TECH TROUBLES ATTACKS WORRY BUT IT SECURITY NOT A PRIORITY SEPTEMBER 2011
ISSN 1812-6855
GAME CHANGER Strong results by Galaxy Macau are surprising the casino sector
SNEAKING PEEKS
SILENT THREAT
CAMERA-POWERED COLLAPSE RISK FOR CHEATS INFILTRATE 35 CITY BUILDINGS DOLLAR VALUE GAMING FLOORS
GOVT PAYS RENT AS BUILDINGS LIE EMPTY SUMMERTIME BLUES
DEALING WITH THE STRESS OF RETURNING TO WORK
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Economy & Finance 24 The special one Special policies for Hengqin Island announced
Property 30 Market watch Home prices falling for three months in a row 36 Office politics Government spends MOP35 million a month on rent while its own buildings sit idle 40 Leaning towers At least 35 buildings in Macau are at risk of collapse
Business 41 Fair winds Shun Tak acquires First Ferry Macau and looks for property sales boost
MB Report 50 Same old refrain UNESCO concerned about the way the city’s heritage is being protected
Gaming 58 Billions race Gross gaming revenue posts new monthly record
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60 Stock watch Macau gaming stocks fall sharply in August 64 Playing for keeps After staggering the market with a strong initial run, Galaxy Macau wants more 68 2020 vision Worries loom over the chance of casino operators not having their licenses renewed 72 Insecurity cameras Are cheats in Macau going high-tech? 76 Exclusive slot Macau Slot gets sports betting monopoly renewed for one more year 78 Beach games Vietnam’s Ho Tram Strip promises to bring change to the country 82 No good Taiwan senior official rejects viability of offshore casinos 84 Local advantage Wynn and Las Vegas Sands face uphill battle in Massachusetts 86 Las Vegas goes Macau-style Baccarat is helping to boost the strip’s results
Special 87 G2E All you need to know about the premier trade show and conference event for the international gaming industry
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Tourism 106 Tough task Authorities admit they need to revise their strategy for tackling illegal inns
Environment 110 Green guide Government fund for subsidising eco-friendly equipment for business lacks certification system
Technology 113 Defences down Local companies still not doing much to secure digital data
Lifestyle 114 White-collar curse Post-holiday stress is commonplace for employees returning to work
Arts & Culture 118 Magic bullets “Der Freischütz” to bring the International Music Festival to a close
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Entertainment 120 Fiery delights This year’s International Fireworks Display Contest is ready to blast off 126 Macau toasts France Local French community and friends celebrate France’s National Day
Opinion 6 From the publisher’s desk Paulo A. Azevedo 9 Editorial Emanuel Graça 21 Europe’s small steps and giant leaps Jean Pisani-Ferry 29 A price for prosperity Keith Morrison 42 Is capitalism doomed? Nouriel Roubini 49 China’s US$3.2 trillion headache Yao Yang 112 Verdant dream José I. Duarte 117 Let’s be unreasonable Gustavo Cavaliere
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Nonsense without consequence
I argue that governments should be accountable for their deeds. Similarly, I believe analysts should also be accountable. In the end, we all bear responsibilities for which we must answer
SEPTEMBER 2011
MACAU IS CONSTANTLY UNDER THE MICROSCOPE, watched by teams of analysts. And it seems new analysts crawl out from underneath the rocks daily. Some were never true analysts but manage to pass as such. Others do no more than talk about their hunches across dinner tables. Yet more are deemed “specialists” and work for multinational companies and investment banks. I am not familiar with their responsibilities towards the companies and clients they mention. I don’t know if anyone compares their analyses with reality and confronts them with their (sometimes epic) mistakes. Since Macau liberalised its gaming sector, and especially since its gaming revenues started to soar dramatically, there have been some analysts panicking for reasons nobody understands. Apparently, all it takes is a rainless day in Zhuhai for an analyst to predict that the Macau gaming sector is going to experience a decline. Sometimes the worry is that Beijing will impose new restrictions on individual tourist visas. Another concern is the impact that weak European and American economies will have on the buying power of the burgeoning Chinese middle and upper classes. Inflation is also a recurrent worry as, according to many analysts, it will reduce the disposable income of mainland families. Mostly, these opinions are speculation. A news report or personal view is enough to trigger them. Unfortunately, analyst opinions have an impact on the financial markets, despite the fact that they are sometimes absurd. Not a month goes by without someone saying a decline in casino revenue is looming.
The opinions are offered without much support, similar to some of the accusations made against Macau by the United States State Department. What we do know is that hotel occupancy rates have never been higher, the number of tourist arrivals continues to break records, and that gross gaming revenue has continued to grow, fuelling record growth in gross domestic product. Even retail sales were up 39 percent yearon-year during the second quarter of this year. How can we explain the gloomy analyses from some specialists in the face of these facts? The cynical thinker might suggest it is planned, a means to manipulate stock prices ripe for opportunistic investment. Such thoughts do not populate my mind. I am not arguing that lady luck is here to stay but I do not believe she will leave us any time soon, despite the volatility in the international financial markets and Europe’s debt problems. And Macau’s fortunes will continue despite the lack of initiative, courage and vision from our government officials; despite their restrictive manpower policy; and despite their lack of investment in infrastructure and the city’s human resources. I argue that governments should be accountable for their deeds. Similarly, I believe analysts should also be accountable. In the end, we all bear responsibilities for which we must answer.
Silly season Ah, August. Typically, a quiet holiday month. For those who leave town, a month to head off on a beach holiday to Vietnam, never expecting to see a familiar face. Or, for those who stay
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here, the month to avoid downtown and the frantic tourists in their collective hysteria that invade Senado Square. August is also synonymous with less news, both in quantity and quality. It is why we call it the silly season even if in Macau’s case there is always the risk it might last a full year. Last month, the Labour Affairs Bureau denied having said that a union law, which legislators have failed shamelessly several times, would contradict workers’ interests. Apparently, what the bureau meant to say was the complexity of the issue requires a proper balance between all the parties involved. So it should only be drafted after a consensus is reached. The body led by Shuen Ka Hung is paying more attention to what it says. It is about time. However, their reply adds nothing new. The supporters of a union law will clearly have a longer wait because it is still miles off. Those pledging a makeover of Macau’s political system can join them in their wait. The head of the Public Administration and Civil Service Bureau, José Chu, told reporters that, since the government feels there is no consensus on change, it is better to keep the status quo. Mr Chu is obviously not afraid of becoming a citywide joke with such a bold statement. I praise his courage in the face of public ridicule.
Export what workers? Only during the silly season would one go on the public record as saying that Macau workers who opt to work on Hengqin Island will enjoy some privileges. In a city that has full employment, to whom are the politicians talking? Perhaps to the 20 workers who lost their jobs at Blue Frog restaurant and bar. The establishment announced it would close because it could not find the Macau staff to meet the government’s quota system for local and imported labour. The Federation of Trade Unions is usually so effective in lobbying for the rights of local workers. Where does it stand on this matter? Dead silence. Maybe the 20 now unemployed staff will have the privilege of becoming the first batch sent to Hengqin for work. If Macau does not have enough people to fill existing vacancies – whether for lack of will, skill or availability – how are we supposed to dispense workers to Hengqin? A total collapse of human resources has yet to hap-
pen in Macau thanks to the goodwill of investors that fight against a restrictive policy. Similarly, why open the door to investors such as public bus operator Reolian but deny them the tools to compete against other players in the market? Elsewhere, Reolian would have the right to file a complaint and ask for an inquiry. Not in Macau. If we had proper investigators, maybe we could understand why the Bureau of Telecommunications Regulation is afraid to act against unlicensed antenna providers. Perhaps it is because, a few years ago, its top official had his authority publicly questioned when trying to tackle this same issue?
Knowledge control Finally, there is something more worrying for those who support the “one country, two systems” model and the autonomy it offers Macau until 2049. According to a Portuguese newspaper close to the president of the Macau Lawyers Association, the new head of the Faculty of Law at the University of Macau comes from the mainland and has no experience in Macau law – a system based on Portugal’s legal system. The newspaper’s concern is understandable. This is another step to undermine the intransigent role the lawyers association has played in denying access to the profession to people holding degrees of dubious origins. The association has made a few enemies, namely among a group of local businessmen with ties to Macau’s other university that teaches law. Because it doubts the quality of that university’s bachelor course, the association demands those graduates (and others from the mainland, for instance) pass an exam before being accepted for an internship. A blow has been struck by putting someone in charge of the Faculty of Law who is not an expert in Macau’s unique legal system. It is a decision that has nothing to do with the silly season. I would not be surprised if, one day, the lawyers association would be confronted with demands to submit to the same pre-internship exam experienced lawyers with degrees and experience from Portugal. To avoid such a scenario could very well be to capitulate to those powerful interests and drop the qualification exam. This would be kind of a “services exchange”, something that was once fashionable in Macau’s business underworld. Did I say once? SEPTEMBER 2011
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Emanuel Graça Editor-in-Chief
emanuel.graca@macaubusiness.com
Bills, bills, bills
The gap between several recent pieces of legislation and the real world should give legislators and the government pause for thought
THE BATTLE AGAINST CORRUPTION IN MACAU entered a new era when the ambit of the Commission Against Corruption was extended to include the private sector. The law mandating this took effect in March last year but it is still unclear if this has changed the world of business. Although the graft buster says in its 2010 report that it is too soon to draw conclusions about how effective its new role has been, it admits it already feels that the law extending its power to the private sector has flaws. This is not the only example of legislation quickly becoming obsolete. The government recently said the new law on unlicensed accommodation, in effect for barely a year, will be revised. The labour law – which was approved three years ago only at the 11th hour and after a lot of horse-trading – is also being put up for revision. The need to revise legislation from time to time to keep it abreast of new developments is clear. But it is strange that several laws enacted not that long ago have become outdated so soon. It raises questions about the quality of lawmaking. It seems our officials and lawmakers do not do their homework properly before drafting new legislation, often leaving the law unfit for the purpose. Last month the president of the Legislative Assembly, Lau Cheok Va, blamed shortcomings in the government’s approach to drafting legislation. The usually discreet Mr Lau also said officials fail to give legislators sufficient details about the bills they expect them to vote on. All this hampers the work of the Legislative Assembly. Mr Lau has a point, but the city’s legislators themselves must bear some of the responsibility for the inadequacy of several recent laws. They are the gatekeepers of the lawmaking process. One of their obligations is
to ensure the bills they pass are top quality and appropriate for Macau. Unfortunately, it seems too few legislators take this task seriously.
Garbage out Moreover, the system is prone to nurturing personal egos at the expense of political discourse. In debating bills, legislators allow their personal concerns to take precedence over the best interests of society at large. On top of all this, proposals that are important for the future of Macau are frequently held up for months in the hands of the Legislative Assembly’s committees. The bill outlining how to revive the city’s older areas reached the assembly in February but there is still no clear indication of when it will be passed. An amended copyright law has been languishing in the assembly since November. The work of the committees is in many cases invaluable but more should be made of the value they add. The government often takes too long to provide members with revised drafts of legislation that reflect changes made by the committees. As Mr Lau says, committee members should also be more judicious in altering legislation. When a bill comes out of the committee process bearing little resemblance to what went into it, the eventual law is likely to be a poor one. If a bill is that bad, it is better simply to reject it and call for an improved one. The gap between several recent pieces of legislation and the real world should give legislators and the government pause for thought. With the Legislative Assembly in recess until the middle of next month, its members and the government should use the break to think up ways of making better laws. A jurisdiction where the law constantly needs to be revised to keep up with changing reality is not much use to anyone, least of all those in business. SEPTEMBER 2011
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Every hole counts The Annual Macau Business Charity Golf Tournament and Gala Dinner is set to chip in for good causes
hen charity and corporate social responsibility meet golf, every hole counts. That is exactly what will happen this month, when the fifth Annual Macau Business Charity Golf Tournament hits the greens, followed by the customary Gala Dinner. The 36-hole competition is divided into two days, one at Caesars Golf Macau on Sunday, September 25 and the other at the Macau Golf and Country Club on Friday, September 30. While the slots for teams have long been oversubscribed, patrons still have a chance to show they care by participating in the Macau Business Gala Dinner, to take place at the Westin Resort on September 30. In its short history, the charity golf outing has distributed MOP800,000 (US$100,000) in prize money, and generated more than MOP1.3 million through auctions and donations. The prize money and other money raised has then been forwarded to various charities in the region. Local charities that have benefited
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from the event include the Tung Sin Tong Charitable Society, the International Ladies Club of Macau, Special Olympics Macau, the Macau Child Development Association, the Cradle of Hope Association and Caritas Macau. Charities and social projects outside Macau that have benefited include Hong Kong’s Yan Chai Hospital, the Hong Kong Society for the Protection of Children, the Cambodian Children’s Surgical Centre and the international children’s charity Operation Smile, among many others. For the fifth anniversary, the organisers have raised the bar for the Annual Macau Business Charity Golf Tournament. With a fully packed goodie bag, and five-star hospitality and service, patrons will be pampered throughout the event. Caesars Golf will host the first round of competition, which will have a more relaxed feel. Teams will be greeted on arrival with an indulgent experience that goes well beyond the round of golf, with fun challenges throughout the day – in-
cluding entertainment at the 19th hole. The more competitive second round takes place at the Macau Golf and Country Club, against the dramatic backdrop of the South China Sea. The tournament format is a Threesome Texas Scramble, while scoring will be calculated according to a double Peoria system, allowing players of different levels to compete on relatively even ground.
