MB 85 | May 2011

LUXE DRIVES HIGH-END CAR DEALERS SITTING PRETTY AS SALES SOAR MAY 2011

ISSN 1812-6855

BOOM CASUALTIES

In the shadow of Macau’s new-found wealth, thousands still rely on hand-outs NEXT BIG THING

Galaxy arrives in Cotai with a bang BUSINESS VISION

AIRPORT ALERT

THE SUCCESSFUL CONVERSION CASE OF LIONEL LEONG VAI TAC

NOT ENOUGH BUSINESS FOR A NEW HANDLER, SAYS MENZIES Macau MOP 35 • Hong Kong HK$ 40 • Mainland China RMB 35

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Economy & Finance 30 Future plays Although attractive, trading in the renminbi is still problematic

Business 38 Cleaning up The successful business case of Lionel Leong

Property 42 Market watch The government has rolled out more measures to curb real estate speculation 47 The new sheriff Arbitration centre for property management disputes is launched 48 Clearance sale Home-grown businesses are being forced to either shut down or to move out of the city’s prime retail area

Transport 54 Up in the air Menzies doubts there is enough throughput for a second ground handler at the airport

MB Report 58 Suffering in the shadows The have-nots are being left further and further behind by the economic boom MAY 2011

Gaming 68 Billions race Casinos continue to post strong results 71 Stock watch Gaming shares unaffected by global uncertainty 74 Star attraction Galaxy Macau opens its doors this month 88 Hidden cost The social cost of gambling in Macau rose by 163 percent from 2003 to 2007, says study 91 Consistency, please Changes introduced for both semi-automated and fully automated electronic table games 92 Full house PokerStars’ Macau Millions 2011 becomes the first poker tournament in Asia to reach the 1,000-entry mark 96 One more try Taiwan tries again to push for offshore casinos

Tourism 98 Building a fan base The new Mandarin Oriental, Macau is striving to lure non-gaming visitors 102 Less from more Mainland tourists are spending less per head on shopping

Environment 106 Waste not, want not Macau slowly starts looking at recycling its food waste

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Management 108 Simulated success Macau grabs the second spot in the 2010 Global Management Challenge international finals

Luxury 110 Hot wheels High-end car sales soar

Essential 113 Fashion Your guide to indulgence

Technology 130 Digital discounts Consumers are increasingly using group-buying sites to get a cheap deal 132 Cyber crime wave Beware of malware attacks, warns international study

Education 133 Leadership lessons Summit exposes youth to enterprising people

Arts & Culture 134 Burlesque punks The Tiger Lillies, one of the weirdest bands of all time, come to town

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136 Buying creativity Pavilion showcases products designed and made by Macau’s creative talent

Corporate Social Responsibility 138 Tasty charity Morton’s The Steakhouse raises money for charity through golf

Entertainment 140 Born to party Essential Macau hosts its launch party

Opinion 10 From the publisher’s desk Paulo A. Azevedo 13 Editorial Emanuel Graça 32 Great expectations José Pereira Coutinho 53 Fooling around José I. Duarte 57 Macau’s signature dish Keith Morrison 86 Promise of change Gustavo Cavaliere 95 All (side) bets are off!

David Green 112 China should import deflation Yang Yao 139 Innocent bystanders Andres Velasco

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MARCH MAY 2011

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All about good intentions WE LEARNED ABOUT SEVERAL OF THE MACAU government’s good intentions to tackle the increasing growing pains of the SAR within just a couple of days. Unfortunately, that is about as far as the administration went, since it provided little or no information regarding how such intentions are to materialise.

Talking to reporters before departing to attend the Boao Forum for Asia in Hainan, the chief executive appealed to residents not to rush into buying real estate or consumer goods. Fernando Chui Sai On also added that the government would implement measures to help the population cope with new challenges to the economy.

Not only did he fail to elaborate on what those measures would be, but very little has come to light since.

For instance, look at the measures to alleviate the continuous increase in food prices. At a press conference, the media were informed that conditions were being created so that importers may negotiate directly with more mainland suppliers. So, finally, Macau will be rid of the monopoly system that should have been terminated more than a decade ago.

Despite our mistrust of the swiftness of the process, it is a step in the right direction.

The lack of political courage when strong interests are in play, namely monopolies with close ties to state-owned enterprises, is well known. It is always easier and more comfortable to pressure foreign companies, as if we were still under the Maoist influence that separated interests into two opposing sides: the patriots and the non-patriots.

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Aside from the formulation of a hypothesis on opening direct import channels, the government has still to come up with any effective measures.

Hollow words At the same time, we received an alert from the Health Bureau warning against counterfeit Panadol Extra tablets, after manufacturer GlaxoSmithKline warned the government.

The statement issued by the bureau however, failed to inform the public as to whether any of the counterfeit tablets have been found in Macau or whether any investigation of retail outlets would be launched. In other words, the question was raised and the public was warned, but the body washed its hands of any further responsibility.

It is the same old political rhetoric; lots of promises and little action.

However it is also true that some steps are being taken in some areas. Indeed we seem to have move on from the inactivity that characterised the second term of the previous government, especially after the arrest of the secretary for transport and public works, when we witnessed the “I’d-rather-not-makeany-decisions-that-might-risk-my-job” phase.

The decisions being made today mean that the administrative machine is finally free of the Ao Man Long nightmare, despite the fact that the parallel investigations into the scandal seem to have silently been interrupted. Naturally, we are not surprised; such were the number of prominent names at risk of being dragged through the mud.

Still, even the measures put forward

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The lack of political courage when strong interests are in play, namely monopolies with close ties to state-owned enterprises, is well known.

It is always easier and more comfortable to pressure foreign companies are incomplete. Take for instance the recent announcement on the redevelopment of old industrial buildings. The use of these buildings to create apartments no larger than 60 square metres represents a growth of the “cage culture” for which Hong Kong has become notorious; a phenomenon that shocks the world for its lack of compassion and reflects a soulless society.

According to legislator Kwan Tsui Hang, the delay in implementing this measure, which had already been announced, did not take the market by surprise. The buildings had long been off the market, thus contributing to the speculative activities the measure was meant to fight.

We won’t mention those who will profit from the delays. There would be ample material to investigate, that is if anyone in Macau was looking into the matter.

Again, the problem is that this too is only a partial remedy. That other redevelopment options for industrial buildings were left out, is just further proof that Macau still lacks a global and coordinated plan to address structural problems.

What we do have are random measures designed to help us survive in the short term, and to sustain the government’s image during that same short period.

Throwing money away Since we’re talking about short-term measures with little impact and high cost, what can we say about the new batch of cheques for the population? The MOP3,000 (US$375) and MOP1,800 that each permanent and non-permanent resident, respectively, is to receive, following a cash handout early this year, will cost the public purse the modest amount of MOP1.7 billion.

It is a pity that the government insists on making the same mistake.

Not only is this amount powerless against galloping inflation, but it also fails to address systemic problems.

As one of my friends commented, it is as if no one remembers the fishing rod and the fish story. Instead of providing residents with a fishing rod and teaching them how to fish, the government insists on doling out the fish.

Anyone can instantly note that this is merely a short-term solution. The fish is rapidly eaten and hunger returns soon after.

A more positive step was the governmentsponsored continuing education support programme. Naturally, we look forward to strict control over institutions offering courses covered by this measure.

Even so, we expect the usual suspects to queue up to get their hands on some of the money directed at those courses.

It would be much more useful to use a part of those wasted billions on programmes to support people who wanted to conclude their post-graduate studies abroad. We could also create programmes to attract foreign resources and expertise, offering advantageous conditions for experts to come and share their knowledge with us.

If we were not so afraid of facing the powerful groups that feel Macau is just fine the way it is, we might realise these facts.

Unfortunately these are the same lobby groups that think the purpose of government subsidies is to help fill the pockets of those who have placed themselves within the circle of power.

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Emanuel Graça Editor-in-Chief

emanuel.graca@macaubusiness.com

The future ahead

It is of the utmost importance that the government lay down a development roadmap for Cotai version 2.0 and beyond

MACAU PUTS ON ITS PARTY SHOES FOR THE OPENING of the city’s 34th casino this month. It is a meaningful event.

Galaxy Macau will be Cotai’s third, fully integrated mega-resort. It will boost the area’s profile, creating a destination where visitors can easily spend a couple of days strolling around, away from the peninsula.

For Galaxy Entertainment Group, the new resort brings a game-changer proposition. Its current flagship property, StarWorld, is pretty much VIP-centric, a trend that increased further last year.

There will be room for high rollers at Galaxy Macau but the property will also appeal to mass and direct premium gaming. Those two segments are not only more profitable per dollar waged for a gaming operator, but are likely to be the segments that offer more sustainable growth on a long-term basis. VIP gaming is forecast to continue to soar in the short run.

Having a strong foothold in both markets and an expanding non-gaming offering to bring in additional revenue, Galaxy Entertainment will be better hedged against risk.

For its competition, the opening of the Galaxy Macau may create a headache for the Peninsulafocused gaming operators; Sociedade de Jogos de Macau, Wynn Macau and MGM Macau. That trio will not face direct competition but will be less able to grab a share of the increasing visitor traffic to Cotai. Nonetheless, visible losses in gaming revenue are unlikely and, if visible, should only take place in the short run.

An era’s end

From a macro-perspective, the opening of Galaxy Macau means the beginning of the end of Cotai’s first phase of development. The cycle will be closed when Sands China’s completes work on parcels five and six.

It is difficult to fully evaluate the effect of having created a new gaming hub in Cotai. So far, the resorts there have helped to create more and better jobs, raised the city’s profile internationally and brought some non-gaming facilities that the territory was lacking.

The 800-pound gorilla in the room is, “what happens next?”.

Clearly, there is still room for further development in Cotai and all six gaming operators here are aware of the opportunities. Some, such as MGM and Wynn, could argue that their

expansion is being held back, as they have only one development each.

The question is whether the city can cope with many more gaming facilities in the short term.

In 2008, then chief executive Edmund Ho Hau Wah announced a freeze on new land for casinos but pledged to honour existing agreements with operators.

If we take into account the projects submitted to the government before Mr Ho’s announcement, we would have at least six new casinos in Cotai: one from MGM, two from Sociedade de Jogos de Macau, one from Wynn, Sands China’s parcel three and Macao Studio City.

In addition, Shun Tak is planning a hotel there, with Angela Leong On Kei announcing a theme park, and both Galaxy Macau and City of Dreams parcels include undeveloped plots.

And don’t forget parcels seven and eight, which were last year taken back by the government from Sands China. There has been no project announced for this land.

Ready for a roadmap

One doesn’t need to be a rocket scientist to see that development on this scale, coming on stream at the same time, is unsustainable in the short term.

It cannot be done for two main reasons. Firstly Macau does not have enough labour and, even if importation restrictions were to loosen up, the city could realistically only cope with a proportion of what is required without clogging the territory and its infrastructure with new labourers. Secondly, there are currently no effective ways to manage the huge increases in visitor volume that the opening of so many new properties in a short period of time would require.

With the problems so glaringly obvious, it is of the utmost importance that the government lay down a development roadmap for Cotai version 2.0 and beyond.

The authorities have already pledged to slow construction speed but interested parties, which include Macau’s residents, are entitled to know the master plan for the area.

What is unthinkable is to have companies waiting since 2007 – or earlier – for an indication from the government on their Cotai projects.

Investors must be able to estimate if or when are they going to be allowed to break-ground.

The continuing government silence on Cotai’s future only adds unneeded risk for the gaming industry and is not business-friendly.

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VOL.1 Nº84

Editorial Council Paulo A. Azevedo, Albano Martins, Duncan Davidson, Herman He Founder and Publisher Paulo A. Azevedo pazevedo@macaubusiness.com

Cover Photo: Luís Almoster | mspagency.org

Editor-in-Chief Emanuel Graça emanuel.graca@macaubusiness.com

Executive Director Business Development Luis Pereira

jid@macaubusiness.com

Regular Contributors Branko Milanovic, David Cheung, David Green, Dominique Moisi, Eswar Prasad, Frank J. Fahrenkopf Jr., Gustavo Cavaliere, Hideaki Kaneda, José António Ocampo, José Sales Marques, Joseph Stiglitz, Leanda Lee, Keith Morrison, Kenneth Rogoff, Kenneth Tsang, Marvin Goodfriend, Pan Yue, Paulo J. Zak, Peter Singer, Ricardo Andorinho, Richard Whitfield, Rodrigo de Rato, Robert J. Shiller, Sin-ming Shaw, Sudhir Kalé, Sun Shuyun, Vishakha N. Desai, Wenran Jiang

Hong Kong Bureau Michael Hoare (Chief), Anil Stephen

Advertising Xu Yu, Irene

pereiraluis@macaubusiness.com

Essential Supplement Coordinator Luciana Leitão leitao.luciana@macaubusiness.com

Property Editor Alan Tso tsoalan@yahoo.com.hk

Senior Analyst José I. Duarte

michael.hoare@macaubusiness.com

irene@bizintellingenceonline.com

Europe Bureau Joyce Pina (Chief)

Advertising Agents Bina Gupta

jpina@macaubusiness.com

Paula Joyce

Special Correspondent Muhammad Cohen info@muhammadcohen.com

Beijing Correspondent Maria João Belchior maria_belchior@yahoo.com.br

Manila Correspondent Max V. de Leon maxdeleon_080975@yahoo.com

Assistant to the Publisher Weng Fung weng.fung@macaubusiness.com

Letters to the editor

editor@macaubusiness.com

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Macau Headquarters Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, No. 679 Av. do Dr. Francisco Vieira Machado Tel: (853) 2833 1258 / 2870 5909 Fax: (853) 2833 1487 pub@macaubusiness.com

Contributing Editors Alexandra Lages, Carlos Picassinos, Christina Yang Ting Yan, Derek Proctor (Bangkok), Filipa Queiroz, Joana Freitas, João Francisco Pinto, José Carlos Matias, Kahon Chan, Kim Lyon, Lois Iwase, Luciana Leitão, Ray Chan, Sara Silva Moreira, Sofia Jesus, Steven Chan, Tiago Azevedo, Wu Yu

Art Directors Connie Chong, Luis Almoster design@macaubusiness.com

Photography António Falcão, António Mil-Homens, Carmo Correia, Greg Mansfield, Gonçalo Lobo Pinheiro, John Si, MSP Agency, Agencies Illustration G. Fox, Rui Rasquinho

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José Reis

jreis@macaubusiness.com

Media Relations GRIFFIN Consultoria de Media Limitada Translations Stephanie Chu, PROMPT Editorial Services, Poema Language Services Ltd Agencies AFP, Lusa Exclusives Gambling Compliance, Hoje Macau, Project Syndicate Printed in Macau by Welfare Ltd Published every month in Macau.

All Rights Reserved.

Macau Business magazine is a media product of De Ficção - Multimedia Projects

Disclaimer: In Macau Business magazine, the translation of MOP amounts into US$ amounts (and vice-versa) is made at the rate of MOP 8 to US$1 for the purposes of illustration only.

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Inbox

A pleasure doing business Growing together with the territory, Macau Business celebrates its seventh anniversary he time is now,” Macau Business said on the cover of its first edition, in May 2004. Seven years have passed and our publication has grown in every possible way.

The figures are impressive: we have more than doubled the number of pages per issue, and our circulation and readership have skyrocketed.

Ours is more than just a Macau publication; it is now available on newsstands and bookstores not only in this town but also in Hong Kong, and has subscribers around the globe. For the business traveller, it is easy to find our magazine at hotels and airports, and on

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planes and ferries all around Macau.

Macau Business was, and continues to be, a pioneer. Besides becoming the first commercially successful English-language publication in the city, it has also ventured online. Today’s Macau Business is more than a magazine. It has expanded to include a multimedia website with daily news at www.macaubusiness.com.

The recently launched daily newsletter has already proved to be a huge hit, providing information instantly that is straight to the point. And, of course, we have a footprint on leading social networking sites, including Facebook and Twitter.

Macau Business and its parent company, De Ficção Multimedia Projects, are working on new projects to ensure our readers can stay in touch, as swiftly and conveniently as possible.

Benefiting from the acumen of and collaboration between journalists, analysts, economists, scholars and policymakers in Macau, Hong Kong, the mainland, the rest of Asia and further afield in Europe and North America, we have worked to provide our readers with the best stories and exclusive insights. And that is what we will continue to do.

Thank you for your discerning patronage.

Congratulations on the 7th Anniversary of Macau Business

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Rolling the sleeves up Guangdong, Macau strive to enact framework co-operation pact hief executive Fernando Chui Sai On last month led a delegation to Guangzhou for a meeting with the secretary of Guangdong Provincial Party Committee, Wang Yang. Both parties discussed taxation issues and hierarchical management regarding the joint development of Hengqin Island as provisioned in the Framework Agreement on Cooperation between Guangdong and Macau.

This was the second meeting between the two sides since the signing of the framework agreement in March.

Talking to reporters after the meeting, Mr Chui said Guangdong and Macau were striving to lay down details about hierarchical management at the Macau-Hengqin

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boundary checkpoint, which is essential to the future development of Hengqin Island.

When asked about the potential problems of smuggling and tax evasion, he said the Guangdong and Macau authorities would join hands in fighting and preventing these kinds of illegal activities. Mr Chui said the Macau government had already asked the central government to give preferential tax treatment to Macau citizens working or living on Hengqin.

Meanwhile, the construction of the Traditional Chinese Medicine Science and Technology Industrial Park at Hengqin officially began last month.

Court case may delay delta bridge The construction of the Hong Kong-Zhuhai-Macau bridge is likely to be delayed, after Hong Kong’s High Court last month ruled that an environmental impact assessment on the project was not done properly. The court ruled in favour of a Tung Chung resident who challenged the legality of the report, saying that the authorities had failed to meet the required standard. The Hong Kong government said it would consider the judgment and seek legal advice on the next step.

Hong Kong construction work on the bridge was scheduled to start early this year and be completed by 2016.

BNU profit goes up Banco Nacional Ultramarino (BNU) posted a profit of MOP373.1 million (US$46.6 million) in 2010, a year-on-year increase of 16.6 percent. According to Portuguese news agency Lusa, the bank’s results were positively influenced by the growth of the local economy and a rebound in the real estate market. Last year, BNU was among the banks that participated in syndicated loans to Sands China, Galaxy Entertainment Group and MGM Macau.

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CTM posts good 2010 Local telecommunications company CTM recorded a year-onyear increase in revenue of 13 percent, to MOP2.76 billion (US$345 million) in 2010, while profit after tax was up by 10 percent to MOP814 million. Substantial growth was seen in both the mobile business and enterprise segment, the company’s chief executive officer, Vandy Poon said. By the end of March this year, CTM’s Internet customer base had grown 5 percent to nearly 134,000 compared to March 2010. At the same time, CTM’s mobile customer base was up by 16 percent to more than 600,000 over the same period last year, of which nearly 90 percent were 3G customers.

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Closed account Bank under investigation for compulsory position squaring group of bank customers has complained to the monetary authority that their margined forex trading contracts were compulsorily squared by their bank, the body announced. The monetary authority, which didn’t disclose the bank’s name, said that it has started a series of follow-up investigations.

Initial results show that the compulsory position squaring was conducted on March 17, when the market exhibited tumultuous fluctuations arising from the strong earthquake and subsequent nuclear leakage in Japan.

There were 822 customers affected by the incident, of whom some had started forex trading with the bank involved as early as 1992.

The latest started in June 2010.

The bank involved is now handling the above complaints.

The monetary authority said it will closely follow the process and, if any wrongdoing is proven to have taken place, the bank will be penalized.

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“No Plastic Bag Day” extended

Bottleneck effect

The Consumer Council has expanded its “No Plastic Bag Day” to the 18th and 28th of each month. The monthly “No Plastic Bag Day” was established in 2008 to arouse the public’s attention about reducing the use of plastic bags. Supermarkets under the council’s “Certified Shops” and “Adherents” mechanism offer no plastic bags to consumers on those days. A survey on the evaluation of ‘No Plastic Bag Day’ was conducted last year and the result showed that most consumers and “Certified Shops’ and ‘Adherents” interviewed agreed to increase the number of days of the “No Plastic Bag Day”, according to the Consumer Council.

“Limited human resources became a bottleneck to sustainable economic development” in Macau, says the European Commission in its latest annual report on the Macau SAR, covering developments during 2010.

The European Commission also says it hopes to see progress towards “greater democracy in Macau in the framework of its Basic Law.” The European Commission expressed its willingness to explore new areas of cooperation with the territory and to see progress on matters such as civil aviation and taxation of savings.

Oil tankers collide in Macau waters Two oil tankers crashed on April 18 on the sea close to Macau’s airport, spilling about 2 tonnes of light diesel fuel into the sea, the maritime authorities said. No casualties were reported. Authorities said the spill was rapidly brought under control and had a limited impact on the environment. An investigation of the crash is underway.

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On the up and up Macau’s GDP per capita to be among the world’s highest in 2025 acau’s gross domestic product per capita will be the world’s fourth highest by 2025, says the McKinsey Global Institute. According to a report released in March, Macau will boast a GDP per capita of US$138,000 (MOP1.1 million) in 2025, at a predicted real exchange rate. The city’s overall GDP will reach US$84 billion, the study says.

Macau’s GDP per capita will only rank behind Oslo,

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Bombardier drops lawsuit The consortium between Bombardier Transportation and China Road and Bridge Corporation dropped a lawsuit related to the public tender for the supply of the system and the rolling stock for the first phase of Macau’s light rail transit system, according to unnamed sources quoted by Macau Daily Times. In the lawsuit, the consortium claimed it was barred by the Transportation Infrastructure Office from analysing several documents from the tender process. The lawsuit had been filed in the Administrative Court in early March. Mitsubishi Heavy Industries won the tender for the supply of the system and the rolling stock for the first phase of Macau’s light rail transit system with a MOP4.69 billion (US$586 million) bid.

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in Norway (US$198,000), Doha, in Qatar (US$195,000) and Bergen, in Norway (US$177,000).

Macau’s per-capita GDP at current prices amounted to US$49,745 in 2010, a 25.8 percent year-on-year jump in real terms.

The McKinsey Global Institute, established in 1990, is McKinsey & Company’s business and economics research arm.

Environmental forum grows More than 8,800 visitors attended the 2011 Macao International Environmental Co-operation Exhibition and Forum (2011 MIECF), a 10 percent growth on last year. According to the organisers, among those visitors 6,400 were trade visitors. During the three-day event that ended on April 2, 31 pacts or agreements were signed on-site. Among the 63 signing parties of these protocols, about 60 percent were from Macau. The 2011 MIECF attracted 324 exhibitors from 24 countries and regions. The exhibition area totalled 16,500 square metres, 22.5 percent more space than last year’s 13,465 square metres.

Consumer confidence down The overall consumer confidence level in Macau in the first quarter of 2011 dropped 1.32 percent from the previous three months to 83.57 on a 0 to 200 scale, according to the latest Macau Consumer Confidence Index. The findings were released by the Macau University of Science and Technology.

Among the sub-indexes, the home purchase indicator was the lowest, still below 50 points.

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No smoking in here Tobacco bill approved after 16 months of debate acau’s legislature last month gave a final ‘thumbs up’ to a revised tobacco control bill that will ban smoking in almost all workplaces, except for casinos, where smoking will be permitted on up to half the floor area.

Debate over the bill took 16 months, with lawmakers mulling over whether there should be some kind of

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exemption for the gaming industry.

The bill will come into effect in January next year, but casinos will be granted one extra year to set up the designated smoking areas.

Bars, dance halls, sauna and massage parlours will be granted a three-year grace period before a full smoking ban will be applied to them.

US slams Macau over imported workers The latest US Department of State report on human rights in Macau points a finger at the way local authorities treat imported workers. The report mentions that foreign workers who leave their jobs for any cause not held to be “just” are obliged to depart the SAR for six months. However, “the lack of coordination” between the Labour Affairs Bureau, which handles complaints, and the Immigration Department, which grants or withdraws permission for migrant workers to remain in the SAR, means that workers filing complaints can “be dismissed from their positions, lose their immigration status, and be forced to depart prior to the resolution of their complaints,” the US Department of State says. The report adds that “while the government noted that workers under such circumstances could apply for special extensions to remain [in Macau], Labour Affairs Bureau director Shun Ka Hung was quoted in the media as stating that dissatisfied workers ‘can always go back to their homeland to find another job.’”

Ban on Japanese food imports enlarged Macau enlarged its ban on food imports from Japan to 12 Japanese prefectures.

The Macau government announced an indefinite ban on imports of food products from Miyagi, Yamagata, Niigata, Nagano, Yamanashi, Saitama and Tokyo. Previously, on March, the government had already announced a ban on food imports from Fukushima, Tochigi, Gunma, Ibaraki and Chiba prefectures, which will continue.

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Labour force growth to be controlled The government wants to control the increase of Macau’s labour force. According to the secretary for economy and finance, Francis Tam Pak Yuen, the overall total labour force (including imported labour) must not increase by more than 10 percent per year. According to Mr Tam, the restrictions are needed due to “concerns over the use of social resources”. Macau’s unemployment rate is currently below 3 percent, with the monetary authority saying that the territory has already achieved full employment.

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Imported workers almost hit the 80,000 mark

Fiscal surplus soars

The number of imported workers continues to increase month-on-month. In February, the total number of non-resident workers in Macau stood at 79,500, up by 2 percent in comparison with the previous month, according to the Labour Affairs Bureau. In September 2008, Macau had a total of 104,000 imported workers, but since then the number had continually fallen monthto-month until it rose back again for the first time in June 2010.

In the first quarter of 2011, the Macau government recorded a fiscal surplus of MOP17.30 billion (US$2.2 billion), up by 34.0 percent compared with the same period of last year, the Financial Services Bureau announced. Total public revenue (excluding the amounts from the autonomous agencies) rose by 48.5 percent year-onyear, to a total of MOP24.36 billion. This increment was due to noticeable increases in the revenue of direct taxes from gaming, up by 46.7 percent.

Total public expenditure was MOP7.06 billion, with an increase of 102.4 percent, which was caused by the increase of transfer payments to autonomous agencies and also the payment of the wealth partaking scheme.

Unemployment slightly down

Forex reserves up

The unemployment rate for January-March 2011 was 2.7 percent, down by 0.1 percentage point over the previous period (December 2010-February 2011), according to the Statistics and Census Service. The number of the unemployed decreased slightly by 300 from the previous period to 8,900, with 6.5 percent being fresh labour force entrants searching for their first job. The total labour force was 334,000. In the first quarter of 2011, the unemployment rate of local residents held stable at 3.3 percent, the same as in the fourth quarter of 2010.

The monetary authority announced that the preliminary estimate of Macau’s foreign exchange reserves amounted to MOP204.1 billion (US$25.45 billion) at the end of March.

The reserves rose by 4.0 percent from the revised value of MOP196.2 billion for the previous month. When compared with a year earlier, the reserves increased by MOP47.9 billion or 30.6 percent.

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Sponsored Feature

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FUN SPLASH

SPLASH Party starts at the poolside of Hard Rock Hotel to continue at Club CUBIC at City of Dreams

City of Dreams is the centre of entertainment in Macau, with enjoyment guaranteed for all

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his month, the party gets started at City of Dreams.

The resort is featuring a strong line up of offerings to ensure everyone enjoys their stay. Couples, singles or families alike will find it is the place to have fun in Macau.

For the clubbers, the SPLASH Pool Party Summer Series kicks off on May 21 (Saturday), featuring an adrenalin pumping, poolside extravaganza.

Co-organized by Hard Rock Hotel Macau and hotspot Club CUBIC at City of Dreams in conjunction with MTV, the party brings together some of the world’s best DJs for a spectacular all-day, all-night bash.

The first of the series will feature a 30-minute special live performance by ‘24 Herbs’, a bona fide hip-hop band in Asia, followed by DJ Judge Jules presiding over the Hard Rock Hotel’s SPLASH Pool Party event, and dance music specialist Eddie Halliwell headlining in Club CUBIC. Tickets for the poolside party cost only HK$250 in advance (HK$300 at the door), while for Club CUBIC the price is HK$300 (HK$350 at the door). There are also special packages available, including a HK$5,000 cabana package and a SPLASH Summer package, starting at HK$2,588.

For families, there are also some good times guaranteed by the pool. The Wave Pool Bar & Grill sumptuous poolside barbecue buffet, at Hard Rock Hotel, is back, at MOP278 per person (MOP188 for children between six and 12; free for children under six). Guests partaking in the buffet can enjoy complimentary access to the swimming pool, meaning allday-long splish-splash family fun.

For more information and reservations, please contact: CITY OF DREAMS Estrada do Istmo, Cotai, Macau Tel: +853 8868 6688 HK Toll Free: 8009 66128 Website: www.cityofdreamsmacau.com

The popular poolside barbeque buffet at Wave Pool Bar & Grill, Hard Rock hotel is now back

A night to remember Joining a league of internationally renowned artists, world-renowned rapper, Flo Rida, donated the outfits he wore for the opening of Club CUBIC, on April 1, as memorabilia to City of Dreams.

The whole set includes the cap of Flo Rida, his signature sunglasses, an oversized T-shirt and a pair of sneakers with his autographs.

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Economy & Finance der Gate is usually in the opposite direction – straight onto the baccarat tables.

Private banking business strategy specialist Simon Lo of Bank of China (Macau) says there are other ways to invest in the mainland. The Macau branch of Bank of China is the local renminbi clearing bank and as such has a “little advantage” in dealing with renminbi, he says.

Mr Lo, who last month gave a presentation to the British Business Association about Bank of China’s renminbi investment products, expects the growth in this area to continue.

“As long as people want to diversify their currency portfolio, the renminbi will be one of the best choices for them at the moment, especially for people living in Macau.”

Steamed up

Future plays Investing in the renminbi is becoming increasingly attractive but still has risks

BY LUIS PEREIRA

veryone in foreign currency trading is keeping a keen eye on the renminbi. If its steady appreciation were not enough, the mainland’s growing economy and massive reserves should sell the currency to even the wariest of investors.

But trading in the renminbi is still problematic, as the currency is far from being fully convertible in international markets. Macau and Hong Kong do have some advantages, notably their legal frameworks and, most particularly, their proximity to the mainland.

Only about one percent of the mainland’s trade is settled in its own currency. Getting renminbi out of the country is easier. The difficulty for

E

MAY 2011

investors is how to get their renminbi back into the mainland, which is now possible only through a mainland authorised dealer, for a fee.

Fervent investors willing to do the leg work may follow in the footsteps of Mr Jones (not his real name) who shared with Macau Business his alternative renminbi channel.

First, over the counter of his bank, Mr Jones withdraws the daily maximum amount allowed in Macau, with no questions asked. The daily maximum is the equivalent of MOP20,000 (RMB16,223). Money in pocket, he calmly hops over to the other side of the border to make his regular “drop” – again, with no questions asked.

The flow of cash through the Bor-

He acknowledges that there are drawbacks to trading in renminbi. “But it is still much more competitive than with other, more volatile, currencies.”

The renminbi has appreciated by 5 percent since it was unshackled from the United States dollar last June, and by 1.36 percent so far this year, after the People’s Bank of China started shepherding it upwards to help keep out imported inflation.

A number of investment banks have tried to forecast this year’s appreciation. Their estimates vary from two percent to seven percent. Whatever the correct figures, Mr Lo believes the central government will continue to let the currency rise gradually – although no faster than it has to.

The size of China’s economy, its steady growth and bright outlook, plus the massive currency reserves the mainland holds, all support the renminbi’s performance.

Even so, few local businesses have yet issued debt in renminbi, colloquially known as “dim sum bonds”.

This is because of the relatively shallow renminbi pool in Macau, Mr Lo says. In contrast, a surge in renminbidenominated deposits in Hong Kong has prompted companies there to issue dim sum bonds.

Renminbi deposits in Macau reached RMB23.2 billion in February, 74.4 percent more than in December, but this amount is tiny in comparison with the RMB407.7 billion in the

31 Hong Kong banking system at the end of February. Goldman Sachs estimates that the Hong Kong figure will reach RMB3.5 trillion in five years.

“If you want to issue dim sum bonds, you’ll probably go to Hong Kong fi rst,” says Mr Lo.

Opening plays Melco Crown Entertainment is one of the few local companies venturing into dim sum bonds. The gaming operator is set to issue this month RMB2.3 billion worth of renminbi-denominated bonds.

This follows the fi rst ever offshore renminbi-denominated initial public offering last month by Hong Kong tycoon Li Ka-Shing, who expected to raise RMB11.2 billion for his Beijing real estate investment trust, Hui Xian.

In the event the IPO was only moderately oversubscribed and the shares tumbled sharply on their debut.

Analysts largely blamed the poor performance on the relatively low yield of the trust and not enough renminbi in Hong Kong to buy and sell renminbi-

Renminbi deposits in Macau reached RMB23.2 billion in February, 74.4 percent more than in December, but this amount is tiny in comparison with the RMB407.7 billion in the Hong Kong denominated securities freely. Bank of China (Macau) peddled the IPO in the Macau market but only to institutional investors.

