in policymaking to reflect social needs. In a radio interview, Mr Sio, a lawmaker nominated to the Legislative Assembly by the Chief Executive, emphasised the importance of bringing in quality researchers. Lawmaker Au Kam San believes the new policy research office will differentiate itself from Ceeds because it is project-oriented and the new policy research office seems set to become a permanent conduit for policy advice. But Mr Au warned that if the administration continued to seek advice from its close allies, the new office would make no difference.
Photos: LuĂs Almoster | mspagency.org
People power Citizens are the key to good goverment and quality of life. Measuring what they think is vital says author and academic Lyle Wray by Tiago Azevedo
ngaging people in the political process is vital to the formulation of policy says Lyle Wray, the executive director of the Capitol Region Council of Governments in the United States. Wray was recently in Macau to meet with government officials and present a lecture at the University of Saint Joseph entitled “Citizen Engagement and Quality of Life: A Toolkit”. He says there are many ways to help improve government efficiency, and engaging citizens in the process is vital. “You have to involve citizens in figuring out what kind of issues might be important for communities and looking at what kind of things they might do to help improve their life,” Mr Wray told Macau Business.
executive director from 1992 to 2003. In a region of three million people, the Citizen League works to get people involved in shaping the community.
Wray believes there are two ways to look at quality of life. “One is objective, income, transportation and so on, and then there is a subjective side about how people feel about their life. There are also two different ways to deal with this. The first, you ask people what is important, while in the second you use an existent way to measure it”, says Mr Wray, the author of the book “Results that Matter: Improv-
“Something that is being done by some organizations here in Macau is similar to what I am doing in the US,” he says, referring to the “Macau Quality of Life” report – a research project by the University of Saint Joseph, Macau Business and Business Intelligence magazines. “Citizens may not have deep expertise on a given subject, but they do have experience and knowledge about their community and can help define priorities,” he says. One example is the Citizen League in Minnesota, of which Mr Wray was
ing Communities by Engaging Citizens, Measuring Performance, and Getting Things Done”. Mr Wray says quality of life reports are an important tool in raising awareness. “They make an important start on raising awareness around issues and engaging citizens on improving quality of life in their communities, addressing what they consider significant,” he says.
Something to look at
“If I were in government I would want to look at them (the reports) and understand them. I think it’s good information,” Mr Wray says. “I think people should be aware of their community, engage in progress tracking and think how they might get involved to improve their community, regardless of the form of government,” he says, adding that surveys measuring quality of life are a very useful piece of civic engagement. At Citizens League, Mr Wray started out with a process of asking citizens what they thought needed improvement. “It was a process conducted by a non-government organization that was very broadly based and where there wasn’t one political party or other, trying to figure out the issues they wanted to address. “The organization has been around since 1952 and for almost 50 years has been coming up with ideas on how to improve the environment, education, transportation, land use and so on,” he says.
All this can only work if there are real opportunities for citizens to shape public policies. Legitimate government decisions and the real promotion of citizen engagement has to be done by ensuring that the voices of those affected by policies have been heard, considered and addressed, which also means involving citizens in monitoring the outcomes of policies for performance evaluation. In the end it is a matter of trust and legitimacy.
Lyle Wray: “Citizens may not have deep expertise on a given subject, but they do have experience and knowledge about their community and can help define priorities” August 2010
Catching up by Tiago Azevedo
he process of citizen engagement is on the move in Macau, according to Agnes Lam Iok Fong. According to the assistant professor of the University of Macau’s Department of Communication and chairwoman of Macau Civic Power, there are more opportunities to share opinions with government departments. “The mentality has changed and citizens are more aware that they need to be an active partner in shaping the outcome of numerous policies,” she says.
However, Ms Lam says more should be done than at present regarding the policy of public consultation. “Macau still has to climb some more steps,” she says.
“First of all, we should have a legal framework for the consultation system. Secondly, citizen engagement still has to be better promoted. Nowadays, there is no motivation because people don’t see that their opinion is heard, considered and addressed,” she says. Beginning the discussion about means of engagement, the policy framework and institutional mechanisms are “essential to support citizen engagement in policy and program development,” says Ms Lam. In recent years, issues of transparency, accountability and citizen influence have grown significantly. As a result, citizen participation is being looked at as an instrument to improve both the quality and legitimacy of government action. “At the bottom end, shaping priorities by working as partners will help improve the quality of life,” Ms Lam says.
Agnes Lam Iok Fong
“Engaging citizens in policy making is a sound investment and a core element of good governance. It allows governments to tap wider sources of information, perspectives, and potential solutions, and improves the quality of the decisions reached. Equally important, it contributes to building public trust in government, raising the quality of democracy and strengthening civic capacity” Organization for Economic Cooperation and Development August 2010
Photos: Luís Almoster | mspagency.org
This level of involvement helps measure government: “Having citizens engaged offers a great opportunity for improving policy outcomes, but also for the public to evaluate what has been done by the government.” If the government-citizen relationship is promoted, the administration will be committed to formulating accountable and efficient policies. “With a legal ground to work on and a more professional approach from local groups, citizen participation can lead to better, longer lasting and wiser policy choices,” says Ms Lam.
Robert J. Shiller Professor of Economics at Yale University
Who should safeguard financial stability? Central bankers around the world failed to see the current financial crisis coming before its beginnings in 2007. Martin Cihák of the International Monetary Fund reported in July 2007 that, of 47 central banks found to publish financial stability reports (FSRs), “virtually all” gave a “positive overall assessment of their domestic financial system” in their most recent reports. And yet, although these central banks failed us before the crisis, they should still play the lead role in preventing the next crisis. That is the conclusion, perhaps counterintuitive, that the Squam Lake Group [http://squamlakegroup.org/], a think tank of 15 academic financial economists to which I belong, reached in our recently published report, “Fixing the Financial System”. Macro-prudential regulators (government officials who focus not on the soundness of individual financial institutions, but rather on the stability of the whole financial system) are sorely needed, and central bankers are the logical people to fill this role. Other regulators did no better in predicting this crisis, and are even less suited to prevent the next. David Cameron’s new government in the United Kingdom apparently came to the same conclusion when it announced plans to transfer regulatory authority from the Financial Services Authority (FSA) to the Bank of England. But agreement about the regulatory role of central banks is not widely spread. In the United States, for example, there is recognition of the importance of macro-prudential regulation, but not of giving this authority to the Federal Reserve. The newly passed US financial-reform legislation entrusts macroprudential policy to a new Financial Stability Oversight Council. That is good, but the US Treasury secretary will be the council’s chairman, and the Fed, despite gaining some new powers, will for the most part be only one of many members. The head of the council is thus a political appointee who serves at the pleasure of the president. Recent history shows that political appointees often fail to take courageous or unpopular steps to stabilize the economy. A modern US president certainly remembers how difficult it was to convince voters to put him where he is, and is perpetually campaigning to maintain approval ratings and to preserve his party’s prospects in the next election. The Treasury secretary is part of the president’s team, and works next door to the White House. George W. Bush won the 2000 election, despite losing the popular vote. In 2003, Bush chose as his Treasury secretary John W. Snow, a railroad president who, as Barron’s columnist Alan Abelson put it, “may not be the sharpest knife in the cabinet.” Snow obliged the president and gave unquestioning support to his policies until leaving office in 2006, just before the crisis erupted. Under the new law, Snow would have been in charge of the stability of the entire US economy. One theme that Bush found resonated with voters in his 2004 re-election campaign was that of the “ownership society.” A successful economy, Bush argued, requires that people learn to take responsibility for their actions, and policies aimed
at boosting home ownership would inculcate this virtue on a broader scale. That sounded right to voters, especially if it meant government policies that encouraged the emerging real-estate bubble and made their investments in homes soar in value. Snow echoed his boss. “The American economy is coiled like a spring and ready to go,” he chirped in 2003. Two years later, near the very height of the bubbles in the equity and housing markets, he declared that, “We can be pleased that the economy is on a good and sustainable path.” But, to Bush’s credit, he also brought in Ben Bernanke in 2006 as Fed chairman. Not part of Bush’s team, Bernanke was protected from political pressures by America’s long tradition of respect for the Fed’s independence. The choice of Bernanke, an accomplished scholar, apparently reflected Bush’s acceptance of the public’s expectation of a first-rate appointee. The same problems occur in many other countries. People who are chosen in part to win the next election often find their economic judgment constrained. A news story in 2003 reported, for example, that Australian Secretary to the Treasury Ken Henry had warned of a “housing bubble” there, but then quickly tried to withdraw his comment, saying that it was “not for quotation outside of this room.” He did earlier this year finally propose new tax policy to slow the still-continuing Australian housing bubble, but now he can’t get his government to implement it. By contrast, in recent decades central bankers in many countries have gradually won acceptance for the principle of independence from day-to-day political pressures. The public in much of the world now understands that central bankers will be allowed to do their work without interference from politicians. There is a tradition of the central banker as a worldly philosopher, who stands up for long-term sensible policy, and this tradition makes it politically easier for central bankers to do the right thing. In fact, while the world’s central banks did not see the current crisis coming and did not take steps before 2007 to relieve the pressures that led to it, they did react decisively and energetically as the crisis unfolded, with coordinated international action. This was facilitated by the tradition of political independence and cooperation that has developed over the years among central bankers. The crisis has underscored the utmost importance of macro-prudential regulation. Although our central bankers are not perfect judges of financial stability, they are still the people who are in the best political and institutional position to ensure it. August 2010
Property | Market Watch
Strong sales Sales of residential property across the first five months of the year have been strong, accounting for 85 percent of the value of all of last year’s transactions by Alan Tso
atest official statistics show that 7,713 homes were sold in the first five months of this year – about 68 percent of the total number of residential properties sold in the whole of last year. The value of the houses sold was MOP18.4 billion, just MOP3.1 billion August 2010
shy of the aggregate transaction value of last year. In May, a total of 1,627 homes were sold. It was the second biggest transaction volume recorded this year and represents a year-on-year rise of more than 100 percent. In combination, these figures are
signs of the revival of Macau’s property market that, so far, appears to have been unaffected by the mainland’s measures to curb property prices. As Macau’s gaming revenues continue to soar, the local housing market is afforded plenty of momentum to sustain its upswing.
Upswing should continue
According to Centaline Property, one of Macau’s leading estate agencies, although housing prices have increased by eight percent in the first half of the year, they are still 10 percentage points below the peak in value recorded in 2008. It is expected that housing prices will continue to climb in the foreseeable future. Looking back over the second quarter, the real estate agency has highlighted several high-profile transactions that underline the bullish sentiment.
More growth to come Jones Lang LaSalle optimistic about residential outlook for property in the second half
Residential units sold per record of stamp duty* NUMBER of Transactions
Value of residential units sold per record of stamp duty YEAR
Value (10^6 MOP)
* Note: The data includes transactions of residential units valued below MOP3 million, which are exempt from stamp duty.
he outlook for Macau’s residential market is for a positive second half of the year, according to Jones Lang LaSalle in its Macau Mid-Year Property Review, released last month. “Macau’s real interest rates will likely remain in the negative regime for the rest of the year, providing a favourable environment for property investment,” said Jones Lang LaSalle’s head of residential property in Macau, Jeff Wong. “Better job security coupled with rising incomes may fuel demand from local end-users, while the limited new supply in 2011 and 2012 will lend support to residential prices.” The firm’s head of research, Greater Pearl River Delta, Marcos Chan, said he expected the reactivation of construction projects on the Cotai Strip to further strengthen the local labour market, fuelling stronger consumption and property investment demand. For the first half of 2010, capital values for high-end residential properties grew by 3.2 percent and rents by 1.5 percent compared with the end of 2009, the report said. Growth for mass and medium residential properties was stronger, with capital values rising by 4.4 percent and rents by 7.0 percent over the same six months. In the office market, the resumption of works on Cotai could spark a “relative pickup” in leasing said Jones Lang LaSalle’s managing director in Macau Gregory Ku. August 2010
Property | Market Watch
average transaction value of residential properties Value (10^3 MOP) 3000 2500
the total number of buyers in residential transactions in the fi rst fi ve months of 2010:
2000 1500 1000 500 0
Jul Aug 2009
Proportion of buyers average transaction price of residential units per square metre Value (MOP) 3000
2500 2000 1500 1000 500 0
The highlights include: the sale of an apartment at One Central Residences for HK$11,500 (MOP11,845) per square foot, an 8,000 square foot villa on Penha Hill that sold for more than HK$50 million, the sale of a three-storey commercial block opposite Leal Senado for HK$300 million, and the sale of the commercial property Zhu Kuan Building for HK$700 million.
Looking ahead, more robust sales are expected in the second half of this year. Among the most highly anticipated
projects will be the second phase of One Oasis, a high-end condominium on the Cotai Strip, and the serviced apartments at Block 8 of One Central Residences. Many industry observers believe the former project, in particular, will spark a new round of excitement in Macau’s luxury property market. The 800 units in the first phase were bought within a week of the presale launch at an average price of HK$4,000 per square foot. It is little surprise then, that all eyes are now on the launch of its second phase.
he results of the latest consumer confi dence survey indicate that Macau residents’ confi dence in the property market has gone up. In contrast, all the other sub-indexes fell when compared with the fi rst quarter of the year. the 2010 second Quarter Consumer Confi dence Survey, released last month by the Institute for sustainable Development of the Macau university of science and technology, indicated a rise of 27 percent for the home August 2010
purchasing sub-index, to 47.8 points. Associate Professor Liu Cheng Kun said the increase was mainly attributable to the government’s reassurances about the goal of building 19,000 public housing units by 2012 and its attitude in handling housing prices. The consumer confi dence index for the second Quarter was still below 100, standing at just 81.2 out of a total 200 points, a slight drop from 82.8 points in the fi rst quarter.
the total value of residential transactions in the fi rst fi ve months of 2010:
Proportion of buyers
Signs ripe for further price rises Ricacorp expects property prices to increase between five and 10 percent in the second half of the year
acauâ€™s overall property market is on the rise, despite a slow start to the second quarter, according to the executive director of Ricacorp (Macau) Properties Jane Liu. In comparison with recent years, this year is showing promising signs of growth, she says. According to Ms Liu, transactions in residential properties in the second half of this year, supported by a range of favourable factors, may increase by 15 to 20 percent compared to the first half. Property prices are expected to increase by between 5 and 10 percent. She predicts investors and residents will be increasingly optimistic about owning property in Macau, given the strength of the gaming and tourism industry, and falling unemployment rates. In the second half of the year, the release of upscale properties into the market will positively impact volumes and values of property transactions. And foreign investor confidence in Macau will improve once the European Union recovers and Beijing relaxes its macro-economic controls to cool its real estate market. August 2010
Property | Market Watch
Big ideas for the development of the Praia Grande Bay reclamation area have for years remained just that – big ideas. After plenty of developers’ proposals the government has gone to the public for inspiration by Vanessa Amaro
he Praia Grande Bay reclamation area, near Macau Tower, has been left undeveloped for 16 years now, and will remain so until the government decides what to do with it. The government admitted last month that it still has to reach a decision. What is more, developers that took control of the land at low prices back in the 1990s and onwards may now have to pay more for what is considered very valuable real estate. In the developers’ worst-case scenario, their projects may even be cancelled. All now depends on the results of the government’s call for a “wall of ideas” from the public about what to do with August 2010
what it prosaically describes as “Zones C and D”, the 34.6 hectares of reclaimed land between the Nam Van and the Sai Van lakes. “We haven’t yet made any decisions about the land in Zones C and D. There’s no definitive urban plan, so until then everything remains as it is,” said Lao Iong, head of the Urban Planning Department at the Land, Public Works and Transport Bureau. The area was reclaimed in 1992 and the former Portuguese administration began granting lots to private parties in 1994. At the time, the biggest construction project in Asia was envisaged. High-end residential complexes, commercial centres and hotels were to be built.
The developers have submitted their proposals to the government, but all projects are stalled. “None of the projects we have received for use of the land have been approved,” said Mr Lao.
Who owes who
Instead of compensating the developers for the delay, the government may eventually demand that they pay more for their land grants. “The administration doesn’t have to compensate the companies,” Mr Lao said. “They are the ones who may have to pay extra to the government, since the land premium has increased with time. But this is a matter to be analysed by the Land Commission.”
Stalled projects at Praia Grande Bay The Shun Tak Holdings Harbour Mile project remains on hold pending a government review, according to the company’s latest annual report. It is envisaged that the 399,500-square-metre development on the Nam Van lakefront will include a hotel, residential towers, serviced apartments, a shopping mall and entertainment facilities. In 2007, Kerry Properties acquired a site at Nam Van Lake for the development of a luxury residential apartment building. According to the company’s website, the project is meant to yield a gross floor area of approximately 400,000 square feet upon its “scheduled completion in the fourth quarter of 2012”. Bel Lago, a joint venture between Pak Keng Van Property Investment and LaSalle Investment Management, was announced in 2007. The 50-storey luxury residential complex, on Lot C9 of the Praia Grande Bay reclamation area, would include four towers containing more than 500 units, close to 400 parking spaces, a clubhouse and facilities such as a swimming pool, gym and spa. Tenacity Real Estate Group and Oaktree Capital Investment announced in 2007 a project for Lots C5 and C6. The development would comprise two 35-storey residential towers containing 300 units with sizes ranging from 74 square metres to 372 square metres. There are no deadlines for the completion of either the planning process or the start of construction. “It’s a little premature to be talking about dates,” said Mr Lao. “Much of what will be built in Zones C and D will depend on what the public thinks.” While the government waits for the public to build the “wall of ideas” for
developing the area, the United Nations Educational, Scientific and Cultural Organisation (UNESCO) has already had its say. UNESCO has warned Macau to be careful about what it builds, so as not to block or otherwise spoil the view of the heritage-listed buildings in the vicinity. But the maximum height for new buildings has yet to be set.
The head of the cultural heritage department at the Macau Cultural Affairs Bureau, Jacob Cheong Cheok Kio, said development would be balanced with the protection of the patrimony, with a buffer zone to preserve the amenity of heritage-listed buildings. “When these landfills were created, there wasn’t yet a buffer zone. Now there’s a need to allow for this in the planning process. The UNESCO experts are quite concerned about the fate of this land and made sure their proposals made their way to us,” he said.
The public have until August 18 to respond to the invitation to contribute to the “wall of ideas” for developing the reclamation area. “This land is very dear to Macau, so its development has to be subject to public opinion. We want to gather as many ideas as possible,” Mr Lao said. Any individual or group may submit proposals. A committee of local and mainland experts will choose up to 10 of the best and the short list will be announced in September. The government will put the best proposals on display so that the public can vote on them, on a date that has yet to be set. Mr Lao believes that although anyone can contribute to the “wall of ideas”, even those with no experience of urban planning or architecture, the initiative will bear fruit. “Everyone’s opinions are welcome, and will help us decide what to do with that land,” he said.
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Stretching, but for what?
Land-scarce Macau is again reshaping its borders, adding one-eighth of its present area in reclaimed land from the sea; giving developers and architects new opportunities and raising old concerns
Photos: Ant贸nio Fal莽ao | Bloomland.cn
by Kahon Chan
s French chemist Antoine Lavoisier put it, in nature “nothing is lost, nothing is created, all is transformed”. In Macau, sea will soon be turned into land, as the government prepares a massive reclamation programme, creating new horizons for the property sector. Macau is no novice when it comes to expanding its landmass beyond its coastline. Well over half its 29.5-square-km area has been reclaimed from the sea in the past 100 years. The surrounding waters are under the jurisdiction of the Mainland and last November, Beijing granted Macau’s request to reclaim another 350 hectares of land in five zones off the Macau peninsula and Taipa island. The proposed reclamation will increase Macau’s landmass by 12.3 percent. The government is now consulting the public about what should be done with this new land. The current consultation ends on August 18. Two further phases will follow next year before the government makes a decision. While the government expects to see the land reclaimed within five years, the schedule for developing it is still uncertain.
The new reclamation areas
A large portion of one of the zones, Zone B to the south of the peninsula, is already dry land. The progress in Zone B reflects the importance of public buildings due to be constructed there, such as a new courthouse. But Zone A is the priority, according to the government. The 138-hectare area to the northeast of the peninsula will connect with the artificial island to be reclaimed for the landing of the Hong Kong-Zhuhai-Macau Bridge, so it is due to be finished before 2016. Given the growing demand for subsidised housing and recent controversy over land grants, Secretary for Land, Transport and Public Works Lau Si Io has said one half of the overall new land will be used for public parks, a seaside promenade, transport infrastructure and other essential public facilities, with the other half for public housing and economic diversification projects.
Zone A is to the east of the Macau peninsula. It is the biggest zone, covering 138 hectares. Its intended uses are for road infrastructure, a seaside promenade, public buildings, various industrial projects, and commercial and residential neighbourhoods.
Zone B, to the south of the peninsula, measures 47 hectares. It will be divided into two parts, one on each side of the Governador Nobre de Carvalho Bridge. The zone is mainly for road infrastructure, tourism and recreational facilities, parks and green areas, public buildings, and commercial and residential developments.
New commercial and residential communities will be built in all five zones. Zones C and D, north of Taipa, will be exclusively commercial and residential.