Rousing highlight The tournament prize money total of HK$200,000 is to be split between the two teams that finish the tournament with the best net and gross scores respectively. Each winning team will have the right to choose the charity or social project that they would like to forward their winnings to. Only teams with the same line-up of players on both days will be eligible for the top prize. The special awards and trophies include one each for longest drive (men and ladies), the stroke nearest to the pin, the straightest drive, the putting
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challenge and the best performing team, among others. The Macau Business Charity Gala Dinner, intended to accommodate nongolfing patrons as well as the tournament players, has become a highlight of the event. Westin Resort’s Pool Loggia will provide the ambience for the evening’s
programme, which includes the prizepresentation ceremony for the golf competition. A charity auction of memorabilia from the fields of sport, music and other kinds of entertainment will run throughout the evening. And so that everyone has a chance to be a winner, a raffle will close the evening’s official programme. Patrons can expect exquisite gastronomic delights, an open bar serving fine wines and spirits, complemented by a cigar-rolling demonstration by a Dominican premium master roller, courtesy of Davidoff. Melco Crown Entertainment Ltd. is again a main sponsor of the Annual Macau Business Charity Golf Tournament and Gala Dinner, along with Australian casino The Star, Caesars Golf Macau and the Westin Resort. Other leading sponsors include the remaining five casino operators in Macau: Sands China Ltd., Galaxy Entertainment Group Ltd., MGM China Holdings Ltd., SJM Holdings Ltd. and Wynn Macau Ltd. Aristocrat, Silver Heritage, Trancity Asia, Morton’s The Steakhouse and YES! Golf are among the other event patrons. Teams hail from every corner of the business community, from banking to construction and engineering, and from professional services to gaming. Fine wines and spirits distributor Seapower Trading and luxury cigar brand Davidoff are the special Gala Dinner sponsors and will be indulging guests with some of their most luxurious products. There are still a just a few openings for companies and socially responsible patrons to participate and support the event. For more information please email golf@macaubusiness.com.
Photo: Luís Almoster | mspagency.org
BRIMMING WITH ENERGY T
he fifth Delta Inter-Chamber Event will take a look at renewable energy in the Pearl River Delta. Organised by Macau Business and Delta Bridges publications, the event is scheduled for Friday, September 9 at Macau Tower. The Delta Inter-Chamber Event is a business occasion that brings together members of the various chambers of commerce in Macau, Hong Kong and Guangdong. It features a conference that focuses on an environmental topic, followed by a networking cocktail reception. The conference will include speakers from the public and private sectors across the delta. Entry is free but limited to members of chambers of commerce.
Can’t get no taxi satisfaction Why is the taxi queue area at the airport so pathetic? As you push your cart through to the end, there is nowhere to put it ‘out of the way’. So you are forced to just leave it there. Carts pile up and they block the next people coming in the queue. This is really stupid planning. As you finally get a taxi, drivers refuse to take you if your destination is too close. Every major city in the world has made this illegal, but not Macau. There isn’t any single attendant at the airport helping direct passengers getting into the queue and getting into taxis. Come on, just employ one guy there, the government can surely afford it. Pathetic and sad. The Macau airport is a horrible first impression for world-travelling international tourists who get treated like kings as they arrive in Singapore or Las Vegas. Richard Fan
Write a letter to the editor To submit a letter to the editor e-mail editor@macaubusiness.com with the subject “Letters to the Editor”. Letters may also be sent by regular mail to this address: Letters to the Editor, Macau Business, Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, No 679 Av Dr Francisco Vieira Machado, Macau. Please include your full name, address and a telephone number for confirmation purposes. Letters should be 200 words or fewer and all are subject to editing. SEPTEMBER 2011
Photo: Luís Almoster | mspagency.org
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RUNNING STRONG Gross domestic product growth speeds up
Macau’s gross domestic product (GDP) for the second quarter of the year expanded by 24.0 percent year-on-year in real terms, to MOP63.69 billion (US$7.96 billion), according to official data. The growth was spurred on by the stellar performance of the gaming industry and the rise in investment and private consumption expenditure. For the first half of 2011, Macau’s GDP increased by 22.9 percent in real terms in comparison with a year ago. Furthermore, economic growth for the first quarter was revised upward from 21.5 percent to 21.6 percent in real terms. Resulting from the continuous rise in total employment and income, together with a low unemployment rate, private consumption expenditure in the territory rose by 11.3 percent year-on-year in the second quarter of 2011, lower than the 13.0 percent jump in the first quarter. Gross fixed capital formation, the gauge of investment, expanded by 23.1 percent, also below the 30.8-percent increase in the first quarter.
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CORRUPTION COMPLAINTS DROP In 2010, the Commission Against Corruption received a total of 389 new criminal complaints, a year-on-year drop of 49 percent. Of the 389 new criminal complaints, only 133 complaints were qualified for handling by the Commission Against Corruption, accounting for roughly a third of the total. According to the graft buster’s annual report, released last month, 93 complaints were related to alleged cases of corruption in the private sector, but only 24 were commenced for investigation. The Commission Against Corruption saw its powers enlarged to the private sector in March 2010.
ZHU SONG YAN APPOINTED AIR MACAU’S NEW CEO Zhu Song Yan was appointed last month as Air Macau’s new chief executive officer. He replaces Zheng Yan, who was appointed as the company’s new chairman of the board of directors in June. Prior to joining Air Macau, Mr Zhu served at various positions in Air China, Air Macau’s majority shareholder.
AIRPORT COMPANY ACQUIRES ADA Macau International Airport Company Limited or CAM has acquired ADA – Administration of Airports Limited, which provides management and operational services at the airport. A deal was concluded last month for MOP45 million (US$5.6 million), a source close to the deal told Portuguese news agency Lusa. CAM had been in talks with ADA’s two shareholders – China National Aviation Corporation and Aeroportos de Portugal (ANA) – for several months. In March, CAM confirmed it would not renew the service contract with ADA, to expire on September 11.
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MACAU OPEN IS BACK The Macau Open has been re-instated, after a one-year stop. The tournament, to be held at the Macau Golf and Country Club from September 15 to 18, returns with a record US$750,000 (MOP6 million) prize pot. The tournament has run since 1998 but last year it was cancelled, with media reports blaming it on a lack of sponsors. “With the Macau Open taking place in a very busy second half of the year on the Asian Tour, the tournament will play an integral part in our Order of Merit race,� Asian Tour Executive Chairman Kyi Hla Han said in a statement.
UP AGAIN
SME lending resumes growth Newly approved lending to small and medium-sized enterprises by Macau banks resumed its growth in the first half of 2011, according to the monetary authority. In the first six months of the year, new SME approved credit limit totalled MOP10.9 billion (US$1.36 billion), 27.8 percent up from the second half of 2010, or 5.5 percent up from the same period of 2010. As at end-June, the outstanding value of total SME loans reached MOP30.6 billion, which represents a growth of 22.8 percent from endDecember 2010 or 36.5 percent from a year earlier. Among the sectors where SME loans increased were wholesale and retail trade, restaurants, hotels and similar activities, and construction and public works. At the end of June, the delinquency ratio, a ratio of the balance of outstanding delinquent loans to total outstanding SME loans, dropped 0.71 percentage points from end-December 2010 to 1.40 percent.
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GOVT STARTS DELIVERING SECOND CASH HANDOUT The second government cash handout of 2011 started to be delivered late last month, the government announced. Each Macau permanent resident will receive MOP3,000 (US$375) while each nonpermanent resident will get MOP1,800. Earlier this year, the government had already handed out MOP4,000 to each permanent resident while each non-permanent resident got MOP2,400. The cash handout program was first unveiled in 2008, when inflation in Macau peaked.
YELLOW TAXIS GET CONTRACT RENEWED Vang Iek Radio Taxi Company, known for its yellow taxis, got its radio-taxi service contract extended for 18 months without a public tender, the government announced last month. The previous contract ended on August 7. The government said it expects the company will step up its service quality, although no changes were introduced in the extended contract. Meanwhile, both parties will negotiate a longer-term deal, with new terms.
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CHEAPER AND FASTER CTM with new tariffs for residential broadband service
Telecommunications provider CTM last month announced the tariffs of all residential broadband service plans would be reduced “significantly yet with increased free usage, enhanced upload and download speed for the benefits of customers”. The new tariffs are already in place. The average reduction rate of the new tariff was 19.1 percent, with the most significant reduction of 41.9 percent for the fibre broadband service, the city’s sole landline Internet service provider said. CTM also announced it is targeting to expand the residential fibre broadband coverage to 70 percent by the first quarter of 2012. CTM had previously announced a 30 percent reduction on the tariffs for its business broadband service starting in June.
LESS TRADE BARRIERS, ASKS MAINLAND OFFICIAL
TAIWAN BANK TO OPEN LOCAL BRANCH
The secretary-general of the Forum for Economic and Trade Cooperation between China and Portuguesespeaking Countries, Chang Hexi, says both sides should further push ahead with more measures to make trade easier. Mr Chang said both parties should oppose trade protectionism. He added this could help both China and the Portuguese-speaking countries to better face the current international economic and financial instability.
Hua Nan Commercial Bank, Ltd., headquartered in Taipei, has been authorised to open a branch in Macau. The authorisation was announced last month. Hua Nan Commercial Bank was founded in 1919 and is a subsidiary of Hua Nan Financial Holdings Co., Ltd. As of December 31, 2009, it operated 183 branches and offices in Taiwan, an offshore banking unit, six overseas branches, and two overseas representative offices.
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PEDRO CARDOSO TO HEAD BNU Pedro Cardoso has been appointed as the new chief executive officer of Banco Nacional Ultramarino (BNU). He succeeds Artur Santos, a bank source told Portuguese news agency Lusa. BNU has 14 branches in Macau and 430 employees. It is a wholly owned subsidiary of Portugal-based Caixa Geral de Depósitos group. Mr Santos will become the new CEO of the Macau offshore subsidiary of Caixa Geral de Depósitos, the same source told Lusa. Mr Cardoso has been one of the directors of Caixa Geral de Depósitos since 2008.
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NO AUTONOMY Macau’s monetary authority still lacking independence, says IMF
The International Monetary Fund (IMF) continues to say there are shortcomings in the operational independence of the Monetary Authority of Macau as the city’s financial regulator. The IMF opposes the fact that, for important supervisory matters like licensing or appointing the chairman of the monetary authority among others, the decision power lies with the chief executive. While “there is no evidence” that the chief executive has ever interfered in the operational independence of the monetary authority, “the possibility exists,” the IMF says. The fund already issued a similar warning in 2002. The lack of independence of the regulator was the major issue raised by IMF’s latest report on the observance by Macau of the Basel Core Principles for banking supervision. According to the document, released last month, “in general, there is a high level of compliance with the Basel Core Principles” by the territory.
SMARTONE MACAU PROFIT JUMPS The Macau operations of telecommunications provider SmarTone posted an operating profit of HK$44 million (US$5.65 million) for the financial year ended June 2011, against HK$5 million one year before. Revenues rose by 28 percent to US$282 million driven by higher revenue from post-paid and inbound roaming services as well as higher handset sales, the company said.
RAINBOW GROUP LOOKING FOR LISTING
CENTRAL SAVINGS SYSTEM POSTS LOW RETURN
The Rainbow Group is looking to raise up to HK$1.56 billion (US$200 million) in a listing on the Hong Kong Stock Exchange. According to The Standard, the company will have its listing hearing in the middle of this month. The Rainbow Group is Macau’s largest distributor of high-end brand products in Macau, holding exclusive dealerships for more than 10 brands in Macau - including Emporio Armani, Cartier, Ermenegildo Zegna and Burberry.
The return rate for the first year of operations of the central savings systems stood at 0.1165 percent, the Social Security Fund announced. The rate was calculated for the period between August 2010 and August 2011 and was set according to the savings bank deposit interest rate. The non-mandatory central savings system is the cornerstone of Macau’s recently revamped retirement system. The scheme is designed to give retirement benefits to people whose companies don’t offer a private retirement scheme.
SEPTEMBER 2011
21 JEAN PISANI-FERRY MEMBER OF THE ECONOMIC ANALYSIS COMMITTEE UNDER FRANCE’S PRIME MINISTER
Europe’s small steps and giant leaps ISSUING EUROBONDS ENTAILS SETTING UP A FEDERAL SYSTEM OF GOVERNMENT, ONE RECOGNIZED AS SUCH BY EUROPE’S STATES AND PEOPLES he world was expecting eurobonds to come out of last month’s Franco-German summit; instead, the eurozone will get economic governance. According to German Chancellor Angela Merkel and French President Nicolas Sarkozy, the great leap forward to the creation of eurobonds would perhaps be the culmination of that process, but for the moment small steps remain the order of the day. The question, obviously, is whether or not these small steps serve any purpose. To answer this, we need to go back a little in time. Until this summer, the sovereign-debt crisis was confined to three small countries – Greece, Ireland and Portugal. Spain had succeeded in limiting the spread between its interest rates and those of Germany to about two percentage points. By mid-July, however, the cost of borrowing for Spain and Italy was nearing four points, and France’s borrowing conditions were rapidly deteriorating. The spectre of a fullblown crisis was starting to haunt markets. But the eurozone was not equipped to deal with this. The European Financial Stability Facility, established in 2010, had a lending capacity of a little more than €300 billion (MOP3.47 billion) – ample for the peripheral countries, but too little to help even Spain alone. Disaster beckoned. On July 21, European leaders attempted – belatedly – to redress this vulnerability by increasing the European Financial Stability Facility’s capacity to allow it to counter the increased Spanish and Italian risk. And, while the European Financial Stability Facility is not equipped to confront simultaneous crises in Spain and Italy, it has now been authorized to prevent such crises – or will be once national parliaments ratify the agreement reached on July 21 – by intervening on secondary debt markets to reduce interest-rate spreads on national bonds. In the meantime, the European Central Bank is intervening in the European Financial Stability Facility’s stead, and quite successfully so far: market tensions have eased markedly since the European Central Bank began buying bonds on August 8.