The liberalisation of the mainland’s currency, broadening the use of the renminbi in the hope that it will limit the U.S. dollar’s dominance of financial markets, has been a slow, gradual, process.

Hong Kong banks were fi rst

allowed to hold renminbi deposits in 2004 but it was not until 2009 that mainland companies were allowed to settle cross-border trade in the mainland currency. Only since last year have multinationals been allowed to issue renminbi-denominated bonds in Hong Kong.

Nonetheless, some opinion-makers have floated the idea that the Hong Kong dollar should soon drop the U.S. dollar as the anchor of its currency board in favour of the renminbi, dragging the pataca along behind it. Such proposal has been rebuffed by several well-respected economics.

“If the renminbi gets more internationalised, then the government might consider it,” says Mr Lo, expressing a personal view.

Mr Lo adds that conjectural talk about making Hengqin Island a special financial zone for renminbi operations is “very innovating, very interesting”.

But he and the rest of the financial world see Hong Kong remaining Beijing’s unofficially appointed offshore renminbi trader for many years to come.

MAY 2011

32

JOSÉ PEREIRA COUTINHO LEGISLATOR

Great expectations THERE ARE SIGNS THAT CHIEF EXECUTIVE FERNANDO CHUI SAI ON IS TRYING TO TACKLE LONGSTANDING INEQUITIES. THERE IS MUCH TO BE DONE, ESPECIALLY WHEN IT COMES TO RELAXING THE RESTRICTIONS ON IMPORTED LABOUR ince the beginning of his tenure, I have said that chief executive Fernando Chui Sai On has all the makings of a successful leader, capable of reshaping the established interests of Macau and driving the region towards a prosperous and fairer future.

From within, there are a few signs that elements of the government are trying to tackle longstanding inequities, such as the growing gap between rich and poor, the asymmetries and speculation in the housing market, the outdated social support systems and the stifling rises in food prices.

The introduction of aid to those on low incomes, the creation of thousands of low-cost housing units and the first steps towards opening the food import market to new ventures, are indeed, promising measures.

Nevertheless, the areas in need of reform – and in some cases, of revolution – are still abundant. The use of cash contributions is a new high-water mark for the lack of imagination and willpower in politics. And let us not forget that Mr Chui inherited a few highly unqualified secretaries that he was forced to live with.

The positive measures are, however, a clear indication that progressive policies can be put into effect and at the same time bolster the region’s economy and increase the quality of life of its citizens.

Moreover, the government, under the auspices of the mainland government, recently signed an agreement with Guangdong, with a special focus on the development of Hengqin Island.

There are voices that describe Hengqin as a delusion of grandeur, and there is certainly cause for concern in Macau that the Guangdong government will soon restrict the SAR’s influence over the project, but I for one believe that Mr Chui’s team will make the most of this opportunity. The appointment and dedication of Alexis Tam Chon Weng to this venture reinforces my belief.

All in all, though, the balance is still not positive enough to confirm my high expectations for Mr Chui’s mandate. And heaven knows that what he needs is to be allowed to reform some of his aged and ill-equipped secretaries.

S

Big problem

An area needing rapid intervention is the labour market.

Despite an already long history of diffi culties, there seems to be no end to Macau’s labour tribulations. The restrictions on recruitment of skilled foreign labour have thrown employers – especially developing small and medium enterprises and foreign investors – into hot water, with more and more positions available and not enough local manpower to fill them.

There was a time, with the first influx of casinos and hotels, when there could have been cause for concern that locals would miss out on professional opportunities – but no longer.

The government needs to realise that the demand for skilled employees clearly outweighs what the local labour market has to offer. More importantly, the government needs to accept the MAY 2011

fact that a surge of ultra-qualified people coming to Macau is not, and should not be a problem.

All over the world, prosperous economies are becoming attractive destinations where high-end professionals from outside can pursue their careers. Why not make the best of it, and create more dynamic and flexible immigration and labour systems, whereby companies would be allowed to import foreign workers provided that they also train local staff?

Sometimes it seems that the government and the opinion makers forget that work permits are issued for limited periods, so the authorities will always have control over overall employment. If, 10 years from now, there is an increase in the unemployment rate among skilled local workers, that would be the time to impose restrictions, not now.

We cannot go from one extreme to the other, but definitive steps need to be taken in order to loosen restrictions on foreign recruitment, while maximising the opportunities for training of local workers. If these steps are taken, maybe, one day, employers will need to look no further than the Macau market to find suitable employees and we will reap the benefits of having learnt from the rest of the world.

33

MAY 2011

34

Economic Trends by JosĂŠ I. Duarte Labour market

GRAPH 1 - Population and labour: absolute figures Total population

Employed population

Labour force

(1,000)

600

500

GRAPH 1

400 300 200

100 0 1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

GRAPH 2 - Population and labour: growth indices Employment index

Unemployment index

Wages index

200 180 160 Base:1999

The relationship between demographics and the labour market is often not given the attention it deserves. Let us look into it in more detail.

140 120 100

Graph 1 displays the development of the population, the labour force and the employed population, in absolute figures.

While they appear to run in parallel, these series hide significant relative changes. Over the given period, the population has grown by an average of 2.5 percent a year, which is statistically significant.

Between 2003 and 2008, the annual growth rate exceeded 4 percent, a value that would allow the population to double in 16 years. A slight dip in 2009 seems to have been reversed the following year.

In another significant change, the total labour force has increased by about 120,000 people in the period of our analysis. That resulted in a leap of its share, from less than half to about 60 percent of the population. This is different to the participation rate, which has also increased but is not represented here.

Employment has closely followed this development, as we might expect since the increase in the natural population has been small and most growth has resulted from inflows of workers.

Overall, unemployment has stood at very low levels.

GRAPH 2

80 60 1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

GRAPH 3 - Average wages: major sectors Median

Manufacturing

Hotels and restaurants

(MOP)

Utilities Communications

Finance Gaming

This graph shows key indices – employment, unemployment and median wages – with the base year set as 1999. They amplify the labour market trends mentioned previously and neatly illustrate three different periods. The first, from 1999 to 2003, represents stagnation. The second, between 2004 and 2007, shows a boom period. The final period, from 2008 to last year, is a time of unwieldy changes.

GRAPH 3

25,000

20,000

15,000

10,000

5,000

0 Dec 2000

MAY 2011

Dec 2002

Dec 2004

Dec 2006

Dec 2008

Dec 2010

Illustrated here is a plot of average wages for various sectors, based on the twice-yearly surveys made by the Statistic and Census Service.

As the sector surveys are not made at the same time each year, direct comparisons must be made with care.

Overall, there are very different tales in the labour market. We see marked differences between the top paying and most dynamic sectors, which have been expanding fast due to the gaming boom, and the rest.

For reference, the evolution of the wage median is included; but note that the survey data provided is for average wages.

35

Consumption expenditure

GRAPH 4 - Household consumption expenditure: select components Food, beverages and tabacco

Durable consumer goods

Other

Abroad

(MOP billion)

50 45

Base: 2008, chain volume

40

Household consumption expenditure levels have increased across most categories recently, both as a result of increasing income and a growing population.

GRAPH 4

Here we illustrate real household consumption expenditure broken into some relevant components. Real consumption has increased by almost 60 percent.

Two important indicators of increasing wealth are present. First, the absolute growth in consumption of food and drinks, and its slightly declining relative share of total consumption; and second, the consumption of durable consumer goods has doubled.

35 30 25 20 15 10 5 0 2001

2002

2003

2004

2005

2006

2007

2008

2009

GRAPH 5 - Household consumption expenditure: shares of selected components Food, beverages and tabacco

(%)

Durable consumer goods

Abroad

18 16 14 12 10 8 6 4 2 0 2001

2002

2003

2004

2005

2006

2007

2008

2009

GRAPH 6 - Per capita household consumption expenditure: select components Household consumption expenditure Durable consumer goods

(MOP)

GRAPH 5

There has been no dramatic change in the relative share of each of these categories when compared to total consumption, with a combined range of between 30 to 32 percent.

GRAPH 6

The overall per capita household consumption expenditure has grown more slowly that the comparable figure for durable consumer goods. In real terms from 2002 to 2009 it has grown by 20 percent, which represents a respectable rate of 2.7 percent a year.

For durable consumer goods, the rates are 33 percent and 4.2 percent, respectively.

The figure for food, beverages and tobacco consumption show modest changes of 10 percent and 1.5 percent, respectively. This change could be considered mostly stable.

The trajectory of food consumption is of particular interest, bearing in mind that food prices are a major component of the consumer price index. Nothing in the values shown here suggests a sharp increase in internal demand that could constitute a significant driver of food prices.

Food, beverages and tabacco Abroad

90,000 80,000

Base: 2008, chain volume

70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2002

2003

2004

2005

2006

2007

2008

2009

MAY 2011

36

Economic Trends by JosĂŠ I. Duarte

Output and expenditure (*) 2009 GDP current (in MOP) Consumption (in MOP) Investment (in MOP)

Economic Activity

Government (in MOP) Trade balance: goods (in MOP) Trade balance: services (in MOP) GDP constant (2008) (in MOP)

165,457 46,154 31,885 16,009 - 35,249 106,535 164,159

million million million million million million million

% var

2.3 4.2 - 36.6 13.2 - 13.6 15.2 1.5

Latest

Notes

% var

64,568

million

13,626 10,059 6,062 - 12,357 84,217 60,322

million million million million million million

34.6 9.7 24.2 17.9 24.2 48.0 27.9

Q4 Q4 Q4 Q4 Q4 Q4 Q4

Money and prices M1 (in MOP) M2 (in MOP) Credit (in MOP) Deposits (in MOP) IPC/Inflation rate (**) AMCM base rate

2010

% var

34,721 million 243,247 million 130,677 million 237,627 million 104.25 base - 2008 0.50 %

13.4 14.6 29.2 14.6 2.81 --

Latest

Notes

% var

37,893 million 257,428 million 135,328 million 250,696 million 108.13 base - 2008 0.5 %

15 19.5 31.5 19.1 4.70 --

Latest

% var

January January January January February March

Population/Labour force

Labour force Median wage rate (in MOP) Unemployment

542,200 329,200 8,500

% var

2.8 % (2010)

- 1.3 - 1.5 6.3 - 0.8

2010

% var

552,300 331,000 9,000 2.8 %

1.9 2.8 -0.1

Notes Q4 Q4 Q4 February, var

Construction

Major sectors

1,835,174 1,271,509 Cement (Apparent consumption) 214,166 Transactions/Commercial (in MOP) 6,580 Transaction/Residential (in MOP) 45,939 Started

m2

Finished

m2 tons million million

- 19.8 - 9.6 - 22.6 117.0 113.0

Latest

1,119 135,591 19,436 1,136 3790

m2 m2 tons million million

% var

Notes

- 96.3 310.4 3.7 90.0 21.0

January January January January January

Gaming 2010 Gross revenue (in MOP) Casinos Tables Machines

189,588 33 4,791 14,050

million

% var

Latest

57.0 2 0.4 2.2

19,965 33 4,853 13,787

% var million

47.5 0 1.3 - 1.9

Notes February Q1, var, ytd Q1, ytd Q1, ytd

Tourism 2010

24,965,000 Average expenditure (in MOP) 1,616 (2009) Average stay 1.10 days (2009) Hotel rooms 20,091 Occupation rate 79.8 % Average hotel stay 1.54 nights Visitors

% var

15.0 - 6.5 -4.3 8.43 0.04

Latest

2,164,000 1,812 0.90 days 19,890 80.3 % 1.41 nights

% var

Notes

February 4.7 Q4 0.3 Q4, var - 0.20 days January 4.2 1.30 January, var - 0.07 January, var

%var - % change on homologous period; var - absolute variation; ytd - % change, year-to-date; x - discontinuous series

2010New base: 2008) (*) Important note: Values for 2009 revised. The methodology and reference period for the real GDP calculation hasAPRIL changed. (**) Important note: The inflation base period has changed ( New base: April 2008 to March 2009 = 100) JANUARY MARCH MAY 2011

Sources: DSEC (Statistics and Census Service), AMCM (Monetary Authority of Macau), DICJ (Gaming Inspection and Coordination Bureau)

2009 Population

Photos: Carmo Correia

38

MAY 2011

Business

Cleaning up By tracking Macau’s economic evolution, Lionel Leong has been able to manoeuvre his business to the top of the pile

BY EMANUEL GRAÇA

ometimes, jeopardy brings opportunities.”

This is the mantra of businessman Lionel Leong Vai Tac, one of the few Macau-based entrepreneurs to have successfully followed the economic changes in the city, switching his business from garment manufacturing to the services industry.

Today, Mr Leong owns the world’s biggest commercial linen laundry and has converted his garment manufacturing factory to a uniform cleaning plant.

Both projects cater to the fast-growing hospitality sector.

Mr Leong’s Seng San Garment Factory Ltd. was found in 1987 with 30 employees. A little over a decade later in 1999, it gave way to Seng San Enterprises Ltd. “We were a factory formed to export. We became one of the biggest in Macau, providing outsourcing services for famous international brand names like Agnès B, Armani and Hugo Boss, that could order up to 20,000 parts, besides having our own brands,” Mr Leong tells Macau Business.

“That is history. We don’t think Macau’s manufacturing sector has any competitive advantage anymore because of rising wages and a lack of human resources.”

The change in business direction began with the establishment of Smartable Holding Ltd., a US$35 million (MOP280 million) state-of-the-art facility to launder linen from hotels. Located in Coloane, it opened in June 2009.

S

“We are the largest hotel room laundry service in the world,” Lionel Leong Vai Tac says

Initially, Mr Leong stilled planned to continue with his contract garment manufacturing enterprise.

“But we understood that our competitive advantage was becoming narrower and narrower. Then, by 2008, before the international financial crisis, we found it strange that all our outsourcing brand names started to cancel orders,” he says.

“That was a feedback signal from the market.”

Alarm bells At that stage, the total liabilities of Seng San’s buyers in the United States stood at US$10 million. It was a figure that set Mr Leong worrying.

As the global financial crisis hit, Mr Leong saw that Macau’s hotels and casinos seemed to be unaffected by the turmoil. Managers in the hospitality industry were not firing people, and the uniform market seemed stable.

“Since we were going to have our hands in the laundry business, we thought: ‘Why don’t we try to shift our garment manufacturing unit into uniform cleaning?’ At that time, we stopped accepting any new orders, even from chain stores.”

The company produced its last exports earlier this year.

Making use of the manufacturing plant’s extensive in-house laundry facilities, Mr Leong switched the focus of his operation. Seng San can clean up to 100,000 pieces of uniforms every day.

One common theme to switching years of expertise in exporting to providing an industrial service for the hospitality industry was complying with the highest standards. Smartable was recently certified to ISO 9001:2008, becoming the first commercial laundry in Macau to achieve ISO certification.

Next year, Mr Leong expects annual revenues for Smartable to reach MOP150 million, four to five times more the figure achieved in 2009.

Minimum wage costs jobs

B

usinessman Lionel Leong Vai Tac opposes the establishment of a minimum wage in Macau. Mr Leong, a member of the Executive Council, says it would increase unemployment.

“Minimum wages will create a risk that some non-competitive, lowskilled workers could be dismissed if they cannot produce enough to cover their salary,” he says.

“A lot of people are complaining that big companies are kicking out the small and medium enterprises.

Who will hurt the most if we introduce a minimum wage? Don’t tell me it is Venetian or Wynn. They can pay higher wages. But what about the grocery store around the corner?”

According to Mr Leong, the current income subsidy model is much better. Introduced in Macau in 2008, it targets low income full-time workers aged 40 or above with monthly earnings below MOP4,400.

Through this scheme, the government gives them a cash allowance to add on to their monthly earnings until they reach the MOP4,400-threshold. Last year, about 6,000 people benefited from this scheme, according to the government’s information.

“That means even if you are a low skilled worker, the employer won’t fire you,” he says. “This is what we have been doing for years and so far it has been working. Even Singapore has learned from us in this area. And now we want to switch to something which has a question mark attached?”

Mr Leong also says SMEs should be allowed to import labour with fewer restrictions but says they must act to help themselves to grab new opportunities, such as on Hengqin Island.

“One SME may not have enough capacity to enter this market; so think about merging,” he says. “You have to learn how to dance with the wolves to survive.”

After seven years with the Executive Council, Mr Leong says the members “help the chief executive to make the right decisions”.

Is it hard? “No, as long as he listens,” he says, laughing.

According to Mr Leong, both Fernando Chui Sai On and his predecessor, Edmund Ho Hau Wah have proven to be good listeners.

MAY 2011

39

40

Business

“We are born locally.

We understand the legal framework and the labour needs. We understand what the market wants.

This is our advantage” “Very importantly, after we opened, all the major four and five-star hotels gave their business to us,” says Mr Leong. Among the company’s clients are City of Dreams’ hotels, L’Arc and the Mandarin Oriental.

“Before, hotels needed to invest in their own in-house laundry because there was no world-class standard laundry available in Macau. Today, whoever wants to know what is happening in this field has to come here and look at us.”

Demanding times

Green business makes sense A

side from his careers in business and politics, Lionel Leong Vai Tac has a string to his bow, the environment. He was the chairman of the defunct Environment Council and still holds several positions in associations and advisory bodies.

His understanding of environmentally friendly business is part of his thinking on business.

Smartable Holding Limited uses just one quarter of the water needed by a regular domestic washing machine to launder the same amount of linen. The laundry plant includes several recycling systems, including one for heat.

“Labour cost is not a major factor for us. Energy and water are. If we are more environment-friendly, it means we use fewer utilities in the long run and that our operating costs will be lower,” Mr Leong says.

MAY 2011

Smartable has a capacity of cleaning laundry of 25,000 hotel rooms per day.

“We are the largest hotel room laundry service in the world and we also have the highest productivity per square metre,” Mr Leong says.

“We still have a lot of unused capacity. We came up too big. Our room capacity is more than the total number of available hotel rooms in Macau now.”

At the end of February, the territory had 20,000 hotel and guest-house rooms. Mr Leong is confident that the gap will narrow when the properties under construction come online. By then, Macau will have up to 50,000 rooms, he estimates.

The next target for expansion is warehousing. Mr Leong plans to develop facilities where hotels can store goods in reserve to ensure continual supply in periods of unusually strong demand.

“For example, some supplies needed in Macau on a constant basis may have been affected by the recent disaster in Japan. You need to have somewhere in town to make sure you can constantly supply,” he says.

Mr Leong is confident there are still “many niche markets” for industries supporting the hospitality sector.

“We are born locally. We understand the legal framework and the labour needs. We understand what the market wants. This is our advantage,” he says.

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MAY 2011

42

Property | Market Watch

Shock therapy

More measures meant to curb real estate speculation are announced

fter the first round half a year ago, the government has rolled out more measures to curb real estate speculation. The big news is the introduction of a special stamp duty.

The proposal, which still needs to be approved by the Legislative Assembly, is to levy a 20 percent special stamp duty on property resold within a year of its purchase. The levy will be reduced to 10 percent if the resale takes place between one and two years after purchase.

Franco Liu, the managing director of the Macau branch of property consultancy Savills, says the measure may have a strong short-term effect on the market. Mr Liu expects deals to fall by nearly a third, but is confident about the

A

MAY 2011

outlook for the medium term.

Some transactions will be exempted from the special stamp duty – for instance, if the property is to be transferred between close relatives or if the seller has been declared bankrupt. Parking spaces and commercial properties are also not included.

Meanwhile, the monetary authority last month further tightened the standards for residential mortgage lending, changing the loan-to-value (LTV) percentages. Regardless of the value of a property, the maximum LTV percentage of equitable mortgages may not exceed 70 percent for those granted to Macau residents and 50 percent for those granted to non-residents.

Chief executive Fernando Chui Sai

On has also advised people not to rush into buying real estate.

Cool breeze The real estate market is showing signs of cooling, at least in the number of deals – although it is not clear if this is a consequence of action taken by the government since late last year.

There were 788 residential property transactions in February, 27 percent fewer than a year before, according to the latest data from the Statistics and Census Service. These deals were together worth MOP1.92 billion (US$240 million), 4 percent less than a year before. The number of transactions in the primary market was 237, 22 percent fewer. Together they were worth

43

Ascott foray

S

outheast Asia’s largest property developer, CapitaLand, has announced that its serviced residence arm, Ascott Ltd, has won a contract with China Overseas Property Ltd to manage serviced apartments in Macau.

The serviced residences, in NAPE, will be called the Ascott Paragon Macau and will open in 2014. This is Ascott’s fi rst foray into Macau.

“With the high rate of growth in China, we expect more expatriates and business travellers to Macau as more international companies arrive,” says Lim Ming Yan, Ascott’s chief executive.

When completed, the Ascott Paragon Macau is expected to have about 100 apartments ranging from studios to one-bedroom units.

Photo: Carmo Correia

AIA Tower for sale

Source: DSEC

Residential units sold as per record of stamp duty* Year

Month

Year

Month

2010

January

2010

January

2011

Number of Transactions 1,297 February 1,084 March 1,503 April 2,202 May 1,627 June 1,543 July 1,204 August 940 September 1,505 October 1,312 November 1,818 December 1,954 January 1,541 February 788

Value of residential units sold as per record of stamp duty*

February March April May June July August September October November December 2011

January February

* Notes: 1. The data includes transactions of residential units exempted from stamp duty.

2. The data covers residential units with stamp duty paid during the reporting month.

Value (MOP million) 3,140 1,995 2,806 6,180 4,281 3,319 2,642 1,889 3,687 3,421 7,569 5,010 3,790 1,918

S

peymill Macau aims to go ahead with the sale of its downtown grade-A offi ce building, AIA Tower.

“We are working closely with various entities and remain committed to only executing a sale when the terms are favourable in all aspects and when the maximum price can be achieved,” says the company’s chairman, Howard Golden.

The company has not set any deadline for the sale, according to its 2010 annual report. Speymill Macau has already sold all the other properties it owned in the city.

Last year Speymill Macau posted a loss after tax of US$5.15 million (MOP41.2 million).

MAY 2011

Property | Market Watch

44

Average transaction value of residential properties as per record of stamp duty Value (MOP thousand) 5,000

Total number of buyers in residential transactions in the first two months of 2011:

3,371

4,000 3,000

Proportion of buyers

2,000

11%

Source: DSEC

1,000 0

Non-Residents

89% Residents

Jan

Feb

Mar

Apr

May

Jun Jul 2010

Aug

Sep

Oct

Nov

Dec

Jan

Feb 2011

* Notes: 1. The data includes transactions of residential units exempted from stamp duty.

2. The data covers residential units with stamp duty paid during the reporting month.

Source: Financial Services Bureau

Average transaction price of residential units per square metre 60,000 55,000 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

Total value of residential transactions in the first two months of 2011:

MOP

5,708,811,000

Proportion of buyers

17% 83%

Non-Residents

Residents

Jan

Feb

Mar

Apr

May

Jun Jul 2010

Aug

Sep

Oct

Nov

Dec

Jan

Feb 2011

* Notes: 1. The data includes transactions of residential units exempted from stamp duty.

2. The data covers residential units with stamp duty bill issued during the reporting month.

3. Some residential units may not be included in the data made available by the Financial Services Bureau for privacy reasons.

MOP1.0 billion, 12 percent less.

The Financial Services Bureau says the average price per square metre of residential space was MOP39,198 in February, 35 percent more than a year before and 6.2 percent more than in January.

Apartments in The Soho Residence, a new development in Rua da Ribeira do Patane, went on sale last month, fetching prices starting from HK$2.7 million. One-third of the apartments had already been sold in the VIP sale in mid-March. Among the VIP buyers was a US private equity fund, which “bought a significant portion of units”, according to the project’s marketing consultant, Jones Lang LaSalle.

The Soho Residence has 27 floors and 126 apartments ranging in size from 55 square metres to 69 square metres.

The new measures to curb speculation follow a package of others announced in September. However, of the measures announced back then, few have actually been put into effect.

MAY 2011

One announcement – the auction of two land plots – was even cancelled last month. The chief executive said it was cancelled because of the state of the market, on the advice of secretary for transport and public works Lau Si Io. The land will instead be used for public housing, Mr Chui said.

Preaching conversion A bill included in the September package that is meant to regulate pre-construction sales will be sent to the Legislative Assembly only by the end of this year. The government said that in the meantime it would introduce guidelines as soon as this month, for pre-construction sales.

Developers will be able to apply for approval to sell unfinished property only after the Land, Public Works and Transport Bureau has approved the draft building plans. Developers will also be obliged to give prospective buyers information ranging from apartment floor plans to the usable area to

details of communal areas.

The government also announced last month that it would speed up the process of approving the conversion of industrial buildings into residences, reducing the time taken to 118 days from 255. To get approval, 70 percent of a converted building’s apartments must be small units up to 60 square metres in area.

This is the only measure announced so far to promote such conversions, which the government wants to encourage in order to increase the supply of apartments. Observers are sceptical that this measure on its own will reduce real estate prices. Developers and owners of industrial buildings alike are asking for more incentives to go ahead with conversions.

The government says there are around 90 industrial buildings in Macau, 40 of which are more than 30 years old.

If all 90 were converted into residences, they could yield up to 12,000 apartments, according to an official estimate.

Property | Market Watch

45 Notable residential property transactions - 16/03 to 15/04, 2011 District Macau Macau Macau Macau Taipa Taipa Macau Taipa Macau Macau Macau Taipa Coloane Macau Macau Taipa Macau Macau Macau Macau Macau Macau Macau Macau Coloane Taipa Coloane Coloane Coloane Macau Macau Macau Taipa Coloane Macau Coloane Macau Coloane Macau Coloane Taipa Coloane Macau Coloane Taipa

Building/Street One Central One Central One Central One Central One Grantai One Grantai Lake View Mansion One Grantai One Central Lake View Mansion Lake View Tower One Grantai One Oasis Cotai South Lake View Mansion L’Arc One Grantai One Central L’Arc Lake View Tower Nam Van Peninsula Lake View Tower Lake View Tower Lake View Tower Lake View Tower One Oasis Cotai South One Grantai One Oasis Cotai South One Oasis Cotai South One Oasis Cotai South Lake View Tower Lake View Tower The Residencia Macau Nova City One Oasis Cotai South L’Arc One Oasis Cotai South Lake View Tower One Oasis Cotai South Villa De Mer One Oasis Cotai South The Pacifica Garden One Oasis Cotai South Lake View Tower One Oasis Cotai South Prince Flower City

Unit Block 3, H/F, unit A Block 3, H/F, unit A Block 3, M/F, unit A Block 3, M/F, unit A Block 5, H/F, unit T Block 4, L/F, unit O Block 1, L/F, unit I Block 4, L/F, unit O Block 1, H/F, unit F Block 1, L/F, unit M Block 2, M/F, unit L Block 3, H/F, unit N Block 3, M/F, unit B Block 3, L/F,unit C H/F, unit B Block 3, H/F, unit L Block 1, L/F, unit F H/F, unit E M/F, unit O L/F, unit C Block 1, L/F, unit O M/F, unit N M/F, unit O M/F, unit M Block 2, M/F, unit B Block 3, L/F, unit M Block 8, H/F, unit E Block 2, L/F, unit A Block 8, M/F, unit E L/F, unit L M/F, unit K Block 1, M/F, unit B Block 9, M/F, unit D Block 8, L/F, unit G H/F, unit C Block 6, L/F, unit D Block 2, L/F, unit J Block 6, L/F, unit E Block 4, M/F, unit R Block 6, L/F, unit E Block 2, H/F, unit G (with car park) Block 6, L/F, unit E H/F, unit G Block 8, L/F, unit D Block 2, H/F, unit F

45 45

Source: Centaline, Ricacorp & Midland

Floor area (sq. ft) 2,729 2,760 2,729 2,729 3,025 2,931 3,485 2,931 1,815 3,054 2,108 2,244 2,361 2,956 2,803 2,062 1,759 2,261 1,899 2,576 1,889 2,233 2,004 2,236 2,072 2,020 1,830 1,936 1,830 2,045 1,668 1,693 2,503 1,838 1,827 1,676 1,850 1,639 2,196 1,693 2,200 1,639 1,590 1,782 1,800

Sale price (HK$) 20,468,000 20,148,000 19,990,000 19,110,000 19,057,500 19,052,000 18,800,000 17,000,000 15,064,500 15,000,000 14,966,800 14,586,000 13,800,000 13,800,000 12,800,000 12,784,000 12,313,000 11,983,000 11,964,000 11,800,000 11,700,000 10,800,000 10,667,000 10,395,000 9,946,000 9,696,000 9,447,000 9,292,800 9,224,000 9,223,000 9,174,000 9,098,260 8,600,000 8,562,000 8,450,000 8,365,000 8,100,000 8,006,000 7,980,000 7,880,000 7,750,000 7,723,000 7,628,000 7,502,000 7,500,000

Price per sq.ft. (HK$) 7,500 7,300 7,325 7,003 6,300 6,500 5,395 5,800 8,300 4,912 7,100 6,500 5,844 4,668 4,567 6,200 7,000 5,299 5,400 4,581 6,193 4,837 5,323 4,649 4,800 4,800 5,162 4,800 5,040 4,510 5,500 5,374 3,435 4,658 4,625 4,991 4,378 4,885 3,634 4,654 3,522 4,712 4,797 4,210 4,167

Note: L/F - Low floor; M/F - Middle floor; H/F - High floor

Notable commercial property transactions - 01/04 to 15/04, 2011 Type Shop Shop Shop Shop Shop Shop Shop Shop Shop Shop

Building/Street Avenida Almeida Ribeiro Rua da Praia do Manduco Rua de Ferreira do Amaral Rua do Almirante Sérgio Rua do Almirante Sérgio Edf. Vai Long Rua do Almirante Sérgio Edf. Jardim San Pou Edf. Cheng Choi Rua da Praia do Manduco

Unit The whole Shop Shop Shop Shop Shop Shop Shop Shop Shop

Source: Centaline

Floor area (sq. ft) 600 5,858 2,900 818 818 850 1,400 600 700 800

Sale price (HK$) Price per sq.ft. (HK$) 67,500,000 22,500,000 15,000,000 10,000,000 10,000,000 9,150,000 8,200,000 6,800,000 2,700,000 2,380,000

112,500 3,840 5,172 12,224 12,224 10,764 5,857 11,333 3,857 2,975

Note: L/F - Low floor; M/F - Middle floor; H/F - High floor

MAY 2011

46

Property | Market Watch

46

Notable residential property rentals - 16/03 to 15/04, 2011

Source: Centaline, Ricacorp & Midland

District

Building/Street

Unit

Macau

L’Arc

H/F, unit B

2,803

30,000

Macau

L’Arc

M/F, unit B

2,803

28,000

9.99

Macau

Lake View Mansion

Block 3, M/F, unit C

3,469

24,000

6.92

Macau

One Central

Block 7, M/F, unit A

1,269

20,000

15.76

Macau

Lake View Tower

L/F, unit G

1,567

18,000

11.49

Taipa

Nova City

Block 11, H/F, unit D

2,500

18,000

7.20

Taipa

Kings Ville

Block 3, M/F, unit H

2,102

17,000

8.09 9.34

Floor area (sq. ft)

Rent price (HK$)

Price per sq.ft. (HK$) 10.70

Macau

Edf. Va Iong

L/F, unit C

1,606

15,000

Taipa

Nova City

Block 9, L/F, unit C (with car park)

1,973

15,000

7.60

Macau

Marbela Garden

Block 1, M/F, unit C

3,539

15,000

4.24

Taipa

Kings Ville

Block 1, H/F, unit B

1,801

14,500

8.05

Taipa

Flower City

H/F, unit C (with car park)

2,066

13,000

6.29

Macau

Lake View Mansion

Block 3, M/F, unit E

1,728

12,800

7.41

Macau

One Central

Block 1, H/F, unit D

654

12,000

18.35

Macau

The Residencia Macau

Block 4, L/F, unit A

1,578

12,000

7.60

Macau

Edf. Dynasty Garden

L/F, unit W

2,260

12,000

5.31

Taipa

Prince Flower City

Block 1, L/F, unit C (with car park)

1,665

11,500

6.91

Macau

Edf. Walorly

L/F, unit AF

1,700

11,000

6.47

Macau

Edf. Walorly

L/F, unit AA

1,780

11,000

6.18

Taipa

Nova City

Block 16, L/F, unit B

1,318

10,000

7.59

Taipa

Kings Ville

Block 2, M/F, unit F

1,423

10,000

7.03

Taipa

Caesar Fortune

L/F, unit I

1,484

10,000

6.74

Macau

The Bayview

Block 4, M/F, unit E

1,603

10,000

6.24

Taipa

Prince Flower City

Block 1, H/F, unit C

1,665

10,000

6.01

Taipa

Nova City

Block 10, L/F, unit E

1,314

9,700

7.38

Macau

The Bayview

Block 5, L/F, unit E (with car park)

1,603

9,700

6.05

Taipa

Nova City

Block 15, L/F, unit F

1,336

9,500

7.11

Taipa

Treasure Garden

Block 2, M/F, unit G

1,709

9,500

5.56

Macau

La Cite

Block 2, H/F, unit E

1,719

9,500

5.53

Taipa

The Pacifica Garden

M/F, unit K

1,216

9,300

7.65

Taipa

Nova City

Block 14, M/F, unit F

1,340

9,300

6.94

Taipa

Nova City

Block 4, L/F, unit A

1,088

9,000

8.27

Macau

The Praia

Block 3, H/F, unit S

1,558

9,000

5.78

Taipa

The Pacifica Garden

M/F, unit D

1,594

9,000

5.65

Taipa

Edf. Mei Keng Garden

Block 4, H/F, unit N

1,900

9,000

4.74

Macau

The Riviera Macau

Block 2, M/F, unit M

913

8,500

9.31

Taipa

Caesar Fortune

Block 1, L/F, unit F

1,600

8,500

5.31

Macau

The Praia

Block 3, M/F, unit N

1,558

8,300

5.33

Macau

The Riviera Macau

Block 1, L/F, unit D

Taipa

The Pacifica Garden

L/F, unit I

Macau

The Praia

Block 3, H/F, unit Q

1,199

8,000

6.67

Macau

La Cite

Block 4, H/F, unit B

1,592

8,000

5.03

Macau

The Riviera Macau

Block 1, M/F, unit D

866

7,500

8.66

Taipa

Jardins de Lisboa

M/F, unit D

1,680

7,500

4.46

Macau

La Cite

Block 5, H/F, unit B

1,189

7,000

5.89

Taipa

Caesar Fortune

L/F, unit D

950

6,800

7.16

Taipa

Treasure Garden

Block 1, M/F, unit E

990

6,800

6.87

Taipa

Treasure Garden

Block 1, M/F, unit D

881

6,000

6.81

866

8,000

9.24

1,197

8,000

6.68

Note: L/F - Low floor; M/F - Middle floor; H/F - High floor

Notable commercial property rentals - 01/04 to 15/04, 2011 Type

Property

Unit

Source: Centaline

Floor area (sq. ft)

Rent price (HK$)

Price per sq.ft. (HK$)

Shop

Avenida de D. Joao IV

Shop

1,138

130,000

114.23

Office

AIA Tower

M/F

2,728

40,920

15.00

Shop

Edf. Jardim Hang Kei

Shop

3,000

38,000

12.66

Note: L/F - Low floor; M/F - Middle floor; H/F - High floor

MAY 2011

47 profile building management conflicts in Macau is between Shun Tak Holdings and a group of Nova City residents.