Architect Joy Choi Tin Tin, former vice-president of the Architects’ Association of Macau, believes the reclamation is an opportunity to create a whole new way of life in Macau. She hopes the government will take the lead in establishing Macau’s own model of private residential communities by setting proper urban planning guidelines. “A private housing estate should be more the kind of place where highways are August 2010
minimal, landscaping is more prominent and buildings are of various heights. The way of life in Macau should change, with the people having more options,” she said. The Ocean Garden complex is often regarded as the model housing estate in Macau but Ms Choi thinks public roads there isolate apartment buildings, that the community network is physically fragmented and that with little space for socialising, there is no community at all. She wants the developments in the reclaimed areas to be different. “Discovery Bay in Hong Kong, for instance, restricts vehicle access and the building density is low. Apartments are relatively not that expensive, too,” Ms Choi said.
While offering a lucrative project to just one developer is risky, conditions attached to land grant could serve effectively as planning controls, she argues. And since large lots tend to be cheaper in proportion to their size than small ones, apartment prices can be lower. “I am not worried about prices. In fact, large-scale housing estates are often more affordable in Hong Kong,” she says.
A Hong Konger who heads a real estate agency that concentrates on the high-end of the market agrees that the reclaimed land could provide people a greater choice, rather than just meeting demand for housing.
“Roughly, there are fewer than 200,000 households and about 150,000 apartments in Macau. Add that to the public housing units built by the government and there is actually more supply than demand,” said Ronald Cheung, chief executive of Midland Realty (Macau). “Around 70 percent of Macau people own their homes and I think there are enough apartments, compared to Hong Kong.” Mr Cheung assumes that either the government foresees explosive growth in population, creating demand for more public housing, or that it predicts greater migration from old neighbourhoods to new ones where the facilities and lifestyle are better.
57 He told Macau Business that developers “will be the direct beneficiaries” but “people at the low-end will benefit the most” from new amenities such as convenient parking.
President of the Macau General Association of Real Estate Chong Sio Kin is guarded in expressing his opinions about the new land, but he has some insightful observations. “Public housing should be built in areas separate from private housing. They should no longer be mixed together, like in Fai Chi Kei,” he said. Mixing the two has made buyers of private apartments hesitate before acquiring units in the area, he said. “Just like for retail space, the same concrete shell in a back alley and on Avenida Almeida Ribeiro has very different values, depending on its location.” Mr Chong thinks private housing projects on the new land should be aimed at midmarket and high-end buyers. “The investment-oriented market should co-exist with the rest of the market once the public housing projects have been done and the middle class is taken good care of. Every part of the world is luring investors, and if real estate values are low, the economy won’t do well, either,” he said. Mr Chong’s business associate, directly elected member of the Legislative Assembly Ung Choi Kun, is more cautious. “It is too early to talk about it,” he said. “The people’s top concern now is about the supply of public housing. I am a developer, but taking a
Zones C and D lie to the north of Taipa island. Zone C covers 33 hectares and Zone D 59 hectares. A water channel will separate them from Taipa. They will be used principally for commercial and residential neighbourhoods.
narrow view is offensive to me as a lawmaker.” Mr Ung believes the market will determine how housing projects will fare in the newly reclaimed areas. For now, he says, there is nothing really to worry about
since the reclamation has yet to be completed.
But the free market needs rules to function. Over the past few months, Mr Ung has stressed the need for greater
regulation of property sales, and lawmaker Kwan Tsui Hang recently questioned the government’s slowness in amending the law on urban planning and land grants. With the outdated and murky land grant laws still in
Zone E is northeast of Taipa, near the Macau International Airport and the Pac On Ferry Terminal. It measures 73 hectares. It will be divided into two parts, called E1 and E2. Land here is intended mainly for infrastructure, public buildings, various industrial projects, and commercial and residential neighbourhoods.
No city boundaries A
t the end of last year, Macau - comprising the peninsula, Taipa, Cotai and Coloane - covered 29.5 square km. In 1912, it covered just 11.6 square km. Most of the growth is due to a string of land reclamation projects that have accelerated in the past 20 years. For instance, taipa comprised the two separate islands of taipa grande and taipa Pequena until 1957, when they were connected by reclaimed land. the ZAPE reclamation, on which the Hotel Lisboa was built, was completed in 1936. In 1984, Macau spanned 15.5 square km. By 1990, the NAPE area had been added. Five years later, the Macau International Airport opened for business, also on reclaimed land. A year later, the Praia grande Bay land reclamation was fi nished. then came Cotai. Where before there was only water, there is now 5.8 square km of reclaimed land. Cotai was originally meant to be a new urban area, but the plan was dropped to give way to the casinos.
place, there have already been rumours of companies ensuring their foothold on the new land – even before the reclamation was approved. Hong Kong-based Kerry Properties has said publicly that it has asked the government to provide land for residential purposes in one of the new zones, to replace the Cotai lot the company gave up to make way for Galaxy Macau. Mr Lau, the Secretary for Land, Transport and Public Works, has issued a public assurance that the government has not yet made any promises to developers. “At the moment, the government has not granted any piece of land,” Mr Lau told lawmakers. “The authorities will follow all the regulations and the relevant laws, giving priority to public tenders, when the time comes to grant any piece of land.”
An artful plan A group of artists is preparing their own action to have reclaimed land developed into a cultural and arts district as a pillar of the city’s tourism industry
Land is not enough
By António Falcão
The dying arts
The government’s “call to arms” was “New Plan, New Dreams. Be a part of it” and it did not go unnoticed. “We read about the new five landfills to be built in Macau in the press,” says Ms Ng, a Macau-born artist who currently works out of her Beijing studio. “There are a number of projects already outlined, residential buildings,
Photo: António Falcão | bloomland.cn
s the government seeks public opinion on how to use the land it is poised to begin reclaiming, a group of artists is not holding back. Led by artists Cindy Ng Sio Ieng and Hope Chiang, the group wants to see some of the land developed on behalf of the arts. High on the group’s list of priorities are a space for the performing arts, a theatre and new museum dedicated to the contemporary arts. The group says there is also a pressing need for more bookstores, cinemas and places to study the arts. The group is preparing for the government’s special meeting on August 7 where officials will hear opinion on the proposed reclamation projects but they want to do more. “We’re talking with people and artists that may, through their art, make a contribution to this cause, creating something that symbolises our struggle. And, if need be, we’ll take it to the streets. Marching for the arts,” says Ms Ng. The movement’s slogan is a simple one: Please give us new land for culture and art.
and can see the difference. I was in London, lived in Taipei for eight years and in Beijing now for three years, and when I return to Macau I feel a little disappointed. “There’s nothing here when compared to what is happening in those cities. Do we want our children to work in a casino? Must we do something for the future? I think so.”
“One must bring together three factors: space, cultural policies and human resources. Only then can everything move forward. One without the other cannot work,” says Cindy Ng gardens etc., but is it possible that this new land could also be a real space for the arts and culture.” “The arts are dying in Macau. That is what I see when I’m here. I go abroad
Using online social networks to marshal support, the group is developing the idea to dedicate an area to the arts and culture but the proposal has more to it than just allocating space. “One must bring together three factors: space, cultural policies and human resources. Only then can everything move forward. One without the other cannot work,” says Ms Ng. There are examples of developments that did not listen to the wishes of the people and have since struggled, she says, pointing towards the attractions at Macau Fisherman’s Wharf. “We have to think about why things happen. That fake volcano, was it a request from the local people here? Did anyone ask our opinion on it? What about the entire fake stuff there, was it something the population was lacking? That’s why everything’s empty,” she says. While tourism has been the main driver for these projects, Ms Ng has called for a change. “One can’t assume that by building more casinos and luxury shops tourists will stay longer in Macau. We attract gamblers but then no one stays that long here,” she says. “Tourism shouldn’t deceive people, it shouldn’t just be a matter of façade. There must be something else behind it. Thus, we want to build a city where culture is the target,” she added. “The spaces that exist, even those that are abandoned, aren’t enough, they’re too small for a 10 or 20 year development, we must make long-term planning, not just for now.”
â€œThe collapse of that model [junket aggregator] created the opportunity for us to deal directly with the junkets, which is good for us because in the past the big aggregator sometimes created obstacles for us to service the customer underneath the junketsâ€?
Nolimits Management at Altira and City of Dreams has been overhauled, and Ted Chan Yin Tat will play an instrumental role as Melco Crown Entertainment’s new co-chief operating officer for gaming. In this exclusive interview with Macau Business – just days before the public announcement that Greg Hawkins was leaving – the president of Altira is bullish on Macau, saying business is stronger than ever
By Paulo A. Azevedo and Luís Almoster (Photos)
hree years after the opening of Melco Crown’s first property, and almost one and a half years after it´s name was changed from Crown to Altira, what exactly have been the major achievements and the biggest challenges? Ted Chan: Well, let’s talk about achievements. This is actually a very small boutique-hotel, not like other competitors that opened with a couple of thousand rooms, resort bases and all sorts of entertainment. The challenges here were the positioning of this property and also how could we brand the [new] name, which is so important to customers. Did we want to go back to three years ago, when this was a kind of all-you-can-come-and-enjoy type of property, we had this big mass gaming area and little VIP gaming, or did we want to realistically do a positioning of the property and be more focused on the tier of customers that we would like to entertain? So we made a decision one and a half years ago. Let’s position this property to be high-end VIP, even if the term can sometimes be quite confusing. We have positioned this as a high-end hotel, uniquely built in a place which is neither a hot spot on the peninsula nor in the Cotai area. We decided not to promote this property in a mass-marketing campaign like many of the new brand names are doing. Because we know that our customers are focused in that particular tier I mentioned, promotion is done by word of mouth by both gaming and non-gaming customers. August 2010
Today, Altira is known by the “who’s who” in Macau, by those who like to appreciate the good things in life in Macau, both non-gaming and gaming. All the achievements in the past year are telling us that our positioning is right and that we are delivering the right product and service to the right people. As well as the business, we changed from a junket-aggregator model to a more focused individual junket partner basis, where we deliver the service to both the junket partner and agent or customer. A more customised service. However, nowadays, it is hard to maintain a certain level of service in Macau, with difficulties on the labour market front, and the fact that customers here are not the same as in Hong Kong and Singapore. Are these not extra challenges? What you mention about the labour market is quite right. In Macau, the government had to make the decision to protect the workforce. In terms of dealers and at supervisor level, we have to hire local people. But the problem is not specific to this property, it applies to every casino-hotel and we sort of understand the reason behind that restriction. So, it’s more about focusing on the training of the people, given the turnover rate is so high, particularly in food and beverage and in the gaming sector. It is so important that you manage the team right and provide enough training. We have become used to that environment quite well in the past three years. Honestly, and in terms of lack of labour, at City of Dreams, before the opening, we were nervous about not having enough labour to have the building ready. But it applies to any new Cotai property as well. After three years, we have just become quite used to that. And our relationship with the government is very close and very well maintained.
Bye, bye Amax At the end of the day what puts a smile on the faces of the shareholders are results and especially gaming results. Before getting into that, why exactly were the changes at Altira regarding the relationship with junkets introduced? (see box in these pages) First of all, we never changed positions on being partners with the junkets. August 2010
The new gaming boss
ed Chan has been promoted to co-chief operating officer for gaming. The move is part of a wider management restructuring at Melco Crown Entertainment. The new operations management structure is organised along functional rather than property responsibilities, and has two newly created co-chief operating officer positions for gaming and operations at the top (see “Changing of the guard” in the Gaming section). The Melco Crown Entertainment press release announcing the restructure says “Mr Chan has been a pioneer in the transformation of the gaming industry in Macau in recent years and is uniquely qualified for this position”. The company stressed his broad experience across Macau’s customer segments, reaching back to 2004 when he was chief executive of Mocha Clubs.
A lot of people just confuse, stereotype or categorise the junkets as somehow being some kind of lower level, but to me it has a different meaning. To me, they are our partners and we can’t live without them because of a lot of restrictions existing in the gaming industry in Macau. Since [many of] our customers come from mainland China, we need our partners to promote and secure them, so that they can have their gaming experience here. What has changed is the fact that in the past we had an aggregator of junkets. However, last year the government announced that there would be a 1.25 percent commission cap and the aggregator’s model – we paid a higher commission to the aggregator, who paid a little bit lower commission to the subjunkets and retained a margin – was no longer valid. The collapse of that model created the opportunity for us to deal directly with the junkets, which is good for us because in the past the big aggregator sometimes created obstacles for us
to service the customer underneath the junkets. Now we are dealing directly with the junkets so we can provide the right service to customers. I am not criticising the aggregator but the fact is... Were you too dependent on one major representative? You are talking about AMA, under Amax Holdings? Correct. And honestly we didn’t make the wrong decision dealing with AMA because in this competitive landscape if anyone can guarantee you, for instance, 50 or 60 billion [of rolling chip], wouldn’t you like to give them a higher commission? Oh yes, of course. As you said, times change. Is AMA still doing any business with Altira? AMA is not doing business here but the junkets beneath AMA before actually are, as well as some new junkets. They are doing well. Is it really possible to maintain a cap on the junkets’ commission? Well, the government is actually implementing the cap. It is in the [Official] Gazette. The law was enacted. The cap is 1.25 percent and everyone in the market is doing so. The problem is never to produce a law but how to enforce it… At the very minimum, we maintain that cap.
A better deal So everyone is satisfied with the cap, including the junkets? The way we see this problem is how we see the market share. In the last seven or eight months, the level of remunerations and business has stayed at a quite healthy level. So, I agree this is the right level. And, honestly, the more you pay to the junkets, the more they have to repay to the agents and customers. Eventually the junkets would not be the ones actually benefiting from an increase in the commission. Everybody forgets it is a very competitive world out there and that the junkets need to repay the subjunkets and the latter to give back to players, so basically the margins are getting thinner…
“With the system that [Greg Hawkins] built and with the exciting elements coming on board, I think the one who could do a good job to continue his quality work is someone who will programme these elements right to meet the customer’s expectations or beat the customers’ expectations”
Who is Ted Chan? T
ed Chan Ying Tat has served as president of Altira Macau since November 2008. Prior to that, he was the chief executive officer of Amax Holdings from December 2007 until November 2008. Before his role at Amax, he led special projects at Melco International Development. He held the position of Mocha Clubs’ CEO from 2004 to 2007. From June 2002 to November 2006, he assisted Melco chief executive Lawrence Ho, getting involved in the group’s
overall strategic development and management. Mr Chan served as a director of development at First Shanghai Financial Holding Limited from 1998 to May 2002, specialising in Internet trading solutions and business development in the mainland. He graduated with a bachelor’s degree in business administration from the Chinese University of Hong Kong and holds a master’s degree in financial management from the University of London.
“The sky is the limit and I see a great benefit and a great future for the mass and VIP segments. I see a great market but it is so correlated to the economy, so there will be some volatility in there. But with a continuing relaxation of [visa] policy, that allows more and more people to enjoy the Macau experience” At Altira, we have about 16 junkets at the moment and we believe that the level of business and the price we maintain with them is a healthy level. Is there some junket sharing between Altira and COD or do all of them just work with Altira? Very few overlap. I think it will be to our benefit in the future to have more collaboration between sister properties. If the same shareholders and the same junkets operate in Altira and in COD, we will be happy with business partnerships. This is one company and that will give more flexibility for junkets to bring in customers. For instance, they like to gamble here but it’s really because of luck. But if they lose money, the agent can suggest to the customer to go to COD and have a look to see other gaming facilities.
Not better, just different For the first quarter, net revenue at City of Dreams was US$336.3 million and adjusted EBITDA was US$70.9 million. In the same period, Altira had net revenue of US$197.2 million and generated adjusted EBITDA of US$21.8 million (see box for second
quarter results on these pages). Has Altira been posting stronger results than COD, especially if we note that it is just one property while COD has three big properties? As I said, in terms of VIP business, we have very few overlapping, so there is no business collaboration. As one single property, Altira’s VIP business is among the top five in the whole of Macau’s properties. So, I’m quite satisfied with the results. Talking about Altira being a single property and earning a US$190 million revenue compared to US$300 million at COD, bigger by three or four times, I think our challenge is actually having a very high percentage of VIP business overall. The VIP segment represents about 80 percent of all revenue in the company. So, I believe there is huge room to go in the mass-gaming market. And I am a super bullish individual looking at the retail and mass-gaming opportunities in Macau in the next five years. On non-gaming revenue, Altira beats COD in the occupancy per available room; 92 percent at the first against 75 percent at the second, according to first quarter figures. What’s the reason for such a difference? First of all, the occupancy in both COD and Altira is not bad. I mean in the whole of Macau... I didn’t say it was bad… Altira is small, we only have 216 rooms. During the weekend, it is always full, 100 percent. So what we have been doing now is actually allocating some of the customers to stay at COD during weekends. COD is different. It is bigger and has more rooms, approximately 1,400 rooms and caters to another sort of customer. So, it is not fair to say Altira beats COD in terms of occupancy rates, although the numbers suggest that. But if you look into more detail, to the customer mix, it is fair to say we are doing pretty well.
The new challenges Let me ask your personal opinion on how difficult it will be to replace Greg Hawkins and still maintain the same level of cooperation between both properties?
he good times appear to be over for Amax Holdings. The 1.25 percent commission cap introduced by the government late last year has been detrimental to the business model of the company, controlled by long-time VIP room operator Ng Man Sun. Amax, through its Macau unit, AMA International, was once the biggest aggregator of junkets in Macau, working closely with Altira Macau. The company charged a higher commission to the casino but, in return, brought in a considerable volume of business. AMA would keep a part of the commission, giving the rest to the junkets under its umbrella, to whom it would also facilitate access to credit. With the regulatory changes, junkets no longer saw the value in the arrangement and began negotiating directly with Altira. Amax is now facing uncertain times. In its results presentation on July 30, Amax said “as AMA’s collaborators ceased to cooperate with AMA, some refused to schedule the repayment time and have not yet settled the debts. Therefore the impairment for dubious debt overshadowed the HK$2 billion revenue received by AMA during the financial year” ended March 31. Last month, Amax hired corporate restructuring and insolvency firm Horwath Corporate Advisory to begin “assessing the recoverability” of the HK$373 million debt (at least) owed by junkets, according to the company’s annual report. For the year ended March 31, Amax posted a loss of HK$2.48 billion, compared to a profit of HK$78 million the year before. The result was mainly due to “the large impairment loss related to the investment in junket related operations.” Amax, which also owns a 49.9 percent share of the Greek Mythology Casino, says it “is undergoing internal restructuring” and, despite the setbacks, is seeking opportunities to cooperate with casinos in the AsiaPacific region. “We foresee that the company will soon embark on a new direction,” it said. August 2010
That’s a very, very, difficult question and I am sure there are a lot of rumours in Macau [interview was done before the public announcement of Greg Hawkins resignation]. Greg is a great guy and he has done a very good job in putting up COD and maintaining the level of quality. That is what we were looking for and he has been doing a great job. He has left a very good system in COD to be followed. At the same time, I think the lack of entertainment at the moment in COD, in my point of view, is the main reason that we are still a little bit behind in terms of the non-gaming or mass-gaming revenue. But that will change soon. For instance, John Choi is going to put Cubic over there and we have the House of the Dancing Water coming, which will be the best show in the world, and also the Hard Rock Cafe. We need someone to put this together and programme it right. With the system that [Greg Hawkins] built and with the exciting elements coming on board, I think the one who could do a good job to continue his quality work is someone who will programme these elements right to meet the customer’s expectations or beat the customers’ expectations. Most of the customers come from mainland China, although we have a significant portion [of clients] from Hong Kong. Ten years ago, mainland Chinese did not know about western restaurants, where you could have a good steak and a good wine, how to order a 1982 Lafite and that kind of stuff. Nowadays, I can assure you they have a similar level of understanding of the good things. Vegas is fuming with rage and jealousy regarding Macau because this city surpassed the Strip in 2006 and in 2007 beat the results of the whole of Nevada, then in 2008, Nevada and Atlantic City altogether, and now basically Macau is doing in one month what Vegas does in three months. It’s amazing. What is the limit of Macau and gaming? There’s no limit. This is the same question that we have been asked and August 2010
Melco Crown’s losses narrow
elco Crown Entertainment Limited reported a net loss for the second quarter of US$30.1 million last month, an improvement on the US$144.0 million net loss in the same period last year. “The reduction in the net loss resulted from a significant year-overyear improvement in the operating performance of Altira Macau and from having a full quarter of earnings contribution from City of Dreams,” the company said. For the second quarter, net revenue was US$573.6 million, representing an increase of about 166 percent year-on-year. (See “Stock Watch” in the gaming section).
have answered for some years and it has to do with the fact that we are the only city in the whole of Greater China where gaming is allowed. If you look at the last couple of years, the central government has put a lot of effort into cracking down on all the illegal gaming activities in China, whether it is Northeast China, Northern China or elsewhere. I am not suggesting this is a Chinese bluff to rule out gambling, but you do not have to be too shy to say that it is human nature, for people to like to gamble. I think it is right to position Macau as the one city where you can come along and gamble, and it is so lucky that an equilibrium position has been built. We have the historical reason and, at the same time, the Chinese economy is doing so well. As long as the supply continues to be very strong, pushed by a strong mainland economy… The sky is the limit and I see a great benefit and a great future for the mass and VIP segments. I see a great market but it is so correlated to the economy, so there will be some volatility in there. But with a continuing relaxation of [visa] policy, that allows more and more
people to enjoy the Macau experience, that will continue to drive business. Do you think that such a scenario will not change even with some measures taken by the central government to try to cool down the economy in the mainland? Look at the last year or two; it has not been that significant.