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Fighting speculation This response is based on the hypothesis that, unlike the Greece crisis, which is a genuine case of insolvency, the Spanish and Italian crises are mainly attributable to self-fulfilling speculation. Here, markets are guided by groundless fears, which are nonetheless perilous because they have a negative impact on borrowing conditions. In such cases, limited and credible intervention should suffice to flip the trend, but there is no guarantee. And, if intervention fails, even boosting the fund to €1 trillion or €1.5 trillion would be inadequate, because there would be a
crippling domino effect: a Spanish crisis would affect Italy, an Italian crisis would hit France, and a French crisis would leave Germany as virtually the sole guarantor of an unbearable debt burden. Issuing eurobonds would mean replacing the current eurozone strategy of “every man for himself” with one based on the principle “all for one and one for all,” which would enable joint borrowing by euro countries. Each member country would benefit from the guarantee of all its partners, and only the aggregate situation of the eurozone – which is significantly better than that of the United States, Japan, or the United Kingdom – would matter. The idea is attractive, but it must be recognized that a joint guarantee implies that each of the participating countries will give their partners access to their own taxpayers, who may be required to stand in for a defaulting borrower. This arrangement is unthinkable without an extremely robust counterpart – for example, prior scrutiny of national budgets. In concrete terms, a country may have to choose between repealing a finance bill adopted by its parliament but rejected by its eurozone partners and losing the joint guarantee.
Two-part response Decisions of this nature cannot be left to a committee of technocrats or a conclave of ministers. They can be taken only by a body with democratic legitimacy analogous to that of a national parliament. In other words, issuing eurobonds entails setting up a federal system of government, one recognized as such by Europe’s states and peoples. Ms Merkel and Mr Sarkozy, no doubt, find this prospect highly unattractive. But their proposal may in practice boil down to a two-part response. In the short term, bolstering European governance by appointing EU President Hermann Van Rompuy as a permanent chairman of the eurozone conveys a signal about the zone’s cohesion that is designed to calm markets and support the strategy adopted on July 21. But if this proves inadequate and a more ambitious approach is needed, the existence of a governance structure, or at least the beginnings of one, would form the basis of more elaborate institutional machinery. With luck, the first part of the response will be enough, because it is far from certain that the second would be politically acceptable. But the decision lies only partly with governments themselves. Since the outbreak of this crisis, they have repeatedly been forced by events to push European integration further than they had initially envisaged. It may well be that these small steps for the eurozone lead in the not-toodistant future to a giant leap for Europe. SEPTEMBER 2011
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UNEMPLOYMENT RATE HOLDS STABLE Macau’s unemployment rate for the period from May to July stayed put at 2.7 percent, the same as the previous period (April-June). The number of unemployed remained unchanged, at 9,000. Fresh labour force entrants searching for their first job stood at 12.3 percent of the total, up by 4.9 percentage points from the previous period, attributable to the increase of graduates entering the labour market. According to the Statistics and Census Service, the total labour force stood at 340,000.
LOANS INCREASE
AIRPORT PASSENGERS UP For the second month in a row, the number of passengers handled by the Macau International Airport increased on a year-on-year basis. In July, the airport handled 379,000 passengers, an increase of 6.3 percent in comparison with a year before, according to data available on ADA – Administration of Airports Ltd’s webpage. Destinations that performed positive growth against July 2010 were Seoul (54 percent increase), Clark (29 percent), Kuala Lumpur (29 percent), Shanghai (22 percent), Singapore (16 percent) and Bangkok (3 percent).
OVERALL MEDIAN EARNINGS STAY PUT The median monthly employment earnings of the employed in Macau held stable in the second quarter of 2011 from the previous period, at MOP9,600 (US$1,200), the Statistics and Census Service said. The median weekly hours actually worked for the same period stood at 46.4 hours.
OVER 900 NEW COMPANIES CREATED A total of 911 new companies were incorporated in the second quarter of 2011, up by 17.1 percent year-on-year, according to the Statistics and Census Service. The total value of registered capital surged by 136.6 percent to MOP321 million (US$40.1 million). Among the new incorporations, 256 were operating in wholesale and retail, 168 in real estate and 156 in business services. On the other hand, between April and June, the number of companies in dissolution totalled 112 with a total registered capital MOP122 million.
SEPTEMBER 2011
Loans continue to grow faster than deposits, according to the monetary authority. In June, total deposits with the banking sector grew 0.4 percent from a month earlier to MOP380.0 billion (US$47.5 billion). In the same period, domestic loans to the private sector increased 4.8 percent, to MOP156.7 billion, while external loans rose 5.0 percent, to MOP158.4 billion. That meant the loan-to-deposit ratio grew 3.6 percentage points from the previous month to 83.0 percent.
MORE CREDIT CARDS The total number of personal credit cards in circulation in Macau stood at 473,000 at the end of June, according to the monetary authority. That represents an increase of 5.6 percent from a quarter ago. The number of renminbi cards continued to rise fast, standing at 45,400 at the end of June, a 26.2 percent quarter-to-quarter rise. On an annual basis, renminbi cards jumped 145.2 percent. During the second quarter of 2011, the credit card turnover grew 2.3 percent quarter-to-quarter to MOP2.3 billion (US$287.5 million).
23
IMPORTED LABOUR KEEPS GROWING The number of imported workers continues to increase. In July, the total number of non-resident workers in Macau stood at 87,100, up by 2.2 percent in comparison with the previous month, according to the Human Resources Office. The majority (25,300) were working in hotels and restaurants. The gaming sector employed around 11,600 imported workers, including almost 3,500 construction workers.
TRADE SECTOR IN NEED OF PEOPLE At the end of June, Macau’s wholesale and retail trade sector had 3,436 job vacancies, up by 11.8 percent year-on-year, according to the Statistic and Census Service. Of those, 2,290 vacancies were in the retail trade. By the end of the second quarter, the wholesale and retail trade sector had 31,800 paid employees, an increase of 10.2 percent in comparison with a year ago, with 20,000 working in retail trade.
INFLATION SPEEDS UP The Composite Consumer Price Index for July increased by 5.96 percent year-on-year, the Statistic and Census Service announced. The increment was attributable to higher charges for meals bought away from home, as well as rising prices of gasoline and garments. For the 12 months ended July 2011, the average Composite Consumer Price Index, Macau’s main indicator for inflation, increased by 4.59 percent from the previous period. The Composite Consumer Price Index for July increased by 0.51 percent month-to-month.
RETAIL SALES SOAR The value of retail sales in Macau for the second quarter of 2011 amounted to MOP9.60 billion (US$1.2 billion), up by 39 percent year-on-year. Retail sales of watches, clocks and jewellery reached MOP2.53 billion, or 26 percent of the total, leading the list. In comparison with the first three months of 2011, the value of retail sales increased slightly by 0.1 percent. The volume of retail sales decreased by 3 percent in the second quarter from the previous period.
EXPORTS DOWN
POPULATION HITS RECORD HIGH Macau’s population reached 558,100 people at the end of June, an increase of 1,300 from three months before and a new record for the city, according to official data. The previous record was set during the third quarter of 2008, when the territory’s population reached 557,300 people. The growth was fuelled by a 6.2 percent quarter-on-quarter rise in the number of live births, to 1,353, and the expanding number of imported workers.
The total merchandise exports for July amounted to MOP585 million (US$73.1 million), down by 4.6 percent year-on-year, the Statistic and Census Service said. The total merchandise imports continued to rise, this time by 46.3 percent year-on-year to MOP5.54 billion. In the first seven months of 2011, the total value of merchandise exports decreased by 6.1 percent year-on-year to MOP3.99 billion, while the total value of merchandise imports increased by 38.3 percent to MOP33.38 billion.
SEPTEMBER 2011
24
Economy & Finance
The special one
Preferential policies for companies operating on Hengqin Island promise substantial returns for Macau firms he governments of Macau and Guangdong have announced a string of policies to tempt regional companies to invest in Hengqin Island. The measures have been lauded by the business sector and approved by the State Council. Included in last month’s announcement were exemptions from import duties for goods shipped to Hengqin, provided that they are used in production. Trading between Hengqin-based companies will also be tax exempt. Also announced was a reduced profit tax rate of 15 percent for companies
T
SEPTEMBER 2011
in “priority sectors”, including tourism, business services, financial services, cultural and creative industries, traditional Chinese medicine and medical care, research and development in scientific and education, and any high-tech industry. Elsewhere in the mainland, profit tax is levied at 25 percent. Macau residents working on Hengqin will be offered rebates on their salary tax to offset differences between the mainland and Macau tax systems. Standard salary tax rates in the mainland range from 5 to 45 percent. Employees in Macau are exempt from tax if
they earn less than MOP144,000 a year and pay no more than 12 percent on income above that. There was no announcement on rationalising the Hengqin border crossing.
SME opportunity Chief executive Fernando Chui Sai On said the preferential policies make the island “even more special” than other mainland special economic zones, offering “more favourable conditions”. He said the collection of tax breaks would ensure Macau companies could participate in the island’s development,
25
Chief executive Fernando Chui Sai On said the preferential policies make the island “even more special” than other mainland special economic zones, offering “more favourable conditions”
Macau, Hengqin is the mainland’s third special economic area, after Binhai New Area in Tianjin and Pudong New Area in Shanghai. The development project will include industrial, office, residential and tourism areas. The goals are ambitious: to increase the current population of 5,000 to 120,000 by 2015 and to 280,000 by 2020, when the area is forecast to have a gross domestic product per capita of RMB200,000 (MOP251,460 or US$31,330). The governments of Guangdong, Zhuhai and Macau are the major supporters. Macau will relocate the University of Macau and establish a Chinese
Medical Technology Industrial Park in a joint-venture with its mainland counterparts. According to Niu Jing, director general of the Hengqin New Area Administrative Committee, the construction of 12 key projects with investment exceeding RMB80 billion has been accelerated. Meanwhile, negotiations concerning 15 other projects with investment totalling RMB51 billion are under way. A number of projects will begin by the end of the year, Mr Niu said. Investment in fixed assets in Hengqin reached RMB4.49 billion in the first half of the year, up 108.5 percent from the same period last year.
creating job opportunities and helping economic diversification. Secretary for transport and public works Lau Si Io says Hengqin could help firms “lower their production costs, while increasing their competitiveness”. Macau is working to formulate policies that would allow small and medium-sized enterprises to be involved in the development, he said. The priority would be helping SMEs obtain investment, while big companies would be pressed to create partnerships with smaller companies. The president of the Industrial Association of Macau, Ho Iat Seng, said the preferential policies were “good news”. “It is very important that both the Macau government and its Guangdong counterpart get together to support the Macau companies,” said Mr Ho, who is also the vice-president of the Legislative Assembly. He predicted that “many companies” from Macau would invest. The chairman of the SME Association, Stanley Au, is also bullish. Although he admitted that it would take time for all the promised measures to bear fruit, Mr Au was upbeat that the Guangdong government was involving Macau businesspeople in the development.
In the making Legislator José Chui Sai Peng warned there was still little information on the business benefits of the promises. He urged the government to create a channel to handle enquiries about the development. Casino operator Galaxy Entertainment Group has already expressed its interest to invest in non-gaming projects on Hengqin Island. A 106-sq-km island, just west of SEPTEMBER 2011
26
Economic Trends by José I. Duarte Traffic snarl
GRAPH 1 - The number of licensed motor vehicles by class Light vehicles
Heavy vehicles
Motorcycles
250,000
200,000
150,000
An increase in the number of cars on the road is usually strongly correlated with the development of an economy. Over the past 10 years, that relationship should be visible in Macau and it should be particularly strong as the economy has grown substantially, compounded by high levels of liquidity in the financial system and low interest rates. GRAPH 1
100,000
50,000
0 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011H1
GRAPH 2 - The number of licensed motor vehicles by class, expressed as annual growth
The first graph illustrates that the growth in the number of vehicles across all classes is statistically significant. There has been an overall growth of almost 75 percent in the number of vehicles on the road between 2000 and last year – equivalent to a sustained annual growth in excess of 5 percent. At the current levels there is one vehicle for every five meters of road, excluding motorcycles. The density of cars on the road in Macau is roughly similar to the levels found in Hong Kong and Singapore. GRAPH 2
Light vehicles
Heavy vehicles
Motorcycles
(%) 12.00 10.00 8.00 6.00 4.00 2.00 0.00 -2.00 -4.00 -6.00 -8.00
This graph shows the annual growth of licensed vehicles by class over the past decade. It suggests that the “boom” years are over and that growth rates are trending towards lower levels. In the case of heavy vehicles, the cycle is quite clear, with negative growth at the beginning and end of the decade. The peak was reached in the middle of the period, in 2005, when the annual growth rates peaked at close to 11 percent. However, as the base number of vehicles on the road is now much larger after years of consistent growth, even small annual increases represent sizeable increases. In a densely populated, smaller territory such as Macau, that change is magnified. GRAPH 3
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011H1
GRAPH 3 - The number of tourist coaches and public transport vehicles Taxis
Light tourism coaches
Public buses
Heavy tourism coaches
4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2000
2001
2002
2003
SEPTEMBER 2011
2004
2005
2006
2007
2008
2009
2010
2011H1
If we look into the number of vehicles registered for public transport, there are some features that deserve to be highlighted. First, the growth in the number of taxis does not seem to be commensurate with the growth of the economy. Compare the paltry growth in the number of taxis between 2000 and June, an increase of just below 30 percent, with the two- and four-fold increases in heavy and light coaches for tourism. The increase in the number of public buses also appears to be well below the increase in population during the period of analysis. In fact, the growth in the number of public buses was less than one-third of the population growth rate, which stood at almost 30 percent between 2000 and June. The slight decrease in the number of public buses in the final part of the period is especially surprising, given the government emphasis on public transportation. These figures seem to support the perceived worsening of traffic and public transportation conditions.