The company has steadfastly refused to recognise decisions made at a residents’ meeting last November and has filed a suit seeking those decisions to be declared void.

Shun Tak, the developer of the Nova City complex in Taipa, still officially owns the property, since the buyers have not received their ownership title certificates – a situation that has dragged on for years.

Better, not best

The new sheriff Macau sets up an arbitration centre to tackle property disputes ith anecdotal evidence that property management disputes are becoming increasingly common, the government has created an arbitration centre. Located at the Housing Bureau headquarters, it will start hearing disputes early next month.

According to government officials, the goal is to create an environment where people can voluntarily settle property issues outside of the

W

courts, “in a simpler and faster way,” with optional legal representation and at no cost.

Housing Bureau chief Tam Kuong Man says each case should take about six months to be resolved.

Since 2006, the courts have heard more than 60 cases regarding property management disputes, the bureau says.

“There are already too many cases in court. It takes too long,” says the head of the

bureau’s judicial affairs division, James Iam Lei Leng.

Court cases presently drag on for several years before a final decision is reached. Most disputes involve conflicts over management of common areas, disputes between apartment owners and building management and disputes over the legal validity of decisions made during apartment owners’ meetings.

One of the current high-

The General Union of Neighbourhood Associations of Macau, commonly known by its Cantonese name Kai Fong, welcomed the launch of the new arbitration centre but believes there will be shortcomings. Nonetheless, Kai Fong says the new arbitration centre is better than nothing.

The biggest issue for the new body will be resolving disputes where one of the parties does not accept arbitration, says Kai Fong representative Wong Chou Tim. In this situation, the conflict must be handled by the courts.

Arbitration and conciliation are not new to Macau but are seldom used to settle disputes. The city already has four arbitration centres for consumer conflicts, legal and commercial disputes, and for conflicts in insurance and private pension funds.

Congratulations on the 7th Anniversary of Macau Business

MAY 2011

48

CLEARANCE

SALE WHILE FREE-SPENDING CUSTOMERS FILL THE TILLS OF HOME-GROWN SHOPKEEPERS, LANDLORDS EMPTY THEM JUST AS FAST, AND OFTEN FASTER. FOR MANY SMALL RETAILERS, RISING RENTS SPELL DOOM

BY ALEXANDRA LAGES AND LUÍS ALMOSTER (PHOTOGRAPHY)

MAY 2011

49 The 66-year-old Long Kei Chinese restaurant, in Leal Senado Square, served its final meal after the building that housed it was sold

MAY 2011

50

Property

This month, the Kac Lan barbershop will cut its last customer’s hair. The barbershop, which has been in business for more than half a century in Avenida Almeida Ribeiro, is another casualty of rising real estate prices in the city centre

ne of the oldest and most traditional small businesses in the Avenida Almeida Ribeiro area closed its doors for the last time last month. The 66-year-old Long Kei Chinese restaurant, in Leal Senado Square, served its final meal after the building that housed it was sold.

This month, the Kac Lan barbershop will cut its last customer’s hair. The barbershop, which has been in business for more than half a century in Avenida Almeida Ribeiro, is another casualty of rising real estate prices in the city centre.

These are the latest names on a long list of home-grown businesses that have been forced to either shut down or to move out of the city’s prime retail area because of rising rents and competition from international chains.

These businesses have also been squeezed by rising operating costs due to inflation and the difficulty of finding staff, so the area has proved too expensive for many of the city’s lower-margin retailers. Since new and affordable retail space downtown is limited, less competitive players are being forced into sub-prime shopping districts.

If you take a picture of Leal Senado Square today and compare it with one taken before the handover, the differences are obvious: several Hong Kong and international chains have sprouted branches in big, renovated shops, occupying the space once used by traditional businesses.

The newcomers include jewellery shops, traditional Chinese medicine stores, international food outlets and clothing retailers, among others. They are aimed at the thousands of tourists that flock to the area every day.

Macau’s fast economic growth means the price of retail-

O

MAY 2011

ing space is shooting upwards. Renting a shop in the Avenida Almeida Ribeiro area can now cost 50 percent more than a year ago, says Noel Cheung, the sales director of real estate agency Centaline Macau.

Centaline’s records show a 155 square metre shop in Avenida Almeida Ribeiro was leased in February for HK$350,000 a month. Around the same time, a 279 square metre store in the same area was sold for a staggering HK$27.5 million.

Customers galore Ms Cheung says that as the number of visitors soared last year, so did the price of retailing premises and rents.

Retail rents increased by 20 to 30 percent last year, estimates Ronald Cheung, chief executive of Midland Macau, another real estate agency.

Last year the total value of retail sales reached MOP29.5 billion, 32 percent more the year before, driven up by greater domestic consumption and a surge in tourist arrivals and associated spending. Mr Cheung says residents are spending more on shopping as salaries increase and going to the mainland to shop becomes less attractive as the renminbi appreciates.

Mr Cheung expects property prices to rise by 5 to 10 percent this year. This, combined with inflation, retail sales growth, and the limited supply of retailing space in prime areas leads him to an obvious conclusion: “It’s very easy to expect rents to continue to go up.”

Local small and medium enterprises (SMEs) are caught in the middle.

“It always happens in developed cities,” Centaline’s

51 Ms Cheung says. “Owners would rather rent to Hong Kong groups, because they can afford expensive rents. Locals cannot afford the rental increases and are forced to move to second- and third-line locations.”

Rose Neng Lai, a property expert at the University of Macau, says the exodus of small businesses from the city centre has been going on for a few years. “Local SMEs which own their shops are able to stay in business. However, some decided that the earnings from selling the shops would be higher than doing business. And, like in the residential market in the early years [of the economic boom], some thought they could buy back the properties later when the market dropped. This did not happen.”

Rents per square metre for retailing space in second-tier and third-tier districts can be one-tenth of those in prime areas, or even less. For instance, a shop in Rua de Nam Keng in Taipa was leased in February for one-twentieth of what shop owners in Avenida Almeida Ribeiro can charge.

As a result, SMEs are “either forced out of business, or forced to move to streets with fewer pedestrians,” Ms Lai says.

“Coupled with the increases in labour costs, it is really not easy for SMEs to survive, despite the strong economic growth of Macau.”

It is not only the city centre that has changed. Similar changes have occurred in the northern part of the peninsula.

“Two years ago, there were many vacancies in the sideline areas, especially in the northern districts. Now it is different, and even those that were vacant for a long time are rented,” says Midland’s Mr Cheung.

Out and back Débora Costa has just opened a book, crafts and fashion shop in a small street not far from Avenida Almeida Ribeiro, also known as San Ma Lou. “I looked at San Ma Lou, but prices were way too high,” she says.

Ms Costa’s initial budget for rent was MOP4,000. She ended up paying MOP4,500 in a street that is a four-minute walk from the main shopping area. The landlord initially asked for MOP5,300.

She points to another business in the same street as hers.

“There is a stationery shop that has just opened its doors and is paying a rent of MOP10,000. That’s too much for someone who is starting a business,” she says.

The Avenida Almeida Ribeiro area is full of stories about retailers that had to leave, and about those that have survived.

Fernando Marques, the owner of Ou Mun, a small café in Leal Senado, is a retailer that has done both. In spite of being widely popular among residents and with tourists, Mr Marques’ café shut down in 2007, after six years in business, when the owner of the premises proposed an “unaffordable” MOP30,000 rent increase. The premises stood empty for six months and was eventually sold.

Then Mr Marques was surprised by a “reasonable” offer from the new owner. Mr Marques accepted it and his business has since run smoothly.

Not far away, the Portuguese Bookshop, owned by Instituto Português do Oriente, a Portuguese-language institution controlled by the Portuguese government, was set to be sold in 2009 for MOP50 million. The deal fell through, but only after a campaign organised by the local Portuguese-speaking community, who feared they would lose one of their favourite MAY 2011

52

Property

The Avenida Almeida Ribeiro area is full of stories about retailers that had to leave, and about those that have survived. Fernando Marques, the owner of Ou Mun, a small café in Leal Senado, is a retailer that has done both places to buy books and magazines written in Portuguese.

Small and Medium Enterprises Association director Kenneth Lei acknowledges that entrepreneurs are facing hard times due to rent increases. “They have no choice but to move out to other areas. Even worse, some close their businesses,” he says.

What’s reasonable The other side of the coin is the influx of international chains into the city’s prime sites. With their business networks and financial clout, they are able to outbid local retailers and absorb rent increases of 20 percent or more, says Frederick Yip Wing Fat, the president of the executive committee of the Macau Association of Retailers and Tourism Services. He explains that to make a healthy profit, a “reasonable” rent should account for only up to 10 percent of a company’s costs.

Mr Yip’s associates are not that worried about rising rents, he says, because profits are going up too. He expects retailing revenue to increase by 20 percent this year.

“For the entire retail business everywhere in the world, if you want to choose the best place to set up a business, you should expect higher rentals. It depends on what location you want to settle the business down [in]. Some locations in the MAY 2011

northern districts are not so expensive, because fewer tourists go there,” he says.

Hong Kong is facing a similar phenomenon. Property consultants there have warned that home-grown retailers are being driven out of the city’s prime shopping districts by highend and mid-range chains lured in by the acceleration in retail sales growth and the growing number of wealthy mainland shoppers that visit the city.

Apart from handing out subsidies, there is little the government can do to help home-grown retailers survive. “The government cannot control the real estate market prices. If prices jump up a lot, you’d better follow the market laws and assess if it is worth keeping the shop or not,” Mr Yip says.

In contrast, the SME association director, Mr Lei, urges the government to make policies to help SMEs cope with increases in rents. “SMEs can have some subsidies for rental if they are running a business in some ‘specific areas’, which must be defined by the government. This is a big issue,” he says.

Mr Lei also proposes the creation of a designated retail area only for local SMEs. “Of course, to support the local business, this shopping mall cannot be discriminated [against by putting it] in a sub-prime district.”

53

JOSÉ I. DUARTE ECONOMIST, MACAU BUSINESS SENIOR ANALYST - jid@macaubusiness.com

Fooling around THE GOVERNMENT SAYS IT IS CONCERNED ABOUT RISING REAL ESTATE PRICES BUT ITS ERRATIC POLICIES ON THE ISSUE DO NOT MAKE MUCH SENSE he housing market usually ranks among the top concerns of the ordinary Macau resident. The government seems to have acknowledged that rising housing prices are a matter of worry for significant sections of the population and, in particular, for younger couples trying to start a life of their own.

Comments from members of the administration suggest that the topic is receiving increased attention and, up to a point, some sense of urgency is setting in. However, neither the public declarations nor the actions taken seem to spring from a clear understanding of the causes of this state of affairs and the costs of prolonged inertia, and they do not point to consistent solutions.

About six months ago, several measures were announced, all purportedly meant to cool the market. Some involved restrictions on credit; others were hardly more than general topics listed for further study and reflection.

At times, the government has also promised to increase the amount of land assigned for housing and, in a bid to fend off suspicions of favouritism, to grant land by means of public auctions.

Then came the promises to develop social and economic housing for the less fortunate. And, maybe none too wisely, the government spelt out a firm commitment to build 19,000 new units of this kind of public housing by 2012. More recently, it suspended two planned public land auctions and promised to set the plots aside for public housing.

What are we to make of this?

First, two connected questions about the new public housing units arise. How was the figure determined? And does it make sense?

T

Two plus two

A few (admittedly rough) calculations raise some doubts. By the end of last year, Macau had about 32,500 public housing units, most built in the 1980s and 1990s. An increase of the magnitude envisaged – to be followed by more in future, it was hinted – is no trivial matter.

Suppose, on the one hand, that all the units will be occupied. That would mean one-third of permanent residents would be living in public housing. That is an improbable figure, to say the least, unless the notion of “needy” is widened to a degree difficult to justify on social policy grounds.

On the other hand, applications for public housing amounted, until recently, to just over 12,500. Experience suggests, as a rule of thumb, that only about 30 percent of requests will be successful. This implies that it is likely that only a quarter or fewer of the promised flats will be occupied by families qualified for public housing.

Something is missing here. These figures beg for an explanation.

Now let us look into the suspended auctions. The suspension was explained by the argument that the auctions would increase the price of housing. This argument was backed up with the promise that the plots would be reserved for construction of public housing.

These are just instances of “pop economics”.

I am not aware of any theory or approach, theoretical or

empirical, that supports the idea that restricting or delaying supply is a weapon against rising prices. Furthermore, it is usually accepted that scarcity is what really determines the price of housing (and everything else).

In general, competing bidders make their estimates about the future selling prices of the units they want to build. Then, taking into consideration their expected costs, they bid up to a point at which they believe they can make a decent profit. This is a procedure that ensures that the most efficient suppliers will, as a rule, outbid the less efficient ones.

One assumes that is how a competitive market functions, how the economy grows and, last but not least, how the government maximises the revenue generated by the common property it has the responsibility to administer.

But these assumptions do not apply to Macau, or so it seems. That said, I grant that direct negotiation with developers is likely to lead to lower concession prices and more generous profit margins – without all the hassle and risks associated with trying to outguess and, finally, to outbid, competitors.

Simple facts

Finally, what about the set of measures presented six months ago?

Some seem to have already been forgotten. The most visible outcomes were the instructions given to local credit institutions to tighten loan conditions.

As far as non-residents are concerned, it is doubtful that the measures will have any significant effect. But in a somewhat puzzling move (bearing in mind that one of the main reasons given for the measures was that they would help residents to own their homes) credit was also tightened for locals. This seems to contradict the stated purpose.

The fact that, just a few days ago, those measures were further tightened only underlines that mismatch. Albeit one must note, in total fairness, that the intent to set up special measures to curb speculation was re-asserted at the same time. Such an approach may prove more effective, but judgement must be reserved until the full picture emerges.

The outcome of these policies or intentions, as they appear at present, may be the intertwined expansion of those two odd bedfellows: luxury condos and public housing estates, growing shoulder to shoulder. For those neither rich enough nor poor enough, Zhuhai will always be an option. But that is not a model of urban and social development that seems desirable – or modern, for that matter.

What is always absent from the government’s arguments is a couple of simple facts. First, the government is the only supplier of land in Macau and the only entity that decides how it is used. Second, no big projects can be carried out without its authorisation.

Therefore, to cool the market, one may be forgiven for thinking that two things might suffice: first and foremost, to hold timely auctions of land for new housing developments adapted to the needs of residents, current and expected; and then, as a complementary move, to impose truly enforceable restrictions or penalties on short-term speculative transactions.

Now, that would cool the market.

Bets, anyone?

MAY 2011

54

Transport

he sole ground handler at Macau International Airport doubts there is enough throughput there for a second operator. But with Menzies Macau Airport Services no longer holding an exclusive ground-handling contract, it is up to Macau International Airport Co, or CAM, to decide.

“The issue here is that you do have to have scale,” Craig Smyth, the president and managing director of Menzies Aviation, told Macau Business. “I think it would be uneconomical.”

His company owns the major stake of 29 percent in Menzies Macau, the provider of passenger, ramp, cargo handling and aircraft maintenance services at the airport.

“This is a substantial airport but it is not so substantial to have two, three or four handlers. We think it has scale, when it comes to security and service provision, for one ground handler,” he says.

“If the passenger numbers were to treble, if you went up to something more than five million passengers [per year], then I think it might be time for a second handler.”

At least one company has shown interest in applying for a second groundhandling licence at the airport: Sociedade de Turismo e Diversões de Macau (STDM). It even hired John Galati, a former Menzies Macau executive, to pursue the idea.

Mr Smyth says his company is “ready for competition” and will compete on world-class safety and services standards. “We welcome competition.

If you can beat our service standards, than you deserve to be here,” says the 43-year-old Scot, who joined Menzies Aviation in 1993.

Menzies Aviation operates at 118 airports, but is the sole provider of ground handling in fewer than 10, says Mr Smyth. “When you are exclusive, there is more pressure to perform. Everyone wants to throw stones at you.”

Menzies Aviation is the world’s largest aviation support company that is not owned by an airline. It has a global network spanning almost 30 countries.

Room to lose The sub-concession Menzies Macau has from the airport company includes the provision of aircraft maintenance, cargo and mail handling as well as ground handling, and does not end until 2013.

However, its exclusive right to perform MAY 2011

Photos: Carmo Correia

T

Up in the air There is not enough business at the airport to justify a second ground handler, says Menzies Aviation’s president and managing director

BY EMANUEL GRAÇA

55

“This is a substantial airport but it is not so substantial to have two, three or four handlers,” says Craig Smyth all these services expired last year. This makes room for other investors to get into the business.

The airport concessionaire is responsible for negotiating with new investors and granting them the right to perform these services. Macau Business has not been able to clarify with the company if it has plans to bring in new ground handlers.

Any such plans and any resulting agreements must receive government approval. “Up until this present moment, we have not yet received any proposals from CAM on how they plan to liberalise this

section of the airport services. On the other hand, no new parties have indicated to us their wish to provide the relevant services in our airport,” a spokesperson for the Civil Aviation Authority said.

CAM is already making changes in other airport services. It told Administration of Airports Ltd that its contract will not be renewed when it ends on September 11. The company is responsible for most of the airport’s day-to-day functions, including the aerodrome, logistics, safety equipment and finances.

“The reform in the airport management structure is only a part of a wider

reform,” CAM said in a press release, without giving details.

The company may want to acquire Administration of Airports Ltd. and is already in talks with its two shareholders, China National Aviation Corp and Aeroportos de Portugal, according to Rádio Macau. However, it has yet to make a formal proposal.

Meanwhile, the airport continues to lose business. In the first three months of this year it handled 9,408 aircraft movements, about the same as a year before. But it handled only 922,000 passengers, 14 percent fewer, and 8,520 MAY 2011

56

Transport tonnes of freight, 36 percent less.

Taiwan was the origin or destination of 35 percent of the passengers. Mainland cities were the origin or destination of 27 percent.

Even with business volume dropping, Menzies Macau aims to stay at the airport far beyond 2013. “We feel we have brought a lot to the party and to Macau,” says Mr Smyth.

“Macau has always been important to us and it still is,” he notes. “It has always been one of our best-performing stations in terms of safety and security, and in terms of service.”

Coping strategies

“We think 2009-2010 was probably the low point, both in cargo and passengers”

Safety first M

enzies Macau Airport Services earlier this year won the biggest accolade an airport ground handler can win: International Air Transport Association Safety Audit for Ground Operations (ISAGO) certification. The company is the first Menzies Aviation operation to achieve the certification.

An audit covers all aspects of ground handling, including load control, passenger handling, baggage handling, aircraft ground movement, aircraft handling and loading, cargo and mail handling – all services performed by Menzies at Macau airport.

“We are very pleased that we have successfully met the ISAGO standards and in recognition have been listed on the ISAGO registry, which demonstrates our determination that safety and security is the number one priority for our company,” says Raymond Lo, Menzies Macau’s managing director.

In 2009, Menzies Aviation awarded Menzies Macau an Outstanding Safety Award for having the best safety record among the group’s 100-plus operations around the world.

MAY 2011

To cope with the drop in business volume since 2008, Menzies Macau’s strategy has been to become more efficient.

“Macau, as Hong Kong, benefited from the Taiwanese-Chinese tensions, which meant aircraft had to fly via Hong Kong or Macau. That business started to change four years ago and we have responded to that. The volumes have reduced and that affected both cargo as well as passenger volumes,” says Mr Smyth.

“We had to respond by looking at our costs, by being more efficient. We have taken out about 20 percent of the equipment but we have never had to make anybody redundant.”

He says Menzies Macau had revenue of about US$40 million (MOP320 million) last year. At the 2007 peak of its business, the figure reached US$50 million.

“What we have seen in the past five years is a growth in the low-cost business,” Mr Smyth explains. But not so many other carriers are making Macau a new destination, he says.

He acknowledges that the failure last year of low-cost carrier Viva Macau harmed Menzies Macau, one of its creditors. “What is more annoying is that they did some good work. Their load factors were improving,” he says. “Basically, we lost an airline. It is a pity.”

But Mr Smyth is optimistic about the future. “We think 2009-2010 was probably the low point, both in cargo and passengers, because of the crossstrait direct flights and the economy.”

One thing that may hurt the recovery is greater competition in the Pearl River Delta aviation business. “The government has got to sponsor the Macau airport and all of the providers to build this and make this truly a world-class infrastructure,” says Mr Smyth.

57 KEITH MORRISON AUTHOR AND EDUCATIONIST - kmorrison.iium@gmail.com

Macau’s signature dish COULD THE GUANGDONG-MACAU AGREEMENT BECOME A CATALYST OR IS IT MERE PASSING FANCY?

I

was recently treated to what one up-market hotel termed its “signature dish”: a most magnificent array of the sweetest, most tempting, most beautifully presented desserts.

Forget the waistline, forget the cholesterol, I thought, live for the moment, eat, laugh, grow fat and, just for a few seconds, taste the rapture of oblivion of the real world outside.

I succumbed. I drank what the poet Coleridge called the “milk of paradise”.

It was totally delicious. A fleeting moment of unimaginable ecstasy and sheer indulgence in what had been an otherwise rather dreary day. As the poet Shelley wrote: “Rarely, rarely, comest thou, Spirit of Delight”. My day was complete.

What a neat metaphor for Macau’s development – or rather, what a warning.

An almost intolerably sweet moment that passes in the twinkling of an eye, delightful at the time but superficial and insubstantial, with no lasting implications apart from a possible health risk, and coming from one of Macau’s trademark industries: eating, surrendering to appetites and the pleasures of the flesh.

To matters more mundane: With the signing of the GuangdongMacau agreement, an avenue has been opened for Macau’s development, with Beijing’s backing and the will, locally, to succeed. Is Macau up to the challenge?

The promise of economic diversification, infrastructure development, cross-border movement and currency easing has already started to exercise the minds of Macau’s government and business community. The race is on to grab land for educational, medical, cultural, tourist and a host of other purposes on Hengqin Island. The profile of the meetings and conventions industry is set to rise, targeting international-level brands and industries.

Ritual laments

There is a lot of noise about cooperation, pan-regional development, Macau as a trading platform for what seems to be the whole world, with implications for social security, schooling and health services. But there is a quite long way to go before Macau is truly ready to meet the challenge of the Guangdong-Macau agreement.

Calls for a five-year development plan have been heard, along with ritual laments about the shortage of entrepreneurial ability in small and medium enterprises.

We have chronic skill shortages, accusations of gross

money laundering in Macau, hesitant government policymaking and procedural delays in getting the required approvals for development works. We have a labour law that was doomed to succeed (only in the minds of its proponents) at the point of inception and which has fulfilled the predictions of unworkability, a law that seems to undermine effective operations by Macau’s large industries and construction businesses.

We have a policy on imported labour that seems to cut the ground from under those enterprises that need specialist labour. We have disproportionate influence exerted by a few self-protecting labour organisations.

As the United Sates ConsulGeneral for Hong Kong and Macau is on record as saying, local businesses are frustrated by labour laws that impede their ability to hire the local and particularly imported labour necessary to meet their requirements. There is a lack of transparency and comprehensibility in the rules governing non-local hiring.

Illumination required

If the Guangdong-Macau agreement is to be more than a signature dish – a fugitive moment of delight and superficial attraction, but with no lasting impact or benefit – then there must be significant human capital investment and provision.

Macau needs sustained investment in training, education and lifelong learning at all levels and fields, the incubation of creativity, research and development laboratories for business and enterprise, and business parks that will attract and serve business development.

Macau must cultivate highlevel expertise in business and management, and solve persistent problems with labour and related legislation. There must be procedural efficiency in government, policy alignment and development, job security and career development.

This requires the government to have a strategic vision of the future and proper plans to turn the vision into reality. It must be a vision that illuminates rather than blinds.

The Guangdong-Macau agreement can be a catalyst for economic, social and cultural change.

However, without the necessary input and investment in people, infrastructure – both tangible and intangible – policy direction and procedural efficiencies, then it risks becoming a moment of sweetness which passes without leaving a trace, shadow or benefit.

MAY 2011

mbreport PEOPLE IN NEED 58

SUFFERING IN THE SHADOWS WHILE THE GLITZY CASINO LIGHTS ARE THE SIGNATURE OF THE ECONOMIC BOOM, THOUSANDS OF THE CITY’S PEOPLE ARE SUFFERING

BY LUCIANA LEITÃO AND LUÍS ALMOSTER (PHOTOGRAPHY)

MAY 2011

59

MAY 2011

mbreport PEOPLE IN NEED 60 s Cheng (not her real name) has been surviving with the help of the Catholic charity Caritas for the past 20 years. She struggles to put food on the table and to educate her two grandchildren. Hers is one of the usually unheard voices of the poor in Macau society.

Her son is in jail and her daughterin-law abandoned the family, so she has no choice but to bring up her two grandchildren with her husband. It is certainly a different life from the one she was looking for when she arrived in Macau from the mainland four decades ago.

Her husband was a building site guard, working on a casual basis and receiving less than MOP2,000 (US$250) a month, before he became severely ill. After hearing about the rice distribution programme by Caritas Macau, they applied for help and since then have received a monthly amount of white rice.

Also, for the past 10 years, the family has received money from the Social Welfare Bureau. Caritas sponsors the education of their granddaughter.

Ms Cheng and her husband belong to a part of Macau’s society that is usually not seen. While the city’s gross domestic product per head has soared to record levels, putting it in the world’s top ten, and the economic boom has persisted, the have-nots have been left further and further behind.

Although several analysts have warned about a widening gap between rich and poor, no official data is available to back such assertions. Since 2008 there has been no update by the Statistics and Census Service of the Gini coefficient, which measures income equality. Political analyst Larry So Man Yum says the government has not updated the indicator, because they want to avoid showing that there is an increasingly large gap between rich and poor.

Money no object In 2008, the Gini coefficient for Macau was estimated to be at 0.38 (on a scale from 0, indicating perfect equality of income distribution, to 1, signifying MAY 2011

Government data indicates that the retail price of some kinds of food is double or triple the wholesale price. For the have-nots, the accounting is more down-to-earth. For instance, a kilo of hairy gourd costs almost twice what it cost a year ago, while chicken is MOP2 more expensive

61 perfect inequality). According to the UN interpretation of the Gini coefficient, this meant Macau had reasonable equality of income distribution.

Since then, things seem to have gone south. For instance, the number of workers earning less than MOP2,000 per month increased by 8 percent last year to 5,400, according to data from the Labour Affairs Bureau. Overall, roughly one in six workers earned less than MOP5,000 per month.

This, coupled with rising inflation, has prompted the government to announce several increases in welfare benefits over the past two months. New forms of assistance for low-income families have also been introduced.

The monthly electricity subsidy has also increased. The government now pays up to MOP180 of every household’s electricity bill, instead of MOP150. Education subsidies will also rise, including tuition subsidies, university scholarships and textbook allowances, among other things.

The government has raised the pension for the elderly and the disabled to MOP2,000 per month from MOP1,700, and the social relief pension to MOP1,310 from MOP1,115.

Last month chief executive Fernando Chui Sai On also announced that the government would give one more cash handout this year. Each permanent resident will get an extra MOP3,000 in the second half of the year, while non-permanent residents will get MOP1,800. This is meant to help them cope with inflation. The extra cash handout is expected to cost the government MOP1.7 billion.

It will be the second cash handout this year. The government has already given MOP4,000 to each permanent resident and MOP2,400 to each nonpermanent resident.

The government admits that giving out money will only increase prices. Mr Chui says it is estimated that the new cash handout will add less than 0.5 of a percentage point to the inflation rate.

The government has raised the hourly salary of employees of companies to which it has outsourced cleaning and property management services to

There is no figure for how many people in economic need are out there. Neither the government nor any charity has counted them. “Some never say anything, nor ask for anything, but instead remain hidden,” admits the head of the department of family and community services at the Social Welfare Bureau, Peter Au Chi Keung

MAY 2011

mbreport PEOPLE IN NEED 62 at least MOP23. In 2007, the government started demanding that all such companies pay employees working at government facilities at least MOP21 per hour. Mr Chui has asked companies that can afford it to follow this example and increase salaries.

Cultural evolution Ms Cheng and her husband came to Macau to escape the Cultural Revolution. She also wanted to be closer to her father, who had already fled to Hong Kong.

At the time, it was hard to adjust to the new city. “I was in a one-bedroom apartment with walls made of wood, [in a building] where 72 families lived together. We all came from different parts of the mainland and paid MOP300 per month,” Ms Cheng recalls.

After a while, she could not handle it any more and found another apartment for MOP750 per month. “It was too much for me, I couldn’t afford it.”

Eventually, someone suggested that she buy an old house and slowly pay off the mortgage. That was what Ms Cheng did, more than 20 years ago. She has already managed to pay back the bank loan, but she still owes MOP60,000 she borrowed from friends.

With two grandchildren and an ailing husband, who now lives in the mainland, Ms Cheng still faces hard times. “With inflation, it’s hard to buy food, so I go to the mainland three times a week to buy things,” she says.

Even though life is hard for Ms Cheng in her old, tiny apartment, depending on charity, she will not consider returning to the mainland. She says she has more here than the people still living in her hometown. “People there are even poorer and ask me for money, which I can’t give. I stopped going there.”

Hidden from view There are many others like Ms Cheng, getting by only with the help of the government or charities. However, there is no figure for how many people in economic need are out there. Neither the government nor any charity has counted them.

MAY 2011

The number of workers earning less than MOP2,000 per month increased by 8 percent last year to 5,400, according to data from the Labour Affairs Bureau. Overall, roughly one in six workers earned less than MOP5,000 per month According to the Social Welfare Institute, around 6,200 families were given some kind of subsidy last year.

But this figure doesn’t include all those going through hard times.

“Some never say anything, nor ask for anything, but instead remain hidden,” admits the head of the department of family and community services at the Social Welfare Bureau, Peter Au Chi Keung.

Caritas secretary-general, Paul Pun Chi Meng, says that last year the charity helped around 9,000 people. Usually, people complain of having difficulty paying their rent, medical expenses and education costs – and about the associated emotional stress.

Last year’s figure was similar to 2009’s. “The number of people in need is not going up, because the government is also helping. In fact, there have

63

been less people coming, because the government is giving bigger support,�

Mr Pun says. However, he says this may change, in view of inflation and the rising cost of housing.

The Statistics and Census Service says the Composite Consumer Price Index was 5.46 percent higher in March than a year before.

Food prices are among those rising fastest. The government says it is

trying to fight back by increasing the sources of food to help stabilise prices.

It is sponsoring agreements between food importers and new suppliers in the mainland and further afield.