No competition worries How can Macau maintain its place as the hottest gaming city in Asia when some other places are betting on a strong gaming presence as well? I think you are referring to some Asian countries like the Philippines and Vietnam. Vietnam, Cambodia, Singapore, the possibility of Taiwan or if one day South Korea allows domestic gaming. And, of course, for the near future, everybody is talking about Japan, which is a very exciting market as well. First of all, the proximity to the customer. It’s quite unique in Macau. And secondly, we have the luxury of having all these developments built in the last couple of years and we are trying, at the moment, to build the total experience, not just gaming. In my view, gaming is the last thing that you have to market. Non-gaming or a total experience, excitement, is what you have to promote. I understand China very well, I am Chinese, and I have travelled quite a lot in China in the last 15 years. When I go to one city, I won’t talk at the executive level, I just talk with people that have 5,000 to 10,000 yuan income. They tell me there is nothing to do in Macau. Think about all these excitements similar to what Las Vegas is providing and hundreds of millions of people being committed, just in the Guangdong area. I am sure you know about the railway network that is being built in China. It is phenomenal. And there is something unique here compared to other Asian countries, which is the history of Macau and Hong Kong. That is something in our hearts that tells us that every Chinese has to pay a visit to Macau and Hong Kong in their lifetime.
â€?Gaming is the last thing that you have to market. Non-gaming or a total experience, excitement, is what you have to promoteâ€?
Billions race Revenue rise strengthens
eporting the casinos’ gross gaming revenue becomes tougher each month. We have run out of verbs: increase, surge, rise, skyrocket... you name it. However, here it goes. Macau’s gross gaming revenues reached MOP16.3 billion last month, the second highest monthly value ever, representing a yearly increase of 70.4 percent, according to official data. The total casino gross gaming revenue for the seven months through July rose 67.5 percent year-on-year to MOP102.2 billion. That is almost has much as the local casinos raked-in
during 2008 (MOP108.8 billion). In terms of market share, there were some changes, sources told Macau Business. Stanley Ho Hung Sun’s Sociedade de Jogos de Macau continued to lead the ranking, with a July market share of 32 percent, with Sands China in second place with 19 percent. Closing the first half of the table of operators was Wynn Macau, with a market share of 15 percent. Melco Crown was fourth, with 14.8 percent, followed by Galaxy Entertainment, with just over 12 percent. MGM continued to round out the ranking, with a market share of 7 percent.
Gaming Results: Gross Revenue
Meanwhile, the gaming bureau opened up the books on the detailed figures for gross revenue from different gaming activities in the second quarter (see page 73 for more). Macau’s VIP baccarat revenue rose 98.7 percent year-onyear to a record MOP32.37 billion – accounting for 72.1 percent of all casinos’ gross gaming revenue in that period. Revenue from slot machines rose 32.3 percent to MOP2.03 billion in the second quarter. Macau’s 14,659 slots accounted for a share of 4.5 percent of the total casino gross gaming revenue in the period from April to June.
In Million MOP (1HKD:1.03MOP)
16,000 14,000 12,000 10,000
8,000 6,000 4,000 2,000 0 Jul 09
Cotai will reshuffle market share: BNP Paribas
asino operators “that possess Cotai assets will be the net beneficiaries in the medium to longer term” in terms of shifting market share, according to BNP Paribas’ latest industry outlook for 2012. Looking ahead less than 18 months from now, the report said the opening of Galaxy Macau in March would lift the company’s market share by about 4.5 percentage points over its 2009 share, and move it to third spot with a 16.1 percent share of the market. The report said Galaxy would overtake Wynn Macau (15.0 percent market share in 2012, 14.9 percent in 2009), while August 2010
MGM Macau’s share will shrink to from 8.6 percent in 2009 to 5.2 percent. SJM will remain the market leader, with a 27.5-percent market share in 2012 (29.6 percent in 2009). Sands China will see its market share increase from 22.5 percent in 2009 to 25.3 percent, the Macau Daily Times reported. Melco Crown’s share will drop, from 12.8 percent to 10.8 percent. Globally, BNP Paribas expects casino gross gaming revenue growth to decelerate to 40.4 percent in the second half of this year. The investment bank predicts revenue increases of 12.6 percent in 2011 and 15.4 percent in 2012.
Gaming Results: Market Share Per Operator 2010
30 20 10 0
*Figures are rounded to the nearest unit, therefore they may not add exactly to the rounded total.
A points victory High Court rules against East Asia in stalled Macao Studio City project as legal battle set to continue
he High Court in Hong Kong has issued an order dismissing various claims made by East Asia Satellite Television against New Cotai and other parties over the Macao Studio City project. East Asia is a joint-venture company through which eSun Holdings and Singapore’s CapitaLand have invested in Macao Studio City. New Cotai became an investor in Macao Studio City in December 2006. The company is owned by former Las Vegas Sands executive David Friedman and two United States investment firms, Silver Point Capital and Oaktree Capital Management. The High Court found that derivative claims made by East Asia on behalf of the Macao Studio City joint-venture companies and the personal claims made on its own behalf against the directors of New Cotai were untenable. The amount sought was understood to be about US$2,385 million (HK$19.1 billion). However, the court said there was “a good arguable case” regarding a separate
US$88.6 million claim against Oaktree and Silver Point “for inducing New Cotai to breach” the share-purchase agreement.
East Asia sued joint-venture partner New Cotai and connected parties for allegedly failing to cooperate and progress the Macau Studio City project. The suit followed the US investors’ offer to buy out eSun at HK$1,200 a square foot in July 2008, according to sources quoted by the Wall Street Journal. Late last year, eSun counter-offered to buy out the US group at HK$400 a square foot. “We are pleased that the High Court dismissed so many of East Asia’s claims at this early stage of the proceedings. We will vigorously defend the remaining claims,” said David Friedman, New Cotai’s chief executive. “New Cotai remains fully committed to Macao Studio City and wants to see the project completed as soon as possible. To date, we have made exhaustive attempts to resolve our differences with East Asia and
have refrained from filing our claims in an effort to come to an amicable resolution that will allow the project to move forward expeditiously. “However, if this cannot be accomplished, then we will have no choice but to assert the substantial claims for damages we have suffered.” eSun has stressed that legal proceedings against New Cotai and others “are continuing”. The continuing proceedings “include claims for damages against New Cotai for breach of contract, and against New Cotai’s shareholders, Silver Point Capital, L.P. and Oaktree Capital Management, L.P., for inducing breaches of contract. “East Asia also claims that it has suffered unfair prejudicial conduct concerning the operation of Cyber One Agents Limited, as the joint venture entity, through which the project is being conducted, in respect of which East Asia seeks an order that New Cotai be required to sell its shares to East Asia at a valuation to be determined by the court.” August 2010
Gaming | Stock Watch
Earnings season announcements from Las Vegas Sands and Wynn Resorts underline Macauâ€™s importance to the bottom line, while Melco Crown Entertainment narrows its losses by Ray Chan August 2010
acauâ€™s strength in gaming continues to boost the balance sheets of both Las Vegas Sands Corp (LVS.US) and Wynn Resorts (WYNN), their second quarter results show. Meanwhile, Melco Crown Entertainment (MPEL.US) has drawn more revenue to narrow its loss for the three months ended June 30. Las Vegas Sands released results on June 28 that bettered expectations, thanks to the strong performance of its Macau properties and revenues from the newly opened Marina Bay Sands in Singapore. Operating profit surged to US$166.8 million (MOP1.3 billion) in the second
Photo: Luís Almoster |mspagency.org
71 quarter from a loss of US$171.3 million in the same period last year. The Las Vegas-based company narrowed its net loss to US$4.7 million from US$222.2 million. Its loss per share recovered to US$0.01 from US$0.34. The company announced that its board had declared a quarterly dividend payment of US$2.50 a share on its outstanding 10 percent Series A Cumulative Perpetual Preferred Stock, to stockholders on record at the close of business on July 30. In Macau, Sands China (1928. HK), a subsidiary of the integrated casino company, recorded a US$133.6 million net profit for the second quarter, up 328 percent on the year before. About US$36.7 million of net profit from Sands China will be contributable to Las Vegas Sands’ consolidated financial statement. The share price has outperformed Hong Kong’s benchmark Hang Seng Index by more than 30 percent so far this year. The US$5.5 billion Marina Bay Sands generated US$94.5 million of adjusted property earnings before interest, taxes, depreciation and amortisation (EBITDA) and an EBITDA margin of 43.7 percent in its first 65 days of operation, according to the company’s quarterly results.
Melco Crown improves
Melco Crown Entertainment narrowed its second quarter net loss to US$30.1 million from US$144.0 million a year before and reported strong top-line growth. Net revenue rose 166 percent to US$573.6 million from US$215.8 million, the company announced on June 28. It reduced its loss per share
Sands China hikes salaries
ands China will boost salaries by 3.5 percent for employees who have served at least one full year of service by july 1 and who are still employed by the company on August 31, sources told Macau Business. the salary increase was announced to workers in a message from sands China director Irwin Abe siegel. the increase took effect on July 1 and will be refl ected in the August payroll. Around two-thirds of Sands China’s 18,000 workers will get the pay increase, the sources said.
to US$0.06 from US$0.30. City of Dreams reported net revenue of US$309.3 million, rising from US$26.8 million a year before and Altira Macau reported net revenue of US$230.6 million, up from US$159.2 million. The company’s share price has gained 13 percent this year. Melco International Development (200.HK) has underperformed the benchmark Hang Seng index by six percent this year.
Wynn Resorts reported second quarter net revenue of US$1.0 billion on June 30, up from US$723.3 million a year before. The result was based on a 74.1 percent increase in net revenue at Wynn Macau.
Macau Casino Stocks Performance Year-to-date versus Heng Sang Index (Base=HK$10) HK$
SJM Holdings Ltd.
Galaxy Entertainment Group Ltd.
Wynn Macau Ltd.
Sands China Ltd.
Melco International Develop.
19000 Dec 09
Hang Seng Index
Gaming | Stock Watch
VIP promoter receives approval to list on NASDAQ
HK-listed casino operators by market capilalization Sands China Ltd Melco International Development
Sands China Ltd.
SJM Holdings Ltd.
Wynn Macau Ltd.
Galaxy Entertainment Group Ltd.
Adjusted property EBITDA increased 46.0 percent to US$281.4 million from US$192.7 million. Overall, Wynn Resorts reported a net profit of US$52.4 million, up from US$25.5 million. The company announced a cash dividend for the quarter of US$0.25 per common share, payable on August 26 to stockholders on
sia Entertainment & Resources Ltd. (AERL), which operates as a VIP room gaming promoter through its subsidiaries and related promoter companies, announced last month that it received approval to list its ordinary shares and warrants on the NASDAQ Global Market. The securities commenced trading on July 2, under the symbols “AERL” (shares) and “AERLW” (warrants). AERL chairman Lam commented, “We believe that trading on the NASDAQ is an important milestone for the company that will lead to increased liquidity, an expansion of our shareholder base, and increased shareholder value.” The company currently participates in the promotion of two major luxury VIP gaming facilities in Macau: one in MGM Grand Macau and the other in StarWorld.
record on August 12. As for the local subsidiary Wynn Macau (1128.HK), the company posted net revenue of US$714.4 million for the second quarter, compared to US$410.4 million a year earlier. Wynn Macau generated adjusted property EBITDA of US$216.2 million, compared to US$117.2 million. Gross non-
gaming revenue increased 59.2 percent to US$70.8 million, boosted by hotel revenue, up 57.9 percent, and retail revenue, up 75.5 percent, which both rose because of the Encore opening in April. Wynn Macau said it had spent US$537.3 million on the development and construction of Encore to June 30.
gross revenue from different gaming activities 2Q 2010
45,219 44,902 32,368 8,310 2,028 856 541 266 161 55 52 43 41 30 24 20 22 9 0.2 0.3 0.4 n/a 110 91 102 12 1 0.001
41,248 40,951 28,761 8,024 1,948 869 594 273 135 55 48 45 39 29 28 19 19 8 2 1 0.5 n/a 124 91 52 27 2 0.0002
36,476 36,161 24,976 7,259 1,820 779 509 262 257 45 42 42 37 27 28 13 26 7 1 1 0.5 n/a 102 110 80 21 1 0.001
25,619 25,408 16,287 5,898 1,533 638 432 223 125 40 32 39 42 23 37 8 20 5 2 2 0.4 n/a 71 60 68 11 1 0.001
26,252 26,019 16,828 5,804 1,533 687 489 174 150 47 32 44 18 21 52 10 24 6 3 4 0.5 n/a 90 45 72 55 2 0.000
24,358 24,078 15,616 5,186 1,478 654 503 182 177 42 20 45 1 13 49 9 25 6 2 7 0.5 n/a 126 53 83 17 1 0.001
-2.4% -2.3% -3.2% 1.6% 0.0% -7.1% -11.7% 28.2% -16.7% -14.9% 0.0% -11.4% 137.1% 9.5% -28.8% -20.0% -16.7% -16.7% -33.3% -50.0% -20.0% n/a -21.1% 33.3% -5.6% -56.0% -50.0% -1100.0%
7.8% 8.1% 7.8% 11.9% 3.7% 5.0% -2.8% -4.4% -15.3% 11.9% 60.0% -2.2% 1358.3% 61.5% 6.1% 11.1% -4.0% 0.0% 50.0% -42.9% 0.0% n/a -28.6% -15.1% -13.3% 47.1% 100.0% -110.0%
-7.0% -7.3% -9.5% -2.7% 3.6% -9.8% -3.3% 5.8% 24.6% -12.5% 5.3% -8.2% 20.0% -23.5% -3.9% -40.0% -7.4% 0.0% -33.3% 0.0% 25.0% -100.0% 20.0% 0.0% 59.6% 183.3% -50.0% n/a
Macau Patacas (Million)
Total Games of Fortune (total) VIP Baccarat Baccarat Slot Machines Cussec Black Jack Stud Poker Roulette 3-Card Baccarat Texas Holdem Poker Fantan Casino War 3-Card Poker Fish-Prawn-Crab PaiKao Craps Lucky Wheel Makccarat Q Poker Tombola Mini Baccarat Horse Racing Greyhound Racing Sports Lottery - Football Sports Lottery - Basketball Chinese Lottery Instant Lottery
32,036 31,781 21,742 6,536 1,616 723 473 253 161 53 39 49 45 22 36 12 23 6 2 2 0.4 n/a 70 111 60 12 1 0.000 QoQ%
Total Games of Fortune VIP Baccarat Baccarat Slot Machines Cussec Black Jack Stud Poker Roulette 3-Card Baccarat Texas Holdem Poker Fantan Casino War 3-Card Poker Fish-Prawn-Crab PaiKao Craps Lucky Wheel Makccarat Q Poker Tombola Mini Baccarat Horse Racing Greyhound Racing Sports Lottery - Football Sports Lottery - Basketball Chinese Lottery Instant Lottery
9.6% 9.6% 12.5% 3.6% 4.1% -1.5% -8.9% -2.6% 19.3% 0.0% 8.3% -4.4% 5.1% 3.4% -14.3% 5.3% 15.8% 12.5% -90.0% -70.0% -20.0% n/a -11.3% 0.0% 96.2% -55.6% -50.0% 400.0%
13.1% 13.2% 15.2% 10.5% 7.0% 11.6% 16.7% 4.2% -47.5% 22.2% 14.3% 7.1% 5.4% 7.4% 0.0% 46.2% -26.9% 14.3% 100.0% 0.0% 0.0% n/a 21.6% -17.3% -35.0% 28.6% 100.0% -80.0%
Source: Gaming Inspection and Coordination Bureau
13.9% 13.8% 14.9% 11.1% 12.6% 7.7% 7.6% 3.6% 59.6% -15.1% 7.7% -14.3% -17.8% 22.7% -22.2% 8.3% 13.0% 16.7% -50.0% -50.0% 25.0% n/a 45.7% -0.9% 33.3% 75.0% 0.0% 150.0%
25.0% 25.1% 33.5% 10.8% 5.4% 13.3% 9.5% 13.5% 28.8% 32.5% 21.9% 25.6% 8.4% -4.3% -2.7% 50.0% 15.0% 20.0% 0.0% 0.0% 0.0% n/a -1.4% 85.0% -11.8% 9.1% 0.0% -60.0%
gM Macau signed on july 30 a fi ve-year refi nancing loan worth us$950 million (MOP7.6 billion) ahead of its initial public share offering in Hong Kong. The bankcommitted loan comprised a 16-bank club led by Bank of America, sources familiar with the deal told Macau Business. Other banks involved include Banco Nacional ultramarino, Bank of China (Macau), BNP Paribas, CCB International Finance, Hang seng Bank, Royal Bank of scotland and sumitomo Mitsui Banking Corporation. “It’s a step forward in restructuring for the upcoming IPO,” an analyst told Macau Business. Another source considered the refi nancing a “success since it was closed quickly if compared to similar deals.” Although HsBC pulled out days before the agreement, the move did not have any impact on the deal since the loan was oversubscribed, according to bankers familiar with the deal. Macau’s casinos returned to loan markets recently in order to refi nance deals or complete projects affected by the global fi nancial crisis. the MgM deal follows a US$1.75billion fi ve-year loan for sands China and an HK$8.8-billion six-year facility for galaxy Entertainment, both signed earlier this year. August 2010
Changing of the guard Sands China and Melco Crown Entertainment have made major changes at the top, replacing their highly visible top leaders with managers focusing on gaming and non-gaming operations by Emanuel Graça
t all happened in less than seven days. On July 23 came the not-sosurprising dismissal of Steve Jacobs as Sands China’s chief executive officer. On July 28, Melco Crown Entertainment announced Greg Hawkins would leave the helm at City of Dreams — another change widely expected within the industry. Both companies have subsequently announced major changes through their highest ranks, bringing in new senior operating executives. Both companies are introducing similar management arrangements, splitting their gaming and non-gaming operations between different top executives. Mr Jacobs left Sands China after 15 months with the company. He was the fifth executive in seven years in charge of leading the Macau operations of Las Vegas Sands Corporation. With his departure, Sands China has appointed Mike Leven, the president and chief operating officer of its parent company Las Vegas Sands Corp, as acting chief executive. Mr Leven said during Las Vegas Sands’ second quarter 2010 earnings August 2010
call that the change “was in the best interest of the company, its employees and shareholders”.
One of Mr Leven’s main tasks as acting chief executive officer will be working with a special committee to select a permanent CEO. “He will divide his time between Las Vegas and Macau while the search is being conducted,” Sands China said in a written statement. “We are looking for an out-of-thebox candidate in many ways and someone that can manage the full asset base that we have, and lead and manage that asset base. Not necessarily a casino person or a hospitality person, but a very strong business person,” said Mr. Leven. “I think the [candidate] pool will be very large actually. We’d like someone with Asian experience in particular, that has Asian cultural experience and can deal with the governments of both Beijing and Macau.” Stephen Weaver, who was previously Sands China’s president of Asian development, will serve as an adviser to Mr Leven during his tenure as act-
ing CEO. However, Mr Weaver’s stay at Sands China may be extended. “Stephen Weaver has come back as a consultant to help us through the transition period and maybe even longer, depending upon his personal situation,” Mr Leven said. Whether Mr Weaver stays or not, Sands China is set to have more new faces at the top. Just a few days after the company dismissed Mr Jacobs, it announced the hiring of two new top executives. On August 10, Edward Tracy becomes president and chief operating officer and David Sisk becomes executive vice-president and chief casino officer. Mr Tracy will oversee and manage all non-gaming operations and Mr Sisk will be in charge of all present and future gaming operations in Macau. Sands China’s existing properties here include the Sands Macao, The Venetian Macao and The Four Seasons Hotel Macao and Plaza Casino.
Too much happening
The final goal is to “give the next CEO the ability to deal in the financial, legal, government affairs area,” Mr Leven said. “It is not possible to run all of the casino business here from the very top of
Las Vegas Sands hires Wing Chao
as Vegas Sands Corp., Sands China Ltd’s parent company, announced last month that Wing Chao has been elected to the company’s board of directors to help the company to expand in Asia. Mr. Chao was most recently the executive vice president of Walt Disney Imagineering. “We are very excited that Wing is joining our board at a time in which our company continues to implement our current development plans and explores future growth opportunities in Asia as well as other parts of the world,” said Las Vegas Sands chairman and chief executive officer Sheldon G. Adelson. Mr. Chao retired from Disney in 2009. He was a key member in the successful negotiation with the French government to build the Paris Disneyland Resort. Subsequently he also played a vital role in the successful negotiation with the Hong Kong government for the Hong Kong Disneyland Resort, which opened in 2005.
the organisation. There is just too much going on, on a daily basis. So that’s how we are structuring the business.” Mr Tracy has more than 20 years of hands-on management and development experience in the gaming and hospitality industry. He was formerly CEO of the Trump Organisation. Mr Sisk is a veteran casino financial and operations executive with more than 18 years of experience at major casinos. Before joining Sands China he was executive vice-president and chief financial officer of Wynn Las Vegas and Encore. He “began by washing dishes in a hotel [and] worked his way up through a series of properties all through his career,” Mr Leven said. Mr Sisk’s task is clear. “The operations of the properties are doing well from a quality basis. It needs a little bit of work on the service side. And also, some substantial improvements can be made on the marketing and sales side,” Mr Leven said.