27
Moving violations
GRAPH 4 - Traffic violations and the number of registered vehicles Traffic violations
Total number of licensed vehicles
600,000
500,000
Given the growth in the number of licensed motor vehicles in Macau, it is not surprising that the number of registered traffic violations has also increased. They have also followed a “boom” pattern. GRAPH 4
400,000
300,000
200,000
100,000 0 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
After 2003 there was a significant increase in the number of traffic violations, with the figure more than doubling until its peak in 2007. The size of the spike suggests the increase cannot be attributed only to growth in the number of vehicles. For most of the period of the analysis, the average number of violations per vehicle oscillates around two but rose to more than three, on average, by 2007. After that, values returned to the apparent “norm”. The sharp increase suggests more zealous enforcement by police rather than a decline in motorist behaviour. GRAPH 5
GRAPH 5 - The number of pedestrians and vehicles involved in accidents Pedestrians
Light vehicles
Taxi
Heavy vehicles
Motorcycles
30,000 25,000 20,000
15,000 10,000
5,000
As the number of vehicles on the road has increased, the number of accidents and number of participants in those accidents have also grown. The number of vehicles and people involved in traffic accidents slowed after 2004, which might indicate increased vehicle density and slower traffic. Taxis are among the vehicle classes that posted a sharp increase in accidents between 2000 and last year. The number of accidents involving taxis grew twice as fast as the total number of taxis during the same period. The number of pedestrians involved in traffic accidents rose by almost 40 percent between 2000 and 2004, from 616 to 852. Over the past two years, the figure has come down significantly, standing at 728 last year. GRAPH 6
0 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Motorcycles
Taxis
GRAPH 6 - Annual road accidents per 100 vehicles by class and type Light vehicles
Heavy vehicles
The final graph reveals two interesting and surprising trends. First, the number of accidents involving motorcycles is, in relative terms, much lower than that of other vehicle classes. Second, taxis are more likely to be involved in an accident than any other category of vehicle, with a peak of 227 accidents per 100 taxis per year in 2004.
250
200
150
100
50
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
SEPTEMBER 2011
Economic Trends by JosĂŠ I. Duarte
28
Output and expenditure (*) 2010 GDP current (in MOP)
217,324
million
Consumption (in MOP)
17,496 27,727 17,496 - 42,676 164,086 207,194
million
Investment (in MOP)
Economic Activity
Government (in MOP) Trade balance: goods (in MOP) Trade balance: services (in MOP) GDP constant (2008) (in MOP)
million million million million million
% var
31.4 9.8 - 13.6 9.3 21.5 54.2 26.2
Latest
Notes
% var
60,995 13,896 5,636 3,369
million
-12,397 50,490 56,498
million
million million million
million million
28.9 26.2
Q1
-21.3 -3.3 60.0 100.0 21.5
Q1
% var
Notes
Q1
Q1 Q1 Q1 Q1
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
38,225 million 270,388 million 149,798 million 264,220 million 110.29 base - 2008 0.50 %
13.8 25.1 37.9 25.2 5.65 --
Latest
% var
May May May May June June
Population/Labour force
Labour force Median wage rate (in MOP) Unemployment
522,300 330,900 9,000
% var
3.0 %
-1.9 0.5 4.7 - 0.1
2010
% var
Notes
558,100 338,200 9,600
2.5 3.6 12.9
Q2
2.6 %
- 0.1
May, var
% var
Notes
Q2 Q2
Construction 1,835,174 Finished 1,271,509 Cement (Apparent consumption) 214,166 Transactions/Commercial (in MOP) 6,580 Transaction/Residential (in MOP) 45,939
Major sectors
Started
m2 m2 tons million million
- 19.8 - 9.6 - 22.6 117.0 113.0
Latest
16,525 52,153 17,102 1,294 6,114
m2 m2 tons million million
1843.0 85.4 21.1 12.0 84.0
June June June June June
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
20,874 34 5,237 15,098
% var million
52.4 1 546 1,048
Notes June Q2, var, ytd Q2, ytd Q2, ytd
Tourism 2010
24,965,000 Average expenditure (in MOP) 1,812 Average stay 0.90 Hotel rooms 20,091 Occupation rate 79.8 % Average hotel stay 1.54 nights Visitors
% var
15.0 0.3 - 0.2 4.3 8.43 0.04
Latest
2,181,000 1,482 0.90 days 21,518 81.96 % 1.45 nights
% var
Notes
June 14.6 Q2 3.2 Q1, var -- days May 5.2 May, var 1.05 May, var 0.02
%var - % change on homologous period; var - absolute variation; ytd - % change, year-to-date; x - discontinuous series (*) Important note: Values for 2009 revised. The methodology and reference period for the real GDP calculation has changed. New base: 2008) (**) Important note: The inflation SEPTEMBER 2011 base period has changed ( New base: April 2008 to March 2009 = 100)
Sources: DSEC (Statistics and Census Service), AMCM (Monetary Authority of Macau), DICJ (Gaming Inspection and Coordination Bureau)
2010 Population
29 KEITH MORRISON AUTHOR AND EDUCATIONIST - kmorrison.iium@gmail.com
A price for prosperity A BOOM FOR SOME MEANS A BUST FOR OTHERS IN MACAU
I
n the middle of World War Two, British economist and social reformer William Beveridge produced a report which laid the foundation for Britain’s welfare state. In it he proposed to eradicate five social evils: want, disease, ignorance, squalor and idleness. Now, nearly 70 years later, British scholar Daniel Dorling’s book “Injustice: Why Social Inequality Persists”, argues (with a vast amount of evidence) that the inequalities that Mr Beveridge was trying to eradicate have been replaced by five vicious new tenets of social injustice: elitism is efficient, exclusion is necessary, prejudice is natural, greed is good and despair is inevitable. Each belief, he writes, creates its own victims. Elitism creates delinquents and stigma. Exclusion creates the debarred, with people excluded from many social norms because they are poor. Prejudice creates the discarded, with people treated as secondclass citizens. Greed creates debtors, as the rich get richer and the poor get poorer. Despair creates the depressed. The final nail in the coffin, he argues, is that people accept this as natural and unavoidable – that this is the way the cookie crumbles. Let us imagine a rich man and a poor man. They both put money in savings accounts for five years, with an annual interest rate of 1 percent. The rich man puts MOP100,000 (US$12,500) into his savings account, and the poor man puts MOP100 into his. At the end of the first year the rich man has MOP101,000 and the poor man has MOP101. Each year they reinvest their savings with compound interest. At the end of five years the rich man has MOP105,101 and the poor man has only MOP105.10. This is the law of cumulative advantage and cumulative disadvantage: while the rules of the game are the same for both – both accounts grow at the same annual rate – they give the rich far more advantage than the poor.
Virtuous and vicious If you are poor and take on debt, with compound interest you increase your debt exponentially, getting into even more debt. The effects are self-amplifying. On this principle, those in power use their power to gain more power, those with money use their money to gain more money and those with advantage use their advantage to gain even more advantage. Conversely, those without power become increasingly powerless, those without money become poorer and those without advantage become yet more disadvantaged. This was the message of the Nobel prize-winning economist Gunnar Myrdal’s theory of cumulative circular causation, now called positive feedback loops and increasing returns. If you are wealthy, it is a virtuous cycle. If you are poor, it is a vicious cycle. What has all of this to do with Macau? Well, I am not sure that Macau has actually cracked the problems that Mr Beveridge mentioned: want, disease, ignorance, squalor and idleness. Further, I see Mr Dorling’s five new social evils clearly in Macau: elitism, exclusion, prejudice, greed and despair. Take a trip round the public hospital, the old people’s dwellings and the wooden shacks that pose as homes. See the treatment of drugs addicts, the support for those with special needs and the squalor in the north of Macau. See how the immigration department handles foreigners. Look
at the eyes of the old man staring vacantly as he sits on a bench in Fai Chi Kei with nothing to do. Look at the positions held by the power elite of a small number of families in Macau. Look at the rights and treatment of migrant workers. Look at Macau’s suicide rate: 73 deaths last year.
Just awards Macau Business has recently announced that it will award “business Oscars” for local businesses. I hope that the jury will question contestants about what their businesses are doing actively and successfully about: - Reducing elitism, prejudice and greed in Macau; - Eradicating poverty in Macau and ensuring that the material prosperity that the company has brought is redistributed to (and reaches) all corners of Macau society; and - Empowering the disadvantaged, the disempowered, the despairing, the unheard and the excluded in Macau. These are matters of action and education which could make corporate social responsibility a key criterion for the business awards. It is not only a matter of creating wealth but of what is done with it, creating opportunity and social action, replacing the “enlightened self-interest” of the free marketers with “enlightened social interest”. What are businesses in Macau doing? SEPTEMBER 2011
30
Property | Market Watch
High rise, deep plunge
Photo: Carmo Correia
Home prices have been dropping steadily since the end of April
SEPTEMBER 2011
31 t is a phenomenon unheard of in Macau for years: home prices have been falling for three months in a row. The average price per square metre of residential space reached its highest this year – MOP50,512 (US$6,314) – in April, and since then has plunged sharply. In July it was MOP38,434, having dropped by a quarter in just three months, according to the Financial Services Bureau. Even so, home prices in July were 12.8 percent higher than a year before. The main reason for the drop is widely acknowledged to be the new special stamp duty on residential property transactions, which has cooled the market. However, there are some signs of stabilisation. The average price per square metre of residential space was only 1.9 percent lower in July than the month before, falling more slowly than in May or June. The fall in the volume of home sales is also showing signs of slowing. In June 2,368 homes were sold, 1.4 percent fewer than the month before but 53 percent more than a year before, according to the Statistics and Census Service. Some analysts had expected a steeper monthly decline, as the government began levying the new stamp duty in the middle of June. In May, nearly one-third fewer homes were sold than the month before. The combined value of housing sales in June was MOP6.1 billion, 23 percent less than the month before.
I
Older and poorer Property industry insiders are now waiting for the impact on the real estate market of the release later this year of thousands of public-sector homes. At least 4,000 subsidised dwellings will be put up for sale before the end of 2011, the government says. Ricacorp executive director Jane Liu says this will curb the number of sales of homes aged over 20 years. Ms Liu says the prices of such homes has risen in line with those of mid-range and high-end dwellings. “As the government also loosened the eligibility criteria for social housing, the demand for this type of old, lower quality, second-hand apartment will drop and their prices are expected to further reduce by 10 to 12 percent,” Ms Liu says. To allow for the sale of the new SEPTEMBER 2011
Property | Market Watch
Residential units sold as per record of stamp duty* Month
2010
January
2011
Value (MOP thousand)
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 March 2,225 April 3,485 May 2,402 June 2,368
6,000 5,000 4,000 3,000 2,000 1,000 0
* 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.
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
Value of residential units sold as per record of stamp duty* Month
2010
January
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 7,704 19,244 7,902 6,114
February March April May June July August September October November December 2011
January February March April May June
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul 2010 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.
Source: DSEC
Year
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 2010 2011
Source: DSEC
Year
Average transaction value of residential properties as per record of stamp duty
Source: Financial Services Bureau
32
Total number of buyers in residential transactions in the first six months of 2011:
Total value of residential transactions in the first six months of 2011:
17,088
46.67 billion
Proportion of buyers
Proportion of buyers
13% 87%
Non-Residents
Residents
27% 73%
Non-Residents
Residents
* 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.
subsidised housing, the Legislative Assembly passed a new law last month, which will take effect on October 1. The legislation changes the way homes are allocated, and allows buyers to sell them only after 16 years, with the government having the right of first refusal.
This won’t hurt It is still foggy how the prices of subsidised housing will be set. It is expected that chief executive Fernando Chui Sai SEPTEMBER 2011
On will soon issue by-laws making this issue clear and setting the income ceiling for eligible buyers. The government is not likely to accept new applications for subsidised housing until next year, as there are still 11,600 households on its waiting list. Last month Mr Chui said the government would build more public-sector homes in addition to the 19,000 it has undertaken to build over the five years ending in 2012, including social housing
for rent and subsidised housing for sale. Mr Chui said there were plans for a further 6,000 homes, with land already reserved for some 2,000 of them and with 3,000 already being designed. Most will be for rent rather than sale. Mr Chui said the government was trying to find a balance between the interests of low-income residents and the health of the real estate market, in order to prevent its public housing programme hurting private homeowners.