The government says that two months ago importers signed cooperation agreements with new food suppliers in the province of Hefei. However, officials cannot estimate how much effect this will have on prices.

Government data indicates that the retail price of some kinds of food is double or triple the wholesale price. For the have-nots, the accounting is more down-to-earth. For instance, a kilo of hairy gourd costs almost twice what it cost a year ago, while chicken is MOP2 more expensive, according to the Statistics and Census Bureau.

This is bad news indeed for those in need.

MAY 2011

mbreport PEOPLE IN NEED 64

Wider, not wiser There is a growing gap between the rich and the poor, and it shows no signs of getting any narrower, analysts say

BY LUCIANA LEITÃO

ooking at Macau’s payrolls is like a downward plunge on a roller coaster. At the top, we have 1,100 lucky ones with monthly earnings of MOP80,000 (US$10,000) or more.

But as the ride gains speed towards the bottom, there is almost 27 times that number taking home less than MOP3,500 per month, according to the latest official figures.

The median monthly income in the fourth quarter of last year was MOP9,000. However, estimates indicate that around half of the city’s 318,000plus workers earned less than that.

How to better redistribute the city’s wealth is a recurring question. Econo-

L

mist Albano Martins says it is up to the government to find solutions. Mr Martins says the chief executive and his team must make an effort to redistribute wealth, especially among the needy, and that the cash handout scheme as it exists today will not do the trick.

“That might happen if the amount was different according to each case.

Some should receive MOP10,000 while others only MOP1,000,” Mr Martins says. Other options could be taxation or lower interest rates on mortgages for first homes, he adds.

The minimum subsistence index officially sets the income needed for a minimum standard of living. Those

earning less may apply for regular government support.

In April the government increased the index by around 14 percent. For a three-member family, it was raised to MOP7,340 from MOP6,460. The government estimates that with the recent increase 780 more households are now eligible for support, raising the total to almost 6,000.

But some analysts say the increase may not be enough, especially in view of the growth of the economy. Last year gross domestic product rose 26.2 percent in real terms to MOP217.32 billion at current prices. GDP per capita in real terms jumped 25.8 percent to MOP398,071 at current prices.

Mr Martins says that raising the minimum subsistence index will not reduce inequality. “This does not diminish the gulf. It just gives out a prettier image of those poor people,” he says.

“Inflation is one of the main things responsible for the income disequilibrium,” he notes. “If the rice price increases, it increases more for those who earn less, than for those who earn more.” This is because the poor spend a greater proportion of their income on food than the rich.

Inflation burden

How to better redistribute the city’s wealth is a recurring question.

Economist Albano Martins says the chief executive and his team must make an effort to redistribute wealth, especially among the needy MAY 2011

Last year, almost 6,200 families were regular beneficiaries of the Social Welfare Bureau’s aid schemes. Spending on these schemes amounted to MOP263 million.

To help low-income families cope with inflation, the bureau twice distributed a special subsidy to those families, and a special living allowance to three categories of particularly vulnerable families on low incomes. In all, MOP71.16 million was spent on these special measures.

Social work professor and political analyst Larry So Man Yum says it is hard to stop the income gap between the rich and the poor from widening.

But some measures could slow the process.

Mr So suggests policies to help the elderly find jobs, to make them less dependent on the welfare system.

The Social Welfare Bureau already has two programmes meant to help welfare beneficiaries re-enter the employment market. “Our purpose is that people manage to be self-dependent,” says the head of the department of family and

65

A shoulder to cry on

Photo: António Mil-Homens

A

Paul Pun Chi Meng

community services at the Social Welfare Bureau, Peter Au Chi Keung.

One of the programmes gives welfare beneficiaries internships. This is meant to help them rebuild their self-confidence, regain their working abilities and eventually to become employed.

The other programme allows part of the income earned by those willing

sking for help when one is in economic distress is never easy. In a society like Chinese society, where not losing face is important, it can be even harder.

Some people prefer to ask Caritas for help, instead of the government, because it is easier and faster. Others get help from both the Social Welfare Bureau and charities, yet still have economic difficulties.

Flora Cheong, a social worker at Caritas, says most people who ask for help from the Catholic charity are having difficulty in paying their rent or medical expenses – and in managing their emotions.

Ms Cheong, who has been working with Caritas for 19 years, says problems in families are different now, tending to be more emotional than financial. “The financial support from the government is much stronger than in the past,” she explains.

Although Caritas is not usually a money lender, Ms Cheong says it may lend small sums. “It all depends on the urgency of those families. Sometimes only one visit from us is enough.”

Caritas Macau’s secretary-general, Paul Pun Chi Meng, says it is probably the only nongovernment agency helping out families and individuals with financial problems in this way.

“The agency will lend money, not give money,” he stresses. “I wish there were more associations helping out with this.”

to work to be disregarded in assessing their eligibility for welfare benefits, at least for a while. This means they may continue to receive benefits while working.

By the end of last year, over 1,000 beneficiaries had participated in these programmes, of which over one-third found jobs, according to the Social Welfare Bureau.

Mr So says the government should not only look at residents while trying to stop the income gap from widening.

New arrivals also need to be cared for so that that they do not end up becoming a new underclass, he says.

Few of Macau’s almost 80,000 imported workers can make use of the city’s welfare system, and if they need help they must seek it from charities.

Congratulations to Macau Business on its 7th Anniversary

MAY 2011

mbreport PEOPLE IN NEED 66

Bags of concern With rice prices going up, the Macau-Thailand Chamber of Commerce decides to show that businessmen can also lend a hand

BY EMANUEL GRAÇA

or most Chinese, having a bowl of rice on the table at each meal is a basic need. But with a kilo of Thai rice now 6.4 percent more expensive than a year ago, keeping up is becoming increasingly hard.

Being aware of this, the Macau-Thailand Chamber of Commerce has decided to launch a programme to distribute rice at cost. The goal is simple: to show that businessmen can also play their part in helping people in economic distress.

“We want to convey the message that there is a need to fight inflation and help those in need,” the chamber’s president, Lino Ho Weng Cheong, told Macau Business. “We hope this programme can work as an example for others.”

Using its contacts with rice producers and exporters in Thailand, the chamber entered into an agreement to import Thai type-A rice for sale at cost price direct to members of the Federation of Trade Unions, the General Union of Neighbourhood Associations and the Women’s General Association.

The imported rice, in 5 kg and 10 kg bags, is being sold for approximately 20 percent less than the market price, as no wholesalers or retailers are involved, Mr Ho says.

The first shipment arrived in the middle of last month. It is estimated that about 13,000 members will benefit. Each eligible person will be limited to 20 kg.

The Macau-Thailand Chamber of Commerce was established in March last year. The organisation aims to act as a vehicle for economic cooperation between Thailand, Macau and the mainland.

All-inclusive Mr Ho is a well-known local businessman, with ventures in real estate, trading, advertising, food and entertainment.

He says the chamber decided to go ahead with the rice distribution programme after seeing media reports on inflation

Lino Ho Weng Cheong

in Macau. He says he feared that rising prices would particularly harm those on lower incomes. The monetary authority has warned that inflation will accelerate this year, mainly because of increases in food prices.

The rice programme is not meant especially for people in need, says Mr Ho. “It is an anti-inflation measure for all.”

He acknowledges that demand has been “higher than initially expected,” with many people queuing up at the distribution points. He says this is a sign that the number of people in difficulty because of inflation may be higher than first thought.

At the end of May, when the programme finishes, the chamber will look again at inflation in Macau. But Mr Ho says the chamber cannot go on distributing rice for long, for fear of undercutting importers too much.

He says that the amount of rice distributed during the course of the programme is not expected to exceed 6 percent of the amount that would normally be imported.

MAY 2011

Photo: Carmo Correia

F

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MAY 2011

Gaming | Billions Race

68

On a winning streak For the third month in a row, casinos set a new gross gaming revenue record

acau’s gaming tables are hot, at least for the house. In April, for the third consecutive month, local casinos have set a new record for monthly gross gaming revenue.

With a gross revenue of MOP20.5 billion (US$2.56 billion), April’s take

by Macau’s casinos eclipsed the record set in March this year, according to data from the Gaming Inspection and Coordination Bureau.

Helping to boost the result was the fact that April included several public holidays and five weekends.

Information compiled by Wells Fargo securities gaming analyst Carlo Santarelli indicated that Melco Crown Entertainment became the second biggest operator by gross gaming revenue in April, with Sands China dropping from second to fourth.

Stanley Ho Hung Sun’s Sociedade de Jogos de Macau (SJM) continues to lead the ranking, with an April market share

M

of 29 percent, followed by Melco Crown, with 18 percent. Wynn Macau is now third, with a market share of almost 17 percent. Sands China came close, with a market share of also almost 17 percent.

Galaxy Entertainment Group dropped to sixth, with a market share of about 8 percent, below MGM Macau, with about 11 percent.

Mr Santarelli expects local casinos to post a new gross gaming revenue record this month. “Given the holiday and our sense of continued junket liquidity health, we would expect May to again break the monthly gross gaming revenue record.”

The total casino gross gaming revenue for the first four months of 2011 is up 43.3 percent to MOP79.0 billion.

Prior to the April results announcement, UBS stock analyst Robin Farley had already updated his estimates, saying Macau’s gaming revenue is set to grow by 33 percent this year. Mr Farley’s previous

Gaming Results: Gross Revenue

estimate was for a growth of 28 percent.

Meanwhile, the Gaming Inspection and Coordination Bureau has released detailed data on the gaming results for the first quarter of 2011.

VIP baccarat generated gross revenue of MOP42.57 billion in that period, accounting for 73 percent of the Macau casino sector’s overall gross gaming revenue. Revenue from VIP baccarat has increased by 48 percent year-on-year.

This means VIP baccarat grew faster than the overall market. Gross gaming revenue increased by 43 percent year-onyear in the first three months of 2011.

Mass-market baccarat was the second most popular casino game, generating revenue of MOP10.56 billion, 32 percent more than the year before.

Slot machines took the third step on the podium, with MOP2.72 billion in revenue, a jump of 40 percent. Slots accounted for 4.65 percent of overall casino gross gaming revenue.

In Million MOP (1HKD:1.03MOP)

21.000

19,863

20,000

18,869

19,000

17,075

18,000 16,000 14,000

14,186

16,310 13,642

18,883

18,571

Dec 2010

Jan 2011

20,087

20,507

Mar 2011

Apr 2011

17,354 15,773

15,302

Aug 2010

Sep 2010

12,000 10,000 8,000 6,000 4,000 2,000 0

Apr 2010

May 2010

MAY 2011

Jun 2010

Jul 2010

Oct 2010

Nov 2010

Feb 2011

69

Gaming Results: Market Share Per Operator 2010

2011

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr*

SJM

34%

32%

30%

32%

29%

30%

32%

31%

30%

31%

32%

34%

29%

Sands China

21%

19%

22%

19%

20%

20%

19%

15%

17%

18%

18%

16%

17%

Galaxy

11%

11%

10%

12%

13%

12%

10%

10%

10%

11%

9%

12%

8%

Wynn

14%

16%

17%

15%

14%

12%

14%

17%

17%

14%

15%

14%

17%

MPEL

13%

14%

13%

15%

17%

17%

14%

15%

15%

15%

15%

14%

18%

MGM

7%

7%

8%

7%

8%

10%

11%

11%

12%

11%

11%

11%

11%

TOTAL

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

40

SJM

Sands China

Galaxy

Wynn

MPEL

MGM

30

20

10

0

Apr 2010

May 2010

Jun 2010

Jul 2010

Aug 2010

Sep 2010

Oct 2010

Nov 2010

Dec 2010

Jan 2011

Feb 2011

Mar 2011

Apr 2011* * estimated

(Figures are rounded to the nearest unit, therefore they may not add exactly to the rounded total)

MAY 2011

70

Gaming | Billions Race

Gross revenue from different gaming activities 1Q 2011

4Q 2010

3Q 2010

58,835 58,521 42,570 10,558 2,723 1,067 663 303 188 65 67 46 45 46 18 30 25 8 2 n/a 0.3 n/a 116 76 89 33 1 0.0006

55,398 55,106 40,472 9,698 2,407 947 627 265 222 57 64 43 38 38 21 24 88 7 1 n/a 0.4 n/a 98 72 92 29 2 0.0005

47,723 47,384 34,047 8,884 2,236 884 528 255 154 52 52 52 38 33 20 23 34 8 1 n/a 0.4 n/a 107 85 134 11 1 0.0006

2Q 2010

1Q 2010

4Q 2009

3Q 2009

2Q 2009

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

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

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

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%

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%

- 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%

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

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 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

6.2% 6.2% 5.2% 8.9% 13.1% 12.7% 5.7% 14.3% -15.3% 14.0% 4.7% 7.0% 18.4% 21.1% -14.3% 25.0% -71.6% 14.3% 100.0% n/a -0.3 n/a 18.4% 5.6% -3.3% 13.8% -50.0% 20.0%

Source: Gaming Inspection and Coordination Bureau MAY 2011

16.1% 16.3% 18.9% 9.2% 7.6% 7.1% 18.8% 3.9% 44.2% 9.6% 23.1% -17.3% 0.0% 15.2% 5.0% 4.3% 158.8% -12.5% 0.0% n/a 0.0 n/a - 8.4% -15.3% - 31.3% 163.6% 100.0% -16.7%

5.5% 5.5% 5.2% 6.9% 10.3% 3.3% -2.4% -4.1% -4.3% -5.5% 0.0% 20.9% -7.3% 10.0% -16.7% 15.0% 54.5% -11.1% 400.0% n/a 0.0% n/a -2.7% -6.6% 31.4% -8.3% 0.0% - 40.0%

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%

71

A sure thing, surely Promising numbers and refinancing deals swell confidence in gaming stocks even as uncertainty looms

BY RAY CHAN

n the face of the end of the second round of quantitative easing by United States authorities, Macau’s gaming sector seems set to pass unaffected by global economic uncertainty. Investors apparently see gaming stocks as a safe bet, well supported by their undemanding valuations and the operating performance of gaming companies.

Global economic factors aside, major analysts remain confident about the outlook for the sector in view of record high gaming revenue and better transportation infrastructure.

First, Macau’s gross gaming revenue rose 43 per-

I

cent in the first quarter, a much faster rate of growth than the 20 percent to 30 percent estimated for the full year. Second, the opening of Galaxy Macau this month and the full operation of the Guangzhou-Zhuhai railway later this year, are expected to drive up the number of mass-market gamblers from the mainland.

Gaming companies are taking advantage of the rosy prospects to refinance themselves.

Last month Melco Crown Entertainment (NASDAQ:MPEL) announced that it intends to conduct an international offering of renminbi-denomi-

nated bonds worth the equivalent of approximately US$350 million (MOP2.8 billion).

The company said the net proceeds would be used to

fund expansion, which could include acquisitions, or to repay other debt, among other things. Melco Crown also announced that it is arranging

MAY 2011

72

Gaming | Stock Watch

for credit facilities of about US$1.2 billion, mainly to refinance its City of Dreams project facility.

Similarly, Sands China is seeking a US$3 billion five-year refinancing deal.

The Sands deal will see it refinance and increase its maturing US$2.5 billion project financing, secured in May 2006, for the Venetian Macao, Reuters reported. The borrower was in talks with banks about the details of the new facility, expected to hit the market for general syndication by late May, banking sources told the news agency.

Wynn looming Wynn Resorts announced that its subsidiary, Wynn Macau (1128.HK), recorded a US$189.7 million net profit for the first three months of this year, 66 percent more than a year before, according to international reporting standards.

Share price performance (local currency)

Name

52-week high 52-week low

17.3

SJM Holdings Ltd.

Change (%)

4/25/2011

Month-to-date Year-to-date

4.6

16.8

23.6

36.5

Galaxy Entertainment Group

14.3

3.2

14.3

26.0

62.0

Wynn Macau Ltd.

28.4

10.1

27.6

27.2

58.6

Sands China Ltd.

22.4

9.9

22.3

28.2

30.3

Melco Crown Entertainment

10.2

3.4

10.1

33.3

59.3

7.0

2.8

6.6

24.9

49.1

24,988.6

18,971.5

24,007.4

2.0

4.2

Las Vegas Sands Corp.

55.5

18.1

46.0

8.9

0.1

MGM Resorts International

16.9

8.9

13.3

1.4

-10.2

149.8

65.8

147.2

15.7

41.7

2.4

0.9

2.2

9.3

2.3

Melco International Develop.

Hang Seng Index

Wynn Resorts Ltd. Genting Singapore PLC Penn National Gaming Inc. Dow Jones Indus. Avg. S&P 500 Index

40.5

22.3

40.2

8.5

14.4

12,506.2

9,614.3

12,479.9

1.3

7.8

1,344.1

1,010.9

1,335.3

0.7

6.2

Turning the tables L

as Vegas Sands Corp. (NYSE:LVS) and subsidiary Sands China (1928.HK) have filed a counter-claim accusing the former chief executive of Sands China, Steve Jacobs, of extortion. The counterclaim is included in the case in which Mr Jacobs is suing his former employer for wrongful dismissal.

The counter-claim says that after Mr Jacobs was fired from Sands China, he threatened to go public with several allegedly false allegations unless “he was paid money to which he was not entitled”. Among these allegations were claims that the company chairman, Sheldon Adelson, bribed or attempted to bribe Macau’s chief executive and that he instructed subordinates to collect damaging information about public officials for Sands China to use for improper leverage.

The counter-claim says Mr Jacobs “engaged in intentional acts intended and designed to disrupt the prospective business relationship by wrongfully accusing Las Vegas Sands Corp. and its officers of engaging in criminal and improper activity”.

It also accuses Mr Jacobs of violating a non-competition MAY 2011

agreement between Las Vegas Sands and Sands China that prohibited Sands China from engaging in gaming business outside Greater China. Mr Jacobs allegedly did so when he announced that Sands China would be pursuing casino business in Japan.

The disclosure by Mr Jacobs that Sands China was interested in Japan injured “Las Vegas Sands’ prospective business relationship with necessary third parties in development of the Japanese market”, the counter-claim says.

Sands also alleges that Mr Jacobs commissioned an investigative report by consulting firm International Risk Ltd about Macau public officials, putting at risk the company’s relationship with the governments in Macau and Beijing. The counter-claim says Mr Jacobs did not seek authorisation before commissioning the report.

Finally, it alleges that Mr Jacobs refused to immediately end junket contracts involving alleged organised crime figure Cheung Chi Tai, identified as a triad member and junket operator by a Reuters report last year.

73 Macau gaming operators’ share price performance (HK$)

500 450 400 350 300 250 200 150 100 50 0 Jan 2010

Feb 2010

Mar 2010

Apr 2010

May 2010

SJM Holdings Ltd. Sands China Ltd.

Jun 2010

Jul 2010

Aug 2010

Sep 2010

Oct 2010

Nov 2010

Dec 2010

Galaxy Entertainment Group Ltd. Melco International Development

Jan 2011

Feb 2011

Mar 2011

Apr 2011

Mar 2011

Apr 2011

Wynn Macau Ltd. Hang Seng Index

US gaming operators’ share price performance (US$)

400 350 300 250 200 150 100

As of April 26, 2011

50 0 Jan 2010

Feb 2010

Mar 2010

Apr 2010

Las Vegas Sands Corp.

Penn National Gaming Inc.

May 2010

Jun 2010

Jul 2010

Aug 2010

Sep 2010

Oct 2010

Wynn Resorts Ltd. Melco Crown Entertainment-ADR

Nov 2010

Dec 2010

Jan 2011

Feb 2011

MGM Resorts International S&P 500 Index

Wheel turns at MGM M

GM Macau’s listing may go ahead as soon as this month, according to media reports. The company is hoping to raise around US$1 billion (MOP8 billion). MGM Macau’s initial public offering will be done through a vehicle registered in the Cayman Islands, MGM China Holdings Ltd. The listing will mean big changes in the shareholding structure of the company, according to a deal reached last month between MGM Resorts International and businesswoman Pansy Ho Chiu King. After the IPO, MGM Resorts will own 51 percent of the company and have management control. Ms Ho will retain 29 percent, while the shareholding public will own 20 percent. At present, MGM Resorts and Ms Ho each own 50 percent of MGM Macau.

The IPO seems to be back on track after the settlement in March of the family tussle for control of Stanley Ho Hung Sun’s gaming and business empire. One of those involved in the dispute was Ms Ho, who was sued by Mr Ho, her father. The suit was eventually dropped. Several analysts say the family dispute could have harmed MGM Macau’s IPO if it had continued.

In another development, MGM Resorts has announced that Kirk Kerkorian will leave the company’s board and become an adviser. Mr Kerkorian founded MGM Resorts and is still its major shareholder, with a 27 percent stake.

Wynn Macau’s net revenue was US$865.7 million, up from US$590.6 million. Adjusted property earnings before interest, tax, depreciation and amortisation were US$272.8 million, a 50.2 percent increase.

On a conference call to announce the results, chairman Steve Wynn said the gaming operator already has approval from the Macau government for its Cotai casino. He said permission to begin construction was expected “any day now”.

Morgan Stanley warns that, in the absence of a Cotai project until 2015, Wynn Macau may not have a catalyst for persistently big improvements in its results in the medium term.

In a note to investors by Praveen Choudhary and Calvin Ho, the investment bank said the gaming operator “could see market share loss” with the opening of Galaxy Macau and Sands China’s development on parcels five and six, both in Cotai.

Wynn Macau’s share price has surged by over 130 percent in one year. Notably, the market expects Wynn Macau to take the lead in its earnings per share growth. Investors are well aware of the demanding valuation of Wynn Macau but also appear in agreement that the top-notch management and the company’s operations will continue to attract longterm business travellers and other customers to its property. According to Morgan Stanley, Wynn Macau is adding two more junket operators this quarter.

With the dispute over control of its major shareholder, STDM, behind it, SJM Holdings (880.HK) saw its share price rebound significantly from its year-to-date low of HK$10.80 to HK$16.96 at the market close on April 25, a bounce of 57 percent. Investors generally like the company’s mixture of business from VIP high-rollers and from its dominance of the mass market. On the other hand, investors are still waiting for good news from SJM about its proposed Cotai development.

SJM stocks trade at about 16.7 times the consensus estimate of its earnings per share this year. In contrast, the equivalent figure for Sands China (1928.HK) is 27.0 and for Wynn Macau it is 24.2.

MAY 2011

74

Gaming

75

Galaxy Entertainment Group opens the doors to its newest project, Galaxy Macau

Photo: Carmo Correia

Star attraction

76

Gaming

his month Macau welcomes a big, new player to town: Galaxy Macau.

The mega resort – the third of its kind in Cotai after the Venetian Macao and City of Dreams – is aiming to boost its parent company’s bottom line, while opening new markets for the gaming operator.

Galaxy Entertainment Group, who owns and manages the property, expects the resort to be the only new integrated destination resort to open in Macau this year. Analysts agree, as there are increasing doubts as to whether Sands China will be able to launch the first phase of its parcels five and six in Cotai by the end of this year, as previously announced by chairman Sheldon Adelson.

“We are confident that it will become a key draw for all visitors,” Galaxy Entertainment Group vice-chairman, Francis Lui told Macau Business.

“And while we would prefer not to speculate on future results, we believe

T

MAY 2011

our successful track record at StarWorld indicates we will also be able to make a success out of Galaxy Macau.”

Mr Lui doesn’t disclose targets on the expected market share growth to be driven by the new property. “We are less concerned about market share than we are attracting a new and different kind of customer to Macau,” he says.

“We believe an increasing number of clientele will come to Galaxy Macau from the mainland, Hong Kong and Taiwan as well as Japan, Korea, and Southeast Asia,” says Francis Lui

Overall, analysts are estimating Galaxy’s new property will further propel Macau’s casino revenue upward to record highs. They do not expect it will impact negatively the other gaming operators, other than in the short-term.

“We believe an increasing number of clientele will come to Galaxy Macau from the mainland, Hong Kong and Taiwan as well as Japan, Korea, and Southeast Asia, and that the mix will include traditional gaming enthusiasts as well as a newer group of weekend holiday-goers who are interested in exploring the true resort, dining, entertainment and leisure characteristics of the property,” says Mr Lui. “Because of what Galaxy Macau is adding to the market, we believe the pie will only grow larger.”

Ted Chan Ying Tat, the chief operating officer for gaming at Melco Crown Entertainment, told reporters he doesn’t expect Galaxy to hit on the bottom line at the City of Dreams.

According to Mr Chan, it is quite the

77

MAY 2011

78

Gaming

opposite: the new property will help to add more traffic to Cotai, benefiting Melco Crown.

Connected territory Galaxy Macau is the first stage of a bigger undertaking by Galaxy Entertainment Group in Cotai. The complex only occupies one-third of the plot it sits on, which is to say that the company owns the biggest contiguous land bank licensed for gaming in the territory.

“We are very excited about the prospects for Galaxy Macau and are committed to its future, which includes developing future phases,” Mr Lui says. “Financial and other details MAY 2011

will be revealed in due course.”

According to him, the company will not aggressively develop the area.

“We will only expand our future plans in alignment with the growth of the market, the expansion goals of the Macau SAR government and the demands of our guests.”

“For now, we are solely focused on the successful opening and operations of phase one,” he says.

The opening of Galaxy Macau also marks Galaxy Entertainment Group’s debut in Cotai as a property owner. Grand Waldo’s casino, the first to open in Cotai area, in 2006, works under the company’s gaming license

but it is owned by a third party.

Currently, the Galaxy Entertainment Group owns and operates StarWorld on the peninsula and operates four third-party owned casinos in Macau.

For the first three months of the year, the group’s earnings before interest, taxes, depreciation and amortisation (EBITDA) reached HK$712 million (US$91.5 million), up 71 percent year-on-year and 14 percent quarter-on-quarter. According to Galaxy Entertainment Group, which only announced certain selected unaudited key performance indicators, excluding net profit, this was its tenth consecutive

79

Defying odds F

or octogenarian Lui Che Woo, the founder and chairman of Galaxy Entertainment Group, the opening of Galaxy Macau is another landmark in a colourful business life.

The entrepreneur arrived in Hong Kong in 1934 as a four-year-old refugee from the war-ravaged mainland, and has created an international conglomerate that spans from construction and property to hospitality and gaming.

Today, he presides over an empire that includes hotels in the United States, office towers in the mainland, quarries in Hong Kong and casinos in Macau. Although he is still active in the boardroom, the operational management of the several businesses is now up to his three sons and two daughters.

Don’t expect to see a family brawl here like the one that erupted a couple of months ago in another famous local clan, namely Stanley Ho Hung Sun’s family.

“We are very grateful that we have a close knit family and that we do not have to worry about the next time we have to see each other in court,” Francis Lui, the eldest son who oversees the casino business in Macau, told Bloomberg two months ago.

quarter of EBITDA growth.

From the beginning, Galaxy Macau has aimed for the emerging middle class in the mainland that is yet to visit Macau, while keeping an eye on the VIP clientele, which accounts for roughly three quarters of Macau’s casino gross gaming revenue.

“With our Jinmen Club, VIP rooms and luxurious setting, we expect that Galaxy Macau will attract a good share of VIP customers,” says Mr Lui. “However, given the property’s scale and incredible offerings, both in the gaming and non-gaming areas, we also believe it will become a popular choice for weekend holiday travellers.”

MAY 2011

80

Gaming

In terms of marketing, Galaxy Macau has positioned itself as an Asiancentric resort.

“Our signature ‘World Class, Asian Heart’ philosophy is a major differentiator. It is embodied throughout every aspect of our company,” Mr Lui stresses.

“From the attention to detail in our design, to the service we provide our guests, to the way we treat our staff, it is a philosophy of heartfelt, sincere customer relations and service.”

More than 97 percent of Macau’s almost 25 million visitors last year were from Asia, according to official statistics. Visitors from the mainland and Hong Kong, which are considered the primary feeder markets, together totalled 22 million or 81 percent.

Galaxy Macau’s Asian

focus includes its food and beverage offerings. Upon opening, the property will feature more than 50 international dining outlets, with more than half of them serving Asian cuisines.

Hotels for all The complex will also accommodate three hotels, all available to guests on the opening day, although only 1,400 of its 2,200 rooms will be ready at that time.

Besides Galaxy Macau hotel, the property marks the entry into the local market of two regional hospitality heavyweights: the Singapore-based Banyan Tree Hotels and Resorts and Okura Hotels & Resorts Worldwide.

Banyan Tree will bring its first Banyan Tree Spa in the Pearl River Delta region.

At 2,800 square meters, it

A LOOK INTO THE PAST FEBRUARY 2002 Galaxy Entertainment Group, in a joint bid with Las Vegas Sands, outperforms 18 American, European and Asian corporations and receives one of the three gaming concessions from the Macau government.

DECEMBER 2002 After strategy disagreements between Galaxy and Las Vegas Sands, the government makes an alteration on the gaming concession contract, to allow Galaxy to grant a sub-concession to Las Vegas Sands. In practical terms, the partnership is dissolved and each gaming operator goes its own way.

JULY 2004 Galaxy Entertainment Group opens its first Macau casino – Casino Waldo.

Casino Waldo

JULY 2005 It goes public and becomes the first gaming operator to be listed on the Hong Kong Stock Exchange.

FEBRUARY 2006 It opens its second casino – Casino Rio.

Casino Rio

APRIL 2006 It introduces its third casino – Casino President.

Casino President

Casino Grand Waldo

SEPTEMBER 2006 Galaxy Entertainment Group opens its fourth casino – Casino Grand Waldo, the first in Cotai, even before the Venetian Macao.

OCTOBER 2006 It introduces its first flagship complex, StarWorld Hotel and Casino.

StarWorld Hotel and Casino

MAY 2011

81

MAY 2011

82 82

Gaming

will be the biggest spa in the Banyan Tree group.

The most striking entertainment at Galaxy is its 52,000-square-meter deck, where a 350-ton white sand beach frames a 4,000-square-metre skytop wave pool.

MAY 2011

It is said to be the world’s largest, generating waves as high as 1.5 meters.

The resort will also include a set of tropical and Japanese gardens and a traditional Japanese tea pavilion, among other venues.

Rounding out Galaxy Macau’s resort offering will be China Rouge, a hybrid private membership club, performance theatre, bar and restaurant conceptualized by renowned Hong Kong designer Alan Chan to evoke a

83

MAY 2011

84

Gaming

GALAXY AT A GLANCE modern vision of 1930s Shanghai. The venue is also inspired by Chinese literature such as “Dream of the Red Chamber” and “Romance of the Three Kingdoms” and aims to compete with City of Dreams’ Club Cubic.

In September, Galaxy plans to open a nine-screen, 3-D, multifunction cinema theatre. “We introduced the state-of-the-art, 3D cinema theatre to offer something that did not exist in Macau before,” says Mr Lui. “We anticipate being able to host gala premier events, becoming the first choice to catch new movie releases.”

COST: HK$15.5 billion OPENING DAY: May 15, 2011 GAMING: - 450 tables and 1,100 slot machines, with the ability to expand to more than 600 tables and 1,500 slot machines

HOTELS: - Galaxy Macau, 1,500 rooms and suites - Banyan Tree Macau, comprising 250 suites and 10 pool villas - Hotel Okura Macau, 500 rooms and suites Galaxy Macau plans to open with 1,400 rooms ready across all three hotels. The remaining 800 hotel rooms are expected to be operating by the end of the year

Expanded business With the opening of Galaxy Macau, the company will have two flagship properties in the territory.

Mr Lui doesn’t believe the new resort in Cotai will drive away traffic from StarWorld, in the peninsula.

“Galaxy Macau and StarWorld are two different types of properties.

StarWorld is a premium, VIP, luxury hotel with internationally recognized, award-winning service.

With Galaxy Macau we are extending that impeccable service across a mega integrated destination property.”

He says Galaxy Group Entertainment expects that Galaxy Macau “will have an expanded customer base given its vast offerings and larger scale, while StarWorld will continue to be one of the strongest players in the VIP segment in Macau.

“The two should be able to coexist successfully and synergistically,” Mr Lui says.

Galaxy Macau

Banyan Tree Macau

Hotel Okura Macau MAY 2011

85

FOOD AND BEVERAGE: - More than 50 food and beverage outlets

Yamazato

LEISURE AND ENTERTAINMENT: - Rooftop wave pool - Cinema complex, featuring nine screens, nearly 1,000 seats and 3D viewing experience (to open

by September) - A 1,000 square metre multipurpose event plaza (to open by September) - China Rouge nightclub SPA: - Banyan Tree Spa, with 2,800 square metres, including 21 treatment rooms RETAIL: - 30 retail shops

Oyster Bar and Grill

MAY 2011

86 GUSTAVO CAVALIERE HOSPITALITY INDUSTRY EXPERT - gustavo.cavaliere@gmail.com

Promise of change GALAXY MACAU’S NEW APPROACH TO TRAINING SEEMS TO BE PRODUCING BETTER AND MORE EMPOWERED NEW EMPLOYEES. AT LEAST THEY SMILE

C

hange is a very powerful constant in our lives. No matter who we are or what we do, change is inevitable.