Sands China has wanted to augment its senior leadership in Macau “for at least
the last six months,” Mr Leven said. He did not explain why there were no changes while Mr Jacobs was CEO. Mr Leven said no more high-level dismissals were expected in the short term. “[I] have not seen any indication that the problem is in the layer of staff below Steve [Jacobs],” he said. Although successful in cutting costs, Mr Jacobs was criticised by Las Vegas Sands chairman Sheldon Adelson for commenting on the possibility of the legalisation of casinos in Japan — a matter outside Sands China’s realm. The company did not officially explain the motives for Mr Jacobs’ dismissal. There is apparently nothing to stop Mr Jacobs from returning to Macau to work for a competitor, because he had no contract with Sands China, according to Mr Leven. Sands China is also re-examining its strategy for the VIP market. Led by Mr Jacobs, the company has pushed forward a direct VIP business model, but it is now looking at reversing this, so as not to damage its relationships with the local junkets, a powerful source of high rollers. “We are in active [internal] discussions right now since we terminated Steve Jacobs about the wisdom of accentuating the effort for direct premium play,” Sheldon Adelson said during Las Vegas Sands’ second quarter earnings call.
Melco Crown evolution
At Melco Crown Entertainment, the resignation of Greg Hawkins as president of City of Dreams (COD) after about five years in Macau gave the company the opportunity to undertake a comprehensive review of its operating
management structure. Mr Hawkins said his decision was purely family-related; however, he is not moving out of COD immediately, a spokesperson confirmed to Macau Business. The company announced that two new co-chief operating officers would each be given responsibility for different functions, instead of different properties. Melco Crown promoted Ted Chan, president of Altira Macau (see CEO Interview in this edition), to the position of co-COO gaming, in charge of gaming across the entire organisation. Nick Naples joins the company from Sands China, becoming co-COO operations, in charge of all non-gaming activities. Both changes were effective from the beginning of this month. Mr Naples has worked in Macau for the last four years. Until recently he was consulting executive vice-president at Sands China and was previously COO at Macau Studio City. “The time is right to implement a new operating management structure that recognises that we have evolved as an organisation and reflects our more mature business model,” said Lawrence Ho, co-chairman and CEO of Melco Crown Entertainment. “This new structure will facilitate a more streamlined approach to managing the operations at our three properties and will allow our senior executives to be more focused on their functional areas of responsibility. I am confident that these changes will yield meaningful benefits to our operations, both in terms of revenue generation and resource efficiency,” Mr Ho said. August 2010
Not the Las Vegas way A lack of suitable human resources, inadequate education, an underperforming justice system, excessive patriotism and government weakness are holding back sustainable development, says prominent lawyer and Galaxy boss Jorge Neto Valente in his first interview with Macau Business
Photos: Carmo Correia
by luis pErEira
orge Neto Valente likes to call a spade a spade. The former legislator and leading lawyer knows his mind. He is now managing director of Galaxy Casino, and he is pleased he made the switch. “Today I work with human beings,” he says, “with people with whom I can have a dialogue”. There are harsh words for his previous employer, Las Vegas Sands, where he was managing director of Macau operations until 2008. “The difference is greed, a greediness of wanting everything,” he says. He claims Las Vegas Sands disregarded public interest in favour of profits. The company’s philosophy, he says, is “we want to do everything that brings profits, because it brings profits, even if it’s not good for Macau. Even if the government says no, who cares? We’ll press on and lobby to have it done.” He contrasts this with Galaxy’s “philosophy of not wanting to go the Las Vegas way”. Galaxy’s new property in Cotai will not put the city’s infrastructure under strain, Mr Valente says, calling it “a drop in the ocean”. As the only big development to open next year “it won’t create any disturbance in the market” either because, by then, “the market will have grown by the same proportion”. He believes the government is wrong to allow the creation of 60,000 rooms in Cotai, and does not believe they will be built. “Even to think of how to fill only 40,000 rooms is scary. We would need to bring in so many people that we would not be able to walk on the streets, which was already hard enough when we only had close to 30 million visitors [a year]”, Mr Valente says. “Locals also have a right to their quality of life.”
At its new Cotai property, Galaxy hopes to bring an Asian flavour to the table. “We believe that people who come to the Orient want to see the Orient,” Mr Valente says. Galaxy calls its offering the first “Asian-centric” resort. Its 2,220 rooms will be operated by two Asian brands, Banyan Tree and Japan’s Okura, plus Galaxy’s own brand. Mr Valente says Galaxy “will give patrons what they want, treat everyone right - at least as well as others, if not better and not force plastic, fast food and such on them.” He thinks that the American organisations in Macau “have understood
that if they treat everyone to sandwiches and plastic they won’t go far” because “that’s not what the patrons want” - even though their services in Macau “are not at all inferior, and sometimes superior to those provided in Las Vegas.”
Singapore no threat
Mr Valente spoke to Macau Business on the sidelines of a conference about the new casino-resorts in Singapore, and he shared some insights into how the resorts there may affect Macau.
“today i work with human beings, with people with whom i can have a dialogue” “if singapore bordered china, then macau would face a serious risk” “the more chinese is spoken, the worse the justice system becomes” “locals also have a right to their quality of life” While Macau caters mainly to a gaming-oriented market, Singapore is more of a “diversified destination”, he says. But the city-state is no threat. “If Singapore bordered China instead of Malaysia, then Macau would face a serious risk. As it stands, there is none,” he says. “I see a big gulf between the amenities that can be and are already being provided by Macau and that Singapore is lacking.” He detects signs in the local market that things are changing slightly. “Length of stay has increased - not exponentially, but it is growing nonetheless - and that tells us that something is changing, that there is some interest among visitors in something other than gaming tables,” he says. There is demand for “a large variety of culinary styles and good service”
he Macau government has cut galaxy Entertainment group’s quota of imported workers by “nearly 1,000” – or about one-third of the company’s entire overseas workforce. the coordinator of the Human Resources Offi ce Wong Chi Hong announced the cuts last month after galaxy failed to meet the 1:1 minimum ratio of local to foreign construction workers at its Cotai site. In a second labour law breach last month, galaxy Macau was named in a case of withholding wages. A total of 144 imported labourers claimed that a contractor owed them around MOP2 million of overtime pay. the debt was paid but only after the Labour Affairs Bureau stepped in. the double dose of bad news is not ideal for a company that is preparing to recruit en masse. the company’s senior vice-president for human resources and administration trevor Martin said galaxy would need 7,000 new employees to staff the galaxy Macau resort, due to open next March. galaxy is competing against sands China for talent. sands’s senior vice-president of human resources António Ramirez has said there would be an estimated maximum of 15,000 positions available at the properties on Lots 5 and 6 when they open later next year.
and “a more comprehensive entertainment offering than in the past,” he says. In providing these, Macau is not falling behind Singapore. However, he thinks “Macau can learn a few things” from Singapore’s resort island of Sentosa, which he first visited 20 years ago. He is impressed by the free transport and the “unobtrusive design” of the properties there. The level of “integration” on Sentosa will be achieved eventually in Cotai, Mr Valente believes. He feels there is potential for cooperation between operators. “A light rail system could have been an option, had there been room for other models and a scheme that would weigh the contributions and the return, because not all would benefit in the same proportions,” he says. “But since the government has no lack of money and announced its own August 2010
project, and the operators already pay the tax, they washed their hands of the issue, and it wouldn’t be easy to have them involved in the project now.”
Asked about the main obstacles to Macau’s sustainable development, Mr Valente responds that diversification has been an Achilles’ heel and points to the “lack of a qualified workforce”. He blames a degraded education system and what he calls a poor “populist” approach to deciding policy on admitting foreign labour. Macau has more qualified workers now, but only on paper, he says, “because it’s easier to buy diplomas” and people who have only paper qualifications “do not survive an encounter with reality.” The problem is exacerbated because “in a 500,000-odd population it’s not possible to find the quality people we need for everything,” he says. As for the policy on foreign labour, “the government has the responsibility not to follow populist trends.” It should guarantee that the rights of local workers are respected but “shouldn’t interfere further.” “Local workers who don’t want to work, such as the ones who attend the Labour Affairs Bureau activities only while being paid for it and then refuse jobs, should not be supported by the government,” he says.
Mr Valente, who is president of the Macau Lawyers Association, also complains about how slowly the wheels of justice grind in Macau. To those who argue that the problem with the system is the language, namely the use of Portuguese, and that the courts should promote the use of Chinese, he has one answer: “The more Chinese is spoken, the worse the justice system becomes” because “of the lack of qualifications, experience and preparation” of those involved. “The situation is getting worse,” he says, not only because of the slowness of the courts but also “the inefficiency of the investigations by the prosecutors office.” As for the judges, he says, “save for rare exceptions - and speaking generally - the quality of the judging is diminishing and where it hasn’t got worse, it has remained the same.” August 2010
“If votes continue to be bought, it makes no difference if there are more or fewer seats” “Chief Executive Edmund Ho Hau Wah was quicker in his decisions, and had a fine-tuned business acumen lacking in Fernando Chui Sai On” “There is excessive patriotism among Macau’s elite”
Mr Valente is convinced that the public thinks “it’s easy to commit a crime, if it’s not a shocking one, and nothing will happen, everything will pass.”
Hail to the chief
Mr Valente understands better than most how businessmen consider the government’s attitude to business. “Chief Executive Edmund Ho Hau Wah was quicker in his decisions, and had a fine-tuned business acumen lacking in Fernando Chui Sai On,” he says. Mr Valente feels that the present chief executive “is less facilitating, more regimented, bureaucratic, more disciplined.” This, he says, “has advantages and inconveniences”. The government’s performance as a whole is still adapting and “getting into gear”, he says. It must tread carefully because change can have major repercussions. The government “has shown no small measure of weakness when faced with absurd claims” by local associations only because they appeal to patriotism, he says. “If the government gives in to these kinds of pressure because they sing the Chinese anthem at Government House, and doesn’t stand firm against absurdity, then it’s yet another hindrance to the sustainable development of Macau,” he says, adding that there is “excessive patriotism” among Macau’s elite.
Macau’s road to universal suffrage and the potential increase in the number of directly elected members of the Legislative Assembly is not something that worries Mr Valente. “If votes continue to be bought, it makes no difference if there are more or fewer bought seats, whether directly or indirectly elected,” he says. He denounces “intimidation” campaigns for taking advantage of the weak civic sense of voters. Such campaigns use specious arguments such as “If you don’t vote for me you’re not a patriot,” or “If you don’t vote for me, you’re not for democracy.” A legislator himself during the Portuguese administration, Mr Valente says the performance of the political elite nowadays is “poor”. In his view, legislators today are more noisy than influential.
Philippines pursues Pagcor privatisation The sale of the Philippines’ state-owned gambling monopoly will go ahead in a bid to stop corruption and increase revenue by dan toWnEnd*
resident Benigno Aquino has indicated the Philippine Amusement and Gaming Corporation (Pagcor) will be passed into the private sector after confirming the government appeared to have been short-changed on revenue by the firm. Mr Aquino told a press briefing the privatisation of Pagcor - which brings in an estimated 30 billion Philippines pesos per year (approx. US650 million) - would end corruption and mean the firm was run more professionally. He did not however give a timescale for the move, saying the sale would happen “eventually, but we have to review Pagcor’s license first.” “In time, after we gather what really transpired in Pagcor in these nine and a half years (of the previous administration),” he said. “Is it true that we didn’t get the maximum that the State could get? “We have uncovered several anomalies in Pagcor amid allegations that the government is not really getting its share of the revenues. “We should ask the questions how come the government was not able to get the maximum revenues out of the gaming licences that Pagcor issued.” Mr Aquino said he would review Pagcor and the licences that it had issued to gaming franchises as some of the gambling casinos were oper-
“We have uncovered several anomalies in Pagcor amid allegations that the government is not really geits share of the revenues” benigno aquino
ating in the wrong places. “There are so many casinos in places that there are no tourists,” he said. “Gambling is not a productive activity, but if Pagcor finds the way to properly donate their revenues to the government, then thanks.” Mr Aquino, who was clarifying the new government’s position on gaming, said it would be more practical to sell Pagcor and that it would also translate into more profits for the government.
but that stopping the game was not one of his administration’s priorities. “I don’t encourage gambling, it’s not a productive activity,” he said. When asked if there is an order to stamp out jueteng,
Aquino said: “That is not a standing order. That is the law. “Jueteng is against the law, and it should be stopped, but then you have to set your priorities since we have limited resources.” Executive Secretary Paquito Ochoa confirmed the Aquino administration was not prioritising proposals on jueteng. “Jueteng is illegal right now, that is our official stand and there is no other stand,” he said. The President’s comments will come as a disappointment to anti-gambling crusaders led by Archbishop Oscar Cruz who have called for the illegal numbers game to be crushed because it is a source of corruption. The President was also non-committal on Cruz’s suggestion to end the Philippine Charity Sweepstakes Office’s small-town lottery (STL) because it is perceived to have become a front for jueteng. *gamblingcompliance/macau busines
What about ‘jueteng’?
During the dinner with local reporters, President Aquino added that he was against gambling, particularly the illegal numbers game ‘jueteng’, August 2010
Mark Dixon Director of Fuse Sport, a Manchester-based sports media and experiential marketing agency
The life of a bookmaker
What did I learn from the World Cup?
As the deafening noise of vuvuzuelas fades into our memories and the debate regarding the introduction of video technology rumbles on, how do bookmakers remember the World Cup? Our dearly departed World Cup threw up some weird and wonderful results. In turn, that prompted many gamblers to pull their hair out, resulting in many bookmakers celebrating with a glass or three of bubbly. Millions were lost backing against New Zealand, the only side to leave South Africa with an unbeaten record. One punter lost €40,000 (MOP412,000) alone on the All Whites. With huge relevance to the bookmakers’ fraternity, Patrick Reilly’s piece on goal.com points out five important lessons for betting on football.
Ignore all first games If this edition of the World Cup demonstrated anything, it was that previous patterns and records went out the window. Spain lost against Switzerland first time out, who were a mighty 13.44 to beat La Furia Roja. No team had ever won the World Cup after losing their opener and no European team had ever won the trophy outside of Europe. Both records have now been consigned to the history books.
Ignore England hype The Three Lions were hot favourites in all three group games and the bookies fancied them to beat Germany too. Since winning the tournament in 1966, England have failed to qualify three times and have only once reached a single semi-final – which they lost. The hype around them is ridiculous.
In doubt? Back Germany Bookmakers underestimated the Germans big time against England and Argentina when they were underdogs. There were some canny punters who made a killing. Germany were 3.29 to beat Argentina.
Forget about Argentina If the hype is what is most annoying about England, much the same can be said for La Albiceleste. Argentina were installed as 5.25-favourites after the group stage as pundits bought into the Maradona comeback story. Since El Diego led them to the final in 1990, Argentina have never gone beyond the quarter-final stage and were booted out in the first round of the 2002 Cup.
Don’t discount Asian sides Asia was not tipped to have a strong World Cup. Then South Korea and Japan made it to the knock-out stages. Japan’s manager Takeshi Okada was laughed at when he said his side could reach the semi-finals. The smirk came off everybody’s face when they beat Cameroon and Denmark in the group phase. The Blue Samurai were 4.0 to beat the Africans and 3.6 to beat Denmark. Asian football is on the rise with Japan ranked 9th in the FIFA World Cup rankings ahead of Chile, Portugal, the United August 2010
States and England. South Korea were placed 15th, more than ten places ahead of Italy and France. Bookies may be in the habit of underestimating Asian sides in major tournaments but they won’t next time.
Little screen grows up What else can we take from the Cup? British gambling group Ladbrokes revealed during the tournament that it had taken four times as many bets placed from mobile phones than all of the bets it took during the Euro 2008 tournament. Company spokesman Ciaran O’Brien said the rapid growth was driven by increasing levels of smart phone ownership, enabling swift access to a bet from anywhere. Ladbrokes has been cashing in. It took more than 100,000 bets from mobile devices during the event – a record – and usage of its iPhone betting app – the first with full functionality – is rocketing. Betting on Ladbrokes’ mobile channels has doubled over the past 12 months. In the same period, they have seen a 600 percent increase in the number of its customers that bet exclusively via mobile. One competing bookie said Ladbrokes “took more on the Net than we took in all our shops”, a figure that was “almost 200 percent above what we’d targeted.”
Big plunges The biggest single World Cup bet ever, €500,000 on Germany to beat Spain, was taken by British bookmaker William Hill. “Not only did the €500,000 bet lose, but so did the €100,000 and €80,000 bets on Germany to win the tournament, and another €75,000 wager on them to get past Spain,” said Hill’s spokesman Graham Sharpe. “Germany losing that game made a difference of around £5million (MOP62 million) to us. It was almost certainly our best World Cup result ever.” One bookmaker who won’t be happy is Stan James, after pledging to pay back all losing bets on the World Cup if it was won by Spain.
Better margins Meanwhile, bwin has reported a jump in gross gaming revenue rising to a daily average of more than €1.1 million – more than double that recorded during the 2006 World Cup. A sports betting margin of 9.1 percent compared favourably to the 8.3 percent recorded for Euro 2008 and the 6.7 percent for the 2006 World Cup. Another big British operator suggested there were stronger margins overall, and that the most profitable matches were England’s two draws plus the final itself. The operator took bets from around 900,000 customers during the Cup, where more than a quarter were new active accounts. The company also reactivated another 90,000 customers during the competition. One question that ran through the industry: “Where was the strangely quiet Betfair?”. Perhaps they were distracted by rumours of a £1.5-billion stock market listing this autumn.
JEWELLERY Discover Damianiâ€™s new masterpiece TRENDS Check out the Fall/Winter 2010 collections
HOT IN THE SUMMER The essentials to have in your wardrobe FASHION STATEMENTS When clothes gain a life of their own
breakdown By the Numbers
The figures behind some fashion facts
It might be cliché, but fashion is definitely all around and the pace of change is really fast. The sun and the heat are on, but Fall and Winter have already shown their magical colours and suggestions on the New York, Milano and Paris runways, during their Fashion Weeks.
The length of the train of Princess Diana´s wedding dress
The bar is set for the seasons to come and in this month´s Essential, we learn about the latest fashion trends including runway, clothing, accessories, handbags, shoes and so much more. The next pages will allow you to get to know some of the creations of the major designers and Couture Maisons. And from the looks it’s going to be a warm, ladylike, very charming and yet sensual Autumn and Winter.
1965 The year Mary Quant launched the Mini-Skirt 36-23-37
Marilyn Monroe´s measurements according to her dressmaker
Advertising and fashion will always walk hand in hand. In this issue, we look at the role of television series on the world’s fashion conscience and taste. After watching it on screen we go to the streets and guess what, there are a lot of “Desperate Housewives” and “Gossip Girl’s” walking around in the latest trends.
The year Jennifer Lopez wore the fabulous green Versace dress to the Grammys, becoming the most famous dress on the red carpet.
Once again, the cherry on top of the cake, is our sexy and sexual column. This time the main question is simple but yet unanswered: “Is less really more”? hmmm...
Have a great read and enjoy Essential´s tips for this month!
The colour combination of Rosso Valentino, Valentino’s trademark red colour. 82
As seasons change so too does the fashion industry. You won’t want to miss getting to know more about the award-winning Damiani jewellery masterpiece, the Peacock necklace and the brand new amazing fall/ winter 2010/11 advertising campaign for Louis Vuitton.
White dress It’s always a magical choice for a younger image.
Too fresh and naive!
Don’t even get close to chocolate ice cream when you’re wearing a white dress. A stained white dress is beyond terrible. Some dresses make you look like a runway bride Try that white dress with a black fabric lace... you might be surprised at how good it’s gonna look
Black dress If you want the audience to take you seriously and you’re not old enough to give such an image, black is definitely your solution! Too formal and serious!
Be aware of your deodorant! If it’s a powder one, make sure there’s no white stains ruining the look! Some dresses make you look like a runway witch A black dress with a white coat and you cannot go wrong!
THE TEN FASHION COMMANDMENTS i i am the trend god, thou shall not have strange trends before me. You need not have formal training or be a fashion expert to know what the current trends are and which of these trends are applicable to you. ii thou shall not take the name of great designers in vain.if you claim to know these great designers, make sure you spell their names right or better, pronounce them correctly. iii remember thou to keep a holy shopping day. before you run out and buy another ridiculous outfit, why don’t you seek the help of a stylist first or even a fashionable friend…maybe they can help you exorcise those bad-taste demons.