Property | Market Watch
AVERAGE TRANSACTION PRICE PER SQUARE METRE OF RESIDENTIAL UNITS BY DISTRICT AS PER STAMP DUTY RECORDS
33
Source: DSEC
(MOP) District
2009
2010
2011
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Macau
24,154
25,631
26,845
32,026
30,347
33,397
38,261
44,269
Macau Peninsula Ilha Verde Tamagnini Barbosa Areia Preta and Iao Hon Areia Preta new reclamation zone (NATAP) Mรณng Hรก and Reservoir Fai Chi Kei Lamau Docks Horta e Costa and Ouvidor Arriaga Barca Patane and Sรฃo Paulo Conselheiro Ferreira de Almeida Ferreira do Amaral (Guia) ZAPE NAPE and Praia Grande Bay reclamation area Downtown Macau Barra / Manduco Praia Grande and Penha
24,158 18,043 13,333 14,845 26,866 18,617 16,565 30,006 21,308 15,805 17,739 16,100 19,661 17,873 51,296 13,945 13,280 17,561
25,415 22,988 20,225 20,123 30,199 21,637 21,180 28,727 23,033 23,457 18,330 19,712 22,541 18,776 52,266 16,814 15,749 24,523
26,674 22,182 19,942 19,812 32,307 20,993 22,744 28,151 25,261 19,396 19,107 21,020 20,308 16,011 59,793 19,931 16,556 21,153
27,603 23,108 25,141 22,857 34,413 25,145 24,895 29,157 25,745 18,875 20,538 20,476 25,713 19,620 48,445 19,383 26,676 24,888
29,517 24,524 25,886 21,887 34,615 23,506 25,437 28,099 28,603 18,849 20,990 21,948 24,953 20,705 58,820 18,223 23,058 32,955
29,664 27,365 27,819 22,519 32,314 26,495 24,072 34,437 29,111 21,853 21,387 23,371 27,565 24,399 51,835 20,742 27,491 37,988
37,159 40,402 26,959 28,581 43,266 30,706 28,762 36,867 32,437 25,714 23,271 27,004 26,267 28,915 67,891 27,878 30,973 35,151
42,296 44,075 34,159 32,586 51,255 33,789 37,637 35,081 32,889 30,370 27,901 30,460 54,703 30,228 76,634 27,862 36,663 34,709
Taipa Ocean Gardens and Taipa Pequena Downtown Taipa University and Pac On Bay Pac On and Taipa Grande City and Jockey Club
23,897 24,851 23,980 18,711 34,361 14,912
26,432 27,733 26,055 21,611 49,628 17,594
27,342 27,893 27,255 20,774 54,776 15,876
28,372 29,608 28,366 21,897 50,445 27,062
29,583 31,888 28,280 26,228 57,185 26,654
39,876 28,837 41,527 22,054 56,702 27,596
33,402 35,102 31,750 26,991 82,688 27,346
42,457 45,435 38,869 34,566 73,898 28,948
Coloane
17,188
20,120
25,778
59,509
64,087
64,398
67,484
70,098
Notes: 1. The above information covers building units with stamp duty paid in the reference quarter 2. Including residential units that were exempt from the payment of stamp duty ~ No figure provided/confidential data
AVERAGE TRANSACTION PRICE PER SQUARE METRE OF OFFICE UNITS BY MAIN DISTRICT AS PER STAMP DUTY RECORDS
Source: DSEC
(MOP) District Macau ZAPE NAPE and Praia Grande Bay reclamation area Downtown Macau Praia Grande and Penha
2009
2010
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
20,049 20,213 22,778 11,043 ~
23,177 19,793 25,233 14,309 16,540
23,740 18,869 28,486 23,186 ~
22,169 16,896 22,252 28,838 ~
23,374 18,839 27,940 16,305 ~
27,078 32,046 27,802 25,801 ~
27,700 27,393 30,819 ~ 19,649
36,618 35,277 37,909 32,506 31,391
Notes: Only covers office buildings with ten storeys or higher ~ No figure provided/confidential data SEPTEMBER 2011
34 34
Property | Market Watch Notable residential property transactions - 16/07 to 15/08, 2011 District
Property
Unit
Taipa Macau Macau Macau Taipa Macau Macau Macau Taipa Taipa Taipa Macau Taipa Macau Macau Taipa Taipa Macau Macau Macau Taipa Coloane Taipa Taipa Taipa Macau Macau Macau Macau Macau Macau Macau Macau Taipa Macau Taipa Taipa Macau Macau Coloane Macau Macau Taipa Macau Taipa Macau Macau Macau Taipa Macau Macau Macau Taipa Taipa
One Grantai One Central Lake View Mansion Lake View Tower Edf. Panorama Lake View Tower Lake View Mansion Lake View Tower One Grantai Nova City Nova City The Residencia Macau Nova City Villa de Mer Villa de Mer Pearl On The Lough Nova City One Central One Central One Central The Manhattan One Oasis Cotai South Edf. Nova Taipa Garden Edf. Nova Taipa Garden Nova City The Bayview One Central Lake View Tower La Baie Du Noble La Baie Du Noble La Baie Du Noble La Cité Villa de Mer Nova City The Bayview The Pacifica Garden Edf. Triumph Torre The Riviera Lake View Tower One Oasis Cotai South The Residencia Macau Grandeur Heights Nova City Grandeur Heights Nova City The Riviera The Riviera Grandeur Heights Nova City Phoenix Garden Grandeur Heights Grandeur Heights Nova City The Pacifica Garden
Block 1, L/F, unit A Block 2, H/F, unit A L/F, unit J Block 1, M/F, unit P Block 2, L/F, unit B (with car park) M/F, unit P L/F, unit H Block 2, L/F, unit K Block 3, L/F, unit N H/F, unit D M/F, unit A Block 1, H/F, unit B L/F, unit A Block 1, L/F, unit A Block 1, L/F, unit A Block 1, L/F, unit D (with car park) block 9, H/F, unit A Block 7, L/F, unit E Block 7, H/F, unit C Block 7, L/F, unit C L/F, unit D (with car park) Block 9, H/F, unit A Block 31, H/F, unit E (with car park) Block 23, H/F, unit E Block 5, L/F. unit B (with car park) Block 1, H/F, unit C (with car park) Blok 7, L/F, unit C M/F, unit C Block 3, H/F, unit K Block 3, H/F, unit K H/F, unit C Block 4, H/F, unit B Block 5, M/F, unit B Block 15, M/F, unit D Block 4, L/F, unit C (with car park) Block 1, M/F, unit D (with car park) M/F, unit F Block 1, L/F, unit A L/F, unit I Block 3, M/F, unit A Block 5, H/F, unit C M/F, unit F L/F, unit B L/F, unit G Block 16, L/F, unit F Block 2, H/F, unit N Block 2, H/F, unit N H/F, unit C L/F, unit C M/F, unit B H/F, unit H H/F, unit D L/F, unit A Block 1, L/F, unit F
Source: Centaline, Ricacorp and Midland
Floor area (sq. ft)
Sale price (HK$)
Price per sq.ft. (HK$)
5,350 2,299 3,400 2,108 4,522 2,107 2,900 1,668 2,167 2,503 2,503 1,693 2,503 1,695 1,703 2,055 2,500 1,274 1,176 1,176 2,305 1,325 2,167 2,167 1,981 1,582 1,176 1,515 1,659 1,659 1,546 1,592 1,475 1,959 1,582 1,594 1,756 1,270 1,237 1,196 1,209 1,372 1,318 1,393 1,340 1,188 1,188 1,169 1,318 1,727 1,144 1,223 1,088 1,188
46,000,000 16,667,750 14,500,000 13,800,000 12,500,000 12,220,000 12,000,000 10,508,000 9,751,500 9,386,000 9,261,000 9,000,000 8,880,000 8,500,000 8,500,000 8,500,000 8,500,000 8,281,000 8,100,000 7,880,000 7,800,000 7,200,000 7,100,000 7,000,000 6,880,000 6,850,000 6,800,000 6,800,000 6,500,000 6,500,000 6,450,000 6,280,000 6,180,000 5,800,000 5,780,000 5,650,000 5,650,000 5,380,000 5,350,000 5,300,000 5,280,000 5,100,000 4,880,000 4,880,000 4,800,000 4,680,000 4,600,000 4,544,000 4,480,000 4,390,000 4,380,000 4,200,000 4,180,000 4,100,000
8,598 7,250 4,265 6,546 2,764 5,800 4,138 6,299 4,500 3,750 3,700 5,316 3,548 5,014 4,991 4,136 3,400 6,500 6,887 6,701 3,384 5,434 3,276 3,230 3,472 4,329 5,782 4,488 3,918 3,918 4,172 3,945 4,189 2,961 3,653 3,544 3,217 4,236 4,325 4,431 4,367 3,717 3,703 3,503 3,582 3,939 3,872 3,887 3,399 2,541 3,829 3,434 3,842 3,451
Note: L/F - Low floor; M/F - Middle floor; H/F - High floor
Notable commercial property transactions - 01/07 to 31/07, 2011 District
Building/Street
Unit
Retail Retail Retail Retail Retail Retail Retail Retail Retail Retail Office Retail Retail Industrial Office Office Industrial Office Retail Retail
Edf. Hong Cheong Avenida do Almirante Lacerda Rua dos Mercadores Rua de Sacadura Cabral Rua dos Hortelãos Avenida do Governador Jaime Silvério Marques Avenida do Governador Jaime Silvério Marques Jardim Lameiras Edf. Nam San (Block 2) Rua de Sacadura Cabral Edf. Zhu Kuan Rua do Bispo Medeiros Rua do Almirante Costa Cabral Edf. Centro Industrial de Macau Edf. Zhu Kuan Centro Comercial Tong Nam Ah Edf. Industrial Cidade Nova Centro Comercial Chong Fok Rua da Palmeira Rua da Palmeira
Shop Shop Shop Shop Shop Shop Shop Shop Shop Shop L/F, unit G Shop Shop M/F, unit C L/F, unit H L/F, unit N L/F, unit L L/F, unit A Shop Shop
Source: Centaline
Floor area (sq. ft) 2,460 1,000 350 1,965 2,380 894 926 456 600 1,059 2,366 780 400 5,612 1,718 1,438 1,600 2,700 797 575
Sale price (HK$) 14,500,000 12,000,000 10,000,000 9,800,000 9,280,000 9,000,000 9,000,000 6,800,000 6,000,000 6,000,000 5,796,700 5,600,000 5,100,000 4,780,000 4,209,100 4,026,000 2,400,000 2,340,000 2,012,425 1,450,000
Price per sq.ft. (HK$) 5,894 12,000 28,571 4,987 3,899 10,067 9,179 14,912 10,000 5,665 2,450 7,179 12,750 851 2,450 2,799 1,500 866 2,525 2,521
Note: L/F - Low floor; M/F - Middle floor; H/F - High floor
SEPTEMBER 2011
35 35 Notable residential property rentals - 16/07 to 15/08, 2011 District
Property
Unit
Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Taipa Macau Macau Macau Taipa Macau Taipa Macau Taipa Taipa Taipa Macau Macau Macau Macau Macau Macau Macau Macau Taipa Macau Taipa Taipa Taipa Macau Taipa Taipa Macau Macau Taipa Taipa Taipa Taipa Macau Macau Macau Taipa Taipa Taipa Taipa Taipa Taipa
L’Arc Lake View Tower One Central The Riviera L’Arc One Central One Central Lake View Tower One Central Lake View Tower Lake View Tower L’Arc L’Arc One Central One Central Lake View Tower One Central Lake View Tower Lake View Tower Lake View Tower Lake View Tower Lake View Tower Lake View Tower Edf. Kam Yuen The Manhattan Lake View Tower One Central Lake View Tower The Pacifica Garden One Central Treasure Garden Magnificient Court Pearl On The Lough The Pacifica Garden Nova City Lake View Mansion Magnificient Court Edf. Dynasty Garden Lake View Mansion The Bayview The Bayview The Bayview The Bayview The Pacifica Garden La Cité Chung Villa Nova City Prince Flower City Wan Yu Villas Nova City Nova City Grandeur Heights Grandeur Heights The Pacifica Garden The Pacifica Garden Hung Fat Garden Nova City Magnificient Court La Cité Superior Mansion Edf. Jardim Wa Bao Edf. Kinglight Garden Edf. Chun Leong Treasure Garden Edf. Le Fu Chong Fok Garden
H/F, unit F Block 2, L/F, unit L Block 5, H/F, unit A Block 1, H/F, unit G H/F, unit G Block 4, H/F, unit B Block 1, H/F, unit F Block 2, M/F, unit J Block 1, M/F, unit E Block 2, M/F, unit J Block 2, M/F, unit J H/F, unit F H/F, unit K Block 1, H/F, unit F Block 1, H/F, unit B Block 1, M/F, unit A Block 1, M/F, unit A H/F, unit A Block 1, H/F, unit A H/F, unit H Block 1, M/F, unit A Block 1, M/F, unit A M/F, unit A M/F, unit J Tower South, L/F, unit B M/F, unit C Block 7, H/F, unit F Block 2, M/F, unit F Block 2, M/F, unit G Block 1, H/F, unit C Block 2, L/F, unit G M/F, unit F Block 1, L/F, unit D Block 2 H/F, unit G Block 11, M/F, unit C Block 3, L/F, unit E Block 2, L/F, unit F M/F, unit V Block 1, L/F, unit M Block 2, L/F, unit C (with car park) Block 2, L/F, unit F (with car park) Block 2, L/F, unit B (with car park) Block 2, L/F, unit E Block 1, M/F, unit A Block 3, L/F, unit E L/F, unit D Block 15, H/F, unit C Block 1, M/F, unit C Block 3, M/F, unit L Block 8, L/F, unit F Block 8, M/F, unit B Moon Tower, M/F, unit B Moon Tower, L/F, unit A Block 1, M/F, unit E Block 2, H/F, unit L Block 1, M/F, unit S Block 10, L/F, unit F Block 1, L/F, unit C Block 5, H/F, unit C M/F, unit C Block 3, M/F, unit M H/F, unit C Block 1, M/F, unit A Block 2, H/F, unit H M/F, unit F Nice Court, L/F, unit J
Source: Centaline, Ricacorp & Midland
Floor area (sq. ft) 2,261 2,175 2,318 2,411 2,411 2,585 1,815 1,853 1,819 1,850 1,854 2,191 2,261 1,841 1,374 1,511 1,273 1,507 1,507 1,506 1,511 1,511 1,511 1,280 1,681 1,515 1,301 1,425 1,725 918 1,708 1,830 2,050 1,725 1,974 1,800 1,830 1,801 3,053 1,582 1,582 1,603 1,603 1,657 1,841 1,979 1,333 1,665 1,290 1,340 1,314 1,602 1,605 1,196 1,317 1,180 1,314 1,350 1,626 1,587 1,671 1,000 1,016 1,197 1,300 1,439
Rent price (HK$) 37,000 35,000 35,000 35,000 35,000 35,000 33,000 32,000 30,000 30,000 30,000 30,000 30,000 27,000 23,000 23,000 22,000 22,000 21,000 20,000 20,000 20,000 20,000 19,000 19,000 17,500 17,000 16,000 16,000 15,000 15,000 15,000 14,300 14,000 14,000 13,800 13,800 13,000 13,000 12,000 12,000 12,000 12,000 12,000 12,000 12,000 11,000 11,000 10,800 10,500 10,000 10,000 10,000 9,500 9,500 9,000 9,000 9,000 9,000 8,500 8,500 8,000 8,000 8,000 8,000 8,000
Price per sq.ft. (HK$) 16.36 16.09 15.10 14.52 14.52 13.54 18.18 17.27 16.49 16.22 16.18 13.69 13.27 14.67 16.74 15.22 17.28 14.60 13.93 13.28 13.24 13.24 13.24 14.84 11.30 11.55 13.07 11.23 9.28 16.34 8.78 8.20 6.98 8.12 7.09 7.67 7.54 7.22 4.26 7.59 7.59 7.49 7.49 7.24 6.52 6.06 8.25 6.61 8.37 7.84 7.61 6.24 6.23 7.94 7.21 7.63 6.85 6.67 5.54 5.36 5.09 8.00 7.87 6.68 6.15 5.56
Note: L/F - Low floor; M/F - Middle floor; H/F - High floor
Notable commercial property rentals - 01/07 to 31/07, 2011 Type
Building/Street
Unit
Retail Retail Office Office Office Retail Office Retail Office Office Office Office Office
Avenida do Conselheiro Ferreira de Almeida Avenida do Conselheiro Ferreira de Almeida Macau Square Macau Square Macau Square Flower City - Edf. Lei Mau Macau Square Avenida do Conselheiro Ferreira de Almeida Edf. Comercial Si Toi Centro Comercial Grupo Brilhantismo Centro Comercial Grupo Brilhantismo Centro Comercial Kuong Fat Centro Comercial Kuong Fat
Shop Shop M/F, unit M M/F, unit E L/F, unit K Shop L/F, unit L Shop L/F, unit K L/F, unit O L/F, unit E M/F, unit E1 M/F, unit E2
Source: Centaline
Floor area (sq. ft) 875 1,176 2,080 1,283 1,854 400 1,354 820 1,142 653 653 300 300
Rent price (HK$) Price per sq.ft. (HK$) 25,000 25,000 19,700 17,900 16,800 14,800 14,000 12,000 8,500 7,836 7,000 4,000 4,000
SEPTEMBER 2011
28.57 21.26 9.47 13.95 9.06 37.00 10.34 14.63 7.44 12.00 10.72 13.33 13.33
36
Property
Currently, 35 public service departments rent almost 140,000 square metres of office and commercial space from the private sector
SEPTEMBER 2011
37
Office politics Macau’s biggest rental tenant is its government, paying MOP35 million a month for offices and commercial space while its own buildings sit idle BY LUCIANA LEITÃO
n a move that will draw additional costs from the public purse, the secretary for economy and finance Francis Tam Pak Yuen and secretary for transport and public works Lau Si Io will soon relocate their offices from government headquarters to the Bank of China Tower. Macau’s civil service spends about MOP35 million (US$4.4 million) a month on rental expenses for offices and commercial sites. Real estate insiders say that makes the government the biggest player in Macau’s office rental market. The two most recent deals have thrown the spotlight on payments the government makes to private sector landlords even though it owns several buildings which are sitting empty. The exact floor area of the empty buildings is not known. In a written reply to questions by Macau Business, the Financial Services Bureau explained Mr Tam and Mr Lau’s new offices could not be relocated to an existing government property since the majority of the office space was already in use. The Financial Services Bureau is the body in-charge of overseeing the government’s real estate properties. It manages all buildings that have not been assigned to a government body or leased to the private sector. It is also in charge of renting office space from the private sector for public bodies. According to the bureau, both secretaries are in urgent need of more
I
space for their staff. “The public service chores have increased and the offices that were used [by the two secretaries] were not enough to fulfil their real needs. Furthermore, given the space limitations where the government headquarters is located, it was difficult to enlarge the facilities,” the Financial Services Bureau statement said. The rent to be paid for the office space in the Bank of China Tower has not been made public.