Today in Macau, a hotel’s efforts to improve its staff’s behaviour show not just its will to survive; they show its vision of a brighter future. This seems to be the case at the new Galaxy Macau, according to what I was able to see during a walkthrough of their training centre, where hundreds of new employees are being comprehensively coached.

In today’s new, changed economy, hotels everywhere are being forced to change their practices. As people are their greatest resource, there are now many competing calls on their time and their ability to adjust their thinking and actions to best fit the ever-changing market conditions.

Change-management techniques have helped businesses to adapt and adopt new ways of doing business. However, businesses are now realising that they need to learn how to change individuals. Galaxy’s new approach to training their employees demonstrates this. It is based on individual, step-by-step, and slow but steady training, focused on changing their employees’ attitudes in order to align them with the vision of the new project.

In Macau, traditional hotel management methods still typically view change only in terms of strategy, structure, business processes, technology, skills, products and services.

However, lasting, productive change requires significant modification of staff behaviour to succeed. Most change management requires fundamental shifts in mindsets, culture, relationships, language, and other aspects of how people work with each other.

Despite the efforts of well-intentioned change-management professionals I have seen in other Macau hotels, most of their education and training efforts fail to produce sustainable changes in behaviour.

Galaxy’s method focuses on innovation, enhanced performance, increased well-being and empowerment to allow its employees to engage in self-development and become self-aware, instead of putting its employees in boxes MAY 2011

and controlling them. It is all about the people as well as the process.

Successful, lasting change flows from individual learning, growth, and development. What are required are not just system changes and individual professional skill changes, but also changes in culture, habits, mindset and personal skills. The latter can only be changed by what I call change agents, who have been trained in the use of evidence-based behavioural change methods.

Human nature

Why is it so hard to change? Because it is human nature to resist change. Another reason efforts to change can fail is that senior management typically equate inspiration with learning and action.

Sustainable change and learning is a process that corresponds with a behavioural change plan. People need a sense of confidence that their changes will be aligned with the people and processes around them.

Growing and developing entails letting go of something, and letting go entails risk. Where there is risk, there is doubt.

Where there is doubt, there is fear. Change is situational and physical, like applying new skills.

Galaxy appears to be on the right track to a new way of training, but there is a transition period, a psychological process, which the new employees must go through to come to terms with the requisite new knowledge, skills and behaviour.

Transition starts with an ending. When you move forward, you have to leave your starting point. This also applies to changing successfully. It takes time and continuous and progressive training.

I was impressed when I walked through the Galaxy training centre, with 800 new employees making eye contact with me, waving and smiling sincerely – unlike in any other luxury fivestar hotel in Macau. Perhaps we are at the starting point of the new employee attitude that this city needs so much.

Galaxy understands this and is already ahead of the game.

Let us hope this trend continues, for the good of Macau’s tourism industry.

87

MAY 2011

88

Gaming

Hidden cost First-time research calculates the escalating, hidden social cost of the gambling boom

BY EMANUEL GRAÇA

t has never been done before in Macau. For the first time since the liberalisation of the casino industry, a team of researchers from the Institute for the Study of Commercial Gaming at the University of Macau have analysed the social costs of gambling.

The report calculated that the social cost of gambling rose by 163 percent from 2003 to 2007, from US$40 million (MOP320 million) to US$106 million based on five different factors (see box).

The results were published in the latest issue of the academic journal International Gambling Studies. The research, led by institute director Davis Fong Ka Chio drew the conclusion that the cost “will continue to rise in the coming years”.

“The year 2007 is merely the beginning of the post-liberalisation era of Macau’s gaming industry. We expect that the full impact of this liberalisation on the social cost of gambling will not be completely realised for at least a couple more years, or even longer, depending on how the casino operators execute the new development plans and if government regulations limit the supply of gambling in the market.”

I

Outstripping GDP The study found the social cost grew at a much faster rate than gross domestic product, which increased by 136 percent

between 2003 and 2007. Gross gaming revenue increased by 177 percent in the same period, from MOP30.3 billion in 2003 to MOP83.8 billion in 2007.

The researchers point out that their estimates should be viewed as conservative. For instance, treatment and prevention costs associated with gambling are likely to have been understated.

“Because the provision of problem gambling treatment services is still at a very young stage in Macau and Chinese gamblers are generally reluctant to disclose their problems, most problem gamblers do not seek treatment services. Furthermore, there is a low rate of awareness of the treatment services available in Macau.”

The study recalls previous investigations which found the prevalence of pathological gambling in Macau in 2007 was 2.6 percent – more than 11,000 problem gamblers.

“However, the total number of cases handled by the four treatment centres [existing in the territory] in 2007 was just 609.”

Nor does the research include the physical and psychological costs felt by family members and friends of problem gamblers because “in Macau there is no appropriate means of estimating this cost”.

Finally, the research also says that the estimates don’t include the social costs incurred by tourists. So, the overall social cost of gaming in Macau should be higher.

SOCIAL COSTS OF GAMBLING IN MACAU ITEMS

2003 (US$)

1. Treatment and prevention costs 2. Legal costs

2007 (US$)

CHANGE

-

0.75 million

-

18.58 million

65.57 million

252.8%

3. Rent seeking costs

0.68 million

1.56 million

130.8%

4. Regulatory expenses

6.85 million

11.40 million

66.4%

5. Public cost of promotion, research and training

14.34 million

27.03 million

88.4%

Total

40.45 million

106.31 million

162.8%

7.95 billion

18.78 billion

136.3%

Gross Domestic Product MAY 2011

Light in the darkness According to the team from the Institute for the Study of Commercial Gaming, the increase in the social cost of gambling does not necessarily mean the city is worse off.

The study notes that the increase in the social cost of gambling represented only 0.6 percent of the increase in gross domestic product between 2003 and 2007.

“Thus only if we assume that the contribution of gaming liberalisation to

89

BREAKING DOWN THE MATHS The Institute for the Study of Commercial Gaming uses a total of five factors to assess the social cost of gambling in Macau TREATMENT AND PREVENTION COSTS The study took into consideration the expenses of the city’s specialised problem gambling treatment centres. According to the report, the first service of this kind, operating under a religious body called the Industrial Evangelistic Fellowship of Macau, only emerged in 2004. By 2007, there were a total of four specialised centres.

LEGAL COSTS This factor mainly refers to the estimated costs of the police, the Public Prosecutions Office and the courts in handling gambling-related crimes. From 409 in 2003, those crimes jumped to 1,279 in 2007, according to the Judiciary Police.

RENT-SEEKING COSTS This factor relates to pro-gambling lobbying and is calculated based on the estimated expenses of the legislators coming out from the gaming sector.

The social cost of gambling rose by 163 percent from 2003 to 2007, from US$40 million (MOP320 million) to US$106 million, according to a new research from the University of Macau

GDP growth were as low as 0.6 percent would the benefits be cancelled out by the increase in social costs. This is implausible.”

On one hand, part of the increase in social cost “is a natural result of gaming liberalisation,” Mr Fong’s team says.

“By increasing the supply of gambling in the marketplace, the prevalence of problem and pathological gambling rises, gambling-related crime increases, rent-seeking activities become more common and obviously, government regulation improves and expands to meet the new needs, and spending on public training, promotion and research increases.”

REGULATORY EXPENSES The researchers used as a proxy the total expenses of the Gaming Inspection and Coordination Bureau, which has the attribution to regulate the development of the gaming industry.

PUBLIC COST OF TRAINING, PROMOTION AND RESEARCH This took into account part of the annual expenditure of the Tourist Office and the relevant expenses incurred by the University of Macau, the Macau Tourism and Casino Career Centre and the Macau Millennium College, which trains people for the gaming industry.

MAY 2011

90

Gaming

On the other hand, the rise in the social cost from gambling is also related to improvements in the overall gaming regulatory framework from 2003 to 2007, says the study. That is to say that, previously, under the “underdeveloped, monopoly system,” a significant share of the social cost of gambling was neither properly identified nor dealt with.

For instance, there were no professional centres for treatment or prevention of problem and pathological gambling in Macau until 2004, even if the prevalence of such issues were already high in previous years.

Similarly, regulatory enforcement during the pre-liberalised era “was relatively weak and incomplete.” The same can be said about training, research and promotion, the study adds.

“Therefore, when we interpret the change in social cost before and after casino liberalisation in Macau, 2003 does not serve as zero degree on the scale, but as a negative start demanding extra effort to compensate for the lack of adequate measures to address the gambling-related social issues of the

MAY 2011

More pathological gamblers

T

he problem gambling rate in Macau increased from 2.6 percent in 2007 to 2.8 percent last year, according to new research from the University of Macau’s Institute for the Study of Commercial Gaming.

The percentage of problem gamblers is increasing but the growth rate is a bit lower compared with the previous study. In 2003, the percentage of problem gamblers was 1.8 percent.

Worldwide, the percentage of pathological gamblers in any given society varies between one and five percent of the adult population.

monopolised decades,” the study says.

That is why Mr Fong’s team concludes that the jump in the social costs of gambling “is not necessarily a bad sign” nor does it reflect “deteriorating social problems as a result of liberalisation”.

“Instead, it is an indicator that we are starting to tackle the hidden social issues in a more direct and socially responsible manner. In this sense, casino liberalisation could decrease the real social cost of gambling in the long term by introducing healthier competition, more comprehensive institutions, better social awareness and more effective preventive measures.”

The Institute for the Study of Commercial Gaming’s work uses 2003 as the starting point, as this was the last year in which Macau’s gaming industry was effectively still operating under a monopoly environment. The first casino outside of Stanley Ho Hung Sun’s empire, Sands Macao, opened its doors in 2004.

The study then jumps to 2007, the year MGM Macau was inaugurated, marking the entrance of the last of the six gaming concessionaires into the market.

91 sic bo bets, the return for the player is now below 70 percent, while the international practice for electronic gaming machines is to give a minimum return of 85 percent.

In Macau, the government has set no official minimum return for such machines.

Making sense

Consistency, please Regulator’s ruling means payouts must be uniform for any given game, regardless of whether it is played on a live table, partial or fully electronic table

A supplier of gaming apparatus, who asked not to be identified, said the suddenness of the new ruling – and worry that further changes might follow – has caused operators to freeze their orders until the rules are made clear. The source said suppliers themselves have found it hard to get answers from the Gaming Inspection and Coordination Bureau. Usually, the regulator deals directly with the casinos.

Sources among those in charge said the reason-

ing behind uniform sic bo payouts is simple: a game should always have the same payouts, regardless of how it is played. “If the game is already regulated in Macau, all different forms need to present the established payout for each bet,� one source said. “It doesn’t make sense to have the same game posting different payouts just because it is being played on a live or on a fully automated table.�

So why is it only now that uniformity has been imposed? The source admits that the authorities were at fault. The payout discrepancy was detected only when semi-automated electronic tables began to appear in local casinos.

Informed sources say the new ruling is in line with future legislation to regulate slot machines.

BY EMANUEL GRAÇA

M

ting. The regulator told the operator that the payouts for games played on such tables must be the same as those for live sic bo.

Previously, the maximum payouts allowed in Macau on some of the bets in live sic bo were lower than those offered by fully automated electronic sic bo. For example, the payout on any triple bet is 150 to one on a live table but 190 to one on some fully automated electronic tables.

In view of this, the regulator ordered operators to reduce payouts on their semi-automated and fully automated electronic sic bo tables to the same level as those for live sic bo tables.

This means that for some

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acau’s gaming regulator has introduced changes for both semi-automated and fully automated electronic table games. Sources have told Macau Business that when electronic apparatus run a game that would be regulated if it was played on a live table (sic bo, baccarat or roulette, to give a few examples), semi-automated and fully automated electronic tables must make the same established payouts per bet as a live table.

The issue was raised after Sands China recently installed some rapid Sic Bo apparatus in its properties.

These are semi-automated electronic tables, with live dealers and electronic bet-

92

Gaming

Full house PokerStars Macau Millions 2011 becomes the first poker tournament in Asia to reach the 1,000-entry mark

BY EMANUEL GRAÇA

okerStars Macau at Casino Grand Lisboa achieved a new record as its Macau Millions 2011 became the first poker tournament in Asia to reach the 1,000-entry mark. “We were extremely pleased with the new record of 1,329, which was above our most optimistic target,” says Danny McDonagh, the recently promoted PokerStars director of live operations in the Asia-Pacific region.

“The Macau Millions has a significantly lower entry cost than our other special events but still has a substantial guarantee which makes it a very inviting event to all poker players.”

The previous record, 741 players, was also set by PokerStars Macau Millions, in August last year.

“Also pleasing is that international recognition of poker in Macau, and particularly PokerStars Macau at Grand Lisboa, is growing at a rapid pace, assisted by events such as the Macau Millions, as demonstrated by players from 55 countries entering,” says Mr McDonagh.

The event was won by Taipei’s Hung-Sheng “Shaq” Lin, who took home HK$400,000 (US$51,506) for his triumph. However, the player that got everybody’s attention was Canadian Jonathan Duhamel, the winner of the main event in the 2010 World Series of Poker, the equivalent to the game’s world championship.

“It was the icing on the cake to have Jonathan here,” says Mr McDonagh.

“Nothing beats having the world champ in the field.”

P

Go grow The new record is the latest of a series set

by PokerStars in Macau. Mr McDonagh says this is part of the company’s strategy to promote Texas Hold ’em poker in the region. “Our aim is for our special events to continue to grow,” he says.

“When Pokerstars Macau moved to Casino Grand Lisboa [from the Grand MAY 2011

Waldo] at the start of 2009, we enjoyed impressive growth in tournament numbers. Last year was more of a consolidation of the previous year’s results.

However, 2011 to date has seen our operation experience a significant boost in patronage.”

The PokerStars room at Grand Lisboa, reputedly the largest poker room in Asia, includes 33 tables.

“In order for us to be prepared for future player number growth of our events, we are planning to allow for increased player number capacity at the next Macau Poker Cup, commencing May 28, our next special event,” Mr McDonagh says.

While some question how much room there is for poker to expand in Macau, the PokerStars chief here has no doubts.

“Poker will continue to grow in the medium term,” says Danny McDonagh

High-stakes buzz

T

here has been a lot of talk recently about high-stakes poker games in Macau. Danny McDonagh, the PokerStars director of live operations in the Asia-Pacific region, says the company’s poker room in Grand Lisboa is also getting some of the action, often during special events.

“The talk about high-stakes poker has been great for building awareness of poker in Macau and some of the biggest names of poker from throughout the world have been visiting Macau in recent months,” he says.

Insider reports mention high-stakes Texas Hold ’em poker games taking place in Macau with up to MOP320 million on the table.

“Poker will continue to grow in the medium term,” he says. “What could really set it off was if a Chinese player was to become world champion. While I was working in Australia, Australian Joe Hachem became world champion and this achievement was the main driver for rapid growth of poker in that country for the next five years.”

Even without a world champion, poker’s rise in Macau is impressive. In the first three months of 2011, local casinos raked in MOP67 million (US$8.4 million) in gross gaming revenue from poker, more than in all of 2008, the year the game was introduced here.

PokerStars Macau is seeing a similar trend. “Regular weekly tournaments look like improving 10 percent to 20 percent. However, it is the special events, which attract players from throughout Asia-Pacific and beyond, that will have the greatest growth,” says Mr McDonagh. “The main tournament of each of our special events will average around 50 percent growth year-on-year.”

Even so, PokerStars has no plans to expand in Macau beyond its room at Grand Lisboa.

Challenging hand Although PokerStars was a first mover in the poker room business in Macau, competition has increased. Mr McDonagh does not think this is a bad thing.

“Competition can be good in some cases, as Macau poker venues actually assist in building business for each other. For example, a player starting up playing poker at a competing venue may then find out about the poker tournament schedule at PokerStars Macau and visit our poker room. Conversely, our special events such as Macau Poker Cup fill Casino Grand Lisboa poker tables to capacity, which leads on to other poker rooms also experiencing above-normal business during these events.”

However, there have been some complaints by international players about rakes in Macau – the commission operators charge – which according to the local regulations goes from three to five percent of the pot, being capped at up to five times the value of the big blind.

Mr McDonagh plays down this issue. “Rakes for poker vary greatly worldwide. Macau rakes are high in comparison to the United States, but compare quite favourably to many European countries and Australia.”

93

Multi-tasking man

D

Photo: Carmo Correia

anny McDonagh was recently appointed PokerStars director of live operations for Asia-Pacific. His job not only puts him in charge of operations in Macau, but also makes him president of the Asia Pacific Poker Tour and the commissioner for the Australia New Zealand Poker Tour. Does he have too much on his plate? His answer is no, because he likes what he does.

“The position gives me a lot of variety, which I enjoy,” Mr McDonagh says. But he admits that sometimes there is a need to juggle with a heavy agenda, particularly when special events in his three areas of responsibility fall close together.

“My role as commissioner for the Australia New Zealand Poker Tour covers quite a mature poker market, and one I have a lot of experience [in], which makes it relatively easy to set up events,” he says.

“However, the Asia Pacific Poker Tour presidency involves identifying new countries to host an event and the cultural and logistical challenges associated. That’s a new role and challenge for me in 2011.”

MAY 2011

94

Gaming

No kids allowed Bill to increase the minimum age to enter casinos to be ready by mid-this year, says government new case of a 16-year-old playing at a local casino made the headlines last month. This time, the case even involved loan sharks.

The 16-year-old was falsely imprisoned by two loan sharks after having lost HK$100,000 that he borrowed from them, according to media reports. The loan sharks called the boy’s father to demand payment of the debt, but the man reported the case to the police, who then arrested the loan shark duo.

The police didn’t disclose the name of the casino where the boy was able to enter and gamble.

Secretary for economy and finance Francis Tam Pak Yuen has already pledged the government will probe the casino’s responsibility in allowing the 16-year-old to gamble.

A

Mr Tam also told reporters that the bill to increase the minimum age to enter casinos to 21 years from 18 would be sent to the Legislative Assembly by mid-this year.

Sands needs 7,000 workers

Edward Tracy, Sands China’s president and chief operating officer, says the company will need 7,000 new workers to run the properties on parcels five and six in Cotai. The company is aiming to open the first stage of the properties by the end of this year, and others in March and May next year. Mr Tracy’s remarks were made last month on the sidelines of the signing ceremony of a memorandum of understanding between Sands China and the Macau Institute of Management. The agreement provides a framework for cooperation between the two parties to promote ongoing education and learning initiatives, to develop management professionals.

Department store for Ponte 16

G2E Asia Visionary Award to Adelson

Sheldon Adelson, chairman and chief executive officer of Las Vegas Sands Corp, will be honoured with the G2E Asia Visionary Award during Global Gaming Expo Asia (G2E Asia) 2011. The G2E Asia Visionary Award recognizes Mr Adelson’s contributions to the gaming industry and key role in setting the stage for the next phase of gaming in Macau with the Sands Macao, the Venetian Macao and the ongoing development of the Cotai strip, the organisers of the award said in a press release.

Under his leadership, last year the company opened the Marina Bay Sands integrated resort in Singapore, now one of the most profitable casinos in the world. The award will be presented to Mr Adelson on June 8 at G2E Asia 2011, which is being held at the Venetian Macao.

MAY 2011

Success Universe plans to open a Sogo-like department store at Ponte 16. The department store is to be located at Ponte 16’s phase 3, to be completed by the end of 2012. The initial estimate construction cost of the shopping arcade is HK$800 million (US$103 million), but the development plan still needs to be approved by the Macau authorities.

Part of the extension will be used for the casino, with the number of gaming tables expected to grow to 150 from the current 109 by 2013.

Ponte 16 on the Inner Harbour is 49 percent owned by a subsidiary of Success Universe. The majority share is owned by SJM–Investimentos, an indirect, wholly owned subsidiary of SJM Holdings.

95 DAVID GREEN GAMING CONSULTANT, NEWPAGE CONSULTING

All (side) bets are off!

DESPITE INCREDIBLE ESTIMATES FROM THE US DEPARTMENT OF STATE, SIDE BETTING IS SET TO GO DOWN IN MACAU, AS IT MAKES NO BUSINESS SENSE FOR JUNKETS

M

uch has been made of the alleged proliferation of side betting in Macau. The argument runs that Macau’s high gaming tax rate (35 percent, plus levies) and poor regulatory oversight of casino operations, encourages VIP room operators to take bets “off the table”, and away from inclusion in concessionaires’ gross gaming revenue.

For example, the room operator (a licensed junket operator) and a player may agree that while play against the house is denominated and recorded in Hong Kong dollars, they will side bet as if that play had been in US dollars. The table action is merely a proxy for the real wagering.

In such a case, the win or loss recorded by the house on its play with the player concerned would only represent about one eighth of the real betting activity undertaken by the player. The effect of this would be to understate the host concessionaire’s gross gaming revenue by around seven eighths, and to proportionately reduce the special gaming tax, and associated levies payable in accordance with the law and the concession contracts.

The US Department of State has been reported recently (Macau Daily Times, March 9, 2011) as estimating that unreported gaming revenue attributable to side betting in Macau could be 10 times higher than reported revenue (presumably VIP baccarat only), which would equate to around US$169 billion (MOP1.35 trillion) in 2010. That figure, if true, would be significantly more than the reported casino revenue of the entire world, estimated by PricewaterhouseCoopers to be just over US$109 billion last year. Remember, these are revenue numbers, amounts allegedly lost by players, not betting turnover figures.

A simple question for the US Department of State: where is the evidence supporting such an incredible proposition? This is rhetorical; there is no such evidence, and there cannot be, given the illicit nature of the activity.

Diminishing trend

In fact, side betting is likely far less significant now than may have been the case in years past, and its prevalence will continue to diminish. Here’s why.

To state the obvious, side betting is both illegal and high risk. Casino concessionaires have the exclusive right to offer games of chance in Macau; VIP room operators are not concessionaires, and cannot themselves lawfully conduct gaming.

It would be naïve to think this fact is lost on VIP players; those from the mainland know that side bets are not only legally unenforceable there, but indeed anywhere. If they incur catastrophic losses on their side bets, they know that there can be no legal avenue available to the room operators to recover the debts.

That doesn’t rule out extra-judicial enforcement, but it does put a participating room operator at elevated and serious risk. He would be a party to a criminal enterprise, and cannot discount the possibility that the player concerned may pre-emptively report the matter to the authorities. Any subsequent “extrajudicial” enforcement would be extremely risky.

On top of that, the room operator would likely lose his junket licensure, thereby denying future access to the legitimate and highly lucrative revenue stream associated with the VIP room operations, never mind any attributable to

possible off-table revenue generated in the course of those operations.

VIP room operators are remunerated by casino concessionaires on one of two bases. They may either receive a commission on the aggregate rolling chip, or betting turnover value (generally stepped, and capped at a maximum 1.25 percent) occurring in a month; or a revenue share, which is uncapped, and may exceed 50 percent of amounts won by the casino concessionaire from play undertaken in the operators’ rooms.

Why risk it?

Irrespective, the basis of remuneration will be detailed in a contract between the room operator and the host concessionaire. That contract is enforceable, and provides both parties with certainty as to the rights and obligations they mutually undertake. It will include the terms of settlement, the provision of, and payment for complimentary benefits, and the basis of credit extension, where credit is provided by a concessionaire.

These contracts underpin the capacity of the junket operators to finance their operations, and, in the case of those with stock exchange listed affiliates, much of the value of those stocks.

As VIP business continues to grow, there will be upside pressure on junket remuneration, as they assume greater credit risk, and the competition for premium junkets intensifies between concessionaires. Indeed, revenue share arrangements in excess of 55 percent in favour of certain junkets are reported to have been negotiated. Why put that at risk?

In terms of global risk and reward, the trade-off militates decidedly against side betting. While junket operators remain at risk for the collection of outstanding gaming debts, and the optimization of their remuneration under their contracts, they do not also assume the operational risk or expense of the house.

In order to optimize their returns, it is in their interest to maximize reported rolling chip values, for two reasons.

First, the win rate on baccarat is sensitive to volume: the higher the volume of rolling chips, the more likely the win rate is to approximate the theoretical win rate of around 2.85 percent on VIP baccarat. Catastrophic losses are much less likely as volume increases. It doesn’t make sense to side bet if all that is happening is amplification of the volatility associated with lower volumes of recorded play.

Secondly, the junkets are increasingly looking beyond their own short-term performance to the longer-term performance of the concessionaires with whom they are contracted.

Assuming MGM Macau gets its initial public offering underway shortly, all of the six casino concessionaires will be companies listed on a major stock exchange. The junket operators can legitimately invest in their own future success, and that of the industry in Macau, by taking stock in those companies.

In such cases, the stock market does much of the heavy lifting of enterprise value, and it does it lawfully. Indeed, there is a real incentive to not use side betting, for the same reason that revenue skimming lost favour in Las Vegas - the market rewards results in a more sustainable and far less risky way than what is effectively theft.

Expect to see a continuing decline in side betting, even if there is no reduction in the special gaming tax rate. It makes excellent business sense.

MAY 2011

96

Gaming

One more try

Taiwan begins grassroots push for offshore casinos

BY MARTIN JOHN WILLIAMS*

aiwan launched last month a new charm offensive to rejuvenate outlying island gaming legislation, with officials backing licensing of two casinos as they push for a “yes” vote in mandatory local referendums.

Two years after the residents of Penghu county - an archipelago in the Taiwan Strait - rejected a casino referendum proposal, remote local governments hungry for investment and tax revenue are pushing for the referendums again with the support of the central government in Taipei. The law does not allow casinos on the Taiwan mainland, but a development law for islands under Taiwan’s control permits casino applications once a local referendum is passed.

Officials from the Ministry of Transportation and

T

MAY 2011

Communications have already completed a draft gaming bill. Last month, they held meetings in the Kinmen and Matsu island groups off the Chinese coast. They were scheduled to go to Penghu early this month.

The officials were armed with draft licensing and taxation rules, as well as conditions of entry and other restrictions they say are modelled on Singapore’s casinos.

“Through the suggestions of the public at these meetings, it is hoped that existing concerns can be dispelled, allowing administration of the gaming law to be improved,” the ministry said in a press release last month.

Serious about it “The government is serious about it, and looking to present a clearer picture” to

local residents, said Liu Dayyang, an economics professor and authority on gaming at the National Taiwan University of Science and Technology. “This will help locals to make up their minds.”

The draft of the gaming law provides for two casino licenses tied to integrated resorts, with no further licenses issued for up to 15 years.

A ministry source told GamblingCompliance that a formal draft has not been disclosed to the media, with officials preferring to share selected details through a spokesman.

That would account for inconsistent details in press reports, but it is clear the proposed tax regime aims to compete with other Asian gambling centres, with combined gaming and special taxes estimated at between

12 percent and 15 percent, though the total tax take could reach as high as 40 percent once company tax and other costs are factored in, according to local media.

Other costs include a minimum NT$3 billion (MOP830 million) fee for a non-renewable 30-year licence, as well as table and gaming machine fees. Ministry officials hope for an annual tax take of some NT$8 billion, with a portion of the money to be directed to local government coffers. However, mindful of the unexpected referendum loss in 2009, officials are reluctant to play up gambling revenue.

Fighting fears “The government does not want gaming to become a major industry, and strict controls will be placed on the casinos to

97

minimize the impact on society,” an unnamed official told the Economic Daily News.

Most of the new rules therefore outline conditions of entry, reflecting greater efforts to win over residents who fear the impact of gambling. Persons under 20 years, public servants and low-income earners on welfare would be barred, while families and creditors could apply for problem gamblers to be banned from entering, in addition to the option of voluntary exclusion.

Restrictions on the casino floor would include a ban on ATMs, credit cards and moneylenders, and gamblers would be able to nominate a loss threshold, the breaching of which would result in removal from the premises.

In addition, license holders would not be allowed to advertise in Taiwan and would impose a NT$2,000 entry fee on Taiwanese nationals.

If consultation with the members of the public, academics and industry players proceeds smoothly, officials expect to submit a draft gaming bill to the cabinet no later than September, which would proceed to the legislature by the end of the year before being debated early 2012. If passed, the government will establish a cabi-

net-level Bureau of Gaming.

Eyeing the possible opening of Taiwan this year to travel by individual Chinese tourists, the Matsu authorities, whose jurisdiction is formally known as Lienchiang county, have said they will look to hold a referendum as early as August.

The Economic Daily News reported last month that Matsu commissioned the Chung-Hua Institution for Economic Research, an independent but partly government-funded think tank, to help “expedite” the referendum process.

Kinmen is also moving toward a referendum, while Penghu must wait until later in 2012 for a plebiscite because three years must elapse before an unsuccessful referendum question can be resubmitted.

Presidential and legislative elections in early 2012 could complicate the process.

If the opposition Democratic Progressive Party (DPP) wins either or both, “it’s likely to have an impact” on any casinos, Mr Liu said.

He said that even if the DPP did not block the casinos outright, there could be “political turmoil” and the new government could “postpone major decisions.”

CONGRATULATES

GRAND OPENING MAY 15, 2011 – AND –

7TH ANNIVERSARY

* EXCLUSIVE GAMBLINGCOMPLIANCE/ MACAU BUSINESS MAY 2011

98

Tourism

Building a fan base

The Mandarin Oriental, Macau was reincarnated on the waterfront less than a year ago. Martin Schnider, the property’s general manager, talks about managing the only big non-gaming five-star hotel on the peninsula

BY JOÃO FRANCISCO PINTO PHOTOS BY ANTÓNIO MIL-HOMENS

ince the new Mandarin Oriental, Macau opened in the One Central complex in June last year, it has been striving to lure the non-gaming visitors that flock to the city.

The hotel’s general manager, Martin Schnider, knows this task is exceptional, since the city is perceived by many to be simply a gambling destination and the hotel is just metres away from the MGM Macau casino.

But the Swiss-born hotelier believes in the potential of the market.

“We are in 2011 and, right now, this niche is small in size, but I’m sure that it will grow in the future,” he says.

In an exclusive interview with Macau Business, Mr Schnider said the Mandarin Oriental is positioning itself in the region and working the mainland market. One of its main targets is the increasingly important meetings, incentives, conferences and exhibitions industry or MICE.

S

“We have developed a strong base in small-to-medium sized business in leisure, meetings and the wedding business,” Mr Schnider says. The hotel can handle groups of between 50 and 100 people, he adds.

Mr Schnider acknowledges that competition is tough in the MICE market but says the Mandarin Oriental has an advantage: it is more exclusive. “Our differentiation and advantage when we face the competition is that we can offer a highly personalised service that no other hotel can provide. This begins at arrival, when guests are picked up from the ferry [and brought] to the hotel and straight to their room in order to process check-in in privacy and comfort.”

It seems to be doing the trick.

MICE business picked up in the first three months of this year. “We had a significant number of meetings in the first quarter and we hope to continue to increase during the rest of the year.”

SWISS MANDARIN M

artin Schnider, a Swiss, became general manager of the Mandarin Oriental, Macau in July 2009. He has been with the Mandarin Oriental Hotel Group for more than 17 years, having started his career in the company at the Mandarin Oriental, Singapore, in 1994.

Mr Schnider worked first in the food and beverage department of the group’s hotels in Singapore and Manila. He then became resident manager in the Kuala Lumpur hotel and subsequently took charge of the Mandarin Oriental Majapahit, Surabaya as general manager. Before coming to Macau Mr Schnider managed the award-winning Mandarin Oriental, Tokyo.

Mr Schnider was trained at the Swiss Hotel Management School in Lucerne and speaks English, French and German.

MAY 2011

Mr Schnider runs not only the hotel but also The Residences & Apartments at Mandarin Oriental, Macau.

These comprise 36 apartments and 56 residences. The dwellings are the first of their kind in Asia to bear the Mandarin Oriental brand.

Mr Schnider says owners of the residences are offered “an exclusive extension to the brand’s luxury hotel experience, with bespoke services and amenities to complement their lifestyle”.

Owners may use hotel facilities such as the swimming pool and gym, which are closed to the general public. The Mandarin Oriental also offers “at-home private dining options created by the hotel’s chefs,” Mr Schnider says.

The Residences & Apartments at Mandarin Oriental, Macau are on the 15 floors immediately above the hotel. The dwellings range in size from 65 square metres to 465 square metres.

The Mandarin Oriental brand is far

“We have developed a strong base in small-to-medium sized business in leisure, meetings and the wedding business,” Martin Schnider says

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MAY 2011

100

Tourism

from being new to the local market. It has had a presence in Macau for 27 years and is one of the most noticeable brands in the city’s hospitality industry.

The original Mandarin Oriental hotel was in the Outer Harbour area. It was renamed the Grand Lapa in August 2009 but it is still managed by the Mandarin Oriental Hotel Group.

Mr Schnider says the original hotel and the new one are quite different.

“The new Mandarin Oriental continues to position [itself] as a relaxing retreat from the vibrancy of the city and thus can be more personalised, with more exclusive facilities and services to customers, such as Mandarin Oriental Spa and our signature restaurant and bar, Vida Rica”.