Vi thou can commit brand adultery. gone are the days when your shirt was ralph Lauren, your belt was ralph Lauren and your shoes were ralph Lauren! There are a thousands brands to choose from and the key is mixing these labels and creating your own unique look. Vii thou shall not steal your neighbour’s bag, shoes, clothes… if you know your friend purchased bag X before you did, and you get the opportunity to get the bag, you will inform her that you intend to buy bag X. That is just plain fashion courtesy. Viii thou can bear true and honest witness against thy neighbour. if you think you can’t kick her fake pedestal the old fashion way, put up your own blog and air your frustrations there.
iV honour thy friend’s discovery. Just because you get to copy and purchase your friend’s fabulous top, that doesn’t iX thou shall not covet thy neighbour’s life. give you the right to act as if you originally thought of buying if you weren’t born rich, don’t act as if you were. the top first. X thou shall not covet thy neighbour’s goods…or V thou shall kill...a past fad! a fad is fashion that is taken weather for that matter. Just because you love the way up with great enthusiasm for a brief period of time; so if Japanese, french or italian women dress, doesn’t mean you those circa 1996 loafers were a fad during that time, they can copy every single piece of clothing or accessory they can’t possibly still be a fad in the year 2006. have. it snows in Paris, but not in Macau!
When fashion becomes an eternal statement of elegance
Flawless details of a Masterpiece A T the 2010 Couture Jewelry Show, industry leaders and opinion-makers recognised Damiani with one of the top honours bestowed upon the best of the jewelry industry. The Italian jewelry house received the prestigious Couture Design Award (in the Coloured Gemstones over $20K category) during the 15th annual award ceremony held at the Wynn Hotel in Las Vegas.
The spectacular Peacock Masterpiece necklace –crafted in white gold with a striking array of diamonds, sapphires and emeralds is one of the best examples of the jewelry art that has made Damiani one of the most renowned and respected houses in the world. The chromatic effect of the peacock’s feathers has been masterfully recreated with over 3,500 emeralds and an equal quantity of sapphires –totalling 18.55 carats. The attention to detail, well-balanced proportions, accurately chosen gemstones and skilful execution make this necklace as alluring as the feathers of a
A magical campaign peacock. The open-back frame of white gold and diamonds is set with feathers covered in diamonds, sapphires, and emeralds that immediately capture the eye with an explosion of colour. The intricate design of the necklace includes a snap-and-lock design, which allows the longer side of the feather to be detached and be worn as a pendant or a brooch. The Couture Design Awards are assigned by the votes of all the exhibitors, buyers and journalists attending the Couture Show, which attracts the top 300 jewelry retailers who vote for their favourite pieces in the various categories. As Italy’s leading luxury jewelry brand, respecting the highest artisanal traditions and elegance in the made-in-Italy style, Damiani is internationally recognized for its innovative spirit. Since 1924, the Damiani brand has been synonymous with flawless quality, and is one of the most recognized and sought-after jewelry houses in the world.
Advertising is one of the most powerful tools for the fashion industry. The last four advertising campaigns of Louis Vuitton have captured the readers´ imaginations and proven the brand’s ability to reinvent itself. Shot in a New York studio by Steven Meisel, Louis Vuitton’s Fall/Winter 2010-2011 fashion campaign brings together three decades of supermodels – Christy Turlington, Karen Elson and Natalia Vodianova – in a series of exquisite images that capture the eternally feminine spirit of the runway show. “Last season was all about the idea of the New Age traveller. This season is a manifesto for beautiful, ladylike clothes. Two different collections, two different campaigns, but one Louis Vuitton”, says Artistic Director Marc Jacobs. Soft sepia tones and a set resembling a movie star’s dressing room conjure up an ambiance that combines intimacy with cinematic glamour as the models pose in the season’s sweet bustiers, Fifties knits and sweeping skirts, surrounded by stacks of shoe boxes from which peep the collection’s charmingly retro bow-fronted pumps. In keeping with the ladylike mood, the spotlight also falls on Louis Vuitton’s dazzling reinterpretations of its iconic Speedy handbag, in alligator, waxed calf leather, or flocked and sequined Monogram canvas. The Louis Vuitton Fall/Winter 2010-2011 advertising campaign will break this month in issues of magazines worldwide.
Fall/ Winter 2010
Be ready for the season to come. Check out some of the best choices from Paris, New York and Milan
Alexander McQueenâ€™s last collection was a tribute to his skill as a designer who created art for fashion. Looking to the Dark Ages for inspiration, he found light, using heavy golden brocades to juxtapose folds of shimmery red material, to form the border of wheighty cloaks and to edge white satin. Statuesque gowns reigned, adorned with angel motifs and gilted red fabrics.
Darkness prevailed at the Yves Saint Laurent show, as it opened with models parading down a dimmed runway in outfits constructed entirely from black save for gold silhouettes strung from chunky chains. Stefano Pilati updated classic looks with split-sleeved jackets, fur-lined, shiny gilets, plastic mantles and dashes of colour, with gossamer dresses in indigo and coats in lustrous deep pink.
For Autumn/Winter 2010, John Galliano took his inspiration from nomadic warrior-women. The result was images of women with lacquered hair wearing structured pieces with ethnic trim. Buttoned skirts with lowwaisted belts belled out with fur borders, waistcoats overlaid puff-sleeved shirts and sheer dresses flitted over slim-fit pants. For evening, tiaras were worn with floor-sweeping, fringed gowns in ruby red.
To showcase his Autumn/Winter 2010 collection, Karl Lagerfeld had an iceberg imported from Sweden. Against this cool back drop, fake fur abounded, taking shape as boots, pants, handbag covers and thick bordered, military-styled bomber jackets. Iconic tweed suits made an appearance in mottled colours with heavy fringing or were dichromatic, edged with contrasting fabrics.
Louis Vuitton Moving in a different direction from past seasons, Marc Jacobs for Louis Vuitton said he wanted to create pieces for gorgeous woman of all ages who like to get dressed up. The result was a retro look with a parade of 50â€™s dresses, swing skirts and cropped, crew-necked sweaters. Hemlines finished below the knee, with attention given to the waist and bust. Pretty details included fringed buttons, bows and compact, signature handbags.
Fall/ Paris, Winter New York 2010
The Hermés show opened with Big Ben tolling in the background, as Avenger-styled models emerged from a tunnel linked to 19th century London. Jean Paul Gaultier’s vision was to reflect the British tradition of the feminine man.
The collection for Autumn/ Winter 2010/2011 unveiled during Milan Fashion Week features beautiful items that would be perfect for various occasions. Dresses are luxurious and glamorous as well as trenches and coats. The collection is obviously inspired by last-century fashion tendencies that are presented with a modern twist.
Italian designer Frida Giannini has created a collection completely neutral and possessing all the essential Gucci elements from the 1990’s. The fox furs permeate luxury into the collection and correspond with the gold hardware recognizable on the belts and bags. The Gucci look this season is about the heritage and luxury of Gucci and the subtle elegance of monochrome.
Giorgio Armaniâ€™s Fall/Winter 2011 haute couture collection is very, very classy. Unlike last yearâ€™s blingy range, this time we can see a lot of elegant fashion in the Armani wardrobe. From the daycoats to the plain trousers and from the evening gowns to the pencil skirts, each garment has a subtle style to it.
With an exclusive attention to prints, the Cavalli Fall/Winter 2010/2011 Collection brings out an explosion of colors through a combination between urban grunge and vintage softness. What a fabulous collection full of edge and sexiness!
checK ouT The righT eSSenTiaLS To haVe in Your Wardrobe ThiS SuMMer
as a hairstylist, make-up artist and wardrobe professional working in the Portuguese movie, television and advertising industry, azoresborn rui Carreiro also produced two of Portugal’s major fashion events, Portugal fashion and ModaLisboa, besides having done some of the hippest fashion productions for major fashion magazines in europe. Today, rui is in Macau working as a hairstylist and fashion adviser for the Málo clinic, he also spends some of his busy time with essential, by giving us some valuable tips in beauty and fashion.
The military trend is here to stay, so why not embrace the trend by giving it a try? i suggest a cropped jean jacket in beige with little militaryinspired details such as the buttons and zippers. Throw it over a dress or wear it with a long tee and skinny jeans. You can also get militaryinspired tube dresses, shorts, and even skirts. Just make sure to accessorize and keep everything else nice and simple.
Summer in the city tropical prints
There’s no better time to steal the tropical look than in this tropical heat! Tropical prints add a punch of color and can look very sexy. Pick up a tropical print frock or full skirt and wear it with a white tanktop and an oversized belt.
don’t know what to stock your closet with this summer? no worries, because this season is bringing a slew of new, and revisited trends that you’ll be sure to love. everything from neutrals, to rompers, and everything in between so even if you don’t have the latest trends, you’ll be sure to find something in the back of your closet.
Love em or hate em rompers have made a huge splash this summer and that’s because they’re virtually fuss free! Think about it… you have an outfit all made for you in one piece. all you need to do is throw on some accessories and wear it with flats, flip-flops, sandals, wedges, or heels.
neutrals have made a very strong statement on the runways for the Spring and Summer season and the demand is: do not be afraid to wear them! although neutrals can sometimes wash out a complexion, it’s important to choose the right kind of neutral for your skin color. neutrals are also great for summer because they keep you cool and they’re super fun to accessorize.
seX and fashion
during the process of evolution such concepts as ethnicity, gender, cultures, subcultures, and sensuality have impacted on the fashion of females around the world. The influence of fashion has presented and enabled women to self-express themselves. also, the influence of fashion has made it possible for women to express their values and morals through the type of clothing they wear. basically, fashion is a tool used to create statement! but have women taken the tool of fashion too far in terms of self-expression?
Sailor stripes have never been so hot, and now you can get sailor striped pants, shoes, shirts, jackets, skirts, anYThing to channel your inner sailor mood.
have you’ve noticed over the past decades how more and more women are wearing less and less? a provocative generation has been brewing over the past decades and eventually sexually provocative clothing has become the norm for women: 1. Women want to accent their “goodies”: and capitalize on the amount of potential they have towards men 2. hey Ladies, we know not only men are checking us out: Women feel competition from other women. and since, women are extremely competitive for the man they have their eye on this may result into the “cat fight.” 3. Women want “approval: it’s always good to leave a room of guys with compliments and positive remarks floating in the air in your direction. The second wave of the feminist movement took place between the years of 1960-1980 whose goals were focused on legal and cultural inequality. The third wave of the feminist movement started in the 1990’s and remains current. but this sexual revolution is leading to more provocative women. because of this new outlook on gender and gender roles in our society women have been expressing to the public the statement that “We are women.” in such ways as exposing their bodies and demonstrating a more distinct feminine identity, wearing more revealing clothes, and exposing their pregnant bellies, women have announced to the world that they are here. So ladies, less can definitely turn out to be more!
circle skirts are hot right now and that’s because they look super cute when paired with flats and a fitted tank top. Pick one up in a fun, bright color or a tropical print, and pair it with a white or neutral form-fitting tank top. To add a little height, throw on some wedges!
Shoes, Shoes and Shoes... also bags
Flower Power John Galliano has done it again for Christian Dior! Galliano has got women head over heels with his magnificent colourful shoes collection. To cry and die for...
Doctor, doctor, tell me the news! London is going wild for Doc Martens...again! For those of you who are unfamiliar, Doc Martens refers to a footwear, clothing and accessories brand called Dr. Martens, best known for its air-cushioned foot wear. They were a major craze for most of the 1990s when grunge took over the music industry. However when the new millennium hit, they were nowhere to be seen. Guess what? They’re definitely back!
Schön’s statement This Fall Mila Schön set the heels high in a simple yet very intelligent, elegant way. These beautiful tricolour shoes are one of our favourites, so if you’re having any doubts when you look at the price, just remember Schön’s motto: “Not how much, but how”.
L for Loubotin’s Lust Every season Christian Loubotin reinvents itself as THE shoe brand. Perfection has reached the highest limit possible, once again. Love it or lust for it!
Rodarte by Nicholas Kirkwood
From Chanel to Shangai
Do we even need to say much about these shoes? Super hot and super wanted! Rodarte Fall 2010 Collection went on fire powered by Nicholas Kirkwood.
It’s all about creativity and Chanel knows it! This Chinese doll purse does not take a world of things, but it can make you feel on top of the world if you carry it in your hand.
Gucci goodies They’re classical and sophisticated and might just be the choice of the season. These Gucci bags have the looks, the quality and most of all our eyes. Don’t miss them.
Miu Miu goes to school Mini kilts, duffle coats, gossip girl-esque kitten heels with crazy fishnet tights, flower appliqué and big bags. Miu Miu hits big this Fall with a wonderful collection. Upside down glasses, mustard yellow, mint green, random cut-outs, office pump’s on LSD and lots of leg. But everything is held together by exquisite cuts, razor
sharp lines and silhouettes, outstanding textures and futuristic hardware making up a collection that could definitely be recipe for disaster: an extremely flattering and wearable one!
Balenciaga tricolor Plastic aquamarine, mahogany crocodile, stacks of colourful marbled prints, orthopaedic looking platform attachments and foam pads... it’s the shoe of the future! Absolutely stunning!
coMMenTS, oPinionS and concLuSionS abouT The gLaMorouS WorLd of faShion
sex and the City
first we take manhattan,then manhattan,than i t all started in the 80’s. “dynasty” and “dallas” were watched by a global audience of over 250 million viewers. Many who watched did so for a look at the 80’s fashions which were always over the top. and from that point on, nothing was ever the same again. The influence of television soap series on viewers´ fashion acquisitions is huge and the business for both brands and designers is tremendously profitable. in fact, while most of us may look to shows for entertainment, we can also gain fashion inspiration from the main characters of series like “Sex and the city”, “gossip girl” or “desperate housewives” just to name a few. We can even go back to “The nanny”, “Prince of bel-air” and once again “dallas” and “dynasty” and still point out some fashion trends that would work perfectly in our present time. how is this possible? it’s no news that fashion is cyclical. This means that trends that were popular in the past will often resurface in the future. Television show series tend to ease the promotion of a new brand, a bag design or a pair of shoes. The reference to Manolo blahnik shoes on “Sex and the city” has made the brand even more successful than before. actually, “Sex and the city” is all about life on top of Manolo´s high heels. fashion statements throughout the television and film industry are much more influential than an advertisement in a magazine or even a huge billboard on a heavy traffic road. The empathy bond created between the main character and the public is undoubtedly defined by the personality, the way the character evolves in the plot and the looks of the actor or the actress. Television series have become the new fashion runways and catalogues. on the internet you can even find some websites pointing out some tips about the dresses and bags worn by the characters on those TV shows and you can also find websites offering their dressmaker services to copy bcbg Maxazria, gucci or
even Kate Miller cocktail dress models. The result is pure fashion on the streets. from Paris, to new York, copenhagen and Tokyo, fashion hits the streets hard and fiction turns into reality when you walk around town and you’re able to identify fictional characters along your way. The modelling does not only happen on the catwalk. it has found its best runway on the streets and day-to-day people are the best models around. We wouldn’t go so far as to call it a fashion revolution, but it’s definitely an expression and a statement of personal behaviour towards trends and the dos and don’ts on the covers of the magazines.
ives sperate housew
we take the whole world
Grand Canal Shoppes, The Venetian Macao 5cm Abiste agnès b. Aigle Aimer Alqvimia Anteprima Apothecary Armani Exchange Arté Madrid Artini Ashworth Autore b+ab Bauhaus Belle Blancpain Blush Boucheron Boutique di Gondola Breil Brooks Brothers Butani BVLGARI Canudilo Caran d’Ache Carat Carl F. Bucherer Century Chai CHARRIOL Chevignon Choi Wai Jewellery Chopard Cirque du Soleil Boutique City Chain CK Calvin Klein Clarins Club Monaco Coach Corona Crocodile Damiani Davidoff Deicae Demandor Derain DG Lifestyle Store Diesel Dilys’ Don Gilato Dooney & Bourke Ecco Edelweiss Jewellery Elle Jewellery Elov Emphasis Jewellery Emporio Armani Emporio di Gondola Enzo EQ:IQ Expressions Fabio Caviglia Fables Fancl Fila Fiorucci Florsheim Folli Follie Fossil Francesco Biasia Franck Muller French Connection Furla Geox; Joy & Peace girls talk Giviea Glashütte Original Godiva Göessele Grossé Guess Accessory Guess Jeans H&B Medicine Shop Hatta Fine Jewelry Hearts On Fire Herborist Hogan Home of Swallows Hugo Boss Orange Label i.t innée
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guide to indulgence
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Izod Izzue Jaquet Droz JC Versace Jean Scott Jipi Japa Just Gold Kaltendin Kego Kilara & Ceu Killah Lacoste Lancel Laneige Le Saunda Levi’s Links of London LLadró L’Occitane Luisa Cerano Luk Fook Jewellery Lush M Missoni Malo Clinic & Spa Manchester United Mango Marisfrolg Marjorie Bertagne Marlboro Classics Massimo Dutti Maud Frizon Paris Max&Co. Mercato Michel René Michele Mikimoto Millie’s Mirabell Miss Sixty Mocca Moiselle Montagut Montblanc Moreline Murano Murphy & Nye NaRaYa Natural Beauty Mix Nautica Next Nike Nine West Normana O’Che 1867 Omega Optica Boutique Optica Fashion Optical 88 Osim Oto Outdoor Fashion Passion Play Patchi Paul & Shark Piaget Piquadro Promod Q’ggle Rado Raffles Rayure Replay Rich Jade Richard Mille Rimowa Rockport S. Culture S.T. Dupont Samsonite Shiseido Sisley Sisley Paris Soft & Intimate Sparkling Color ST GE Staccato Stefanel Stella Luna Stone Market Sulwhasoo Swarovski Swatch Tasaki Thomas Sabo Tie Rack / Bric’s
2423 2613 2523b 2001 2433 2102a 2113 2017a 2402a 2306 2306a 2508a/ 2403 2701 2409 2210a 2425 2608a 2013c 2608 2622 2018 2636a 2630 3015 2215 2321 2619 2648 2509 2442 2650 2623 2508 2703 2621 2011 2405 2658 2438 2322 2607 2525a 2002 2639 2652 2702 2212 2128 2709 2211 2432a 2605 1020 2426c 2003a 1010 2005a 2019 2106 2120 2523a 2300b 2111a 2007 2013 2023b 2316 2216 2006a 2119b 2606a 2427 2117 1002 2708 2203 2300 1022 2527a 2017 2310 2630a 2527 K9 2612a 2319a 2421 2026 2402b 2617 2415 2426a 2101 2426b 2435
Tiffany & Co. TISSOT Tommy Hilfiger Tonino Lamborghini Tourneau Toywatch Triple Five Soul Triumph and Hom TSL Tumi U-Boat United Colors of Benetton Valente Venilla Suite Verri Vertu Vilebrequin What For Wolford Y Nan Yes Zara Zydo
2003 2411 2710 2646a 1003 2417 2436 2220 2022 2707 2426 2308 1021 2600 2703a 2006b 2623a 2205 2626 2625 2023 2313 2013b
DFS Galleria, The Four Seasons
Armani Bally Burberry Cartier Celine Chanel Chaumet Chloe Chopard Clinique Debeers Dior Dior (Beauty Zone) Dunhill Estee Lauder Fendi Folli Follie Gucci Hermes IWC Jurlique Kiehl’s The City of Dreams Lancome L’Occitane Alfred Dunhill Level 1, The Boulevard Loewe Bally Level 1, The Boulevard Louis Vuitton Burberry Level 1, The Boulevard Omega Cartier Level 2, The Boulevard Prada Chopard Level 2, The Boulevard Ralph Lauren Chow Tai Fook Level 2, The Boulevard Salvatore Ferragamo Coach Level 1, The Boulevard Shiseido Hublot Level 2, The Boulevard Swarovski Hugo Boss Level 1, The Boulevard Tag Heuer i TO i Level 1 and 2, The Boulevard Tod’s Insider Level 1, The Boulevard Tumi IWC Level 2, The Boulevard Vacheron Constatin LeSportsac Level 1, The Boulevard Van Cleef & Arpels Longines Level 2, The Boulevard PENACHE Level 2, The Boulevard Shoppes at Four Seasons Ralph Lauren Level 1, The Boulevard Rock Shop Level 1, Hard Rock Hotel Abiste Salvatore Ferragamo Level 1, The Boulevard Alain Mikli Swarovski Level 1, The Boulevard Altea Milano Tag Heuer Level 2, The Boulevard Aquascutum The Bubble Shop Level 1, The Boulevard Armani Collezioni Timeless Level 2, The Boulevard Audemars Piguet Tumi Level 1, The Boulevard Autore Valentino Level 1, The Boulevard Bottega Veneta Vivienne Westwood Level 1, The Boulevard Brioni Butani The Esplanade, Wynn Macau Canali Cerruti 1881 Alfred Dunhill 16 Chic Elegance Bvlgari 3 Coach Chanel 5 Cole Haan Christian Dior 12 David Yurman Ermenegildo Zegna 17 Diamond SA Fendi 10 Diane Von Furstenberg Ferrari 21 Dilys’ Giorgio Armani 8 Ed Hardy / Christian Audigier Gucci 25 Gieves & Hawkes Hermes 18 Giuseppe Zanotti Hugo Boss 23 Givenchy Louis Vuitton 6 GoldVish S.A. Miu Miu 11 Guess by Marciano Cigar Imporium 4 H&B Medicine Shop Piaget 9 Hugo Boss Prada 27 Jimmy Choo Sundries 13 Juicy Couture The Signature Shop 4 Kate Spade Tiffany & Co. 7 Kent & Curwen Van Cleef & Arpels 24 Kenzo Versace 26 Kwanpen Vertu 22 La Perla Lancel Grand Lapa Hotel Mango Tree Marc by Marc Jacobs Bally 13 Marni Burberry 1 Max Mara Cartier 12 On Pedder Christian Dior 11 Optica Privé Cigar Imporium 17 Renaissance Arts Gallery Alfred Dunhill 10 Roberto Cavalli Class Emporio Armani 9 and Cesare Paciotti Ermenegildo Zegna 2 Samsonite Black Label Florinda Jewelry 16 Shamwari South African Diamonds Hermes 8 Shanghai Tang Hugo Boss Orange Label 5 Shiatzy Chen Louis Vuitton 4&5 Shimansky Omega 6 St. John Salvatore Ferragamo 7 Stefano Ricci Valentino 15 Stuart Weitzman tsesay Valentino Versace
1112 1123 1110 1125 1109 1117 1101/41 1123a 1101/43 1101/22 1101/42 1120 1101/23 1106 1101/20 1102 1101/37 1108 1116 1101/44 1101/26 1101/21 1101/28 1101/25 1121 1115 1101/45 1126 1111 1113 1101/29 1101/38 1101/33 1105 1101/31 1101/39 1101/40
1208 1212 2835b 2836 2805 & 2806 1130 & 1131 1129 2845 2802 1223 2850 2801a 1207 2856 2812 2801 2816 2846 1211 2820 2835a 2847 2851 1226 2858 1215 2807 2838 2859 2829 2837 2840 2817 2849 2857 2813 2831 2841 2808 2848 2823 1213 2800 2825 2818 2839 2833 2821 & 2822 2809 1128 2850a 2832 2842 2853 & 2855
October 15th Caesars Golf Macau
October 22nd Macau Golf & Country Club For more information visit macaubusiness.com or write to firstname.lastname@example.org
No cheap trick With zero-fee tours and unlicensed accommodation again in the news, officials plan a new series of laws to improve standards in the tourism sector
guides and stiffened penalties, including bigger fines. There were 142 travel agencies, 1,340 tour guides and 28 transferists registered last year. It is understood that the new laws are aimed at shutting down zero-fee tours. Consumers on a zero-fee package tour are charged less than the basic costs of the holiday’s transportation, accommodation and entry fees. The operators earn commissions from stores where tourists are pressured into buying or they overcharge for extra activities.