Keeper of keys In 2009, the Commission of Audit highlighted a lack of rules covering the renovation, relocation and building of offices for the government. It suggested establishing guidelines and controls that set office floor areas, per capita area, specifications for interior works and car parks. The government “should assess the allocation of office spaces in an integrated perspective, striking a balance between rented spaces and owned spaces, so as to protect itself from the market fluctuations and avoiding the inherent losses,” the commission concluded. There are still no public guidelines. Currently, 35 public service departments rent almost 140,000 square metres of office and commercial space from the private sector. “The rent value is based on what is practiced in the market. Since the government is a tenant with bigger stability and less risk, the rent is usually lower,” SEPTEMBER 2011
38
Property
the Financial Services Bureau said. By June, office rents were up 7.9 percent year on year, after a 1.8 percent increase last year, according to Jones Lang La Salle. The real estate services firm says it is possible they will rise 10 percent this year, driven by demand for premium offices. Vacancy rates in the first half fell to 20 percent from 24 percent last year. There are several examples of government bodies totally or partially operating in private buildings. The Government Information Bureau, for example, operates from China Plaza. There are several government offices in private buildings in the NAPE area. Although it rents a big chunk of its offices, the government is unable to provide either clear data on how many buildings it owns and their value, or the number of government-owned buildings actually in use. “There is a wide range of real estate property owned by the government, including residential, commercial, land, parking, and their valuation also differs because of the time of the valuation,” the Financial Services Bureau says. The bureau knows however that of the 1,200 government-owned residential units under its management around 200 are not being used. “Close to 350 were already allocated to civil servants to be used for housing, while 560 others are being used by public services,” the statement said. Another 70 units have been lent to charities and non-profit organisations.
Wide open space The search to find a big, empty government-owned building does not take long. The glass-fronted building on Tap Seac Square is one of the most striking examples. This government-built shopping mall was also to include restaurants, to revitalise the area and bring in more tourists. It was part of a wider plan to overhaul Tap Seac, including underground parking for tourist buses and a renovation of the square. The building has been empty since its completion in 2007. Only part of its ground floor has been used, on an onoff basis, as a temporary information centre for the cash handout and healthcare voucher programmes. Architect Maria José de Freitas suggests the government should do a comprehensive survey of its existing stock of SEPTEMBER 2011
buildings. The survey would form a database listing the specifications of each property, permitting the government to clearly assess their potential. “The only way to keep a building well preserved is to keep it alive and give it a use,” Ms Freitas says. Architect Mário Duque has been responsible for leading the design of several important buildings, including the Legislative Assembly Building. He says the government must define a clear strategy to rehabilitate its stock of buildings and, in some cases, revamp them to house activities that differ from those originally planned.
Central solutions Mr Duque says there are government initiatives to convert buildings but the process takes too long. ”The old courthouse was to be converted into the Central Library but years have gone by and still we see nothing,” he says. The space has recently been used to host temporary art exhibitions. A campaigner for the preservation of cultural and architectural heritage, architect José Maneiras says the solution to re-using empty, governmentowned buildings might come from thinking out-of-the-box. While existing public buildings might not have enough space to become headquarters for government departments, he said they were ideal for hosting cultural and social activities. The conversion of buildings in the São Lázaro neighbourhood to house cultural industries has brought new life to the area but more work is needed. “Many [government-owned] buildings [in the area] are closed. There are some art products there but that could really be a creative centre,” he says. Eilo Yu Wing Yat, a University of Macau public administration professor, supports the construction of a new government headquarters that would centralise all departments. He said research would be required comparing the long-term cost of either renting or constructing and maintaining such a complex. But using vacant real estate owned by the government is probably not enough to cover all the bureaucracy’s needs. For its part, the government has been working for several years on a plan to relocate its justice-related public bodies to the NAPE waterfront. The plan includes new buildings on
Although it rents a big chunk of its offices, the government is unable to provide either clear data on how many buildings it owns and their value, or the number of government-owned buildings in use
39
The glass-fronted building on Tap Seac Square is one of the empty government-owned properties
reclaimed land but there is no timeline for development. Political analyst Larry So Man Yum does not think the existing empty space is sufficient to house the public service and it requires a central headquarters where bureaus can work together.
Referee, not player “This is much easier to manage and things would be centralised. People wouldn’t need to run around,” Mr So says. He admits renting office space in the city centre may be the next-best op-
tion, at least from the end-user point of view. “It is much more convenient,” Mr So says. Whether it is an efficient use of the public’s money, he has some doubts. “The money [paid in rent] could be accumulated and used for a new building. And the government would not be in the market competing and pushing up the value of the buildings. “They are big tenants competing with other enterprises and they are pushing the rents up.” Mr So points out the government is spending a lot of money on renovating private buildings, which may be left be-
hind when leases expire. “They are not using our money responsibly. It would be much easier if everything was centralised.” No matter how government-owned buildings are used, Mr So believes officials must forget about thinking like businessmen. Instead of cashing in by selling off old buildings to private developers, the government should use its properties to provide housing to public workers or room for associations to grow. “Otherwise, very easily this leads to corruption,” says Mr So. And importantly, the government needs to “be a referee, not a player.” SEPTEMBER 2011
40
Property
Leaning towers Macau has several poorly maintained and ageing residential buildings at risk of collapse BY LUCIANA LEITÃO
any of Macau’s 3,600 residential buildings aged 30 years or more are poorly maintained and are now a latent safety threat. The 29,000 homes and other premises they house are in danger, although not imminent, of collapse. At least 35 buildings at risk have already been identified. Meng Heng Building at Ilha Verde is one of several buildings the Land, Public Works and Transport Bureau is monitoring, wary of their poor upkeep. Another is Fok Neng Building, in the San Kio neighbourhood. Further details about other properties under surveillance, namely their locations, have not been disclosed by the government. After a lengthy series of discussions, the bureau reached an agreement to demolish the Meng Heng Building last month. The government says the building is at risk of collapse. The government has three levels of risk. The highest level is reserved for structures that need to be immediately demolished and is currently empty. The second tier risk level included six buildings at the end of July. Meng Heng was one of them. “In general they [tier 2 buildings] don’t pose an eminent risk of ruin but there have been damages to their structure, on the façade finishing or the public facilities,” the bureau says.
the Land, Public Works and Transport Bureau says. Meng Heng was built in 1981 and the government had signalled the building was in its sights. A first inspection took place in March last year, after a tenant’s complaint. At the time, cracks were found in the west side of the building and the block was tilted. The situation grew worse, with the angle of the tilt increasing. The bureau concluded that the tilting “did not only appear in recent years but accumulated over the years” and that two illegal structures on the rooftop had contributed to the damage.
M
Tumbledown turnaround Meng Heng Building (left)
The government can demand the owner of a damaged building to demolish it or consolidate the structure. In cases where landowners do not cooperate, the government will arrange the works but the owner must pay the expenses. In the third risk level category, there were 29 cases at the end of July. “These are buildings that require simple repair work and the government will, according to procedures defined by law, notify their owners to do the needed repair, maintenance or consolidation works,”
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Fok Neng Building was in a similar state of disrepair. The building’s crumbling structure became a public issue last year. The tenants agreed to rebuild the property and works have begun. The government hopes its programme to renovate the city’s old neighbourhoods will reduce the number of poorly maintained buildings in Macau. The renovation of older districts could unlock as much as MOP50 billion (US$6.3 billion) in real estate value according to some industry insiders. The government bill that dictates the renovation of the city’s old neighbourhoods went to the Legislative Assembly in late February.
Business
41
Fair winds
Shun Tak acquires First Ferry while eyeing a boost in property sales to smooth out a rough first-half performance
he first half of the year was turbulent for conglomerate Shun Tak Holdings, with net profit plunging 18 percent to HK$222.2 million (US$28.5 million). The group is aiming to steer into calm waters for the remainder of the year and its recent acquisition of First Ferry Macau and projected increase in property sales will be pivotal. Shun Tak is “looking forward to an exciting later half of year with multiple milestone projects bearing fruition,” says managing director Pansy Ho Chiu King. The real estate division is preparing for a series of new launches in Hong Kong and Macau which will last until the end of the year, including the fourth phase of Nova City in Taipa. Although Macau’s property market has softened since June when the government introduced a new stamp duty to curb real estate speculation, Ms Ho says the supply of new homes is limited. Nova City’s fourth phase comprises three residential towers. Pre-sale mar-
T
keting is likely to begin before the end of the year and building completion is set for 2014. A fifth phase is also in the pipeline. Another majority-controlled Shun Tak project, the Taipa Hills Memorial Garden columbarium with more than 40,000 niches, is likely to open before the end of this year. A package of 8,500 niches was first introduced to the market in April and 22.6 percent were sold by June. A second phase of 7,500 niches will be offered to buyers later this year. In other major developments, Shun Tak is still waiting for government approval for its Harbour Mile residential project, near Macau Tower, and for a proposed Jumeirah Hotel in Cotai. A nine percent increase in passenger volume was not enough to offset high fuel costs that led to a HK$59-million operating loss for Shun Tak’s TurboJetbranded ferry operation in the first half. Again, the second half is looking more promising with the Macau government granting an increase in fares of be-
tween 10 and 24 percent, depending on the class of ticket bought. Shun Tak does not expect the fare hike will affect demand as the last adjustment dates back to 2004. The price rise will be partially offset when the government drops a MOP19 departure fee this month. Combined with the fare increases, last month’s HK$350-million acquisition of First Ferry Macau “will contribute to higher income and lower operation costs,” Ms Ho says. Shun Tak’s hospitality division, which includes Macau’s Mandarin Oriental, The Westin Resort, Macau Golf & Country Club and Macau Tower, as well as properties in Hong Kong and the mainland, registered an operating profit of HK$15 million, a 210 percent yearon-year jump. Overall, Shun Tak is bullish on its Macau businesses. “Obviously Macau is doing very well. There are all the reasons to also continue to invest in here,” says Ms Ho. SEPTEMBER 2011
42 NOURIEL ROUBINI PROFESSOR OF ECONOMICS AT THE STERN SCHOOL OF BUSINESS, NEW YORK UNIVERSITY
Is capitalism doomed? KARL MARX, IT SEEMS, WAS PARTLY RIGHT IN ARGUING THAT GLOBALIZATION, FINANCIAL INTERMEDIATION RUN AMOK, AND REDISTRIBUTION OF INCOME AND WEALTH FROM LABOUR TO CAPITAL COULD LEAD CAPITALISM TO SELF-DESTRUCT he massive volatility and sharp equity-price correction now hitting global financial markets signal that most advanced economies are on the brink of a double-dip recession. A financial and economic crisis caused by too much privatesector debt and leverage led to a massive re-leveraging of the public sector in order to prevent Great Depression 2.0. But the subsequent recovery has been anaemic and sub-par in most advanced economies given painful deleveraging. Now a combination of high oil and commodity prices, turmoil in the Middle East, Japan’s earthquake and tsunami, eurozone debt crises, and America’s fiscal problems (and now its rating downgrade) have led to a massive increase in risk aversion. Economically, the United States, the eurozone, the United Kingdom, and Japan are all idling. Even fast-growing emerging markets (China, emerging Asia, and Latin America), and export-oriented economies that rely on these markets (Germany and resource-rich Australia), are experiencing sharp slowdowns. Until last year, policymakers could always produce a new rabbit from their hat to reflate asset prices and trigger economic recovery. Fiscal stimulus, near-zero interest rates, two rounds of “quantitative easing,” ring-fencing of bad debt, and trillions of dollars in bailouts and liquidity provision for banks and financial institutions: officials tried them all. Now they have run out of rabbits. Fiscal policy currently is a drag on economic growth in both the eurozone and the United Kingdom. Even in the United States, state and local governments, and now the federal government, are cutting expenditure and reducing transfer payments. Soon enough, they will be raising taxes.