Even so, he believes many longstanding patrons frequent both hotels. “I don’t think our guests have said goodbye to Grand Lapa. Instead, we have two different products and the guests can choose between both,” he says.

One of the notable aspects of the local hospitality business is the growth

in the number of five-star hotels. In the near future the Mandarin Oriental will face added competition from Galaxy Macau in Cotai, opening this month, and eventually Sands China’s developments on parcels five and six there.

Mr Schnider sees it as a positive development, helping develop Macau as a destination for the more sophisticated tourist. “The more high-end products you have, the more people have to strive to do even better, reinventing and finding new things to do.”

He believes his hotel can cope with any competition. “We prioritise in [the] non-gaming market, whereby the new developments may focus on other markets.”

Luxury buzz He also thinks that Asian customers, including mainland Chinese, can now clearly identify luxury brands. “People are more aware of luxury and, therefore, are creating more demand for luxury products and luxury hotels in Macau.”

And Mr Schnider thinks the Mandarin Oriental’s situation right next door to One Central’s shopping mall, with its 37,000 square metres of high-end retail outlets, could not be better. “The hotel provides the ultimate in retail therapy, featuring luxury retail and a stunning line-up of the world’s leading brands just steps away from the lobby.”

The rapid growth in the hospitality industry has of course increased demand for qualified manpower. For Mr Schnider, the Mandarin Oriental’s almost three decades of experience in the local market is a plus when it comes to retaining staff. “This adds a great value for running this hotel. Colleague development and counselling is a priority for our human resources team, to build [a] high colleague retention ratio.”

The hotel has also been working with the Institute for Tourism Studies to offer internships. “Some of these students might return to Mandarin Oriental to work because they know the environment, the culture, and they see the opportunities within the company.”

“The new Mandarin Oriental continues to position [itself] as a relaxing retreat from the vibrancy of the city and thus can be more personalised”

MAY 2011

Photo: António Falcão

101

Red alert

Prices rising fast for tourists he Tourist Price Index for the first quarter of 2011 rose by 14.58 percent year-on-year, according to the Statistics and Census Service.

The increment was attributable to soaring hotel room rates and charges for restaurant services during the Lunar New Year, as well as dearer prices for food and gold jewellery.

The average Tourist Price Index for the last four

T

quarters ending at the first quarter of 2011, increased by 12.45 percent from the previous period.

According to the latest data available, the Tourist Price Index is increasing at a much faster pace than inflation in Macau. The Composite Consumer Price Index, the city’s main indicator for inflation, rose by 5.46 percent year-on-year in March. For the 12 months ended in March, the average Composite Consumer Price Index rose by 3.69 percent from the preceding period.

The Tourist Price Index reflects the price changes of goods and services purchased by visitors. Starting this year, the Tourist Price Index has been rebased to October 2009 – September 2010.

IFT student wins PATA competition

Fiona Huang Hao, a senior student at the Institute for Tourism Studies (IFT), won ‘Tomorrow’s Tourism’ competition organized by Pacific Asia Travel Association (PATA). Fiona is currently enrolled in IFT’s bachelor degree programme in Heritage Management. The competition attracted more than 30 individual and group participants from the Asia Pacific region. The competition, one of the activities celebrating the 60th anniversary of PATA, was launched last September. It challenged undergraduate students from PATA member schools to come up with new ways of measuring tourism, taking into account its wider impact on the environment and community at large.

Hotels see demand go up

Hotels and guesthouses received 600,000 guests in February, up by 3.7 percent year-on-year, according to the Statistics and Census Service. The majority came from the mainland (55.1 percent of total) and Hong Kong (18.8 percent). The average length of stay of guests increased by 0.04 nights to 1.5 nights. The average occupancy rate of hotels and guesthouses was 82.2 percent, up by 4.4 percentage points year-on-year.

Fewer visitors at Ching Ming

A total of 304,000 tourists entered Macau over the Ching Ming festival holidays (April 3 to April 5), according to official data. That represents a 5.61 percent year-on-year drop.

Overall, local authorities recorded 1.1 million border crossings during the Ching Ming festival holidays including Macau residents and blue card holders.

MAY 2011

102

Tourism

Less from more

More mainland tourists are visiting but they can’t keep retailers’ cash registers full t is a common sight in Macau: a tourist coach stops by a shop; dozens of visitors from the mainland hop off, and the shopping frenzy starts.

Spending by visitors last year, excluding gaming, reached MOP37.9 billion (US$4.7 billion), an 8-percent increase on the year before, data from the Statistics and Census Service show.

More than half of the money was spent on shopping and mainland tourists were the biggest spenders.

The average amount per mainland visitor shelled out in the shops last year was MOP1,290, more than the amount spent by any other tourists. But the figure is one-third lower than in 2009.

Worryingly, 2009’s figure was lower than 2008’s.

Experts believe more money from mainland tourists is going to casinos, which saw gross gaming revenue reach MOP188 billion last year, a leap of 58 percent.

But that may not be the only reason

I

MAY 2011

that mainland visitors are spending less per head in the shops.

Oscar Ho Man Cheng, an expert on business development at the Institute for Tourism Studies, says more and more mainlanders are making their second or subsequent visits to Macau. “They spread around their expenditure,” he says.

The increase in the number of tourists from across the border does not make up for their more parsimoni-

ous shopping. The estimated amount of mainland money spent in shops fell almost 20 percent last year to MOP17.1 billion.

Eventually, spending will bounce back, as Macau equips itself with more shopping facilities, says Mr Ho. But that may take some time because the city still lags behind Hong Kong, a mainland tourist’s shopping paradise.

“In Macau, shopping malls are still

Tour de force T

hree out of four mainland tourists coming to Macau on package tours are satisfied with the service provided by their travel agencies. At least, that is what the Statistics and Census Service’s 2010 survey of visitor comments says.

The survey interviewed 4,300 tourists, mostly from the mainland. The results were announced last month, shortly before yet another row between a mainland tour party and their guide.

According to newspaper reports, 30 Wuhan tourists complained to police they had been asked by their tour guide to pay MOP120 (US$15) to enter the Venetian Macao.

They were kept inside a jewellery shop for two hours when they refused to pay. The guide has denied the accusations.

It is the latest of several high-profile confrontations in Macau and Hong Kong between mainland tourists and their guides.

103

Spending big: A breakdown of mainland tourism expenditure in 2010 Overall spending per capita, excluding gaming: MOP2,039 Non-shopping spending per capita: MOP749 Shopping spending per capita: MOP1,290

Non-shopping spending Entertainment

4%

Others

1%

Accomodation

Food and beverage

48%

39%

Local transport

4%

Outbound transport

4%

Gaming expenses excluded. Outbound transport excludes air fare.

Shopping spending very concentrated in downtown and in Cotai. In Hong Kong, there are a lot of shopping malls and in different districts.

But we are catching up,” says Mr Ho.

Shoes, handbafs and wallets

12%

Others

Clothing

4%

19%

Chinese herbs and medicines

2%

Cosmetics and perfumes

Cosmetic changes The number of mainland visitors is expected to increase again this year, according to the latest Annual Report of China Outbound Tourism Development, released last month by the China Tourism Academy.

The report forecasts 65 million overseas trips by mainland tourists this year, up from 57.4 million last year.

Together those tourists are expected to inject US$55 billion in spending into the global economy, an increase on last year’s US$48 billion.

Macau is the second most popular destination for mainland tourists, behind Hong Kong. Last year, Macau attracted 16.1 million mainlanders, about six million fewer than Hong Kong, according to Beijing’s figures. Curiously, the government here says only 13.2 million mainlanders visited Macau last year, 20 percent more than the year before.

Sa Sa International Holdings Ltd, a cosmetics company, is among the retailers to benefit from the increase in mainland tourists. The boost is most obvious during the holiday seasons. In the first

13%

Jewellery and watches

Cellular phones and electrical equipment

23%

5%

Local food products

Tabacco and alcohol

19%

2%

Note: Percentages may not add up to 100 owing to rounding errors.

Source: Statistics and Census Service

week of this year’s Lunar New Year holiday, the takings at its Macau and Hong Kong shops were 16 percent higher than in the corresponding week last year. Sa Sa International chief executive Simon Kwok says the growth was due mainly to mainland visitors.

The Annual Report of China Outbound Tourism Development also includes the results of a survey of more than 2,000 tourists from six big mainland cities last year. The survey found that 63 percent of the money spent in Macau last year went into retailers’ cash registers. Of the money they spent in

Hong Kong, 76 percent went to retailers.

The figure for Taiwan was 50 percent.

The survey also found that 26.9 percent of respondents said they spent more on shopping than on food, accommodation or other expenses.

Experts say more mainland tourists are expected to flock to Macau to shop in the near future. This is because high inflation in the mainland and the rising value of the renminbi make day trips more cost-effective. Food scares across the border have also increased the number of visitors coming to Macau to purchase baby formula, for example.

MAY 2011

May Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail: Date: Event: Venue: Organiser: Address: Website: E-mail: Date: Event: Venue: Organiser: Address: Tel: Website: E-mail:

4th – 7th

Date: Event:

Taipei World Trade Center, Taiwan Haw Ji Co., Ltd. 2F, No. 17, PaoChing St., SongShan Dist., Taipei City 10585, Taiwan (886) 2 27607407~10 (886) 2 2742-0522 http://www.gtiexpo.com.tw/taipeien/ gametime@taiwanslot.com.tw

Venue: Venetian Macao Resort Hotel Organiser: De Ficção Multimedia Projects Address: 9/F Flat H, Block C, Nam Fong Ind. Bld., 679 Av Dr Francisco Vieira Machado, Macau Tel: (853) 28331258 Fax: (853) 28331487 Website: www.macaubusiness.com E-mail: events@macaubusiness.com

14th

Date: Event:

GTI Asia Taipei Expo

ILCM Grand Charity Ball 2011

Four Seasons Hotel Macao International Ladies Club of Macau PO Box 1370, Macau www.ilcm.org.mo ball@ilcm.org.mo 17th – 19 th

GIGSE

TBC, San Francisco, California Clarion Gaming Earls Court Exhibition Centre, London SW5 9TA, UK (44) 0 20 7370 8579 www.gigse.com yeemay.huang@clariongaming.com

25th

Macau Business 7th Anniversary Party

18th - 20 th

International Hotel Investment Forum (IHIF) Asia Pacific

Venue: The Venetian Macao Organiser: Questex Media Address: 371 Beach Road, #12-02/03 Keypoint, Singapore 199597 Tel: (852) 2589 1360 Website: www.ihif-asiapacific.com E-mail: jchung@questexasia.com Date: Event:

31st – 2nd June

Hospitality Architecture + Design Expo (HA+D Expo)

Venue: Marina Bay Sands, Singapore Organiser: Questex Asia Ltd Address: 1211 Prosperity Millennia Plaza, 663 King’s Road, North Point, Hong Kong Tel: (852) 2296 9099 Fax: (852) 2562 6040 Website: hadexpo.questexevents.net E-mail: eileen.chang@trefoilmedia.com

June Date: Event: Venue:

6th - 7th MB EVENT

Asia Business Technology Forum 2011

Park Royal Hotel, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia Organiser: Comfori International Address: KL Business Centre, Level 2, Menara KH, Jalan Sultan Ismail, 50200 Kuala Lumpur, Malaysia Tel: (603) 2141 0342 Fax: (603) 2141 3727 Website: www.comfori.com E-mail: hueyying.leong@comfori.com

Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:

Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:

7th - 9 th

G2E Asia

The Venetian Macao Reed Exhibitions | AGA 39/F., Hopewell Center, 123 Queen’s Road East, Wanchai, Hong Kong (852) 2965 1633 (852) 2824 0246 www.g2easia.com wendy.fong@reedexpo.com.hk

7th - 9 th

Russian Gaming Week

Crocus Expo, Moscow, Russia Smile-expo.com 8а, Vernadskogo prospect, Moscow, 119311, Russia (7) 499 550 08 96 (7) 499 550 08 97 www.rgweek.com info@smile-expo.com

Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:

25th

Best of British - Royalty Rocks

Star World Hotel Grand Ballroom British Business Association of Macau Alameda Dr. Carlos d’Assumpcao, No. 263, Edf. China Civil Plaza, 20 andar, Macao (853) 8798 9697 (853) 2875 7762 www.britchammacao.org bbam@britchammacao.org

July Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail: Date: Event:

5th

World Gaming Executive Summit

Eurostars Madrid Tower, Spain Terrapinn Wren House, 43 Hatton Garden, London, EC1N 8EL 44 (0)20 7092 1000 44 (0)20 7242 1508 www.terrapinn.com/2011/wges/ enquiry.uk@terrapinn.com 13th - 14th

Mobile Payments & NFC Asia 2011

Venue: Eaton Smart, Hong Kong Organiser: Symphony Global Address: 10 Anson Road, #25-03 International Plaza, Singapore 079903 Tel: (65) 6221 8119 Fax: (65) 6221 8796 Website: www.symphonyglobal.com E-mail: registration@symphonyglobal.com Date: Event:

4th - 6th

Asian Infrastructure & Property Development Summit 2011

Date: Event: Venue: Organiser: Address: Tel: Website: E-mail:

8th - 9 th

BetMarkets

Venue: The Venetian Macao Resort Hotel Organiser: marcusevans Address: 4 Battery Road, 13-01 Bank of China Building, Singapore 049908 Tel: (357) 22 849 333 Website: www.aipdsummit.com E-mail: delegates@.com

Date: Event: Venue: Organiser: Address:

22nd - 23rd

Date: Event: Venue: Organiser: Address:

Tel: Fax: Website: E-mail:

Vienna, Austria, TBC Clarion Gaming Earls Court Exhibition Centre, London SW5 9TA, UK (44) 0 20 7370 8579 www.bet-markets.com yeemay.huang@clariongaming.com

SAGSE Gaming Panama 2009

ATLAPA Convention Center, Panama City Monografie S. A. Av. Alvear 1883 Loc. 21, (C1129AAA) Cdad. Aut. de Buenos Aires, Argentina (54) 11 4805 4623 (54) 11 4805 4791 www.sagsepanama.com info@monografie.com

Tel: Fax: Website: E-mail:

8th - 10 th

Macao Franchise Expo 2011

The Venetian Macao Resort Hotel MFE | IPIM World Trade Centre Building, 1st & 4th Floors,918, Avenida da Amizade, Macao (853) 6212 8811 | 2871 0300 (853) 2825 7277 | 2859 0309 www.mfe.mo contact@mfe.mo | ipim@ipim.gov.mo

If you know of an event that you believe should be listed with Macau Business, please drop us an e-mail: calendar@macaubusiness.com. In the subject bar, type in “List me as an event”.

TBA : To be advised |

: A Macau Business partner event

106

Environment

Waste not, want not Recycling food waste is still something new to Macau’s food and beverage industry

BY SOFIA JESUS

very day Macau incinerates an average of almost 900 tons of solid waste, according to the latest available data. A large part of that is food waste from the city’s restaurants and hotels. Now, imagine if this could be recycled. Well, it can be.

The Environmental Protection Bureau has decided to study the possibility of treating food waste, to minimise the harm to the environment caused by incineration. The first step is to try out treat-

E

ment processes this year at selected hotels and schools.

The aim is to find out what kind of waste they produce and how better to treat it locally, the bureau said in a written reply to Macau Business enquiries.

The government is also planning to use the recently announced Environmental Protection and Energy Conservation Fund to support restaurants willing to invest in equipment to treat food waste.

For now, the bureau says it will continue to gather opin-

Nor any drop to drink T

he government is studying ways to recycle water. The head of the Maritime Administration, Susana Wong Soi Man, says the aim is to reduce the amount of fresh water used by some industries, and the amount used to water outdoor plants and flush toilets.

“We have a five-year plan,” Ms Wong told reporters. “We hope to complete the study this year.”

Ms Wong said that to allow for water recycling, the city’s five wastewater treatment plants would have to be extended or improved, which could take up to three years.

MAY 2011

ions about recycling to determine how best to pursue it.

Macau Hotel Association chairman Samuel Yeung has no doubt that most hotels would agree with the idea, but he says they are eager for more information. “The system has to be practical,” Mr Yeung says. For some hotels, like those downtown, the obstacle is not a lack of money, but a lack of space, he says.

Hotels want to know how much manpower the experiment would require and what effect it would have on patrons, he says. “Any kind of subsidies could help solve part of the financial issues, but people are more concerned with the procedures.”

At present, no major hotel recycles food waste, but some collect used cooking oil and grease and separate wet and dry garbage, Mr Yeung says.

One institution that does

recycle is the Pousada de Mong-Há, a hotel and restaurant run by the Institute for Tourism Studies for the instruction of its students.

Last year it bought a food waste decomposer that can treat 50kg at a time. This year it started a food waste recycling project and the management is happy with the results so far.

Good start Pousada de Mong-Há director Gloria Wong says the property produces 70kg to 100kg of food waste per day.

Recycling reduces this to 30kg of fish food or fertiliser for the herb garden per week.

The Pousada de Mong-Há is considering distributing the recycled waste to other government agencies to use for similar purposes.

The recycling process poses no hazards, Ms Wong notes. Separating the waste

107 believes recycling food waste in hotels and restaurants is “a good start”. He says a way to encourage it would be to create a recognition system.

Worms at work

before it goes into the decomposer is simple, and students and staff do it after meals.

The process also teaches future hoteliers and restaurateurs how to take care of the environment.

“It’s quite good”, Ms Wong says.

Ms Wong stresses that about one third of the 900 tons of rubbish Macau produces every day is food waste. Recycling, she says, would mean less incineration and therefore less pollution.

Ms Wong does not believe restaurants and hotels can make a profit from recycling. And she acknowledges that a food decomposer “is not a small investment”. A 10kg decomposer can cost more than MOP30,000. “It’s a matter of social responsibility,” she says.

Environment Consultative Committee vice-chairman Lionel Leong Vai Tac

The Environmental Protection Bureau says recycling food waste is important, but that it is only a “secondary method” of reducing waste.

It says the most efficient way to reduce waste is to do it at the source – meaning people should waste less food in the first place. This is why the bureau focuses on public education.

The Civic and Municipal Affairs Bureau is not standing by idly. It recycles food waste at the Iao Hon Market and the Macau Wholesale Market, near the Border Gate. Kenny Fong Vai Seng, the head of the bureau’s environment, hygiene and licensing department, says each recycling facility can treat 100kg per day, mainly fruit and vegetables.

But it is just an experiment, Mr Fong says. He says the bureau aims to establish an environmental education centre in Taipa by the end of this year, which would be able to treat about two tons of food waste per day, collected from nine markets, and eventually create fertiliser for the city’s public green areas.

Another experiment backed by the Civic and Municipal Affairs Bureau uses earthworms to do the recycling. The Macau Wholesale Market has 50 boxes of worms that can treat more than 5,000kg of food waste per year.

The bureau also has plans for a glass recycling project.

The idea is to start by collecting glass bottles from bars in NAPE. The glass could be crushed in Macau and then taken to Hong Kong for use as construction material.

Congratulations Macau Business on your 7th Anniversary

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MAY 2011

108

Management

Macau team

Simulated success Macau is the runner-up in the international finals of the world’s biggest management strategy contest

BY LUIS PEREIRA

he Macau team climbed the podium as the runner-up in the 2010 Global Management Challenge international finals, which last month drew 25 teams to the city. Slovakia won the competition.

Macau was represented by a group of five mainland students from the Macau University of Science and Technology. The team started well in front but lost steam during the second day of competition.

The finals were hosted by the Macau Management Association. The Global Management Challenge is regarded as the world’s biggest strategic business management simulation. Each team runs a notional company and the object of the game is to finish with the highest share price on a notional stock market.

Macau Business and Business Intelligence magazines – the flagship financial publications in English and Chinese respectively published by De Ficção Multimedia Projects – are media partners of the Global Management Challenge.

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MAY 2011

Right from the kick-off, the Macau team pulled away from the tougher competitors. At the end of day one, they stood at the top of their group, by a wide margin. There was no such luck for the Hong Kong squad, who finished one place shy of the cut.

In the final rounds against seven other finalists, something happened to the local champions: “Things slowed down,” said captain Xiong Junjun. “The competition was very tough and we were guessing the other teams’ strategies.”

Xiong said each team had navigated the simulation in its own way, demonstrating differences in business cultures.

“The Chinese team strategy was to save money everywhere, and as much as possible. Most teams chose to use agents for their advertising, spending a lot of money. We didn’t. We tried to do it in-house, but in the end it cost us more because the agents got good results for the money.”

Preparation key Now in the fourth and final year of his studies in Macau, the Hubei-born

marketing major hopes to land a job in Guangdong, preferably in sales. He acknowledges that the business culture in the mainland is still considered traditional but is rapidly changing.

Slovakia fielded a team of young Polish room-mates who were friends from high school before working in finance and IT in their adopted country.

It was Slovakia’s first victory in a Global Management Challenge final.

The key to their victory, they said, was not friendship – which they see as a disadvantage because it can lead to arguments – but preparation.

Third place went to the Czech Republic, followed by Poland and Russia.

Perennial contenders the mainland team finished sixth, ahead of Ukraine and Australia.

The early 2000s were golden years for the mainland in this competition, with five titles in seven years. Now, is the era of the rise of Eastern Europe, with the Czech Republic winning the international finals in 2006, Russia winning in 2008 and Ukraine winning last year.

109 A number of national teams, such as France, Britain and Finland, were made up of Chinese students. The Global Management Challenge rules do not prevent citizens of a foreign country from belonging to a national team. The number of Chinese students taking part is probably due to the huge popularity of the simulation in the mainland, where every year more than 1,000 teams compete to represent the country at the international level.

One slip Next year, they will compete for a trip to Ukraine, where the international finals will be held, concurrently with the European Championship for soccer. Debutants Venezuela and Puerto Rico have already confirmed that they will take part.

More than 450,000 students and young executives have competed since the inception of the Global Management Challenge in 1981.

The simulation program for the Global Management Challenge, known as EDIT 515, was created by economists at Scotland’s Strathclyde University. The

New challenges

T

he Asian Association of Management Organisations will run a Global Management Challenge simulation among its 15 members, it was announced last month, when the body met in Macau.

The agenda of the meeting included the development of programmes for the improvement of professional management standards throughout the region.

The association engages in dialogue with governments, large multinationals and small and medium enterprises. It is an independent, non-political and not-forprofit organisation.

The Macau Management Association now holds the presidency of the Asian Association of Management Organisations.

The Macau Management Association recognises that improvements in management standards have not kept up with the pace of other developments among its members.

goal is to test the outcome of strategic management decisions by a company that has competitors.

To simulation developers, it is its depth that makes EDIT 515 different.

One of the ”fathers” of the game, Bill Armitage, a former economics professor, explains that overlooking one simple factor, such as maintenance, could have a terrible impact on a company’s performance in the simulation.

“You might find that your production has gone down 20-odd percent, your margins tumbled and you don’t know why. That in itself could also cause disruption in your distribution and in the end you would be paying for a full container to ship your goods and find out that it was only one-third full ... only to find out that it all was caused because you didn’t account for the maintenance of your production line,” Mr Armitage says.

The programmers are now introducing new decision variables into the simulation. High on the agenda is the introduction of a carbon footprint measurement tool, following international trends.

MAY 2011

110

Luxury

Hot wheels More and more drivers are hitting the road in style as high-end car sales soar

BY LUCIANA LEITÃO

radition is not what it used to be on Macau’s roads. Not only are there more cars but the number of luxury automobiles is rising fast.

The head of the Macau Motor Traders Association, Patrick Tse, says most of the high-end marques are European, with Mercedes-Benz, BMW and Audi leading sales.

Usually, a car is regarded as “luxury” if it costs more than MOP400,000 (US$50,000). A mid-range model costs between MOP150,000 and MOP250,000, including taxes.

Paying a couple of hundred thousand patacas more for a luxury car, which is usually bigger than a standard saloon, seems a nonsensical idea in a small, compact city, full of narrow streets such as Macau. But with the economy booming, the niche has been widening, as there is a clear demand for such status symbols.

“Now, people are willing to pay and the consumption power is higher,” Mr Tse says.

Furthermore, new hotel-casinos are pushing up demand, since they tend to buy luxury vehicles from Rolls Royce, Bentley or Mercedes-Benz to transport their VIP patrons. Apart from the casinos, individuals connected with the gaming industry and an increasing number of businessmen account for a significant slice of the luxury car market.

And then there is the relatively new phenomenon of businessmen from the mainland who have either migrated to Macau or have a company registered here, that buy luxury cars because, overall, taxes in the territory are lower than they are across the border, says Mr Tse. “They can register [the car] in Macau, use a dual license and drive back to the mainland.”

Among the luxury marques, Mercedes-Benz retains its popularity, having increased sales by one-third last year to 475 cars. “Mercedes are tradi-

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MAY 2011

tionally very expensive. Others watching a person driving a Mercedes will have the feeling he’s a rich man,” says Mr Tse.

Roller derby The sticker price on a Mercedes-Benz SLK350 officially reads more than MOP670,000, including sales tax, according to the Financial Services Bureau. In the two first months of this year, 102 Mercedes-Benz were sold, 52 percent more than in the corresponding period the previous year.

BMW sales are also on the rise.

BMW Concessionaires (Macau) increased sales to 406 cars last year from 285 in 2009. In the first two months of this year it outsold Mercedes-Benz, 115 cars representing a 76 percent increase year-on-year. A significant number of those sales were high-end models.

Rolls-Royce Motor Cars, which is owned by BMW, is also posting good results. BMW Concessionaires started selling the marque in Macau in 2005.

The vehicle is considered by many to be the epitome of the luxury car. Just one was sold in Macau in 2009. Last year, they sold six.

Motoring show time E

xhibition organiser Top Marques will hold its first supercar show in Asia later this year.

The Top Marques Macau show will be held at the Venetian Macao from November 24-27. It will feature about 60 exhibitors and have space for test drives.

The aim is to do for Macau what Top Marques has been doing in Monaco for several years; develop the luxury car business.

“As the Asian market continues to develop an appetite for supercars and luxury products, it was a natural decision for Top Marques to come to this region,” says the founder and chairman of Top Marques, Lawrie Lewis.

111 The general manager of BMW Concessionaires (Macau), Albert Hui, says of local Rolls-Royce buyers: “They have been growing, particularly since last year, when we launched the new model, the Rolls-Royce Ghost. Before, there was just the Phantom, the big one. Then came the smaller one, the Ghost, which is more appealing to a wider range of customers.”

The price tag, however, is not much less. While a Phantom costs at least MOP5.4 million, to take a Ghost home one needs to pay around MOP3.5 million, taxes included.

Mr Hui is thinking of opening up a separate showroom just for Rolls-Royces later this year. “There has been a growing demand, not only from locals, but also from mainlanders. We’ve also seen a substantial demand from casinos,” he says. For instance, Wynn Macau’s limousine fleet includes nine Rolls-Royces.

Illustration: Rui Rasquinho

La bella figura Last year was also a good one for Porsche, with sales increasing to a record 107 cars, up from 44 in 2009. Sales are down early this year, with just 18 sold in the first two months of 2011, 30 percent fewer than a year before.

The general manager of Porsche Centre Hong Kong and Macau, Derek Tong, believes the record sales from last year came after expanding the range, including the launch of the new Panamera.

“It is a four-seat sports car. It’s still a performance car, so it appeals to a larger segment of customers,” he says.

Porsche’s most recent model, the 2011 Cayenne, has also been receiving a great deal of attention, Mr Tong says.

It is much the same story for Ferrari and Maserati. Ferrari delivered only one car in 2008 but last year it imported four. And it has orders for new models to be delivered by the end of next year, says the deputy managing director of Ferrari Maserati Hong Kong, John Newman.

Who are the select few buying a Ferrari in Macau? Mr Newman says some are local residents, including casino and hotel people but that most are mainlanders who use Macau as a second home or place of business.

As for Maseratis, only one vehicle was delivered in 2008 but seven were sold in 2009 and 15 were sold last year.

“It is a lower-end car versus Ferrari but we’re still talking of an entry price point of HK$1.5 million,” says Mr Newman.

MAY 2011

112 YANG YAO DIRECTOR OF THE CHINA CENTER FOR ECONOMIC REFORM, PEKING UNIVERSITY

China should import deflation UNLIKE EXPORTS, HIGHER IMPORTS OF CONSUMER GOODS WOULD HELP CHINA COMBAT INFLATION

W

ith China’s inflation – and inflation expectations – rising, how can price stability be maintained without threatening the country’s booming growth?

Reconciling growth and fighting inflation is not impossible, but it does require that the government overcome its deep-seated suspicion of opening China’s markets to imports.

The World Bank predicts 3.5 percent growth for the world economy this year, and most analysts predict that the United States will grow at a similar pace. As a result, external demand for China’s exports will be strong, while the interestrate differential between China and the world’s advanced economies is resulting in massive capital inflows. Thus, China will continue to accumulate large foreign-exchange reserves this year.

As a result, the Chinese authorities are now deploying a combination of tools to stabilize domestic prices. With the reserve ratio of banks already at 19.5 percent and unlikely to be raised by a large margin, interest rates will most likely continue to be raised.

Indeed, the benchmark interest rate reached 7.47 percent in August 2008, after a five-year climb. Given today’s current lending rate of 5.56 percent, the authorities have a great deal of upside room.

But raising interest rates has its downside: higher capital inflows, which will offset the disinflationary effect of higher borrowing costs. As a result, it is reasonable to expect that Chinese authorities will soon tighten controls on capital flows.

The renminbi debate Foreign governments and international markets would like to see China fight inflation by letting the renminbi appreciate in value. To the extent that the renminbi becomes more expensive, appreciation would discourage the influx of foreign capital.

But any currency appreciation would also raise peoples’ expectations of further appreciation – and thus invite higher capital inflows.

Appreciation will help China’s fight against inflation only if it brings down China’s trade surplus. But the experience of 2004-2008 suggests that moderate appreciation is not enough.

That is why some economists believe that China should take much bolder steps toward allowing the renminbi’s exchange rate to strengthen. For Chinese officials, however, this is out of the question, because it would almost certainly cause largescale unemployment and thus threaten social stability, which is closely tied to the government’s legitimacy.

Because the main inflation-fighting tools are double-edged swords, the Chinese authorities are likely to turn to other measures. For one, they will likely introduce quantity controls on bank lending, though the effects of such regulations are diminishing because banks and other financial institutions have developed a range of ways to circumvent them.

New ways A more effective measure is to expand the central bank’s sterilization operations. In theory, the People’s Bank of China can sterilize any amount of money supply caused by foreignMAY 2011

capital inflows simply by issuing the requisite amount of bonds.

In practice, the PBOC faces two kinds of costs.

The first cost is a direct accounting loss: the interest rate will inevitably increase when more bonds are issued. At the same time, the interest rate paid on the central bank’s foreign reserves, mostly in dollar-denominated US Treasuries, is low.

The second cost is implicit, but potentially far more substantial: because sterilization bonds are forced savings (and deflationary by definition), they absorb the potential investment and consumption implied by today’s trade surplus.

For example, banks would curtail mortgage lending in response to higher rates paid on sterilization bonds, forcing consumers to save more in order to buy houses. So more bonds today would deter domestic investment and consumption tomorrow.

Thus, the PBOC’s sterilization operations are likely to be self-defeating in the long run. The Bank sterilizes the money supply caused by today’s trade surplus, but in the meantime causes further current-account surpluses in the future.

“A policy aimed at increasing imports would serve several important goals – and poses little or no risk to economic growth. There is no good reason why the Chinese authorities should reject such an effort” So China’s authorities must find new ways to address its external-imbalance problem. One way might be to increase consumer imports. Right now, consumer goods account for only 2.3 percent of China’s imports, as they are subject to relatively high tariffs and value-added or sales taxes at customs, where procedures are complicated and slow.

Lowering the tariffs on consumer goods and simplifying customs procedures would improve consumer welfare while causing no significant harm to domestic industry. To see why, consider potential imports from the US, most of which are likely to be brand-name products, furniture, high-end cars, and land-intensive agricultural products (such as beef). China has a comparative advantage in none of these areas.

Unlike exports, higher imports of consumer goods would thus help China combat inflation. Moreover, increased imports would reduce China’s trade surplus and help balance China’s external position, which would be much welcomed by the international community.

In short, a policy aimed at increasing imports would serve several important goals – and poses little or no risk to economic growth. There is no good reason why the Chinese authorities should reject such an effort.

LUXURY THERAPY

Escape to a world of beauty at Wynn’s spas INTERNATIONAL TRENDS

What the big fashion houses envision as the latest in-things LOCAL VOGUE

In search of the best deals for a shopping rampage in Macau

Louis Vuitton

BREAKDOWN

BY THE NUMBERS

ALL THE DETAILS YOU MIGHT NOT NEED BUT STILL WANT TO KNOW ABOUT FASHION

The number of times China has hosted the Miss World beauty pageant. It took place in 2003, 2004, 2005, 2007 and 2010 and always in the same location; Sanya, in Hainan province

The year the first fish spa in Macau opened at The Shoppes at Four Seasons. Importing a Turkish tradition, this treatment uses fish to nibble away dead skin from your feet The year the Macau Fashion Designers Club was founded. Created by the Macau Productivity and Technology Transfer Centre in order to attract the best design talent in Macau, 13 years later local fashion still has a long way to run The number of consecutive years that the Miss Macau beauty pageant was not held. It was resurrected again in 2008 and last year it was postponed again The decade that fashion stopped in rural China.