‘Spend more, be happier’
llegal inns and zero-fee group tours are again in the government’s sights. Macau has approved a new law to police and shut down unlicensed accommodations that takes effect on August 13. Next it plans to change the regulations that control travel agencies, tour guides and “transferists”, the ground staff that escort tourists between border posts and hotels. Director of the Macau Government Tourist Office João Manuel Costa Antunes has promised more inspections at checkpoints and tourist attractions, including at the Macau Ferry Terminal. New inspectors are being recruited by the tourist bureau to help enforce the laws. The tough illegal accommodation law includes fines of up to MOP800,000 for the owners of unlicensed premises and MOP3,000 for their guests. The authorities will also have the power to cut water and electricity supplies to apartments suspected of operating as illegal inns. August 2010
Director of the Legal Affairs Bureau André Cheong Weng Chon says there are about 200 to 300 suspected illegal inns in Macau, mostly around the International Centre complex and in the buildings behind the Holiday Inn in the ZAPE district. Until now, closing down illegal operations had been difficult. Without specific legislation, the courts had frequently ruled against shutting down suspected illegal premises.
More changes ahead
The bureau has other matters of regulation to overhaul, flagging its intent to upgrade the way tour groups are handled. Until September 14, the government is holding public consultations on the operations of travel agencies, tour guides and “transferists”. Under its proposal, tour operators will need to inform the bureau of a group’s arrival 24 hours ahead of time and group tourists must be given a programme when they arrive. There are plans for a code of good practice for
The scam has cursed the industry for years and is back on the radar after an incident last month in Hong Kong. A seven-minute video posted online showed a tour guide shouting at a group of mainland Chinese tourists to spend more on shopping. “Spend more, you’ll be happier... don’t tell me you don’t need [to buy more], next you’ll be telling me you don’t need to eat at meal time. I will lock you out of your hotel rooms because you don’t need them [either],” the tour guide tells the group. The agent has since apologised but the outcry from the mainland has left Hong Kong tourism officials red faced. In one of Macau’s worst cases from 2007, 120 tourists from Hebei were told they would be left on Hac Sá Beach in Coloane if they didn’t pay an additional MOP120 for their visit to The Venetian Macao or an additional MOP420 to see a show.
The tourist bureau has signed several agreements with its mainland counterparts to stamp out the practice, most recently in April with the Shenzhen Municipal Bureau of Culture, Sports and Tourism. The Quality and Honest Macau Tour agreement includes clear quality standards through which to a process conflict resolution. At the opening ceremony of the bureau’s Annual Marketing Meeting and Tourism Forum last month, Mr Antunes said quality should be the key to building the city’s tourism industry, not low prices. “Macau cannot be promoted as a cheap destination; it should be promoted as a destination were the price translates into service quality,” Mr Antunes told attendees.
Hotels to get trainees on western cuisine
IFT programme aims to answer the need for young chefs
he Institute for Tourism Studies (IFT) is offering a “Western Culinary Arts Practicum Programme”, in cooperation with the
local industry, to train professionals in the area of food production. The programme, which will be launched in September, is being set up
to answer the need for young chefs in the local industry, hence its special emphasis on practical training. The concept of this programme is for IFT to provide theoretical knowledge while working with local hotels for practicum opportunities, where students can apply the theories in a hands-on practical training environment. The industry partners include: Altira Macau, City of Dreams, Four Seasons Hotel, Grand Lapa Macau, Grand Hyatt Macau, Grand Lisboa Hotel, Hotel Lisboa, MGM Grand Macau, Sands Macao Hotel, The Westin Resort Macau and Wynn Macau. This free programme will be carried out six days a week (one day at IFT and five days at hotels), and will last for 18 months, during which time participating hotels will pay a monthly allowance of not less than MOP4,000 to the students. Upon completion of the programme, students will receive a certificate issued by IFT and a skills certificate issued under the Macau Occupational skills Recognition System (MORS).
Tourists paying more
A total of 650,849 guests checked into Macau’s hotels and guest-houses in May 2010, up notably by 46.3 percent year-on-year, with the majority coming from Mainland China (51.9 percent of total) and Hong Kong (19.4 percent). The average occupancy rate of hotels and guest-houses soared substantially by 18.6 percentage points year-on-year to 77.9 percent. The average length of stay of guests decreased by 0.02 nights to 1.5 nights. The cumulative number of guests reached 3,197,610 in the first five months of 2010, up by 20.3 percent over the same period of 2009. In the first five months of 2010, visitor-guests of hotels and guest-houses accounted for 60.8 percent of the total number of tourists, down from 61.7 percent in the same period of 2009. At the end of May 2010, the total number of available guest rooms of the hotel sector increased by 2,001 year-on-year to 19,573 rooms.
The Tourist Price Index (TPI) for the second quarter of 2010 rose by 12.29 percent year-on-year to 164.04, according to official data released last month. The price indices of accommodation and restaurant services increased notably by 17.38 percent and 4.79 percent respectively, attributable to rising hotel room rates, as well as higher charges for restaurant services. The second quarter TPI went up by 1.38 percent quarter-to-quarter. The price index of accommodation decreased by 10.60 percent as a result of lower hotel room rates compared with the first quarter. The average TPI for the last four quarters increased by 8.45 percent over the previous period, quite above the general inflation rate in Macau: for the 12 months ended June 2010, the average Composite Consumer Price Index rose by 0.97 percent from the preceding period. TPI reflects the price changes of goods and services purchased by visitors, which is compiled according to the consumption pattern of visitors.
Tours keep on increasing Visitor arrivals in package tours surged by 132.9 percent year-on-year to 569,803 in May 2010, as visitors in package tours for May last year were adversely affected by the human swine influenza pandemic. Visitors from Mainland China (422,204); Japan (22,645); Taiwan (21,293); and Hong Kong (20,368) rose substantially by 168.0 percent, 85.9 percent, 38.1 percent and 14.5 percent respectively. Those from the Republic of Korea (14,714) and India (11,375) also registered notable increases. In the first five months of 2010, visitor arrivals in package tours increased by 23.2 percent year-onyear to 2,575,916. August 2010
Visitor arrivals surge by 18 percent in 1H2010 Total visitor arrivals reached 12,229,446 in the first half-year of 2010, up by 17.9 percent year-on-year, according to official data. The number of visitor arrivals in June 2010 increased by 30.6 percent year-on-year to 1,904,395. The main reason for this was that visitor arrivals for June 2009 were still adversely affected by the human swine influenza pandemic. In June 2010, same-day visitors (984,916) accounted for 51.7 percent of the total visitor arrivals, with 514,827 coming from Mainland China.
Keith Morrison Author and educationist - email@example.com
Of MICE and men Efforts to build a flourishing MICE sector have scarcely made a squeak The Scottish poet Robert Burns wrote the famous lines “The best laid plans of mice and men, Oft go awry, And leave us nothing but grief and pain, For promised joy”. They are, perhaps, a fitting commentary on the meetings, incentives, conventions and exhibitions (MICE) industry in Macau. Data from this year and last show unstable and rather disappointing patterns of development. We see a steady decline in MICE activities in the education and training, medical and health, and information and other technology segments, and only a marginal rise in the commerce, trade and management, and banking and finance segments. The tourism and culture segment seemed to remain more or less stable. Even including the spike in events and participants for the fourth quarter of last year, the numbers are not high. The number of incentives, conferences and exhibitions is stubbornly low. In May, the Macau Government Tourist Office launched the second phase of its Strategic MICE Stimulation Programme. The programme started last year and attracted 67 meetings, 36 exhibitions and 62 incentives programmes in that year. It offers financial subsidies and tailor-made support to organisers of MICE events. Last year, this amounted to US$6.4 million (MOP51.3 million). It covered, for example, promotional assistance, facilitation in liaison with government authorities, support for accommodation, food and beverages, venue rental charges, hardware, support for an opening ceremony, and a fixed amount of MOP300 for each overseas participant in incentive activities. It was very attractive. Despite the assistance, the MICE industry seems not to be the flagship development that was hoped for in Macau. Even if we assume that all the participants were from outside Macau (which probably they were not, but detailed data are not publicly available) and if we take the highest number of participants, 232,353 in the fourth quarter last year, this only represents 3.15 percent of visitor arrivals for the period. Taking the latest data, for the first
quarter this year, the 92,737 participants represent only 1.23 percent of visitor arrivals. It is hardly an avalanche of tourists. In April, 17 executives rated Macau as a destination for corporate incentive programmes, which are important for businesses that seek to attract, retain and reward high performers. Indeed, major groups such as Herbalife, with 7,000 delegates, and Hagemeyer, with 960, have already used Macau as an incentives destination. The executives commented on the need for better ferry services, better immigration services, better local traffic infrastructure and better air quality. An aside, the issue of air quality raises a 2009 Q1
question mark over the criteria used by the Macau government when its statistics department reported that the “level of air quality was classified as ‘good’ for 301 days in 2009.” To what extent the much-heralded Hong Kong-Zhuhai-Macau Bridge or the rail link from Guangzhou to Zhuhai will increase MICE activities is an open question. We need far more effort to promote this major MICE initiative in Macau, from all sectors of government and business. As Deng Xiaoping was quoted as saying: “It doesn’t matter if a cat is black or white, as long as it catches mice.” It is time to think creatively about how to catch MICE. 2009 Q2
Type of event Meetings
Subject of event
Education and training
Information and other technology
Medical and health
Tourism and culture
Banking and finance
Commerce, trade and management
Travel and tourism
Judiciary and law
not used until 2010
Culture and arts
Number of Events
Number of participants
These categories were
Source: Compiled from data from the Macau government’s statistics and census service * This figure is an aggregate of the percentages for both travel/tourism and culture/arts. They became separate categories only in 2010. August 2010
If you know of an event to be held in Macau that you believe should be listed with Macau Business, please drop us an e-mail: firstname.lastname@example.org. Gaming In the subject bar, type in “List me as an event”.
TBA : To be advised TBA : A Macau Business partner event August
Date: Event: Venue:
8th – 10 th
Australasian Gaming Expo
sydney Convention and Exhibition Centre, Darling Harbour, NsW Australia Organiser: gaming technologies Association (gtA) Address: Level 34, 50 Bridge street, sydney, NsW 2000 Australia tel: (612) 82160931 Fax: (612) 82160701 Website: www.austgamingexpo.com E-mail: email@example.com Date: Event: Venue: Organiser: Address: tel: Fax: Website: E-mail: Date: Event: Venue:
20 th – 22nd
Asia Adult Expo 2010
The Venetian Macao-Resort-Hotel Vertical Expo services Co. Ltd Room 1101,193 Lockhart Road, Wanchai, HK (852) 2528 0062 (852) 2528 0072 www.asiaadultexpo.com firstname.lastname@example.org 26th – 28th
GTI Asia China Expo 2010
Poly World trade Expo Center, Pazhou, guangzhou City, China Organiser: Haw ji Co., Ltd./game time International Address: 2F, No. 17 PaoChing st., taipei City 10585, taiwan tel: (886) 2 27607407 ext. 207 Fax: (886) 2-27623873 Website: www.gtiexpo.com.tw E-mail: email@example.com
Date: Event: Venue: Organiser: Address:
14th – 17th
Venue: Organiser: Address: Fax: Website: E-mail:
Radisson sAs Palais Hotel, Vienna, Austria European Association for the study of gambling NL - 1006 AD, Amsterdam, The Netherlands (31) 206896418 www.easg.org firstname.lastname@example.org
Date: Event: Venue: Organiser: Address:
21st – 26th
tel: Fax: Website: E-mail:
8th European Conference on Gambling Studies and Policy Issues
The Freight Summit 2010
The Venetian Macao-Resort-Hotel Raueber & Walle solutions Ltd. unit 2601, 26th Floor China Insurance group Building, 141 Des Voeux Road, Central, Hong Kong (63) 2892 0642 (63) 2892 4438 www.thefreightsummit.com email@example.com August 2010
The Women in Gaming Awards
Hilton Park Lane, London, uK Clever Duck Media Ltd. suite 105 Park Plaza, Point south, Hayes Way, Cannock, Ws12 2DB, uK tel: (44) 0 1543 57 86 89 Website: www.gaming-awards.com/wig E-mail: firstname.lastname@example.org October
Date: Event: Venue: Organiser: Address: tel: Fax: Website: E-mail: Date: Event:
5th – 7th
Asian Casino & Gaming Congress
Marina Bay sands, singapore Beacon Events 20/F siu On Centre, 188 Lockhart Road, Wanchai, Hong Kong (852) 2219 0111 (852) 2219 0112 www.asiangamingcongress.com/ info@BeaconEvents.com 12th – 14th
Gaming Executive Summit Australasia 2010
Venue: Etihad stadium, Melbourne, Australia Organiser: terrapinn Address: Level 14, 111 Pacifi c Highway North, Sydney, NsW 2060, Australia tel: (61) 2 9021 8808 Fax: (61) 2 9281 5517 Website: www.terrapinn.com/2010/ges E-mail: email@example.com
Date: 14th – 17th PATA Travel Mart 2010 Event: Venue: The Venetian Macao-Resort-Hotel Organiser: Macau Government Tourist Offi ce | PATA Address: unit B1, 28th Floor, siam tower, 989 Rama I Road, Pathumwan, Bangkok 10330, thailand tel: (66) 2 658 2000 Fax: (66) 2 658 2010 Website: membership@PAtA.org E-mail: www.pata.org
19 th – 21st
Venue: Organiser: Address: tel: Fax: Website: E-mail:
Bella Center, Copenhagen, Denmark Clarion gaming Earls Court Exhibition Centre, London sW5 9tA, uK (44) 0 20 7370 8579 (44) 0 20 7370 8561 www.eigexpo.com firstname.lastname@example.org
21st – 24th
Venue: Organiser: Address: tel: Fax: Website: E-mail:
The Venetian Macao-Resort-Hotel Macau trade and Investment Promotion Institute Av. da Amizade No 918, Edf. World trade Centre, 1-4 andar, Macau 853 2882 8711 853 2882 8722 www.mif.com.mo email@example.com
Date: Event: Venue: Organiser: Address: tel: Fax: Website: E-mail:
28th – 30 th
The 9th Annual European iGaming Congress and Expo
15th Macau International Trade & Investment Fair (MIF)
Wine & Gourmet Asia 2010
The Venetian Macao-Resort-Hotel Koelnmesse Pte Ltd 152 Beach Road, #25-05 Gateway East, Singapore (65) 6500 6712 (65) 6294 8403 www.wineandgourmetasia.com firstname.lastname@example.org
TM is preparing to launch its 100 megabytes per second (MBps) fibre optic broadband service to residential consumers at a price four times greater than a Hong Kong service that is up to 10 times faster. Companhia de Telecomunicações de Macau announced the launch of the service last month ahead of gaining final approval from the Bureau of Telecommunications Regulation. Pre-registration for the new service opened on July 20.
A price to pay
The service will be available in two plans with download speeds of either 50 MBps or 100 MBps. While prices have not been finalised, CTM has proposed fees of MOP600 a month for the 50 MBps plan and MOP800 a month for the 100 MBps service. The prices have already generated negative feedback, with several Internet users accusing the company of overcharging. They have
The residential market will soon be able to enjoy high-speed fibre optic broadband from CTM but it comes with a big price tag
cited the Hong Kong Broadband Network package that provides a faster 1000 MBps service for HK$199 a month on a 24-month contract, with a one-time installation fee of HK$890. For an equivalent 100 MBps service, clients pay only HK$109 a month, with a HK$380 installation fee. The CTM service plans will include two supplementary accounts to allow customers unlimited Wi-Fi usage at more than 200 CTM Wi-Fi hot spots. Each account has an email account with 4 GB of free storage and the primary account also offers 1 GB of free online storage.
fibre coverage by March. “CTM has been actively developing its local fibre broadband technologies since 2000, and started to introduce fibre broadband service to business sectors such as the banking and hotel industries in 2003,” says CTM’s vice-president of network services Thomas Lei. “We have earmarked no less than MOP60 million to further enhance the quality of fibre optic broadband service in the next three years,” Mr Lei said. The total investment in the residential service has not been made public.
Rollout to continue
It is not the first time CTM has been criticised for high prices. Rival mobile operator SmarTone Macau launched a new 3G service last month but is unlikely to offer mobile broadband. SmarTone chief executive Patrick Chan Kai Lung said his company would not be offering mobile broadband because “currently, the
At present, CTM has installed optical fibre in residential buildings in densely populated districts throughout Macau and Taipa, including Portas do Cerco, Areia Preta, Toi San, Fai Chi Kei, Iao Hon, Horta e Costa, Ouvidor Arriaga, Coronel Mesquita, Almirante Lacerda, Rua do Campo and ZAPE. It has plans to double
monopoly [CTM] is charging very high prices” to rent Internet lines. Mr Chan says the “monopoly is against the overall consumer interest in Macau, they [CTM] are suffocating the development of mobile broadband and Internet experience.” Tele c om mu n ic at ion s bureau director Lawrence Tou Veng Keong says the government is trying to further liberalise the market. The bureau is also studying the feasibility of adopting a higher-speed 4G network and broadcast-type, mobile television services. According to a study released in February by the International Telecommunication Union (ITU), an UNassociated agency, Macau leads the world in offering the best price for accessing information and communication technologies overall relative to per capita national income. The study says both Hong Kong and Singapore trail Macau. August 2010
Electric dreams New generation electric motorcycles are headed our way, with the potential to clear the air and kickstart a drive that would place the city in the vanguard of a global emission-free revolution by Yuci Tai
n the bad old days of the 1990s they were regularly torched in batches or used for drive-by shootings. Today, thankfully, like a demonic plague of two-stroke mosquitoes, they keep the city on the move. You could argue that next to casinos, the humble motorcycle is the territory’s most ubiquitous item. But as Macau strives to burnish its environmental credentials, it is electric motorcycles that are making all the buzz. At the forefront of the technology in Macau is JJ (Macao) Ltd, a designer and manufacturer ready to bring electric motorcycles to the territory. The company’s chief executive Paul Tung Cheuk tells Macau Business that, in addition to the official commitment to promoting environmental protection, factors including rising public awareness about the environment, the upsurge of green energy and fluctuations in international oil prices have accelerated global demand for electric vehicles worldwide. That has pushed automobile manufacturers towards the development of hybrid vehicles to reduce greenhouse gas emissions. “However, hybrid vehicles only go as far as required by the Kyoto Protocol and further reductions are required, with the Holy Grail being zero emissions,” he says. August 2010
According to research conducted by Beijing Normal University’s Institute of Economics and Resource Management, the development of ecological and environmental protection industries would help Macau build a positive image and enhance competitiveness. The city has the perfect starting point. Its core and dominant industry, gaming, does not leave a huge carbon footprint. The city is in pole position in the race to create a lowcarbon economy.