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Looking for solutions Another round of bank bailouts is politically unacceptable and economically unfeasible: most governments, especially in Europe, are so distressed that bailouts are unaffordable; indeed, their sovereign risk is actually fuelling concern about the health of Europe’s banks, which hold most of the increasingly shaky government paper. Nor could monetary policy help very much. Quantitative easing is constrained by above-target inflation in the eurozone and the United Kingdom. The U.S. Federal Reserve will likely start a third round of quantitative easing (QE3), but it will be too little too late. Last year’s US$600 billion (MOP4.8 trillion) QE2 and US$1 trillion in tax cuts and transfers delivered growth of barely 3 percent for one quarter. Then growth slumped to below 1 percent in the first half of 2011. QE3 will be much smaller, and will do much less to reflate asset prices and restore growth. Currency depreciation is not a feasible option for all advanced economies: they all need a weaker currency and better trade balance to restore growth, but they all cannot have it at the same time. So relying on exchange rates to influence trade balances is a zero-sum game. Currency wars are thus on the horizon, with Japan and Switzerland engaging in early battles to weaken their exchange rates. Others will soon follow. Meanwhile, in the eurozone, Italy and Spain are now at risk SEPTEMBER 2011
of losing market access, with financial pressures now mounting on France, too. But Italy and Spain are both too big to fail and too big to be bailed out. For now, the European Central Bank will purchase some of their bonds as a bridge to the eurozone’s new European Financial Stabilization Facility (EFSF). But, if Italy and/or Spain lose market access, the EFSF’s €440 billion (MOP5.08 trillion) war chest could be depleted by the end of this year or early 2012. Then, unless the EFSF pot were tripled – a move that Germany would resist – the only option left would become an orderly but coercive restructuring of Italian and Spanish debt, as has happened in Greece. Coercive restructuring of insolvent banks’ unsecured debt would be next. So, although the process of deleveraging has barely started, debt reductions will become necessary if countries cannot grow or save or inflate themselves out of their debt problems.
Listening to Marx So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labour to capital could lead capitalism to self-destruct (though his view that socialism would be better has proven wrong). Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labour income, increases inequality and reduces final demand. Recent popular demonstrations, from the Middle East to Israel to the United Kingdom, and rising popular anger in China – and soon enough in other advanced economies and emerging markets – are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities. To enable market-oriented economies to operate as they should and can, we need to return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon model of laissez-faire and voodoo economics and the continental European model of deficit-driven welfare states. Both are broken. The right balance today requires creating jobs partly through additional fiscal stimulus aimed at productive infrastructure investment. It also requires more progressive taxation; more short-term fiscal stimulus with medium- and long-term fiscal discipline; lender-of-last-resort support by monetary authorities to prevent ruinous runs on banks; reduction of the debt burden for insolvent households and other distressed economic agents; and stricter supervision and regulation of a financial system run amok; breaking up too-bigto-fail banks and oligopolistic trusts. Over time, advanced economies will need to invest in human capital, skills and social safety nets to increase productivity and enable workers to compete, be flexible and thrive in a globalized economy. The alternative is – like in the 1930s – unending stagnation, depression, currency and trade wars, capital controls, financial crisis, sovereign insolvencies, and massive social and political instability.
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SEPTEMBER 2011
44
In the spotlight Ten groups and artists vied for the crown at “The Venetian’s Talent Spotlight” and the chance to perform alongside five of Asia’s top stars at the CotaiArena SEPTEMBER 2011
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The winners, four other finalists and the judges of “The Venetian’s Talent Spotlight” contest
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an you believe there are youths in Macau doing some great hip-hop moves, breakdance steps and Broadway-style dance routines? With the help of Sands China Ltd, some have had the opportunity to show their skills on stage in the second citywide “The Venetian’s Talent Spotlight” contest. Ten acts were selected for the final, held at the Sands Theater on August 12. Besides prize money, they were competing for a chance to perform in The Venetian Macao’s fourth anniversary concert, at the resort’s CotaiArena on August 27. The final was spread over two hours, making it nerve-wracking for the
panel of judges to reach a decision. The contest had the support of several organisations, including the Association of Macau Street Dance, Macao Folk Club and Pak Vai Activity Centre. The show opened with a fantastic performance by Sands China Ltd’s team members group, Skulls and Cuff Links, warming up the audience with their energetic rock ‘n’ roll and giving them a taste of what was to come. Then it was time for the 10 finalists, with contestants showing off their skills in singing, dancing, making music or performing magic tricks. In the end, there could be only one winner and that honour went to
the all-female LD Group. There was more to see and hear apart from just the contestants. The winners of the first “The Venetian’s Talent Spotlight” contest, street dance group ZEAL, returned to the Sands Theater to show their latest moves, while a Macao Folk Club performance wrapped up the evening.
Dance chance Inspired by Broadway musicals, the nine-member LD Group put on a fantastic dance performance, full of vitality and spirit. Through the rhythm of hit songs such as Beyoncé’s popular “One Night Only”, SEPTEMBER 2011
46
LD Group, the winners
Sun Chan San, the first runner-up
they dazzled the audience. Their victory gave the girls a booking to perform with five of Asia’s most famous stars in front of thousands at The Venetian Macao anniversary concert. They earned the privilege of being billed with Sammi Cheng, who held two sell-out shows at the CotaiArena in July; Show Luo, returning after his own live show there in May; Vivian Chow; Chilam Cheung; and Justin. Having trained for a month for “The Venetian’s Talent Spotlight”, the LD Group’s goal was to test their abilities, says member Zoe Leung. “We were surprised to get the first prize,” she says. It was a pleasant surprise because even though the group has been in existence for four years, some of its members have only been dancing for a few months. However this was not LD Group’s stage debut – far from it. “We have a lot of performance experience,” Ms Leung says. “We joined many competitions before, some of them with great results and some of them not so good.” They certainly enjoyed “The Venetian’s Talent Spotlight”. She says the contest “gives good support to dancers”. Ms Leung says Macau, being a small region, has given dancers few opportunities to develop until recently. “With the [new] casinos coming to Macau, dancers have more chances,” she says. The first runner-up was Sun Chan San, with an impressive magic show. He succeeded not only in creating eye-catching illusions but also in being highly amusing. A full-time magician for a couple of years, Mr Sun decided to compete in “The Venetian’s Talent Spotlight” because it is different from magicians-only contests. “It’s for all types of audiences,” he says.
Risk rewarded
TDSM, the second runners-up SEPTEMBER 2011
Mr Sun has been interested in magic for many years, having started practising tricks as a child. Why the love for magic? “Because I want to bring joy to the people. I want them to smile like a child,” he says. TDSM group, the second runnerup, surprised the judges with their sexy moves. Dressed in red and black corsets, the 10 ladies performed a burlesque-style routine. The girls were disappointed not to win but
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47 acknowledged the competition was fierce. The inspiration for their performance came from Broadway musicals. They had previously thought of putting on such a performance but had been afraid to risk it. “We [each] thought our figures were not perfect. We were either too strong or too tall,” says group member Wina Tang. Dancing in high heels only added to the challenge. Ms Tang praised “The Venetian’s Talent Spotlight” as a way to promote dance among the public and attract students and dance lovers. The president and chief executive officer of Sands China Ltd, Edward Tracy, was one of the judges and was impressed by what he saw on stage. “There was good quality,” he says. Mr Tracy stresses that “The Venetian’s Talent Spotlight” is “very much a community entertainment event”. He says that Sands China Ltd, having pioneered Las Vegas-style entertainment in Macau, believes that by developing talent in a fun and exciting way, “can encourage the further blossoming of Macau’s nascent creative industry, a major objective in the government’s drive to diversify the economy”. He says the contest is crucial in
that it provides an opportunity for the hidden talent sprinkled all over Macau to step into the limelight. “We reach out to the community and provide a service that wouldn’t otherwise be provided. The response we got is tremendous,” he says.
Decent exposure More important than the prize money for the best act is the opportunity to perform at The Venetian Macao’s anniversary show, Mr Tracy notes. Being a big event held in the CotaiArena, he says it is a chance for the winners “to cut their teeth a little bit and show what they are made of in front of a real, big, live audience”. Exposure may well be the only thing some talent needs to reach the heights of the entertainment business, he says. Sitting alongside Mr Tracy on the judging panel were singer-songwriter, drummer and record producer Jun Kung; musician and head of the Macao Folk Club band Anthony Hoi; creative director Felix Ferreira; TDM television producer Rony Chan; Association of Macau Street Dance chairman Kenny Chao; and Pak Vai Activity Centre head Koy Ian. Mr Jun was quite satisfied with
the overall quality of the participants but says he was surprised to see so few singers on stage. “What happened to the karaoke rooms?,” he asks. He says it was a privilege to see so many young artists perform and an honour to judge them. Some of the burlesque groups showed a lot of stage maturity and the potential to reach a professional standard, he says. As an artist raised in Macau who has achieved international success as a musician, Mr Jun believes locals should not be afraid to show the public their skills. “It’s all about exposure. If you don’t find a platform to step on, you might never leave the ground. You might be turning around in circles,” he says. As a judge, Mr Jun felt he needed to choose his words carefully when talking to contestants. He says that, while always expressing his true opinion, it was also important to motivate them. “I believe in constructive criticism,” he says. The Macao Folk Club’s Mr Hoi found it far from burdensome to judge the contestants since most, he says, were very professional, demonstrating a lot of potential. “The Venetian’s Talent Spotlight” is a good opportunity for young talent to prove themselves, he says.
A bet on the future S
ands China Ltd’s commitment to developing talent does not extend only to the field of entertainment. The company also takes very seriously its role as one of the main sponsors of Macau’s institutions of higher education. At the start of “The Venetian’s Talent Spotlight” show last month, Sands China Ltd president and chief executive officer Edward Tracy presented to five such institutions cheques together worth MOP590,000 (US$73,750) to fund scholarships or fellowships for 90 students. The institutions are the University of Macau, the Macau University of Science and Technology, the Macao Polytechnic Institute, the Institute for Tourism Studies and the University of Saint Joseph. “In the spirit of community, we once again affirm our support for
Edward Tracy, president and chief executive officer of Sands China Ltd, presents to representatives from five higher educational institutions cheques together amounting to MOP590,000 for scholarships or fellowships for 90 students
five deserving institutions of higher educational study that we believe make a difference in the Macau society,” Mr Tracy says.
Since 2004 Sands China has supported over 130 beneficiaries from various walks of life with cash donations amounting to over MOP42 million. SEPTEMBER 2011
48
COMING SOON For more information visit macaubusiness.com or write to awards@macaubusiness.com SEPTEMBER 2011
49 YAO YANG DIRECTOR OF THE CHINA CENTRE FOR ECONOMIC RESEARCH, PEKING UNIVERSITY
China’s US$3.2 trillion headache DIVERSIFICATION AWAY FROM DOLLAR ASSETS IS THE ADVICE OF THE DAY FOR BEIJING. BUT THIS IS NO EASY TASK, PARTICULARLY IN THE SHORT TERM hile the downgrade of Unites States government debt by Standard & Poor’s shocked global financial markets, China has more reason to worry than most: the bulk of its US$3.2 trillion in official foreign reserves – more than 60 percent – is denominated in U.S. dollars, including US$1.1 trillion in U.S. Treasury bonds. So long as the U.S. government does not default, whatever losses China may experience from the downgrade will be small. To be sure, the dollar’s value will fall, imposing a balance-sheet loss on the Peoples’ Bank of China. But a falling dollar would make it cheaper for Chinese consumers and companies to buy American goods. If prices are stable in the U.S., as is the case now, the gains from buying American goods should exactly offset the Peoples’ Bank of China’s balance-sheet losses. The downgrade could, moreover, force the U.S. Treasury to raise the interest rate on new bonds, in which case China would stand to gain. But S&P’s downgrade was a poor decision, taken at the wrong time. If America’s debts had truly become less trustworthy, they would have been even more dubious before the agreement reached on August 2 by Congress and President Barack Obama to raise the government’s debt ceiling. That agreement allowed the world to hope that the U.S. economy would embark on a more predictable path to recovery. The downgrade has undermined that hope. Some people even predict a double-dip recession. If that happens, the chance of an actual US default would be much higher than it is today.
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Warning call These new worries are raising alarm bells in China. Diversification away from dollar assets is the advice of the day. But this is no easy task, particularly in the short term. If the Peoples’ Bank of China started to buy non-dollar assets in large quantities, it would invariably need to convert some current dollar assets into another currency, which would inevitably drive up that currency’s value, thus increasing the Peoples’ Bank of China’s costs. Another idea being discussed in Chinese policy circles is to allow the renminbi to appreciate against the dollar. Much of China’s official foreign reserves have accumulated because the Peoples’ Bank of China seeks to control the renminbi’s exchange rate, keeping its upward movement within a reasonable range and at a measured pace. If it allowed the renminbi to appreciate faster, the Peoples’ Bank of China would not need to buy large quantities of foreign currencies. But whether renminbi appreciation will work depends on reducing China’s net capital inflows and current-account surplus. International experience suggests that, in the short run, more capital flows into a country when its currency appreciates, and most empirical studies have shown that
gradual appreciation has only a limited effect on countries’ current-account positions. If appreciation does not reduce the current-account surplus and capital inflows, then the renminbi’s exchange rate is bound to face further upward pressure. That is why some people are advocating that China undertake a one-shot, big-bang appreciation – large enough to defuse expectations of further strengthening and deter inflows of speculative “hot” money. Such a revaluation would also discourage exports and encourage imports, thereby reducing China’s chronic trade surplus. But such a move would be almost suicidal for China’s economy. Between 2001 and 2008, export growth accounted for more than 40 percent of China’s overall economic growth. That is, China’s annual GDP growth rate would drop by four percentage points if its exports did not grow at all. In addition, a study by the China Centre for Economic Research has found that a 20 percent appreciation against the dollar would entail a 3 percent drop in employment – more than 20 million jobs.