Today many farmers still wear the same type of clothes that their parents did 50 years ago

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P

eople say it’s all about your inner beauty, and maybe that’s true. But won’t your inner beauty shine more if your exterior looks better?

For sure if you feel beautiful, you will act even more beautiful. So with that being said, this month’s Essential takes a close look at the stunning world of fashion.

For this edition, we interview the director of the spas at Wynn Macau. Jennifer Simms talks about the current offerings at the two Wynn properties in Macau and unveils some of the future promotions for those who enjoy beauty as a lifestyle.

We also feature two new exhibitions on fashion and cinema that will travel throughout several Sofitel luxury hotels, from Europe to the Middle East, and Australia.

As usual, we take a peek at the latest suggestions from some of the biggest international fashion houses, so get updated on all the current trends in the fashion universe. Everything you need to know about what should and shouldn’t be in your wardrobe.

As for the local vogue, we grab our shopping bag and look around the city’s best shops for the newest trends, accessories wise.

We also go in search of the best cosmetics products from the most famous brands to let you know what is hot. And our ‘Sex and Beauty’ article teaches how taking care of beauty can have advantages on the bedroom front. Enjoy!

Jewellery in Europe

One of the earliest cultures to begin making jewellery in Europe was the French In the beginning, European jewellery designs were very religion-oriented and contained Christian symbols, a tradition that has almost ceased to exist European gold jewellery must be of at least 10K purity and is typically found up to 18K

Europeans usually don’t use jade, preferring other types of materials, such as gold or silver Jewellery usually has two functions in Europe: embellishment or investment Usually, jewellery is deemed effeminate, so fewer men wear it

Jewellery in Asia

One of the earliest cultures to begin making jewellery in Asia was the Chinese, around 5,000 years ago Initially, Chinese jewellery designs were very religionoriented and contained Buddhist symbols, a tradition that continues today Higher gold purity levels that are less common in Europe, like 22K (91.6 percent pure gold) and 24K (99.9 percent pure gold) are common in Asia Jade is closely linked to Asian culture, history, and tradition, and is sometimes referred to as the stone of heaven Jewellery is usually seen, in Chinese culture, as a symbol of power. The more expensive it looks, the better Wearing earrings is a wide spread practice in many Asian countries, even among men

SEVEN DEADLY SINS OF BEAUTY IN ASIA GLUTTONY – The Chinese just can’t get enough of jade.

With a metaphoric meaning and equated with human virtues because of its hardness, durability and beauty, it is the favourite stone for tools, carved insignias and talismans.

unanni that help with de-stressing, body toning, weight loss and pain healing. As for Thailand, tourists choose it not only because they are able to enjoy a holistic healing experience, but also because they can enjoy a vacation by the beach at the same time.

GREED – The more expensive, the better. In Chinese culture, jewellery is seen as a symbol of prestige and, if it features diamonds or are particularly ostentatious, then the more important you seem among your peers.

ENVY – We always want what we don’t have. Western women envy Oriental eyes, which add a mysterious touch, while Asian women envy big, round Western eyes. For the latter, it’s easier to solve: use eyeliner, mascara or false eyelashes.

LUST – If you are lusting for some good old fashioned shopping days, then Bangkok, Thailand is one of the world’s best cities – particularly if you are looking for tailor made clothes, Thai silk or bags and shoes.

WRATH – You are allowed to be angry if you bought special batik or tribal accessories in any Asian country other than the Philippines. So next time, be warned: for these types of pieces, the prices are so cheap in the Philippines, it is ridiculous to buy them anywhere else.

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SLOTH – Sloth away at Thailand and India’s spas. In Asia, these are the best options for those who are looking for medical spa destinations. India’s cultural history provides holistic approaches such as ayurveda, yoga, siddha or

PRIDE – China and India can be proud of themselves. They are the only Asian countries, so far, with Miss World winners.

One for China – Zhang Zi Lin –and, up til now, five for India.

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FEATURE

STRIKE A POSE

A

total of 13 Sofitel hotels, spread around the world, have been celebrating fashion and cinema since March with two photo exhibitions. The expositions are organized by the French luxury hotel brand in collaboration with the Polka Gallery in Paris. One reveals backstage of the mystical world of haute couture, while the other presents the fantastic world of cinema.

The properties chosen to receive the exhibitions are located in London, Budapest, Brussels, Lisbon, Amsterdam, Munich, Dubai, Cairo, Marrakech, Rome and, closer to Macau, the Sofitel hotels in Sydney, Melbourne and Brisbane. Unfortunately, Sofitel hotel at Ponte 16 is not among the selected properties.

“Fashion Stills” are portrait works by several stars of photography of the French runways, such as Derek Hudson, Françoise Huguier, Jean-Marie Périer and Gérard Uféras. They immortalise rare moments in the very secret universe of haute couture masters like Dior, Chanel, Jean-Paul Gaultier and Yves St Laurent, which are now shown in this exposition.

First displayed at the Sofitel Le Faubourg in late 2009, the “Fashion Stills” exhibition was given an international flavor on its 2010 journey across Europe and North America. This year, the story goes on.

As for the “On-set/Off-set” exhibition, the photographers capture unique moments in the lives of French and international actors. Johnny Depp, Sophie Marceau, Monica Bellucci, Woody Allen, Serge Gainsbourg and Jane Birkin are the emblematic film stars that can be seen in the exhibition.

The exhibitions are touring the world until April 2012, giving you plenty of time to choose one of the destinations and enjoy this unique event.

Sofitel has 120 addresses in almost 40 countries, including Asia in locations such as Beijing and Shanghai as well as Thailand.

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BIG SPENDER

Royal slippers

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FASHION STILLS Si la mode m’était contée Australia Sofitel Sydney Wentworth: May 2 - August 20 Sofitel Brisbane Central: September 7 - December 26 Africa/Middle East Sofitel Dubaï Jumeirah Beach: March 16 - May 20 Sofitel Cairo El Gezirah: June 16 – August 15 Sofitel Marrakech Palais Impérial: September 15 - November 10 Europe Sofitel Lisbon Liberdade: December 1 - January 22 (2012) Sofitel Budapest Chain Bridge: February 17 - April 20 (2012)

ON-SET / OFF-SET Cinema moments Sofitel Brussels Le Louise: March 10 - May 19 Sofitel Amsterdam The Grand: June 3 – August 15 Sofitel London St James: September 2 - November 11 Sofitel Munich Bayerpost: November 29 - February 7 (2012)

hey are among the top ten most expensive pairs of shoes in the world.

Valued at US$160,000 (MOP1.28 million), these are the slippers worn by the Indian monarch Sikandar Jah, Nizam of Hyderabad, who lived in the 19th century.

Nizam, a shortened version of Nizam-ul-Mulk, meaning ‘Administrator of the Realm’, was the title of the native sovereigns of the Hyderabad State, in India.

Encrusted with rubies and diamonds, these royal slippers were even stolen once, in January 2006, from the Bata Shoe Museum, in Toronto, Canada, but were later recovered after an anonymous tip.

After they vanished, the daughter of one of the museum managers’ saw some pictures of the slippers in her photo lab.

This was the first clue that eventually led to the recovery of the slippers.

Even though no damage was found, authorities confirmed the shoes had been worn.

Recognised as a symbol of royalty, these slippers are now, once again, a museum piece, considered by several media as one of the ten most expensive pairs of shoes in the world.

No wonder the thief wanted to wear them. Who wouldn’t?

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INTERVIEW

in the flesh When a guest arrives at any of Wynn’s spas in Macau, they are welcomed into an environment of elegance and luxury.

Spa director Jennifer Simms explains the secrets of the trade

By Luciana Leitão

S

pring has arrived and it’s all about renewing energies at Wynn’s two spas in Macau. There are already some promotions ongoing, while others are being prepared.

At the Spa at Wynn Encore, it is time to ‘Renew’, a rejuvenating treatment designed just for Spring, which includes an energizing body scrub with Himalayan body salts, a lymphatic massage and a vitality facial with strawberry or rhubarb.

The ‘Renew’ is a seasonal promotion that finishes on June 15, but others are already being prepared. “We’ll have seasonal escapes for Encore. The next one will be for Summer and then we’ll have one for mid-Autumn as well,” explains the director of Wynn’s spas, Jennifer Simms.

The massage menu itself will undergo some changes, and is still being designed. “We will have ‘Eminence’, which is a beautiful organic line,” Ms Simms says, while explaining that there is also a new product for anti-ageing, as well as a new line just for men, called ‘Hommage’.

“They actually use crushed black diamonds for exfoliation.

It’s a very unique facial, just for men and we’ll have the razors and shavers to go with it as well.”

The differences

The spas at Wynn Macau and at Encore have different styles, starting with their guests’ profiles. “Encore is more hotel guests.

Wynn is more of a day spa, so we get a lot of locals. We have a hair salon there too, so a lot of people from Macau and Hong Kong come,” Ms Simms says.

There is also a new phenomenon, which is happening more and more, particularly at Encore: people offering a treatment as an anniversary or birthday gift.

Treatments are basically the same in both facilities, with subtle differences. “The spa at Wynn Macau actually has a couple suite with a bathtub in it, so we have a special couples’ treatment, which we don’t have at Encore. Then, at Encore, we have our signature four-hand massage, which we don’t have at Wynn,” Ms Simms explains.

Even though the therapists and the products are the same, the experience can be different. At Encore, guests have their own private spa, while the spa at Wynn has a communal change

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area, steam, shower and jacuzzi. “Encore is more luxurious, more exclusive, definitely a great getaway,” says Ms Simms.

The intuition

The therapists working for both spas are chosen according to several criteria. Coming from Macau, the mainland, the Philippines, Thailand and Indonesia, they all have previous experience in five star resorts.

“We wouldn’t take them straight from a small spa where they haven’t actually experienced the kind of standard we are expecting,” Ms Simms says. As such, they are all multi-skilled, fit to do massages, facials, manicures and pedicures.

Also, it is important for such professionals to have a highly developed intuition, so when a guest comes in, they are able to understand how much pressure he or she needs. “The therapist can tell by touching certain parts of the body where the problem areas are,” Ms Simms notes.

Overall, people coming to a spa are looking for a special experience, she continues. This means that spas should be particularly careful with things such as design and hygiene.

“If at our spa treatment rooms, all our walls were white, with no flowers and no amenities for you, it would totally change your experience. All your senses should be at peace, they shouldn’t be wondering: Why didn’t they paint the walls?”

THE SPA AT WYNN MACAU Facilities: 14 treatment rooms for massage, body treatments, facials and hydrotherapy; separate women’s and men’s facilities with showers, steam room, sauna and spa; fitness area; and beauty salon Treatments: Macanese massage, hot stone and ‘tui na’, facials and body treatments Hours: 6am to 10:30pm THE SPA AT ENCORE Facilities: One couple’s room and seven single rooms each with their own steam room, sauna and aroma hydrotherapy bath and shower; fitness centre Treatments: Macanese massage, hot stone and ‘tui na’, four-hand massage, facials and body treatments Hours: 6am to 10:30pm

HAUTE COUTURE

For Her

Here are the latest suggestions from some of the most luxurious brands in the world

Kenzo Rich and sumptuous, the kimono, for Kenzo, still preserves some of the aspects of the traditional Japanese dress – the colours, the textures and decorative elements.

In its Spring/Summer collection, Kenzo uses rusty tones, sand, ochre, brick, coral, and jade.

The Kenzo woman wears a crepe de soie, sandy chiffons, frayed threads, prints, tulle, rustic linen, silks and wool jacquards, as elegant as ever. Embroideries, encrusted stones, sketches, kimono and landscape patterns, microprints, wool tapestries and graphic symbols are all portrayed in Kenzo’s collection.

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Ferragamo For the Autumn/Winter collection, Ferragamo portrays an elusive woman dressing in contrasts. Free from conventions, the Ferragamo woman likes a deep-necked pinstripe robe manteau combined with the femininity of pumps, wearing overcoats and trenches with generous volumes and wide shoulders or masculine cut jackets with pointed lapels and traditional patterns.

Shirts with structured collars and geometric pattern scarves go hand in hand with cut skirts or trousers with pleats.

During the night time, transparencies and sumptuous bustier dresses reveal the sensible woman. Black and white, grey and red are the chosen colours.

Louis Vuitton Inspired by Art Deco, Louis Vuitton’s pre-Fall collection thinks of women from the past that were ahead of their time.

In tweed, silk and feathers, the Art Deco diva moves in a luxurious and seductive way, using coats in striped tweed or a burgundy coat in bonded wool. Wearing a little matching shortsleeved shirt or a silk jersey wrap dress, the Art Deco diva walks around in style.

The colour palette goes from burgundy to brown, passing by red and navy.

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HAUTE COUTURE

For Him

We take a peak at the men’s collections from some of the best international fashion houses

Shanghai Tang The pre-Autumn/ Winter 2011 men’s collection offers an alternative for the modern gentleman.

Inspired

by Oriental culture, but complementing it with Western styles, Shanghai Tang’s new collection is called “From China with Love” and portrays a new era in style.

Considered the pioneering luxury lifestyle brand from China, Shanghai Tang was founded in 1994, providing a new and elegant way of looking into China through fashion.

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Kenzo Blues in shades of navy and sky, mixed with beige and a touch of vibrant red are the colours for Kenzo’s Spring/ Summer collection, combined with nuances of taupe, tobacco, twine and ecru.

Natural, but sometimes involving creative fibres, the materials recreate leather mixed with jersey, linen and denim. Shirts with floral prints, watercolours and micro patterns as well as large prints of tigers and landscapes are some of the brand’s ideas for men.

Ferragamo Using sophisticated combinations, Ferragamo’s Autumn/ Winter collection recreates the masculine forms.

With colours, finishes and references to equestrianism, this collection portrays an unpredictable style.

The classic cashmere overcoats in tones of camel and the military flavoured outerwear items are a dynamic response for the modern man.

With longer jackets and pointed lapels, the new world of Ferragamo is a mixture of characters.

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HAUTE COUTURE

The accessories

Because you need the right piece to match your clothes, here are some high-end suggestions for watches, jewellery and bags

Bulgari’s Mediterranean Eden The “Mediterranean Eden” is a new collection inspired by nature, using shapes and precious metals with harmonious chromatic combinations.

Creations of haute jewellery, the smooth and irregular precious and semi-precious gems mounted on necklaces, long chains or multiple string necklaces, contrast with more conventionally cut stones.

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The Wedding collection,

by Enzo The luxurious gemstone brand Enzo presented its 2011 wedding collection in Macau.

And among Enzo’s luxurious coloured gemstone jewellery, including some rare Paraiba Tourmaline pieces, was the famous “Heart of the Ocean” Tanzanite necklace, a classic Diana Tanzanite Diamond Ring and a valuable tourmaline gentleman ring.

Steel and Gold, by David Yurman America’s favourite jeweller and timepiece designer has a new product: the Steel & 18K Gold timepiece. Available with a stainless steel and 18K gold bracelet fitted with a fold-over clasp, this new piece captures the essence of American luxury through Swiss craftsmanship.

Ferragamo’s Fall collection The new set of accessories for this luxury brand portrays a new metropolitan look, where women wear crocodile print calfskins or leopardspot ponyskins. The Ferragamo bags are clean and classic in flavour, with crafted leather braiding in soft colours, as well as hand-painted exotic skins. For the accessory collection, Salvatore Ferragamo has prepared a masterpiece: a new silk scarf based on a 1950s painting from Italian artist Alvaro Monnini.

Louis Vuitton’s Art Deco Diva The bags and clutches for the pre-Fall Louis Vuitton collection combine muted tones with smooth and grained leathers, while hand stitched details on the shoes are paired with heels, half in lacquered wood, half in rubber.

But the Art Deco diva from Louis Vuitton never forgets the silks, weighted by feather pompoms, as well as the cashmere and wool hat with plastic visor and her jewellery. With a vintage look, the glittering bracelets and pendant earrings with ostrich feathers are paired with cuffs and bangles in coloured resin.

David Yurman’s Classic GMT Worldtimer It’s a fresh and innovative interpretation of the GMT Worldtime wristwatch. The Classic GMT Worldtimer’s stainless steel case features a fine Swiss automatic movement. It has a round, 43.5mm stainless steel case with integrated cable design, world-cities scale around a rotating inner bezel and front sapphire crystal.

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COSMETICS

The products

Check out the latest news in the beauty department

New sublime masks This is an innovative range of beauty masks boosted by Oxygen Carrier and it has Bulgari’s name on it. Oxygen Carrier detoxifies the skin and encourages cell oxygenation, helping the complexion to become fresh and regain its natural beauty. Each of these masks contains Bulgari Gem Essence, which is essence of precious gemstones, leaving the skin completely revitalised.

The Sublime Masks Collection includes Masque de Lumière for ultimate radiance, Masque Précieux for a global anti-aging effect and Masque Source Défense for a soothing-relaxing result.

THE LOCAL TRENDS

For its 25th anniversary, Dior has included TP Vityl (a vitamin E derivative) in the Dior Capture Totale skincare collection. The TP Vitylenriched Longoza Cellular Complex is intended to revitalize epidermal and dermal cells damaged by the environment and stress.

Lush charity pots This limited edition is purely to benefit Japan. In the aftermath of the earthquake that severely hit the Asian country, Lush Cosmetics has developed the Rising Sun soap, as well as three Charity Pots. Modelled after the Japanese flag, the Rising Sun soap is scented with a sweet cherry fragrance and helps to soften skin. The body lotion in the charity pots is made with fair trade organic cocoa butter and a little bit of ylang ylang and geraniums.

Accessories

We tour around and spot some of the best luxury products available in Macau. Just take a look

Versace bag

Price: MOP80,600 Where: The Grand Canal Shoppes, the Venetian Macao

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TP Vityl-enriched Longoza Cellular Complex, Dior

Bulgari Daniel Roth Papillon Chronographe Price: MOP337,300 Where: The Grand Canal Shoppes, the Venetian Macao

Louis Vuitton Avant-Garde clutch Price: MOP27,500 Where: One Central Macau

SEX AND BEAUTY

The god of small things Inner beauty is important when two people are in love. But when it comes to the bedroom, let’s get real: women are more interested in men who take care of themselves and vice-versa.

Don’t get us wrong. We are not talking about those who are naturally beautiful. We are talking about those who take care of themselves and become even more beautiful before the eyes of their loved ones.

First and foremost, don’t take anything for granted.

Relationships need to be nurtured and that also means taking care of how you look. So don’t think that you can pull it off by wearing a gym suit everyday.

Let’s start with the girls.

Why not use a moisturiser every day? Your skin will have a fresher sensation and you’ll feel more relaxed and beautiful.

Silky skin makes women so much more attractive. Also, think about what you are wearing, the combinations and the colours.

Waxing is also important – don’t think that because you are in a stable relationship you can neglect that part. Believe us, it’s important. Finally, don’t neglect the underwear: if yours is sexy, it will do wonders under the sheets.

Now, let’s talk about the boys. Shaving and thinking about the clothes you’re wearing is important. Don’t just wear sloppy and clumsy things – they’re not attractive. Also, don’t neglect personal hygiene – for sure, your partner will appreciate that, thus improving your love life a great deal.

You might be thinking, “details, details”, but overall, these simple things will work wonders on your relationship.

Try it, you won’t regret it.

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Grand Canal Shoppes, The Venetian Macao 3D Gold 2115 5cm 2611 Abiste 2629 Adidas 2211 Adidas Originals 2211 Grand Canal Shoppes, agnès b.

2615 The Venetian Macao Aigle 2419 Aimer 2628a 3D Gold 2115 Alqvimia 2606 5cm 2611 Anagram 2446 Abiste 2629 Anteprima 2618 Adidas 2211 Apothecary 1036b Adidas Originals 2211 Armani Exchange 2442a agnès b.

2615 Arté Madrid 2623c Aigle 2419 Artini 2015 Aimer 2628a Ashworth 2323 Alqvimia 2606 Atelier 1013 Anagram 2446 Autore 2643 Anteprima 2618 b+ab 2312 Apothecary 1036b Bauhaus 2428 Armani Exchange 2442a Belle 2108 Arté Madrid 2623c Bershka 2508 Artini 2015 Blancpain 2706 Ashworth 2323 Blush 2642 Atelier 1013 Bossini 2210 Autore 2643 Boucheron 2007a b+ab 2312 Boutique di Gondola 2301, 2660 Bauhaus 2428 Boutique V 1036b Belle 2108 Breguet 2011 Bershka 2508 Breil 2610 Blancpain 2706 Brooks Brothers 2711 Blush 2642 BSX 2212a Bossini 2210 Butani 2523 Boucheron 2007a BVLGARI 2006 Boutique di Gondola 2301, 2660 Canudilo 2705 Boutique V 1036b Canudilo Holiday 2005 Breguet 2011 Carat 2400 Breil 2610 Carl F. Bucherer 2207 Brooks Brothers 2711 Cerejeira 2202 BSX 2212a Century 2402 Butani 2523 Chai 2646 BVLGARI 2006 CHARRIOL 2402c Canudilo 2705 Chevignon 2432 Canudilo Holiday 2005 Chocoolate 2302a Carat 2400 Chow Tai Fook 2118a Carl F. Bucherer 2207 Watch & Jewellery Cerejeira 2202 Choi Wai Jewellery 2118a Century 2402 Chopard 2010 Chai 2646 Cirque du Soleil Boutique 1044 CHARRIOL 2402c City Chain 2019a Chevignon 2432 CK Calvin Klein 2622a Chocoolate 2302a CK Jeans 2431 Chow Tai Fook 2118a CK underwear 2601a Watch & Jewellery Clarins 2625a Choi Wai Jewellery 2118a Club Monaco 2446 Chopard 2010 Coach 2009 Cirque du Soleil Boutique 1044 Codes Combine 2423 City Chain 2019a Columbia Sportswear Co. 2211 CK Calvin Klein 2622a Converse 2211 CK Jeans 2431 Corona 2212a CK underwear 2601a Crocodile 2023a Clarins 2625a Crocs 2211 Club Monaco 2446 Daks 2101 Coach 2009 Damiani 1013a Codes Combine 2423 Davidoff 1001/2623b Columbia Sportswear Co. 2211 Deicae 2107 Converse 2211 Demandor 2105 Corona 2212a Derain 1019 Crocodile 2023a DG Lifestyle Store 2201 Crocs 2211 Diesel 2632 Daks 2101 Dilys’ 2109 Damiani 1013a Dooney & Bourke 2616 Davidoff 1001/2623b Ecco 2025 Deicae 2107 Edelweiss Jewellery 1020a Demandor 2105 Elegant Prosper 2609 Derain 1019 Elle Jewellery K3 DG Lifestyle Store 2201 Elov 2207a Diesel 2632 Embry Form 2646 Dilys’ 2109 Empezoni 1021 Dooney & Bourke 2616 Emphasis Jewellery 2020 Ecco 2025 Emporio Armani 2700 Edelweiss Jewellery 1020a Emporio di Gondola 2660 Elegant Prosper 2609 EQ:IQ 2612 Elle Jewellery K3 Esprit 2303 Elov 2207a Eu Yan Sang 2100 Embry Form 2646 Expressions 2103 Empezoni 1021 Fabio Caviglia 1008 Emphasis Jewellery 2020 Fables 2300a Emporio Armani 2700 Fancl 2635 Emporio di Gondola 2660 Fila 2401 EQ:IQ 2612 Florsheim 2603 Esprit 2303 Folli Follie 2407 Eu Yan Sang 2100 Fossil 2413 Expressions 2103 Franck Muller 2012 Fabio Caviglia 1008 Fables 2300a Fancl 2635 Fila 2401 Florsheim 2603 Folli Follie 2407 Fossil 2413 Franck Muller 2012

French Connection Furla G-Star Raw G2000 Geox; Joy & Peace Giordano girls talk Giviea French Connection Glashütte Original Furla Godiva G-Star Raw Göessele G2000 Grossé Geox; Joy & Peace Guess Accessory Giordano Guess Jeans girls talk Hanmac Giviea H&B Medicine Shop Glashütte Original Hauber Godiva Hearts On Fire Göessele Herborist Grossé Henry Jewellery&Watches Guess Accessory HKW Medicine Shop Guess Jeans Hogan Hanmac Home of Swallows H&B Medicine Shop Hugo Boss Orange Label Hauber Hush Puppies Hearts On Fire i.t Herborist innée Henry Jewellery&Watches Izzue HKW Medicine Shop Jaquet Droz Hogan JC Shop Premium Home of Swallows JC Versace Hugo Boss Orange Label Jean Scott Hush Puppies Jean Scott Sport i.t Jipi Japa innée Joan&David Izzue Kaltendin Jaquet Droz Kego JC Shop Premium Kilara & Ceu JC Versace Killah Jean Scott Lacoste Jean Scott Sport Lacoste Accessories Jipi Japa Lancel Joan&David Le Saunda Kaltendin Levi’s Kego Links of London Kilara & Ceu LLadró Killah L’Occitane Lacoste Longines Lacoste Accessories Luisa Cerano Lancel Luk Fook Jewellery Le Saunda Lush Levi’s M Missoni Links of London Malo Clinic LLadró Health & Wellness L’Occitane Malo Pharmacy Longines Mango Luisa Cerano Karen Millen Luk Fook Jewellery Marisfrolg Lush Marjorie Bertagne M Missoni Marlboro Classics Malo Clinic Marathon Sports Health & Wellness Massimo Dutti Malo Pharmacy Maubossin Mango Maud Frizon Paris Karen Millen Max&Co. Marisfrolg Meng Tim Telecom Marjorie Bertagne Mercato Marlboro Classics MICHAEL WYLER Marathon Sports Michel René Massimo Dutti Mikimoto Maubossin Milestone Maud Frizon Paris Millie’s Max&Co. Mirabell Meng Tim Telecom Miss Sixty Mercato Mocca MICHAEL WYLER Moiselle Michel René Montagut Mikimoto Montblanc Milestone Monte Carlo Jewellery Millie’s Moreline Mirabell Murphy & Nye Miss Sixty NaRaYa Mocca Natural Beauty Mix Moiselle Nautica Montagut Next Montblanc Nike Monte Carlo Jewellery Nine West Moreline Nokia Murphy & Nye Normana NaRaYa Omega Natural Beauty Mix Optica Boutique Nautica Optica Fashion Next Optical 88 Nike Osim Nine West Oto Nokia Outdoor Fashion Normana Patchi Omega Optica Boutique Optica Fashion Optical 88 Osim Oto Outdoor Fashion Patchi

2440 2628 2427 2303 2641 2218 2302c K5 2440 2706 2628 2640a 2427 2627 2303 2631 2641 2601 2218 2429 2302c 2417 K5 2120a 2706 2622 2640a 2008 2627 K6 2631 2013b 2601 2637 2429 2510 2417 2201a 2120a 2031a 2622 2111 2008 2328 K6 2636 2013b 2613 2637 2523b 2510 2112 2201a 2001 2031a 2007a 2111 2433 2328 2102a 2636 2612a 2613 2017a 2523b 2402a 2112 2306 2001 2306a 2007a 2508a 2433 2403 2102a 2701 2612a 2210a 2017a 2425 2402a 2608a 2306 2013c 2306a 2608 2508a 2400 2403 2622 2701 2018 2210a 2636a 2425 2630 2608a 3015 2013c 2608 2652a 2400 2321 2622 2605 2018 2619 2636a 2648 2630 2509 3015 2221 2442 2652a 1013 2321 2650 2605 2623 2619 K11 2648 2508 2509 2446 2221 2703 2442 2011 1013 2112a 2650 2405 2623 2658 K11 2438 2508 2322 2446 2607 2703 2525a 2011 2002 2112a 1001a 2405 2639 2658 2702 2438 2212 2322 2128 2607 2709 2525a 2211 2002 2432a 1001a 2605 2639 2111a 2702 1020 2212 2003a 2128 1010 2709 2005a 2211 2019 2432a 2106 2605 2120 2111a 2523a 1020 2111a 2003a 1010 2005a 2019 2106 2120 2523a 2111a

Paul & Shark 2007 Piaget 2013 Piquadro 2023b Private i Salon • Nail Nail 2617a Promod 2316 Pull&Bear 2525 Rado 2006a Rayure 2606a Paul & Shark 2007 Rich Jade 2117 Piaget 2013 Rimowa 2708 Piquadro 2023b Rockport 2203 Private i Salon • Nail Nail 2617a Sa Sa 2318 Promod 2316 Sa Sa Selective 2642a Pull&Bear 2525 S. Culture 2300 Rado 2006a S.T. Dupont 1022 Rayure 2606a Samsonite 2527a Rich Jade 2117 Sisley 2310 Rimowa 2708 Sisley Paris 2630a Rockport 2203 Skechers 2216 Sa Sa 2318 Soft & Intimate 2527 Sa Sa Selective 2642a Staccato 2319a S. Culture 2300 Stefanel 2421 S.T. Dupont 1022 Steve Madden 2612b Samsonite 2527a Stone Market 2402b Sisley 2310 Stradivarius 2509a Sisley Paris 2630a STS Canada 2643k Skechers 2216 Sulwhasoo 2617 Soft & Intimate 2527 Sunglass 88 K9 Staccato 2319a Swarovski 2415 Stefanel 2421 Swatch 2426a Steve Madden 2612b Tara Moor 2426 Stone Market 2402b The Body Shop 2300b Stradivarius 2509a The Kiss 2302b STS Canada 2643k The Manchester United 2215 Sulwhasoo 2617 Experience Sunglass 88 K9 Thomas Sabo 2426b Swarovski 2415 Tie Rack / Bric’s 2435 Swatch 2426a Tiffany & Co. 2003 Tara Moor 2426 TISSOT 2411 The Body Shop 2300b Tokyu Walker 2652 The Kiss 2302b Tommy Hilfiger 2710 The Manchester United 2215 Tonino Lamborghini 2646a Experience Triple Five Soul 2436 Thomas Sabo 2426b Triumph and Hom 2220 Tie Rack / Bric’s 2435 Trussardi Jeans 2625 Tiffany & Co. 2003 TSL 2022 TISSOT 2411 Tumi 2707 Tokyu Walker 2652 Tung Fong Hung 2102 Tommy Hilfiger 2710 UM Undergarment 2526 Tonino Lamborghini 2646a United Colors of Benetton 2308 Triple Five Soul 2436 Venetian Flori 2633 Triumph and Hom 2220 Venilla Suite 2600 Trussardi Jeans 2625 Verri 2703a TSL 2022 Vertu 2006b Tumi 2707 Vilebrequin 2623a Tung Fong Hung 2102 Wolford 2626 UM Undergarment 2526 Yes 2023 United Colors of Benetton 2308 Zara 2313 Venetian Flori 2633 Venilla Suite 2600 Verri 2703a The City of Dreams Vertu 2006b Vilebrequin 2623a Alfred Dunhill L1, The Boulevard Wolford 2626 Bally L1, The Boulevard Yes 2023 Burberry L1, The Boulevard Zara 2313 Cartier L2, The Boulevard Chanel L2, The Boulevard Chopard L2, The Boulevard The City of Dreams Chow Tai Fook L2, The Boulevard Coach L1, The Boulevard Alfred Dunhill L1, The Boulevard Emporio Armani L1, The Boulevard Bally L1, The Boulevard Gucci L1, The Boulevard Burberry L1, The Boulevard Hublot L2, The Boulevard Cartier L2, The Boulevard Hugo Boss L1, The Boulevard Chanel L2, The Boulevard i TO i L1 & 2, The Boulevard Chopard L2, The Boulevard Insider L1, The Boulevard Chow Tai Fook L2, The Boulevard IWC L2, The Boulevard Coach L1, The Boulevard Jimmy Choo L1, The Boulevard Emporio Armani L1, The Boulevard LeSportsac L1, The Boulevard Gucci L1, The Boulevard Longines L2, The Boulevard Hublot L2, The Boulevard Marc by Marc Jacobs L1, The Boulevard Hugo Boss L1, The Boulevard Omega L2, The Boulevard i TO i L1 & 2, The Boulevard PENACHE L2, The Boulevard Insider L1, The Boulevard Ralph Lauren L1, The Boulevard IWC L2, The Boulevard Rock Shop L1, Hard Rock Hotel Jimmy Choo L1, The Boulevard Rolex L2, The Boulevard LeSportsac L1, The Boulevard Salvatore Ferragamo L1, The Boulevard Longines L2, The Boulevard Swarovski L1, The Boulevard Marc by Marc Jacobs L1, The Boulevard Tag Heuer L2, The Boulevard Omega L2, The Boulevard The Bubble Shop L1, The Boulevard PENACHE L2, The Boulevard Timeless L2, The Boulevard Ralph Lauren L1, The Boulevard Tudor L2, The Boulevard Rock Shop L1, Hard Rock Hotel Tumi L1, The Boulevard Rolex L2, The Boulevard Valentino L1, The Boulevard Salvatore Ferragamo L1, The Boulevard Vertu L2, The Boulevard Swarovski L1, The Boulevard Vivienne Westwood L1, The Boulevard Tag Heuer L2, The Boulevard Yves Saint Laurent L1, The Boulevard The Bubble Shop L1, The Boulevard Timeless L2, The Boulevard Tudor L2, The Boulevard Tumi L1, The Boulevard Valentino L1, The Boulevard Vertu L2, The Boulevard Vivienne Westwood L1, The Boulevard Yves Saint Laurent L1, The Boulevard