JJ (Macao) plans to operate a “plug-and-run” battery replacement system where customers can exchange run-down batteries for fully charged batteries that can be used immediately
105 That is why JJ (Macao) is preparing for the launch of the eRider in the territory. The electric motorcycle designed and produced by the company has passed testing and should sell for less than MOP20,000, including a two-year warranty and ongoing maintenance. JJ (Macao) is the local arm of PortaPower Group, a developer of electric vehicles from research to production since 2003. The group has offices in Hong Kong and Macau, with production carried out in Shenzhen, Guangzhou, Panyu and Hunan. Macau will act as a test market for the company, which has plans to take the eRider global. “Hong Kong is our next target,” says Mr Tung. Customers in Europe and the United States are also testing the company’s products and there are indications they may cooperate in developing the eRider, he says. This is the second generation of vehicles the company has produced. The first generation of electric vehicles had a range of between 70 km and 90 km powered by mixed lithium and lead-acid batteries. The second generation uses eco-friendly lithium batteries, which cut the vehicle’s range but produce no emissions. Each set of lithium batteries can be charged 1,700 times and cover a total distance of about 50,000 km. After this they retain 80 percent of their capacity.
Plug in and go
The company plans to operate a “plug-and-run” battery replacement system where customers can exchange run-down batteries for fully charged batteries that can be used immediately. “We will establish several charging stations in Macau. The first will be on Areia Preta,” says Mr Tung. “People who choose battery rental need only pay a deposit for each battery they get. After paying the monthly service charge for battery maintenance and exchange, owners can have unlimited battery changes within the contract period.” Although a decision is still pending, it is understood the government will exempt the eRider from import tax, and that it is also considering waiving motor vehicle taxes for electric vehicles in the interest of environmental protection.
A batterypowered future E
lectric two-wheelers, including electric bicycles and motorcycles, will spread rapidly over the next several years, according to a recent report from Pike Research. The market research and consulting firm estimates worldwide sales of electric two-wheel vehicles will increase at a compound annual growth rate (CAGR) of 9.4 percent between now and 2016. “While electric two-wheel vehicles tend to be a lifestyle choice in North America and much of Western Europe, in the developing world they’re used more as primary means of transportation,” said industry analyst Dave Hurst. “Rising incomes and increased urbanisation are driving the need for, and the ability to purchase, reliable transportation and electric twowheel vehicles fill a growing niche.” Battery improvements that extend the range and speed of the vehicles, Mr Hurst added, will also hasten adoption of e-motorcycles and e-scooters. However, lukewarm perceptions and a lack of infrastructure could combine to slow growth. In many markets, people regard e-bikes and e-scooters as old technology, lacking the prestige of electric automobiles. And while government-funded incentives for electric two-wheel vehicles are becoming more common, the infrastructure required for the safety of lowspeed electric vehicles, such as separate lanes, is often an afterthought for government officials, particularly in developing countries. The report says that while the Asia-Pacific region, particularly the mainland, will continue to account for the vast majority of electric twowheel vehicle sales for several years, the fastest growth will occur in the Middle East (54 percent CAGR), Latin America (30 percent), and North America (24 percent).
Joseph E. Stiglitz University Professor at Columbia University and a Nobel laureate in Economics
Taming finance in an age of austerity It was not long ago that we could say, “We are all Keynesians now.” The financial sector and its free-market ideology had brought the world to the brink of ruin. Markets clearly were not self-correcting. Deregulation had proven to be a dismal failure. The “innovations” unleashed by modern finance did not lead to higher long-term efficiency, faster growth, or more prosperity for all. Instead, they were designed to circumvent accounting standards and to evade and avoid taxes that are required to finance the public investments in infrastructure and technology – like the Internet – that underlie real growth, not the phantom growth promoted by the financial sector. The financial sector pontificated not only about how to create a dynamic economy, but also about what to do in the event of a recession (which, according to their ideology, could be caused only by a failure of government, not of markets). Whenever an economy enters recession, revenues fall, and expenditures – say, for unemployment benefits – increase. So deficits grow. Financial-sector deficit hawks said that governments should focus on eliminating deficits, preferably by cutting back on expenditures. The reduced deficits would restore confidence, which would restore investment – and thus growth. But, as plausible as this line of reasoning may sound, the historical evidence repeatedly refutes it. When US President Herbert Hoover tried that recipe, it helped transform the 1929 stock-market crash into the Great Depression. When the International Monetary Fund tried the same formula in East Asia in 1997, downturns became recessions, and recessions became depressions. The reasoning behind such episodes is based on a flawed analogy. A household that owes more money than it can easily repay needs to cut back on spending. But when a government does that, output and incomes decline, unemployment increases, and the ability to repay may actually decrease. What is true for a family is not true for a country. More sophisticated advocates warn that government spending will drive up interest rates, thus “crowding out” private investment. When the economy is at full employment, this is a legitimate concern. But not now: given extraordinarily low longterm interest rates, no serious economist raises the “crowding out” issue nowadays. In Europe, especially Germany, and in some quarters in the US, as government deficits and debt grow, so, too, do calls for increased austerity. If heeded, as appears to be the case in many countries, the results will be disastrous, especially given the fragility of the recovery. Growth will slow, with Europe and/ or America possibly even slipping back into recession. Stimulus spending, the deficit hawks’ favourite bogeyman, did not cause most of the increased deficits and debt, which are the result of “automatic stabilizers” – the tax cuts and spending increases that automatically accompany economic fluctuations. So, as austerity undermines growth, debt reduction will be marginal at best. Keynesian economics worked: if not for stimulus measures August 2010
and automatic stabilizers, the recession would have been far deeper and longer, and unemployment much higher. This does not mean that we should ignore the level of debt. But what matters is long-term debt. There is a simple Keynesian recipe: First, shift spending away from unproductive uses – such as wars in Afghanistan and Iraq, or unconditional bank bailouts that do not revive lending – toward high-return investments. Second, encourage spending and promote equity and efficiency by raising taxes on corporations that don’t reinvest, for example, and lowering them on those that do, or by raising taxes on speculative capital gains (say, in real estate) and on carbon- and pollution-intensive energy, while cutting taxes for lower-income payers. There are other measures that might help. For example, governments should help banks that lend to small- and medium-size enterprises, which are the main source of job creation – or establish new financial institutions that would do so – rather than supporting big banks that make their money from derivatives and abusive credit card practices. Financial markets have worked hard to create a system that enforces their views: with free and open capital markets, a small country can be flooded with funds one moment, only to be charged high interest rates – or cut off completely – soon thereafter. In such circumstances, small countries seemingly have no choice: financial markets’ diktat on austerity, lest they be punished by withdrawal of financing. But financial markets are a harsh and fickle taskmaster. The day after Spain announced its austerity package, its bonds were downgraded. The problem was not a lack of confidence that the Spanish government would fulfil its promises, but too much confidence that it would, and that this would reduce growth and increase unemployment from its already intolerable level of 20%. In short, having gotten the world into its current economic mess, financial markets are now saying to countries like Greece and Spain: damned if you don’t cut back on spending, but damned if you do as well. Finance is a means to an end, not an end in itself. It is supposed to serve the interests of the rest of society, not the other way around. Taming financial markets will not be easy, but it can and must be done, through a combination of taxation and regulation – and, if necessary, government stepping in to fill some of the breaches (as it already does in the case of lending to small- and medium-size enterprises.) Unsurprisingly, financial markets do not want to be tamed. They like the way things have been working, and why shouldn’t they? In countries with corrupt and imperfect democracies, they have the wherewithal to resist change. Fortunately, citizens in Europe and America have lost patience. The process of tempering and taming has begun. But there is far more yet to do.
Arts & Culture
Culture and cash
Some of the worldâ€™s most famous artists died as paupers and it is true that brilliance can come from adversity, but should more be done to finance the arts?
by Luciana LeitĂŁo
here are no laws on arts patronage in Macau and if a company wants to sponsor any cultural activities or artists, it only benefits from a small tax incentive with very specific terms. If an individual wants to do the same there is no such benefit, which begs a question: Is it really that significant for Macau’s cultural growth that the government promotes patronage of the arts through tax incentives? For Boice Lam, acting chief of the special projects division of the Cultural Affairs Bureau, this is not a big issue. The bureau provides support to local organisations or associations - not to private companies - for the development of art related activities each year. “The association/organisation just has to state in the proposal what kind of events, their purpose and format. Then we decide how much money will be given,” says Lam. Certain tax breaks exist for private companies, says Lam, but if an individual wants to do the same, the same benefit is not available.
Is it enough?
Mr Lam thinks the level of suppport is “quite enough” especially because it allows any artist or organiser of a cultural activity to find private and public entities, while the bureau provides a venue. Mr Lam says in the near future nothing should change, but if companies or individuals are interested, they can make proposals or suggestions and the government may look at them. Despite the shortfalls, the trend seems to be that banks, hair salons, and casinos, just to name a few, are all willing to fund art related activities. Mr Lam says: “This is a good thing from our point of view, we encourage private companies to
“We encourage private companies to be involved. It will not relieve the government’s workload, because these artists will still look for government funding, but it will bring diversity to culture,” says Boice Lam, acting chief of the special projects division of the Cultural Affairs Bureau be involved. It will not relieve the government’s workload, because these artists will still look for government funding, but it will bring diversity to culture,” he says. Such patronage also brings companies more public exposure.
Ponte 16 is one of the casinos interested in promoting cultural activities. “Once in a while, we sponsor cultural activities, such as a food festival,” says the casino’s senior vice-president Larry Ho. Examples of its efforts to promote the arts include the Michael Jackson Gallery, as well as the exhibition of Michael Jackson items for Julien’s Auction in last May, in addition to bringing the first Julien’s Auction to Asia, in October. Sponsoring such activities might also prove beneficial to the company itself and to the region, says Ho, adding: “We can increase the number of tourists by conducting different marketing campaigns, and thus benefit the development of the whole district”.
Art rules, OK I
n Portugal, patrons of the arts - whether companies or individuals - who contribute to the cultural development of the country, benefit from a significant tax reduction, while in Hong Kong, just as in Macau, this does not apply, and in fact has been the subject of discussion for a number of years. The Statute of Patronage in Portugal states that all donations, be they money or in other forms, given to private or public entities towards the organisation of cultural activities, must benefit from certain tax privileges. If the donations are given to a public entity, then it depends on whether the patron is a company/organisation or an individual. In the case of the former, donations are integrally accepted as expenses of the company, but are deductable up to 20 percent of the taxes due. If the donator is an individual, the deduction limit is 25 percent.
If the beneficiary is from the private sector and the patron is a company/organisation, then the donations are accepted as costs only up to 6/1000 of the total sales of the company, with a 20 percent deduction limit. Once again, if the patron is an individual, then 25 percent of the donations will be deducted, but it cannot be more than 15 percent of the tax due. In Hong Kong, which is known to be much more culturally vibrant than Macau, there is no such statute nor are there significant tax benefits for those who sponsor art related activities. In fact, over the years, two issues have been on Hong Kong’s political agenda relating to the patronage of the arts: the potential corporatisation of the management and operation of arts and cultural facilities; and the possibility of introducing incentives for business sponsorship. L.L.
Arts & Culture
Like Ponte 16, the casino L’Arc is also interested in sponsoring cultural events and artists to enrich the city’s cultural bottom line. As a private company, art related activities are beneficial because they enhance the corporate image while at the same time attracting potential customers. L’Arc has already organised some cultural events. In February it co-sponsored the Fine Ceramics and Porcelain Ware Exhibition, which aimed at promoting the development of Macau’s economy and cross-cultural undertakings, and enhancing the cultural exchanges of ceramic art with Foshan Shiwan, Guangdong and Jingdezhen, Jiangxi. This type of thing will continue, the company says. Ponte 16 and L’Arc are evasive on the question of bigger official incentives. Larry Ho, for instance, only replies that the government “should take the lead in promoting cultural events”. A spokesman for L’Arc avoided the question.
Does it matter?
Lawyer and art patron, João Nuno Riquito, doesn’t see the point in tax benefits for arts
The biggest advantages of arts patronage are “relieving the government from financing certain creations and educating companies to invest in art”, says Carlos Marreiros patronage. “It is a cultural issue, not a fiscal nor economical one. “The issue at study here is to know whether culture is better served with an art patronage law.” In his opinion, this will not happen. Taking the Renaissance or other periods as examples, the lawyer says there was a lot of cultural production and many of those painters appeared without any need of sponsorship. “Picasso, for instance, was never sponsored and his work appeared. Sponsorship does not make the artist,” says Mr Riquito. Macau should focus on other issues like education: “There should be an arts society and a strong public investment in cultural products,” the lawyer says. Architect and painter Carlos Marreiros does not agree. He says a law clearly defining the
statute of art patronage (with rights and duties) in Macau is long overdue. “Not only for exhibitions or events, but also for the acquisition of works of art. With that defined, they help the development of the arts, by helping businessman/companies save tax,” he says. On existing support for the fine arts, Mr Marreiros distinguishes three levels: arts patronage, government sponsorship to local associations and organisations (not private entities) and a percentage of government tax paid by casinos that is allocated to the conservation of monuments and beautification of squares. The biggest advantages of arts patronage are “relieving the government from financing certain creations and educating companies to invest in art,” he says. This will promote cutural diversity, he adds.
111 Cinema is one solution, a new industry that might develop a new form of tourism. “It can become a film-orientated area,” he says.
Teaching leads the way
Photo: John Si
Having set up his film production company in March, Mr Stos-Egan is talking with the Macau Trade and Investment Promotion Institute (IPIM) to move further ahead and create a film commission. “I’m at a discussion stage with IPIM about setting up a committee with different stakeholders. It has to be coordinated with tourism, education, the film industry here and some of the associations and the creative arts”, he says. Alongside the commission, Mr Stos-Egan wants to create a film training school to develop talent with the skills required to manage the production of a feature-length movies. With the help of the Australian Trade Commission and Melbourne-based training centre Open Channel Studios, he is hopeful that residents already filming in Macau will get the technical support they need. “There are talented people in Macau doing small films. Those people work part-time, they cannot do it full-time because they need jobs to sustain themselves,” he says. It is likely that the first instructors will probably be Australian. “An advisor will come over. They [students] will do distance learning,” he says. As they develop skills through the training school they will become the teachers. “We train them to train others.” Funding may come from institutions such as IPIM and the Macau Foundation. Their support would mean access for his Australian partners. “We have structures here and in Australia that might help,” he says.
Roll camera If European-style locations, proximity to the mainland and a thriving underground scene could be matched with a training school, Macau would have a ready-made film industry by Luciana Leitão
he film industry lives next door. What about having one in Macau? The business director of Macawood Productions wants to take the first steps and create a cinema school in Macau later this year. According to Darrell Stos-Egan, Macau is currently at the crossroads. “The government has to find a way of getting into the creative arts, that brings home the money and also the benefits for other areas, such as tourism,” he says.
Stage is set
With the mainland’s already acclaimed international film industry growing in stature and the future of Hong Kong’s movie industry precariously balanced, there are questions about the sustainability of a new industry in Macau. “We need a variety for the rest of the world and Macau can provide that. It can complement the Chinese film industry as a whole but with a European influence,” he says. Mr Stos-Egan says Macau is a great place to shoot, not only because of the city’s unique heritage. “The streets are not so busy, the Coloane hills are good for green scenes”, he says, adding that the city’s compact size helps with tight deadlines.
Work in progress
While proposing to set up a structure that will develop the film industry in Macau, Mr Stos-Egan is also taking concrete steps now to meet his goal. He is preparing two movies to be filmed here. “I’m in the early stages of negotiations with China Film Group Corporation for a project”, he says. The corporation is the biggest state-run film production house on the mainland and the film will be an historical co-production, partially set in Macau. The rest is still a secret. The second project is further along and, although he will not talk about the script, he says it is an action-drama film scheduled to start this year. At the moment he is budgeting for the crew. “I’m searching hard in Macau. Maybe I have to go to Hong Kong as well,” he said. August 2010
Arts & Culture
by Luciana Leitão Photos Carmo Correia
It was once the city’s largest residential dwelling and a historical treasure. After extensive renovations, Macau Business takes a tour to the Mandarin’s House
t took eight years, MOP43 million and its restoration continues. But when the Mandarin’s House opened to the public in February, it was already a main tourist destination. The grand old dwelling has been through several incarnations since its auspicious beginnings as the former home of Zheng Guanying, a 19th century Chinese reformer. Near Lilau Square in one of the oldest parts of the city, the house originally belonged to Zheng’s father and was developed by his brothers in stages prior to 1869. With its 60 rooms occupying an area of 4,000 square metres, there is no reason to doubt the claim that it is the biggest house in Macau, especially when it comes from Cultural Institute architect Carla Figueiredo. When financial difficulties struck, Zheng’s descendants began renting some of the rooms. “At a certain point, several Macau families were living here and officials lost track of the Zheng family in the 1950s,” says Ms Figueiredo. At the beginning of 2000, the government bought the property and a little over a year later, renovation work began. According to Ms Figueiredo, it took eight years before it could be opened to the public because the building required extensive reconstruction.
The entrance to the Mandarin’s House is mainly in traditional Guangdong style but its design also features
Arts & Culture
some Western elements, such as the false ceiling and the arched doorway. That sets the tone for the rest of the property which is a fusion of Chinese and Western designs. Plaster ornaments on the walls of the gatehouse, a shrine to the Earth God and a feng shui screen wall are clearly Chinese architectural influences. Ms Figueiredo says figures such as the drawing of carp leaping over a dragon gate are symbols of the family’s wealth. A nearby moon gate has been completely rebuilt using archived images. The original was believed to have been removed in the 1950s. The original inhabitants would have studied at Wenchang Hall, which is connected to the main garden through a round moon gate. How the garden would have looked 150 years ago is unknown. Passing through Ronglu Hallway leading to the master’s quarters, visitors reach the courtyard. “At its centre are stone stools used to rest on,” explains the architect, pointing also to the mulberry tree, which was planted after 1960. The main building is composed of two traditional, similar mansions: the family’s living quarters at Yuqing and Jishan. Between them is an inner courtyard with two floors.
Zheng Guanying was born in Xiangshan County, near present day Zhongshan, Guangdong province, in 1842. His family lived in Macau for several generations. At 16, Zheng became a merchant in Shanghai, where he took an interest in political affairs and learnt English. In 1886, he returned to the family home in Macau, where he wrote his famous work Words of Warning in Times of Prosperity, in which he wrote “a country must create wealth to become strong through economic and industrial developments.” He also produced works on reform issues entitled Vital Remedies, On Change and Words of Alarm in Times of Peace.
Mandarin’s House Opening Hours
10am - 6pm (17:30 stop visits) Closed on Wednesdays and Thursdays Online reservation
www.wh.mo/mandarinhouse (reservations can be made up to 45 days prior to visit) Address
No. 10, Travessa de António da Silva Enquiries
(853) 28968820 Note: It is possible to organize guided tours (in Cantonese) at the site, on weekends. Saturdays 14:30-15:15 pm 15:30-16:15 pm Sundays 10:30-11:15 am 14:30-15:15 pm 15:30-16:15 pm August 2010
Arts & Culture
W rld s und A cclaimed musicians from as far apart as Chile and the mainland will rub shoulders with their peers from Europe and the United States at the latest edition of the Macau International Music Festival. The annual event, now in its 24th year, runs the gamut of musical genres from choral and chamber to folk, pop, fusion and jazz for five weeks beginning in October. Presented by the Cultural Affairs Bureau, the festival is a combination of the best of the local scene with talent from overseas.
Classic education Kicking off the event will be the Gurzenich Orchestra from Cologne, a 200-yearold German ensemble that is one of the symphonic delights in store for enthusiasts. Another is distinguished cellist Jian Wang, who makes a return visit. And to celebrate the 200th birthday of Fryderyk Chopin, highly-regarded Chinese pianist Yundi Li, the youngest winner of the prestigious International Chopin Competition, will interpret his favourite composer. No Macau music festival would be complete without Cantonese Opera or August 2010
Diverse sounds from around the globe and across dozens of genres transform this year’s International Music Festival into a melting pot of musical entertainment
Yueju, which is well represented at this year’s festival with Hong Kong bringing to life two classic love stories from Ming Dynasty China penned by the “Shakespeare of the East” Tang Xianzu. Fans of Baroque Western opera will be delighted to learn that the genre is included for the first time this year, while the classical and contemporary chamber music programme features ensembles of high quality and creativity. Mainstream flavour More mainstream offerings in this year’s festival programme include the American Brass Quintet whose members have been hailed as “the high priests of brass” by Newsweek. Cantopop fans will appreciate a tribute to the late star Teresa Teng by The Macau Chinese Orchestra who will welcome Lily Chen as this year’s special guest. If fusion music is your bag, HaitianAmerican band The Mission will thrill, as will Portuguese electro-rock band Blasted Mechanism, a group famed for their elaborate stage shows and costumes. Jazz enthusiasts will embrace the
Opera Il Trovatore
sound of the Netherland’s Jazz Orchestra of Concertgebouw (JOC) and lovers of Western opera will appreciate Giuseppe Verdi’s Il Trovatore which is scheduled to bring the festivities to a close. The Macau International Music Festival runs from October 3 to November 7 and performances take place at a number of venues. The event will also include workshops, talks and other activities to accompany the musical programme. Tickets are available from Kong Seng ticketing outlets, online at www.macauticket.net and via the hotline (853) 8399 6699. For more information, visit the website of the Cultural Affairs Bureau www. icm.gov.mo/fimm.
Ricardo Andorinho Business Developer | MB Intelligence Consultancy Limited (“MBi”) email@example.com
It works well as an advertising slogan for fitness centres or gyms and is currently seen printed on colourful T-shirts, but the origin of the saying “no pain, no gain” takes us back to the eighteenth century. Its founding father is Richard Sauders, better known as Benjamin Franklin, a selfmade successful editor and publisher, statesmen and diplomat. He published Poor Richard’s Almanac, an immensely popular book filled with clever aphorisms and wise advice such as “There are no gains without pains”. Perhaps some of the book’s quotes were not his, being popular sayings at the time, but he certainly gave them credit and made them instantly recognisable worldwide. Today, in our opinion, this quote should have assumed the role of a recognised self-management principle. As we all know, “things” do not fall into your lap. People have to combine dedication, effort, strengths, abilities and capabilities to create, construct, design or give rise to new ideas and concepts, products and services. If you have already noticed that things do not fall into your lap and you are willing to work towards your goals, keep going. It means you have the right attitude. If you want to win a marathon, you are certainly aware that you need to spend hours every day working out over a considerable period of time. But what if you want to become an exceptional husband or wife, an admirable parent or an excellent professional? You definitely need to work hard as well. You need to believe in yourself and you need to sacrifice! After all, no pain, no gain. Pain is the key to success. Pain does not necessarily have to be physical but it could be if you feel sore because you have been working out to improve your health or to win a marathon. However, most of the “pain” is psychological. It is the anger or frustration that you commonly feel when you have to work over a weekend to meet a deadline, when what you really want is to be with your loved ones. Don’t be afraid of the pain. Don’t worry, be happy. What does not kill us makes us stronger. Statistically, 96 percent
of the things people worry about never happen. So, do not act like a spoiled brat or a victim of circumstance. You can choose to honour all your contracts; to under commit and over deliver; understand, respect and trust people; and be honest even when it hurts. Obstacles appear in our lives for two reasons: to make us prove that we really want a particular thing; and to keep others who don’t want such thing as badly as we do, away from having them! Therefore, if you have run into an obstacle that you have not yet learnt to overcome, don’t panic. It is almost certain that your life is not the mess you imagine it is. Running into an obstacle often indicates that you are on the right path to achieving your goals and that success is dead ahead. Notwithstanding this, do not feel surprised if you see people around you changing just because the “pain not to change” exceeds the “pain to change”. It is a common mistake of all human beings! However, don’t let them influence your belief system! If you believe in the principle of no pain, no gain, and if you feel that you need to sacrifice for a particular cause, just do it. Success is on the way.
Corporate Social Responsability
Hit for hope
Leading corporate social responsibility event, the Macau Business Charity Golf Tournament and Gala Dinner, tees off for two days and on two courses this October
he fourth edition of the Macau Business Charity Golf Tournament and Gala Dinner has grown into a two-day event, accommodating two rounds of golf on two courses. The event’s newest partner, Caesars Golf Macau, will host the first tee off on Friday October 15, while the final round will take place at the Macau Golf and Country Club a week later on October 22. The traditional gala dinner, ceremony and auction will be held that evening at the Pool Loggia at The Westin Resort, Macau. “This is a first for Macau as no other golf outing or local corporate social responsibility event has ever been extended to include both local golf courses,” says event organiser Paulo Azevedo. The co-managing director of event organisers Macau Business SK Events adds: “We came up with the idea to include both courses as a way to grow the event and give something special to the participating patrons who have supported us from the start”. The event is now the biggest corAugust 2010
porate social responsibility and golfthemed event in the Pearl River Delta Region, something the organising team can be proud of, says Mr Azevedo.
Raising the bar
Since its inception in 2007, the charity has brought together more than 200 players and welcomed about 550 guests
to the gala dinners, raising more than MOP1.45 million. Those funds have been distributed to local organisations, such as Tung Sing Tong and Caritas, as well as charities in Hong Kong and the mainland. Macau Business SK Events co-managing director Stefan Kuehn says this edition of the tournament and dinner “is
Macau Golf and Country Club
119 age,” says Mr Luis Pereira, the organising group’s executive director of business development. “The concept of CSR is now better understood by the local business community compared to when we started the tournament four years ago. Patrons are keen to participate in an event that brings together different sectors and industries under the charity umbrella.” While Caesar’s Golf Macau and The Westin have already signed up as major sponsors, organisers say talks are continuing with other responsible corporate citizens.
Caesars Golf Macau
going to be an event of superlatives”, adding that the organising team has “raised the tournament to the next level”. They are pushing for a recordbreaking level of participation at this year’s tournament. Invitations have been sent out for the two-day challenge, where patrons compete in teams of three and can nominate a charity of their choice to receive the winnings.
CSR “better understood”
The event was designed as a platform for the business community to exercise their corporate social responsibilities and show they care for a growing sector of the population that does not benefit from Macau’s rapid economic growth. Supporting patrons are found in the banking and finance industries, entertainment, the hospitality and gaming sectors, as well as in manufacturing and service providers. “We feel the event has come of
The two-day event on two different courses gives patrons two distinct experiences. At Caesars Golf Macau, players will enjoy a more jovial round overcoming obstacles, such as teeing off with a tennis racket or a hockey club. The final round at the Macau Golf and Country Club will have more of a competitive edge. This year’s total prize money has been raised to MOP200,000. The prize will be split by the two teams who finish both rounds with the best gross and net scores. Tournament play is under a Texas Scramble format with a Double Peoria scoring system that allows veteran and novice players a fair shot at the prize. The Macau Professional Golfer’s Association will oversee safe and fair play throughout the tournament.
Players and non-players alike are welcome to the black-tie gala dinner. Set in luxurious surroundings, with fine dining and five-star entertainment, the evening sets the mood for the traditional art and sports memorabilia charity auction. Previous auctions have seen rare autographed items – such as a guitar played by U2 and a Roger Federer tennis racquet – up for bid. All money raised by the auction or from personal donations goes directly to the charities. For more information about the Fourth Macau Business Charity Golf Tournament and Gala Dinner, email firstname.lastname@example.org. August 2010
Corporate Social Responsability
Marching orders Pack your rucksack and pull on your hiking boots, the region is warming up to trek for charity
rekking in Macau often only goes as far as walking to a seat at a gaming table. However, the territory’s highland trails have many surprises to offer nature lovers. To get the best out of the city’s trekking routes and raise money for charity, Upward Bound Unlimited and the Macau Daily Times are readying for the launch of the First PokerStars Macau TrailWalker hike on September 11 in Coloane. Upward Bound’s Robert Kirby says the Macau trek is designed to promote health and wellness in the community,
and to foster team-building and leadership skills. “I’m very keen to create a great sporting event that promotes challenge and fun, and encourages the public to participate in the wonderful outdoors of Macau,” he says. There are two entry types: the Full Adventure TrailWalker that covers a total distance of 30 km and the Family TrailWalker over 12 km. Teams of four are expected to enter from Macau, Hong Kong and the surrounding Pearl River Delta region.
There is a limit of 250 teams, with entries on a first-come, first-served basis with preference given to corporate and family teams. In addition to paying an entry fee, teams will be encouraged to obtain sponsorship from friends, colleagues and family. All money raised will be distributed to charities in Macau. The First PokerStars Macau TrailWalker event, which will be held annually, “symbolises health, vitality, team spirit, a commitment to excellence and to the Macau community,” says Mr Kirby.
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Wellington K. K. Chan Professor of Humanities and Professor of History at Occidental College
The middle kingdom’s middle class Why has China succeeded so spectacularly in the span of just three decades since the launch of Deng Xiaoping’s economic reforms? The reasons that are usually cited are China’s compelling demographic, geographic, and broad cultural factors. What is less understood is that China’s success has also depended on its entrepreneurs – and their deeply rooted patterns of activity. There are two key aspects of Chinese entrepreneurship. Traditionally, successful Chinese businessmen emphasized trust and reliability in fulfilling commitments (xinyong), the gradual development of sentiments (ganqing) with customers and suppliers, and the ability to build on networks of relationships (guanxi) that are often based on common origin or kinship. They also stressed the need to be bold, frugal, and highly driven to succeed, as well as the ability to adapt to changing market conditions. Some of these characteristics are more culturally specific than Joseph Schumpeter’s description of entrepreneurship as a process of “creative destruction” might imply. But boldness and adaptability do accord with Schumpeter’s emphasis on forming new combinations and doing things in new ways. For example, traditional businesses, from fabric wholesaling to banking and salt mining, evolved elaborate profit-sharing schemes among owners, partners, and employees as their business expanded over time or into chain outlets across the country. When new forms of business such as textile manufacturing and department stores came to China from the West in the late nineteenth century, Chinese businessmen quickly adopted them and adapted them to local conditions. More recently, local managers who took on McDonald’s franchises transformed several aspects of the business to fit Chinese tastes and habits. A second aspect of Chinese entrepreneurship is the kind of institutions and the management style that it embodies. I have studied many Chinese firms that flourished from the earlynineteenth to the mid-twentieth century. They all seem to have the following core features: - Small to medium size, with a relatively simple organizational structure; - Considerable overlap of ownership by individuals linked by family and kinship ties, or by partnerships among kin and family friends; - Centralized and disciplined decision-making; - Personal and family networking that encourages opportunistic diversification, transcending regional and national boundaries to expand; - Cooperation with affiliate firms to reduce transaction costs in sourcing, capital acquisition, and contracts; - A high degree of strategic adaptability. These structural features fit well with Chinese merchants, who did not want to see their companies grow so large that they attracted official attention. Successful businessmen could in fact build up extensive holdings by owning or sharing several businesses. Since China never established male primogeniture, this meant that when he died, each son could have his own business to start with. Likewise, the functional features of Chinese entrepreneurship were heavily dependent on cultural values, particularly given a financial and legal system that was often unreliable. Thus, control and management were carried out mostly by family members and kin, with support through
networking with those in an established relationship of trust. This history and evolution matter in trying to understand today’s Chinese entrepreneurs. Of course, one special group today comprises the children of officials, from powerful national party leaders to local satraps who use their family connections to their advantage. But this group’s members are usually not among the most successful entrepreneurs; none, for example, has been included in the annual Forbes list of the ten richest persons in China. The great majority of the roughly 24 million private individuals estimated to have gone into business between 1980 and 2005 were ordinary folk with very small capital – usually obtained by pooling the savings of family members and perhaps friends. Their businesses include small stores or a stand on a busy sidewalk selling specific goods or providing some service. Only some three million of these businesses gained sufficient size and organization to form limited-liability corporations that issued shares. And all firms with annual revenues of US$1 million or more seem to have required some form of support from party officials, who serve as gatekeepers for all forms of licensing, sourcing, and financing. In recent years, some of these controls have been relaxed. Attending to the gate-keeping role of party officials has become less of a necessity. But networking and party connections continue to matter. And, aside from a relatively small number of joint ventures with foreign partners and state enterprises that are in fact hybrid public-private firms, most businesses today, including publicly listed companies, remain family owned or dominated. Some may have grown large in size and scale, but only to the point where they could compete efficiently in international markets. Even the small number of national companies that have grown large are relatively small when compared to the Japanese kereitsu or the Korean chaebol. Chinese entrepreneurs nowadays are particularly well adapted to take advantage of new market trends brought about by rapidly changing fashion and similarly rapid technological progress. Their relatively small companies and their efficient decision-making processes allow them to remain nimble and to react quickly. In addition, their often highly diversified structure and their loose network of affiliates and supply chains allow Chinese entrepreneurs to reconfigure business strategy and production facilities quickly, thereby bringing new products to market with shorter lead time. For example, Chinese cell-phone companies offered 3-G phones much earlier than in America, and when they learned that each phone was being used by several individuals in rural China, they programmed their phones to allow multiple accounts for each phone, thereby adding tens of millions of new subscribers. Despite continuing political restrictions imposed by an authoritarian regime, Deng Xiaoping succeeded beyond his wildest imagination. August 2010
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Photos: Nuno Cortez-Pinto
A SOUND BET
evellers from the six local gaming operators, casino suppliers and service suppliers showed that they know where to place their bets when it comes to partying â€“ the Macau Industry Night. Last month, besides a lot of networking and dancing, the eveningâ€™s programme also included a capoeira performance, a mix of martial art and dance from Brazil. Already in its third edition, the party partnership between Club Cubic and Macau Business has proven to be a winning choice.
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Photos: Nuno Cortez-Pinto
FIRST INTER-CHAMBER MEET A HIT
OW MANY CHAMBERS OF COMMERCE CAN YOU FIT INTO ONE
room? Quite a lot it seems, as proven during the first Delta Inter-Chamber Event. Held in Macau on July 9, the event was a great networking opportunity for chamber of commerce members, business leaders and government officials. It was also a chance to make new friends and, of course, to have fun. The eight participating chambers were the European Chamber of Commerce (Hong Kong), AmCham (Macau), BBAM (Macau), CanCham (Macau), the German Chamber of Commerce (South China), AustCham (Hong Kong and Macau), the Luso-Chinese Chamber of Commerce (Macau) and the Zhuhai Chamber of Commerce (Zhuhai). The second Delta Inter Chamber event will be held in autumn. For further information, visit www.deltainterchamber.com. August 2010
Nouriel Roubini Professor of Economics at the Stern School of Business, New York University
Double-dip days The global economy, artificially boosted since the recession of 2008-2009 by massive monetary and fiscal stimulus and financial bailouts, is headed towards a sharp slowdown this year as the effect of these measures wanes. Worse yet, the fundamental excesses that fuelled the crisis – too much debt and leverage in the private sector (households, banks and other financial institutions, and even much of the corporate sector) – have not been addressed. Private sector deleveraging has barely begun. Moreover, there is now massive re-leveraging of the public sector in advanced economies, with huge budget deficits and public-debt accumulation driven by automatic stabilizers, counter-cyclical Keynesian fiscal stimulus, and the immense costs of socializing the financial system’s losses. At best, we face a protracted period of anaemic, belowtrend growth in advanced economies as deleveraging by households, financial institutions, and governments starts to feed through to consumption and investment. At the global level, the countries that spent too much – the United States, the United Kingdom, Spain, Greece, and elsewhere – now need to deleverage and are spending, consuming, and importing less. But countries that saved too much – China, emerging Asia, Germany, and Japan – are not spending more to compensate for the fall in spending by deleveraging countries. Thus, the recovery of global aggregate demand will be weak, pushing global growth much lower. The global slowdown – already evident in second-quarter data for 2010 – will accelerate in the second half of the year. Fiscal stimulus will disappear as austerity programs take hold in most countries. Inventory adjustments, which boosted growth for a few quarters, will run their course. The effects of tax policies that stole demand from the future – such as incentives for buyers of cars and homes – will diminish as programs expire. Labour-market conditions remain weak, with little job creation and a spreading sense of malaise among consumers. The likely scenario for advanced economies is a mediocre U-shaped recovery, even if we avoid a W-shaped double dip. In the US, annual growth was already below trend in the first half of 2010 (2.7% in the first quarter and estimated at a mediocre 2.2% in April-June). Growth is set to slow further, to 1.5% in the second half of this year and into 2011. Whatever letter of the alphabet US economic performance ultimately resembles, what is coming will feel like a recession. Mediocre job creation and a further rise in unemployment, larger cyclical budget deficits, a fresh fall in home prices, larger losses by banks on mortgages, consumer credit, and other loans, and the risk that Congress will adopt protectionist measures against China will see to that. In the euro zone, the outlook is worse. Growth may be close to zero by the end of this year, as fiscal austerity kicks in and stock markets fall. Sharp rises in sovereign, corporate, and interbank liquidity spreads will increase the cost of capital, and increases in risk aversion, volatility, and sovereign risk will undermine business, investor, and consumer confidence further. The weakening of the euro will help Europe’s external balance, but the benefits will be more than offset by the damage to export and growth prospects in the US, China, and emerging Asia. August 2010
Even China is showing signs of a slowdown, owing to the government’s attempts to control economic overheating. The slowdown in advanced economies, together with a weaker euro, will further dent Chinese growth, bringing its 11%-plus growth rate towards 7% by the end of this year. This is bad news for export growth in the rest of Asia and among commodity-rich countries, which increasingly rely on Chinese imports. An important victim will be Japan, where anaemic real income growth is depressing domestic demand and exports to China sustain what little growth there is. Japan also suffers from low potential growth, owing to a lack of structural reforms and weak and ineffective governments (four prime ministers in four years), a large stock of public debt, unfavourable demographic trends, and a strong yen that gets stronger during bouts of global risk aversion. A scenario in which US growth slumps to 1.5%, the euro zone and Japan stagnate, and China’s growth slows below 8% may not imply a global contraction, but, as in the US, it will feel like one. And any additional shock could tip this unstable global economy back into full-fledged recession. The potential sources of such a shock are legion. The euro zone’s sovereign-risk problems could worsen, leading to another round of asset-price corrections, global risk aversion, volatility, and financial contagion. A vicious cycle of assetprice correction and weaker growth, together with downside surprises that are not currently priced by markets, could lead to further asset-price declines and even weaker growth – a dynamic that drove the global economy into recession in the first place. And one cannot exclude the possibility of an Israeli military strike on Iran in the next 12 months. If that happens, oil prices could rapidly spike and, as in the summer of 2008, trigger a global recession. Finally, policymakers are running out of tools. Additional monetary quantitative easing will make little difference, there is little room for further fiscal stimulus in most advanced economies, and the ability to bail out financial institutions that are too big to fail – but also too big to be saved – will be sharply constrained. So, as the optimists’ delusional hopes for a rapid V-shaped recovery evaporate, the advanced world will be at best in a long U-shaped recovery, which in some cases – the euro zone and Japan – may be long enough to stretch into an L-shaped neardepression. Avoiding double dip recession will be difficult. In such a world, recovery in the stronger emerging markets – the great hope for the global economy – will suffer, because no country is an island economically. Indeed, growth in many emerging-market economies – starting with China – is highly dependent on retrenching advanced economies. Fasten your seat belts for a very bumpy ride.
Bad ferry feng shui
Although business seems to be picking up for Macao Dragon, the company endured a terrible day one. After months waiting on the docks, the company’s ferry service was suspended on its first day of operations after the very first ferry plying the route between Hong Kong and Macau crashed into the pier at the Pac On terminal. Luckily, no one was injured and the ferry was not damaged. The pier however needed to be repaired. The company runs such big ferries, carrying 1,100 passengers, that there were no other suitable berths. The route was shut down for three days. Frozen Spy is pleased the company is fighting for value in ticket prices and is glad that consumers are the real winners here but we strongly recommend the company consults a feng shui expert.
Adelson’s long learning curve
Around eight C-level executives in six years seems an awful lot, Mr Adelson. One day the company big boss will realise that the way he lobbies in Washington is really not the way he should voice his discontent with Beijing or even little Macau. Steve Jacobs was, obviously, correct about some things. One in particular: if Mr Adelson thinks Sands China should be run from Las Vegas, he is mistaken. Strongly mistaken. But we guess we all learn with experience, right? Some more quickly than others.
Beer? No. Whisky? Maybe...
Labour Affairs Bureau director Shuen Ka Hung is a recurring presence in these pages. It is not that we personally dislike Mr Shuen, but he seems to always have something up his sleeve. In a recent public announcement he instructed workers not to drink beer while on shift during the warmer weather. But Mr Shuen, is there anything more refreshing than a cold one on a hot day? Frozen Spy is aware that drinking alcohol can dehydrate you and may be dangerous on the job, but why the campaign against beer? Maybe Mr Shuen is more a whisky kind of guy.
Orieta’s soap opera
Frozen Spy is confused. Is or isn’t the disgraced director of the Finance Services Bureau Orieta Lau Ioc Ip going to be hired as an advisor for the preparatory office that will oversee establishment of the traditional Chinese medicine industrial park on Hengqin Island, a MacauGuangdong joint-venture? Portuguese-language daily Hoje Macau broke the news, saying the job was on offer with a monthly wage exceeding MOP50,000. Government spokesman Alexis Tam Chon Weng was asked by at least three different media outlets to clarify the story and each time it was neither confirmed nor denied. The public eventually heard that Ms Lau was “capable” of doing the job, despite her demotion for misusing public money. Capable or not, she is still a senior civil servant, one who kept her job even after screwing up big time. Perhaps that is why everyone in Macau wants to be a civil servant.
Yes, yes, Frozen Spy was expelled from school at early age, so maths is really not his strong suit. But how exactly can the government maintain a new table cap of 5,500 when about 4,800 tables already exist and an operator was promised 600 tables, in writing? What about the other operator in Cotai? Will he only get 100 tables? Someone has a big problem to deal with.
Land showdown looms
Listen closely, a hot tip. This is the next gold rush: reclaimed land. No wonder so many are already showing concern (the pan-democrats) and yet others are maintaining a cautious silence (the land developers and some officials). Will a soap opera follow? For sure, because, my friends, it seems it was a long time ago when the public would simply eat and shut up. Today, it is not so simple. Even Facebook is playing its part in what seems a revolution. A revolution where Macau finds its voice.
The monthly quiz
First came the studies. For anything the government wanted to do, a study was proposed. Occasionally the studies cost millions and there results were nonexistent. That has been replaced by the public consultation. Want to do a garden? We will consult the public. Want to decide where to put a public toilet? The public shall answer where. How to enhance economic planning? The public will share its views. What is very odd is although we know the matter to be solved and know there is a will to consult, we so very seldom know the process involved in reaching the conclusion or even the conclusion itself, except when the government says the public wants this and that. It is a wonderful thing that we all believe in our government so deeply.
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