The Esplanade, Wynn Macau Alfred Dunhill Bvlgari Chanel Christian Dior Ermenegildo Zegna The Esplanade, Fendi Wynn Macau Ferrari Giorgio Armani Alfred Dunhill Gucci Bvlgari Hermes Chanel Hugo Boss Christian Dior Louis Vuitton Ermenegildo Zegna Miu Miu Fendi Cigar Imporium Ferrari Piaget Giorgio Armani Prada Gucci Sundries Hermes The Signature Shop Hugo Boss Tiffany & Co. Louis Vuitton Tudor Miu Miu Van Cleef & Arpels Cigar Imporium Versace Piaget Vertu Prada Wynn&Co Watches Sundries and Jewellery The Signature Shop Tiffany & Co. Tudor The Encore, Van Cleef & Arpels Wynn Macau Versace Vertu Cartier Wynn&Co Watches Chanel and Jewellery Piaget

Shoppes at Four Seasons Abiste Aquascutum Archaic Chinese Arts Armani Collezioni Audemars Piguet Bottega Veneta Shoppes at Four Brioni Canali Abiste Cerruti 1881 Aquascutum Cho Cheng Archaic Coach Chinese Arts Armani Cocco Collezioni Audemars Cole Haan Piguet Bottega Veneta David Yurman Brioni Diane Von Furstenberg Canali Dilys’ Cerruti D’urban1881 Cho Cheng E-Rave CustomShop Coach Fabio Caviglia Cocco Fish Spa Cole Haan Galerie du Monde David GievesYurman & Hawkes Diane Von Givenchy Furstenberg Dilys’ Guess by Marciano D’urban H&B Medicine Shop E-Rave CustomShop Hugo Boss Fabio Caviglia Juicy Couture FishCavalli Spa Just Galerie du Monde Kate Spade Gieves & Hawkes Kent & Curwen Givenchy Kenzo Guess by Marciano Kwanpen H&B Medicine Shop La Perla Hugo Boss Marc by Marc Jacobs Juicy Couture Max Mara Just Cavalli Old House Gallery Kate Spade On Pedder Kent & Curwen Optica Privé Kenzo Ports 1961 Kwanpen Samsonite Black Label La Perla Tang Shanghai Marc byChen Marc Jacobs Shiatzy Max Mara St. John Old House Gallery Stefano Ricci On Pedder Stuart Weitzman Optica Privé Tse Ports 1961 Valentino Samsonite Black Label Versace Shanghai Tang Vintage Fine Wines Shiatzy Chen Vinum Fine Wine St. John Merchants Stefano Ricci Stuart OneWeitzman Central Tse Valentino Bally Versace Bottega Veneta Vintage Bvlgari Fine Wines Vinum Fine Wine Burberry Merchants Cartier

Next month look for

Grand Lapa Hotel The Encore, Wynn Macau Bally 13 Burberry 1 Cartier Cartier 12 Chanel Christian Dior 11 Piaget Cigar Imporium 17 Alfred Dunhill 10 Grand Lapa Hotel Emporio Armani 9 Ermenegildo Zegna 2 Bally 13 Florinda Jewelry 16 Burberry 1 Hermes 8 Cartier Hugo Boss Orange Label 12 5 Christian Dior 11 Louis Vuitton 4&5 Cigar Imporium 17 Omega 6 Alfred Dunhill 10 Salvatore Ferragamo 7 Emporio Armani 9 Valentino 15 Ermenegildo Zegna 2 Florinda Jewelry 16 DFS Galleria, Hermes The Four Seasons8 Hugo Boss Orange Label 5 Louis Vuitton 4&5 Bally 1123 Omega 6 Burberry 1110 Salvatore Ferragamo 7 Caran d’Ache 1129 Valentino 15 Cartier 1125 Celine 1109 DFS Galleria, Chanel The Four Seasons1117 Chloe 1123a DFS Beauty World 1101/18-30 Bally 1123 DFS Jewellery 1101/33-45 Burberry 1110 and Watch World Caran d’Ache 1129 DFS Sunglass World 1101/36 Cartier 1125 Dior 1120 Celine 1109 Emporio Armani 1101/23 Chanel 1117 Fendi 1102 Chloe 1123a Gucci 1108 DFS Beauty World 1101/18-30 Hermes 1116 DFS Jewellery 1101/33-45 Jurlique 1101/26 and Watch World Kiehl’s 1101/21 DFS Sunglass World 1101/36 Lancome 1101/28 Dior 1120 L’Occitane 1101/25 Emporio Armani 1101/23 Loewe 1121 Fendi 1102 Louis Vuitton 1115 Gucci 1108 Omega 1101/45 Hermes 1116 Prada 1126 Jurlique 1101/26 Ralph Lauren 1111 Kiehl’s 1101/21 Salvatore Ferragamo 1113 Lancome 1101/28 Shiseido 1101/29 L’Occitane 1101/25 Swarovski 1101/38 Loewe 1121 Tag Heuer 1101/33 Louis Vuitton 1115 Tod’s 1105 Omega 1101/45 Tumi 1101/31 Prada 1126 Vacheron Constatin 1101/39 Ralph Lauren 1111 Van Cleef & Arpels 1101/40 Salvatore Ferragamo 1113 Shiseido 1101/29 Swarovski 1101/38 Tag Heuer 1101/33 Tod’s 1105 Tumi 1101/31 Vacheron Constatin 1101/39 Van Cleef & Arpels 1101/40

1208 2836 1213 2805 & 2806 1130 & 1131 2845 Seasons 2802 2850 1208 2801a 2836 2821 1213 2856 2805 2847 & 2806 1130 & 1131 2812 2845 2801 2802 2846 2850 1211 2801a 2835b 2821 1210 2856 2838 2847 1209 2812 1220a 2801 2835a 2846 2851 1211 2858 2835b 1215 1210 2807 2838 2859 1209 2841 1220a 2829 2835a 2837 2851 2840 2858 2817 1215 2849 2807 2831 2859 2808 2841 1220 2829 2848 2837 2823 2840 2810 2817 2825 2849 2839 2831 2833 2808 2809 1220 1128 2848 2850a 2823 2832 2810 2842 2825 2853 & 2855 2839 1206 2833 1216 2809 1128 2850a 2832 2842 128-129 2853 & 2855 G8 1206 G9-G10 1216 125-127

Cars

Céline One Central CentralDeli CK Calvin Klein Bally Dior Bottega Veneta Dolce&Gabbana Bvlgari Emporio Armani Burberry Ermenegildo Zegna Cartier Europe Watch Company Céline Fabio Caviglia CentralDeli Fendi CK Calvin Klein Furla Dior Gucci Dolce&Gabbana Emporio Hermès Armani Ermenegildo Zegna Hugo Boss Europe Kenzo Watch Company Fabio Caviglia Lancel Fendi Leonard Furla Loewe Gucci Loro Piana Louis Vuitton Hermès Hugo Boss Kenzo Marc by Marc Jacobs Lancel Marc Jacobs Leonard Max Mara Loewe Montblanc Loro Piana Officine Panerai Louis Vuitton Pal Zileri Rainbow Ralph Lauren Marc

by Marc Jacobs Rimowa Marc Jacobs Salvatore Ferragamo Max Mara Shiatzy Chen Montblanc Tod’s Officine Vertu Panerai Pal Zileri Rainbow Ralph Lauren Rimowa Salvatore Ferragamo Shiatzy Chen Tod’s Vertu

G1-G2 G35 222 232-233 128-129 G30-G31 G8 G36-G38 G9-G10 G32-G33 125-127 G39-G42 G1-G2 101-107 G35 130 222 G11-G12 232-233 131 G30-G31 G24-G26/ G36-G38 110-120 G32-G33 G13-G15 G39-G42 132-135 101-107 116 130 139 G11-G12 112 131 G5 G24-G26/ G6-G7 110-120 G27-G29/ G13-G15 121-132/ 132-135 229-231 116 117 139 G23 112 113 G5 G4 G6-G7 G22 G27-G29/ 115 121-132/ 136-138 229-231 G19-G20 117 211 G23 G3/108-109 113 110 G4 G18 G22 G17 115 136-138 G19-G20 211 G3/108-109 110 G18 G17

129

MAY 2011

130

Technology

Digital discounts For the money-minded, the emerging format of online collective purchasing can create a brand buzz

BY KIM LYON

argaining in Macau’s street markets is almost a lost art but consumers are increasingly using the power of collective purchasing to win a cheap deal. It is a simple idea: to aggregate demand in order to negotiate discounts from goods retailers and service providers.

The practice is already established in wholesale buying of industrial products – in the auto industry for instance. But since 2009 group-buying websites have emerged as a powerful force in the online shopping business. This segment is among the fastest-growing in web commerce.

Although Hong Kong websites have occasionally offered deals that apply in Macau, group buying is a rarity here. A few players are now trying to make their way into the market, including Renabees.com, which launched earlier this year.

They are entering a highly competitive international market, increasingly being led by internet giants. In December, Amazon.com invested US$175 million (MOP1.4 billion) in start-up LivingSocial, which has said it expects to generate more than US$500 million in revenue this year.

Google has begun testing its new Google Offers service in some United States cities.

Last month e-commerce site Groupon Hong Kong joined forces with ferry company Macao Dragon to create the biggest group-buying campaign involving Macau. More than 60,000 one-way tickets for the Macau-Hong Kong ferry service were sold at a 54 percent to 70 percent discount on standard fares.

The four-day offer generated more than HK$4 million in revenue, according to Groupon.

B

Group buyer beware W

hile offering appealing goods and services at big discounts, group-buying websites have been a source of disappointment for consumers.

According to the Hong Kong Consumer Council, there has been an increase in scams reported in Hong Kong, with buyers either dissatisfied with what they get or, worse, getting nothing at all.

The Macau Consumer Council “has received no complaints or inquiries about online group purchases this year,” a spokesperson told Macau Business.

Even so, the council advises locals to beware of scams.

“Online group purchase equals online purchase and the same caution applies. Consumers should pay special attention to overseas websites and be aware of purchases which require money transferred between banks in advance. Consumers should take precautions against this kind of prepayment,” the spokesperson said.

MAY 2011

If the gain for consumers is obvious – cheaper fares – what is in it for the service providers? The answer is volume.

The seller supplies the product or service at the announced discount rate only if a minimum number of customers buy it, ensuring that he seller does not make a loss.

Herd mentality “We have chosen to work with Groupon, the global leader in daily deals sites, as our partner in our initiative to boost our consumer base through the fast-growing power of social media,” says Francis Liang, director of the ferry company. “We are pleased with the tremendous response we have seen so far, in terms of the number of vouchers sold and of the social media presence.”

Mr Liang says the idea behind the partnership was to create a buzz around Macao Dragon. “Groupon has the PR and are experts in developing huge exposure for brands and companies of all sizes. Our goal was to create tons of new customers which, in looking at the results, we have definitely achieved.”

131

Money mechanics C

ollective-buying platforms negotiate heavily discounted deals with retailers or service providers, and advertise a daily deal online. The concept originated in the mainland and is known as “tuangou” or team buying.

Deals can be completed only when a set number of consumers purchase the product or service. Once sufficient interest is secured, credit cards are charged and coupons are sent to buyers’ inboxes.

Bargain-hungry consumers can have their fill of cut-price services and products, with the added thrill of a time limit on each day’s deal. Meanwhile, both the collective-buying platform and its merchant partner see a surge of interest.

At every stage, shoppers can spread news of their new-found bargains to their friends and family, using the likes of Facebook and Twitter, to add the power of viral communication.

“From the customer point of view, such offers have great appeal because they have the ability to offer huge discounts on products and services,” says Groupon Hong Kong’s chief executive Danny Yeung

The deputy general manager of Macao Dragon, Connie Lai, says the company teamed up with Groupon “to start a new marketing channel and to promote Macao Dragon’s service in a fresh and innovative manner, having had a previously successful experience in online marketing with BeeCrazy,” another popular group-buying platform in Hong Kong.

Ms Lai says Macao Dragon and Groupon are planning more promotions, offering different travel packages. “With Groupon’s promotional and internet marketing skills, Macao Dragon will be able to reach a far larger customer base and thus continue to improve constantly on its service to passengers,” she says.

Groupon Hong Kong chief executive Danny Yeung stresses these types of promotions can boost brands.

“From the customer point of view, such offers have great appeal because they have the ability to offer huge discounts on products and services.

The deals are definitely a great way to get people in the door. We help create buzz, and in 24 hours you cannot establish this type of phenomenal response with any other type of marketing,” he says.

“The main goal is that we create a winwin situation for our merchants and our consumers.”

Since it was set up in June last year, Groupon Hong Kong has seen its profits rocket, despite competition from at least 30 other collectivepurchasing portals in Hong Kong alone. Hong Kong consumers have bought more than 610,000 group buying vouchers and saved more than HK$160 million, according to Groupon. The site’s customer database has more than 600,000 names and more than 200,000 consumers have benefited from its offers.

MAY 2011

132

Technology

Cyber crime wave Malware attacks are on the rise worldwide

BY SARA SILVA MOREIRA

new warning has been issued to think twice before using a credit card to shop online or when reaching for a smartphone to upload a picture to Facebook. According to the most recent Symantec Internet Security Threat Report, both activities are increasingly prone to online attacks. Macau is also under threat.

According to Symantec, a global

A

anti-virus software provider, the volume and sophistication of malicious activity increased substantially last year. The company recorded more than 3 billion malware attacks last year, involving more than 286 million variants of malware.

Macau-based organisations and individuals are also increasingly targeted, according to recent local studies. The 2010 Information Security Survey Report,

conducted last year by the Manetic iCentre, says 88 percent of organisations surveyed had suffered from a virus infection or malicious software in the preceding 12 months. The survey analysed internet security in the public and private sectors in Macau, including the gaming industry.

Angus Cheong Weng Hin, an internet researcher at the University of Macau, says awareness is high, with reported rates of anti-virus software usage close to 90 percent, according to 2008 data. Mr Cheong stresses that the most important defence is prevention.

In Hong Kong, the Computer Emergency Response Team Co-ordination Centre noted an increase in published security alerts to a record 308 last year from 220 in 2009. The centre had 1,153 incidents reported to it last year, most involving hacking.

An increasing threat, according to the Symantec report, is cyber attacks directed at social media sites such as Facebook and Twitter. The sites are more likely to attract private or sensitive information posted by users – a prime target for hackers.

Think twice, click once Surveys or quizzes can be useful information-gathering tools but they may also include questions that are often used as password reminders. It creates a malware target, if it isn’t already designed to be malware.

Social media sites accessed from the workplace may also allow attackers to penetrate an organisation’s internal network. Although social networking sites are an important marketing tool for many businesses, they also pose a security threat, Symantec warns.

Links that redirect the user to a website carrying malware are common on social networking sites. Attackers are increasingly using shortened URLs that obscure the real destination from the user.

Even smartphones are increasingly vulnerable. Symantec’s database recorded a sharp rise in the number of reported weaknesses in new mobile operating systems, to 163 last year from 115 in 2009.

Usually, cyber attacks against smartphones come in the form of third-party applications. Some are specially designed to target people using their phones for online banking.

The number of cyber attacks on social networking sites and smartphones in Macau has yet to be tallied, Mr Cheong says.

MAY 2011

Education

133

Leadership lessons Exposure to enterprising people was the thrust of the first Y Now Youth Summit

BY LUCIANA LEITÃO

ixteen casually dressed students walk through Senado Square without a care in the world. Suddenly, music begins to play, a girl starts dancing. One by one, the rest of the youngsters join the choreography. Their message is for youths to say “no” to bullying.

The flash mob activity was one of the community outreach activities in the Y Now Youth Summit programme, jointly supported by Macau Business.

The three-day summit, ending on April 1, targeted grade 10 to 12 students at The International School and 28 visiting Canadian students from Calgary.

The goal was to inspire, challenge and encourage students to make a difference, now and in the future.

Other activities included a clean-up at Hac Sa Beach, scrubbing down graffiti at the Olympic Stadium and caring for dogs at Anima, the society for protection of animals in Macau.

S

The programme included talks from leaders in Macau’s business community that focused on business development, social and urban planning, the environment and community. Among the speakers were Akiko Takahashi, Melco Crown’s executive vice-president and chief human resources/corporate social responsibility officer, and Niale McLaughlin, director of learning and advancement at Wynn Macau.

The International School head of schools, Howard Stribbell, says the idea behind the event was to “leverage the great expertises in Macau and Hong Kong, both by business leaders and community leaders and, at the same time, bring students together from different countries and allow them to work together to see how they can become involved in responsible business now and in the future”.

Morgan Tonner and Krystle Mor-

ley were two of the summit’s student organisers. They also took part in the flash mob. “Although discrimination is not as large here as it is in other places, it is still a problem, and we wanted to make it public that love should not have boundaries, beliefs, race, size, whatever it is,” Morgan says.

Both students were grateful for the chance to take part in the summit. “It is a great opportunity, especially because we’re in Asia and don’t get the same opportunities as American or Canadian students might get. Having a youth seminar here opens up new worlds to us, to see successful people and how they did that in their lives,” says Krystle.

The summit’s second edition will be held in Calgary next year and returns to The International School in 2013, with the intention of inviting other schools in Macau, Hong Kong and the mainland to take part.

MAY 2011

134

Arts & Culture

Talented musicians, cabaret comedy and black humour: The Tiger Lillies debut promises a very different experience

135

E

xtraordinary musicianship, a battering of demonically black humour and no small outrage awaits audiences at the Macau premiere of British cabaret trio, The Tiger Lillies, early next month at the Cultural Centre’s small auditorium.

Their mélange of Vaudevillian antics and satirical songs owe as much to Romani (Gypsy) and carnival music as they do Bertolt Brecht, Kurt Weill and Klaus Nomi, or even Jim Morrison, and Nico and the Velvet Underground.

They may have been called “one of the weirdest and most disconcerting bands of all time” by London’s Telegraph newspaper but The Tiger Lilies have toured the world and built an enormous cult following.

From the feint-hearted there are often gasps of scorn, but for the rest of the audience, their performances are comedic genius, tour manager Tim Whitehead told the University of Los Angeles California magazine, The Daily Bruin.

In appearances, lyrics centre around the dark side of life with all its fears, anxieties, incongruities and perversions, vividly depicting characters dwelling in the seedy underbelly of society, “the gruesome, the macabre and the visceral”.

Founder Martyn Jacques leads the troupe in garish, mainly white and black make-up, exaggerated early 20th century costume and with a voice that ranges from operatic falsetto to a Tom Waits baritone growl, all the while switching between the accordion, piano and ukulele.

Meanwhile, Adrian Stout mainly plays the upright bass, a musical saw and the theremin, an instrument first used on the score of the film “The Lost Weekend” to portray the sadness of alcoholism and made famous by fifties sci-fi movies, such as “The Day the Earth Stood Still”, and in The Beach Boys’ song “Good Vibrations”.

Percussionist Adrian Huge often uses a lavatory as his seat behind a children’s toy drum kit, with additional sounds delivered on kitchen utensils, kazoo, and mouth, with a range of flatulent and other noises, depending on the songs. The band also runs a number of comic physical routines involving Huge whereby he drops his drumsticks to the disdain of his cohorts.

So from what cave does all this darkness made humorous emanate?

Before founding the band, Jacques spent seven years living in solitude above a brothel in London’s Soho district while training himself as an opera singer in the castrati style, all the while writing songs and spying on the lower end of life.

After a few years performing, an early review in 1994 in the London Evening Standard said his “songs of street life are short, savage and passionate, with an unfashionably moral tone that comes in a startling mix of opera, gypsy song and boulevard ballads”.

Despite the seemingly morbid tone, the trio’s performances also range to the hilarious, upbeat and mysterious and include some cover versions of hits such as “My Funny Valentine” and “Send in the Clowns”.

Album names including “Spit Bucket”, “The Brothel to the Cemetery”, and just one of hundreds of songs stretching the limits of vulgarity called, “Kick a Baby”, provide further shock and awe.

Their current tour has taken in dates in St. Petersburg, London, Helsinki, Zurich, Berlin, Bremen and Frankfurt, and on June 8 in Macau audiences will have the opportunity for much more than a live performance, but “a wild ride to the dark side of mankind”.

The Tiger Lillies – Live concert is organised by the Macau Cultural Centre. Tickets are available at a range of prices and discounts from the centre’s box office and Kong Seng outlets. For further enquiries please visit www.ccm.gov.mo or call (853) 2870 0699.

The Tiger Lillies Voice, Accordion and Piano: Martyn Jacques Drums: Adrian Huge Voice and Double Bass: Adrian Stout Ticket: MOP140 For ages 13 or above

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Corporate Social Responsibility

TASTY CHARITY It is one of our favourite golf events. Morton’s The Steakhouse tournament not only succeeds in grabbing a great number of players but also raises a nice sum to help a local charity, after a delicious meal with some of the best steaks in town. This year, the always tireless Andrea Mansfield, Morton’s sales and marketing manager, who also heads the International Ladies Club, gave a cheque of MOP130,000 (US$16,250) to the Fountain of Hope orphanage. Well done, Morton’s!

1 2 3

- Players start checking in - That is what I call a shot!

- Raise your glasses to charity, boys!

4 - The traditional group picture 5, 6 - After the golf, a well-deserved meal 7 - The energetic Andrea Mansfield 8 - Ladies and gentlemen, the champion team MAY 2011

139 ANDRES VELASCO CHILE’S FORMER FINANCE MINISTER (2006-2010)

Innocent bystanders EMERGING COUNTRIES IN LATIN AMERICA, EAST ASIA, EASTERN EUROPE, AND AFRICA ARE INNOCENT BYSTANDERS IN THE TUSSLE BETWEEN THE US AND CHINA OVER CURRENCIES AND TRADE IMBALANCES

T

ake a taxi in São Paulo nowadays and you will experience the maddening traffic and untidy streets of an emergingcountry metropolis. But when the time comes to pay for the ride, you may feel like you are in Boston, Luxemburg, or Zurich: the value of the Brazilian real, like the currencies of many emerging-market countries, is high – and could go higher.

Strong currencies make strong countries, a senior United States policymaker used to say. Many emerging-country exporters, struggling to retain customers in the wobbly US and European markets, feel otherwise.

For decades, developing countries dreamed of a nirvana of sky-high commodity prices and rock-bottom international interest rates. But perhaps finance ministers in Lima, Bogota, Pretoria, or Jakarta should have been more careful about what they wished for. The problem? An invasion of short-term capital flows fleeing the slow-growth, low-interest-rate advanced countries.

Meeting in Calgary in March, the Inter-American Development Bank reported that US$266 billion (MOP2.1 trillion) entered Latin America’s seven largest economies in 2010, compared to less than US$50 billion a year, on average, between 2000 and 2005. And while only 37 percent of inflows in 2006 were “hot money” that can leave at a moment’s notice, last year such inflows accounted for 69 percent of the total.

Global imbalances

So, what is going on? Emerging countries in Latin America, East Asia, Eastern Europe, and Africa are innocent bystanders in the tussle between the US and China over currencies and trade imbalances. And the bystanders are absorbing some of the hardest blows.

For a decade now, the world economy has suffered from tremendous global imbalances: massive external surpluses in countries like China, Japan, Germany, Switzerland, and the oil producers, matched by equally large external deficits in the US, the United Kingdom, Spain, and others. The imbalances were reduced temporarily as the global financial crisis caused private demand to drop in the US, the UK, and elsewhere.

But, starting in 2010, the imbalances returned, and, according to the International Monetary Fund’s recently released World Economic Outlook, they will not shrink between now and 2016. G-20 communiqués have repeatedly pledged to secure “adjustment” and “rebalancing” in the world economy, but those promises have come to nothing.

Still-troubled financial systems and huge fiscal deficits are keeping the West’s deficit countries (especially the US) from expanding domestic demand. And an unwillingness to trade away export-led growth is having the same effect on the East’s surplus countries (especially China). As a result, emerging countries, according to the IMF, have been pressed to carry “a disproportionate burden of demand rebalancing since the crisis.”

Countries running surpluses accumulate massive stocks of foreign assets, and those resources have to be invested somewhere. Before the crisis, a substantial amount of that money was invested in US, Spanish, or Irish real estate.

Today, that market is dead and the money must go elsewhere.

Europe, gripped by a tremendous banking and debt crisis, is not an attractive destination, and loose monetary policy in

the US has produced ultra-low bond yields there. As a result, many emerging countries, with their higher interest rates and promising growth prospects, have become irresistibly attractive to investors.

Money problems

After recent events in Tunisia, Egypt, and Libya, Wall Street analysts are waxing somewhat less optimistically about political stability in emerging countries. And a flat 2011 performance in some Latin American and Asian equity markets – following tremendous runs in 2010 – has taken a bit of sheen off the emerging-market investment fad. But the money keeps coming.

This dollar invasion is making macroeconomic management in emerging countries even more challenging than usual. If high commodity prices are expected to persist, then some strengthening of currencies is both desirable and inevitable. But a thin line separates orderly adjustment to changed conditions from market over-reaction. And sensible people in many emerging-country capitals are wondering whether we have crossed that line.

“Strong currencies make strong countries, a senior United States policymaker used to say. Many emerging-country exporters, struggling to retain customers in the wobbly US and European markets, feel otherwise” Loss of export competitiveness as a result of excessively strong currencies is not the only problem. Massive capital inflows caused real estate and stock-market bubbles in the US and parts of Europe. Today, some policymakers in Latin America, worried that the same thing could happen to their countries, are casting about for policy tools to prevent it.

As a result, the US Federal Reserve’s policy of so-called “quantitative easing” is going south, where it takes the form of foreign-exchange intervention. If rich-country central banks can buy long-term bonds, then emerging-country central banks can buy dollar-denominated bonds. Even countries that practice inflation targeting and have otherwise vowed to let their exchange rates float – Brazil, Colombia, Peru, and Chile, for example – have done it, and in large quantities.

Expect macroprudential policies to go south, too – and to be redefined in the process. If buying dollars is not sufficient to stem the appreciation tide, regulators in emerging economies will erect an array of other barriers to keep money out.

None of these policies is without costs. They are secondbest local-policy responses to an ineffective mechanism for international adjustment (or non-adjustment). A better system to rebalance the world economy is as necessary as it is unlikely.

All we can look forward to is the next G-20 communiqué.

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Entertainment

The officiating ceremony

BORN TO PARTY Essential Macau, the new glossy bimonthly magazine dedicated to the world of high-end shopping and leisure, hosted its launching party last month.

And what a blast!

Hundreds of guests flocked to the Mandarin Oriental, Macau, the venue patron, where they were received by a troupe of entertainers generously provided by the Venetian Macao.

Manuel Cansado de Carvalho, Portuguese consul general in Macau; Li Zhengqiao, vice director-general of the department of culture and education of the Liaison Office of the Central People’s Government in the Macau SAR; Lionel Leong Vai Tac, Macau SAR Executive Council member; Rafael Gama, adviser for the Macau SAR chief executive cabinet; Francis Lui, vice chairman of the Galaxy Entertainment Group; Ambrose So Shui Fai, director and chief executive of SJM Holdings; and Grant Bowie, president of MGM Macau were the officiating guests, showing the strong support of the local business and political community for this new publication.

Essential Macau is Macau Business’ youngest sister. The new publication is produced by Global Asia Media, a joint-venture between De Ficção Multimedia Projects, the publisher of Macau Business, and Open Media from Portugal. This month, don’t miss its second issue, full of glamour!

Li Zhengqiao, Biantao and Grant Bowie

Peter Caveny, Artur Santos and Robert Drake

Amelia Chan and Constance Hsu

Ambrose So Shu Fai, Paulo A. Azevedo and Lionel Leong Vai Tac MAY 2011

Bruce Hawker and Fernando Caetano

141 Photos by: Gonçalo Lobo Pinheiro

John Galati and wife, JosĂŠ Braz-Gomes and Mimi Chan

Cath Burns, David Punter and Bina Gupta

An entertainer welcomes Andrew Macaulay

Paulo A. Azevedo chats with Francis Liu, under the close attention of Rafael Gama and Li Zhengqiao

Grant Bowie and Luis Pereira

Photo by: John Si

Rafael Gama and Ana Telo Mexia

Manuel Cansado de Carvalho and Bruce Hawker

Photo by: John Si

Rodrigo Pedro Domingos and Adalberto Barros

Anabela Niza Barros and Raymond Lo

Paula Neves and Paulo Barbosa

Filipe Senna Fernandes and Alex Chan

Stephan Winkler and Martin Schnider MAY 2011

142

Entertainment

Eric Saudeté, Pereira Coutinho and Franklin Willemyns

Luis Pereira and Albano Martins

Carlos Lobo and Cristina Ferreira

Eric Mou, Daniel Un and Evelyn Lau

Cristina Lobo and Luis Melo

Rita Chan and Luciana Leitão

Richard Whitfield and Ken Jolly

Some of Macau’s best marketing experts MAY 2011

Luis Herédia

Essential Macau seems to have already won the heart of Ho Wai Ming

Robert Kirby, Ada Chan and Charlotte Tsang

Connie Chong and Luís Almoster

Pedro Cortés and João Francisco Pinto

Photo by: John Si

Photo by: John Si

Juliet Risdon and Denise Lau

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SHOP NOW, RULES LATER The photos displayed here were taken in the north of the Macau Peninsula, just beside the fire station in Areia Preta. Every day here is similar.

Dozen of coaches pull up and stop, ignoring traffic rules and dropping off hundreds of tourists.

But isn’t that an area full of old industrial buildings? What is there for visitors to see here? The answer couldn’t be more obvious: tour operators’ “friendly” shops. Thus goes the quality tourism experience in Macau.

MAKING HEADLINES Frozen Spy just can’t get enough of Labour Affairs Bureau head Shuen Ka Hung.

Once again, Mr Shuen was able to surprise by becoming probably the first Macau official quoted in a United States’ human rights report. It was not, of course, for the right reasons.

In the section dedicated to human rights practices in its latest round of reports, the US Department of State recalled Mr Shuen’s infamous statement that dissatisfied imported workers “can always go back to their homeland to find another job”.

That Mr Shuen keeps his job is no small wonder.

One might assume that if Mr Shuen is under fire for his blunders, a view shared by many in the government, those above him are shielded from criticism and the message is transmitted anyway. Capisce?

PLAYING POLITICS The government has again come up with a plan to curb real estate speculation. Funnily enough, one of the new measures is to withdraw a policy introduced in September last year – you guessed it – to curb real estate speculation.

Of course, we’re talking about the promise to hold two land actions, which never materialised. According to the government, such a measure would only help to drive prices up.

Wait a minute. What changed so suddenly that a good measure became a bad one in half a year? Nothing, apart from the fact that the construction lobby grew stronger.

FUZZY LOGIC Light up your cigars for the occasion.

After around 16 months, Macau finally has a new law targeted to curb smoking. But, as is usual in the territory, several important issues were left open for clarification, and for the chief executive to decide by himself.

For instance, the law states that casinos can have smoking areas in up to 50 percent of their public areas.

What does that really mean? Must smoking and nonsmoking areas cover up to the same area only, or must they also have the same number of gaming tables and slots?

And what impact do such rules have on VIP rooms?

More importantly, what about the workers?

Can they refuse to work in the smoking areas? Or will there be compulsory rotation schemes? What about pregnant employees?

Do you have more doubts to add to these questions?

No worries. Ask Mr Chui.

After all, he’s the boss and it’s the boss who decides.

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index

Consulate General of the Republic of Angola Page 51

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CEM

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CTM

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Galaxy Entertainment

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GPI Gaming

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Grand Lapa

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Hutchinson

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IGT

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IPIM

Page 37

www.ipim.gov.mo

Konami

Pages 41 & 82

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Macau Daily Times

Page 129

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Macau Post Office

Page 28

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Melco Crown Entertainment

Page 27, 29 & IBC

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MGM Macau

Pages 01-02 & 23

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MGTO

Page IFC

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Morton’s The Steakhouse

Page 96

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Our Dental Clinic

Page 71

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PokerStars Macau

Page 19

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Sands China

Pages 09 & 69

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Seng San Enterprises Ltd

Page 67

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Shuffle Master

Page 90

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Shun Tak Group

Page 65

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SJM

Page 109

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Star City Hotel & Casino

Page 77

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Transcity Asia

Page 80

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Wynn Macau

Page 25

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MAY 2011