Long-term medication There is no short-term cure for China’s US$3.2 trillion problem. The government must rely on longer-term measures to mitigate the problem, including internationalization of the renminbi. Using the renminbi to settle China’s international trade accounts would help China escape America’s beggarthy-neighbour policy of allowing the dollar’s value to fall dramatically against trade rivals. But China’s US$3.2 trillion problem will become a 20-trillion-renminbi problem if China cannot reduce its currentaccount surplus and fence off capital inflows. There is no escape from the need for domestic structural adjustment. To achieve this, China must increase domestic consumption’s share of GDP. This has already been written into the government’s 12th Five-Year Plan. Unfortunately, given high inflation, structural adjustment has been postponed, with efforts to control credit expansion becoming the government’s first priority. This enforced investment slowdown is itself increasing China’s net savings, i.e., the current-account surplus, while constraining the expansion of domestic consumption. Real appreciation of the renminbi is inevitable so long as Chinese living standards are catching up with U.S. levels. Indeed, the Chinese government cannot hold down inflation while maintaining a stable value for the renminbi. The Peoples’ Bank of China should target the renminbi’s rate of real appreciation, rather than the inflation rate under a stable renminbi. And then the government needs to focus more attention on structural adjustment – the only effective cure for China’s US$3.2 trillion headache. SEPTEMBER 2011
mbreport HERITAGE 50 50
SEPTEMBER 2011
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SAME OLD REFRAIN UNESCO is concerned about shortcomings in the way Macau’s heritage is protected but the city’s historical centre is not yet at risk of losing its World Heritage status BY LUCIANA LEITÃO
SEPTEMBER 2011
mbreport HERITAGE 52
Heritage researcher Vincent Ho believes the situation “is not as bad as it looks” he United Nations Educational, Scientific and Cultural Organisation (UNESCO) will keep Macau’s historical centre on its World Heritage list, at least in the short run, says the director of UNESCO’s World Heritage Centre, Kishore Rao. Mr Rao says that if a place completely loses the characteristics that qualified it for the list in the first place, it can eventually be deleted from it. There is no such complete loss in Macau, he says, since the government seems to be “in the process of implementing the requested conservation measures”. At this year’s meeting of UNESCO’s World Heritage Committee in June, the members expressed concern about “the continuing inadequacy of the current management system, the buffer zone and legal provisions to protect effectively the very important visual and functional linkages” between Macau’s historical centre and the wider urban landscape and seascape. The committee also asked Macau to speed up the drafting of its urban plan. The government has promised a plan, but has so far failed to deliver. And the committee asked Macau to report to the World Heritage Centre by
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February 2013 about the state of preservation of the monuments in the city that are on the World Heritage list, and about progress made toward correcting shortcomings in conserving them. Mr Rao says the concern expressed by the committee was about “development projects that are being implemented or proposed in areas surrounding the buffer zones of the World Heritage property which might have a negative impact on its visual integrity”.
Third warning This is not the first time the committee has voiced concern about heritage management in Macau. It did so in 2008 and in the following year. In response to the 2009 report, the government reported to the committee in January this year about what has been done to protect the local heritage. The report mentioned the completion of two studies, which would form the basis of an urban plan, and said the government was taking other measures, such as revising the heritage law. The heritage law is due to be reviewed by the Legislative Assembly later this year. A draft of the revised law was published for public consultation in
2009, but since then the process of revision seems to have lost momentum. All things considered, Mr Rao says it appears that the recommendations made by the World Heritage Committee in 2009, similar to those made in June’s report, “are in process of implementation, but have not yet been fully implemented”. Hence this year’s new warning. Mr Rao says that when the government reports again in 2013, “we would expect to see significant progress”.
Surprise us Mr Rao notes UNESCO welcomes the reduction of the height limit to 90 metres for buildings constructed around the Guia Lighthouse, which stands atop the 91-metre Guia Hill. The limit was reduced in 2008 after plans were revealed for new buildings that would have blocked the view of the lighthouse. One, the central government’s liaison office, would have been 99.91 metres tall, to reflect the 1999 handover of Macau to China. But in 2009, UNESCO was still worried about new buildings obscuring the view of Macau’s heritage, and it asked the government to make an
53 urban plan that would stop such developments. This year, it asked once again. Architect Carla Figueiredo of the cultural heritage department of the Cultural Affairs Bureau, acknowledges UNESCO’s concerns. “These have been, and continue to be, addressed by the Cultural Affairs Bureau, in conformity with adopted standards for heritage management practices,” she says. “The new Cultural Heritage Protection Law is already being developed, as well as the on-going re-structuring of the management plan for the historic centre of Macau and the new urban plan, that will have an indirect and inclusive benefit also for the main heritage districts of the city and the improvement of their related urban setting and environmental outlook.” UNESCO’s concerns are “not a surprise” and “are convergent with the same objectives of the government, as can be seen in the list of works that are part of the Chief Executive’s agenda for 2011,” Ms Figueiredo says. Local architects agree with UNESCO’s misgivings, pointing in particular to the insufficiency of the buffer zones and the lack of urban planning. The president of the Architects As-
sociation of Macau, Ben Leong Chong In, says fast real estate development is doing most harm to the city’s heritage. A balance must be struck between the demands of development and the demands of conservation, he says. But he admits the sheer number of visitors to Macau’s monuments is also harmful, and suggests limiting the number.
Not what’s wanted Architect Maria José de Freitas is not reassured by the government’s actions since 2009. Ms Freitas, who was involved in the restoration of the Taipa Houses Museum, says that the observance of the buffer and transition zones around a historical building is just as important as the preservation of the building itself. “It’s important that the monuments are clearly seen,” Ms Freitas says. Giving an example of how not to do it, she points to the central government liaison office which, while adhering to the 90-metre height limit around Guia Hill, still “cuts a lot of the view for the Guia Lighthouse”. Since Macau is small, the whole peninsula should be considered a buffer zone, and the urban plan should reflect
this, she says. “If not, then we might end up being able to see the monuments only from very secondary streets. That’s not what UNESCO wants.” Heritage researcher Vincent Ho believes the situation “is not as bad as it looks”. Although the skyline is changing rapidly, the monuments that constitute the historical centre are well preserved, he says. And if something is damaged, the authorities quickly repair it, he adds. Mr Ho thinks the government has been following UNESCO suggestions. “I guess some of the things are being carried out. For instance, they stopped the constructions near Guia Hill,” he says. Experts that spoke to Macau Business say there are heritage sites in Macau that are not listed by UNESCO and that they, too, should be protected. The architects association’s Mr Leong would like to see the official heritage list brought up to date. There are almost 130 items on the list, which was last updated in 1992. He says there are several buildings of historical value, including some modern ones, that should be included to prevent them from being destroyed.
SEPTEMBER 2011
mbreport HERITAGE 54
THE VICTOR’S VERSION Macau boasts that its cultural heritage is a tourism draw although experts say tour guides are little help SEPTEMBER 2011
world of difference, the difference is Macau,” says the slogan of the Macau Government Tourist Office, referring to the city’s rich historical heritage. But ask local tour guides for more information and you will likely get none or, worse, inaccurate information, says a recent study by a scholar at the Institute for Tourism Studies. Sightseeing guides tend to give mainland tourists “a simple and rough interpretation”, Io Man U Yan concludes in her research report about tour guides’ interpretation of and mainland tourists’ reaction to Macau’s cultural heritage. Ms Io, a specialist in tourist behaviour and cultural heritage, says the poor service given by local guides can mislead visitors. Tourists can end up with the impression that the Ruins of St Paul’s are independently
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SMART PHONE TOURISM T
Photo: Luís Almoster | mspagency.org
he Cultural Affairs Bureau has launched an iPhone app for tourists and residents to get the know more about the city’s heritage. The “WH Macau” app includes an introduction to the local World Heritage sites, real-time multimedia information on tourist attractions and an interactive interface. Using GPS for guidance, the app “accompanies” the user as they stroll through the territory, giving information on scenic spots. The interface and content is available in traditional Chinese, simplified Chinese, English and Portuguese.
included on UNESCO’s World Heritage list, whereas Macau’s entire historical centre is on the list. “As a result, the historical and cultural significance of the whole historic centre of Macau and any visited historic centre site cannot be fully grasped,” Ms Io says. On paper, the government assures tour guides know what they are talking about. A prospective guide must take a course at the Institute for Tourism Studies covering Macau’s history, its attractions, tourism theory, guide techniques and first aid. A candidate must then pass written and practical exams to obtain a
licence, without which a guide is not allowed to work. There were almost 1,500 licensed guides in Macau at the end of 2010. Complaints about being kept in the dark about the city’s heritage are not new. Research indicates tourists find the information given at most heritage sites insufficient. “Given that insufficient information is provided at the heritage site, tourists are likely to turn to tour guides for more information. Thus, tour guides become important for educating tourists about the significance of the heritage sites,” says Ms Io. She says one reason guides tend to give mainland tourists only a rough and ready idea of the city’s heritage is the size of their tour groups – usually around 20. Another is that guides think that only some heritage sites are attractive, opting to focus mainly on the Ruins of St Paul’s and A-Ma Temple.
Intentional neglect Add to this the usually tight schedule for tours – in many cases, just one day – with tourists preferring to spend more time in the casinos and shops, and heritage is the loser, Ms Io says. “In addition to professional training, it is also important that [the authorities focus on] how to motivate tour guides to offer a quality interpretation at a heritage site and arouse Chinese tourists’ interest in visiting the under-used historic centre of Macau sites,” she suggests. Cora Wong Un In, a lecturer in tourism and heritage studies at the Institute for Tourism Studies, says Macau’s heritage suffers from the sanitisation of its colonial history. The problem, she says,
starts with the government but spreads to tour guides. In a paper she presented at a conference in July, Ms Wong says: “The imprint of the colonial history of Macau is at the root of its attractiveness as a cultural tourism destination.” Yet there is careful selection of how history is presented. By interviewing several tour guides, Ms Wong found that sensitive episodes of Macau’s colonial history that are perceived as not being fully compatible with the tastes of most tourists “are intentionally neglected” by guides. “This seems to be particularly the case when the audience is from the mainland.” Ms Wong says the hardware of the city’s heritage – the buildings, streets and piazzas – is easily accessible to tourists. But the software – the history of Macau under Portuguese rule – is “sanitised and reduced to the minimum”. Instead, the official line dished out focuses on “cultural diversity and exchanges between the East and the West”, Ms Wong says. “Note that phrases such as ‘cultural diversity’ or ‘exchanges’ present a notion of equality rather than a suggestion of one group of people being dominated by another one.” She says this “sanitised, un-historic, ‘cultural exchange’-dominant, hegemonic view of Macau is the one promoted by the government”. She proposes an explanation for this: “If Chinese tourists travel overseas in a quest for modernity and assertion of racial superiority, then the tourism industry may be reluctant to expose a history of domination of Western powers over the Chinese, particularly now that the territory has reverted back into Chinese hands.” SEPTEMBER 2011
mbreport HERITAGE 56 56
STROLL THROUGH TIME More than 20 monuments and two core zones compose Macau’s UNESCO-listed historic centre
SEPTEMBER 2011
he historical centre of Macau was added to UNESCO’s World Heritage list in 2005. The distinction recognises the city’s historic settlement that includes several streetscapes and piazzas that connect over 20 monuments. The first core zone consists of the centre of the original settlement of Macau, comprising buildings and spaces representative of the integration of Portuguese and Chinese elements along the city’s primary route from the ancient Chinese harbour in the south to the old Christian city in the north. The route starts at Barra Square and the 15th century A-Ma Temple, an example of Chinese culture inspired by Confucianism, Taoism, Buddhism and
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57 57 folk beliefs. North of the temple there is the 1874 neoclassical Moorish Barracks, with its wide verandas raised on a granite platform. It was built to house policemen recruited from Goa, in India. Lilau Square is one of the first residential quarters of the Portuguese in Macau, but also has the Mandarin’s House, a traditional Chinese residence that belonged to a prominent figure in Chinese literature. St Augustine’s Square was established by Spanish Augustinian priests in 1591, and maintains the tradition of its Easter procession. The Dom Pedro V Theatre, a neoclassical brick edifice built in 1860, was the first Western-style theatre in China.
The Baroque St Joseph’s Seminary Building and Church was the principal base for Christian missionary work in China, Japan and east Asia. Leal Senado Square is the main public square of the city, containing the two-storey neoclassical Leal Senado building. Nearby is Cathedral Square with the Cathedral Church, rebuilt in 1850, and the headquarters of the diocese of Macau. Further north is St Dominic’s Square, with St Dominic’s Church, founded in 1587, and the old Chinese bazaar area. Here also is the Sam Kai Vui Kun Temple. Company of Jesus Square has the Ruins of St Paul’s, being the front elevation of the Church of Mater Dei, and the Na Tcha Temple.
Not far away can be seen a section of the old city walls, built in 1569 from “chunambo”, a mixture of clay, sand, rice straw, ground rock and oyster shells compacted in layers. Just to the east is the Mount Fortress. It was built to protect the city against attack from the sea. The Camões Garden area boasts St Anthony’s Church, the old headquarters of the British East India Company and the Protestant Cemetery, with the tombs of some renowned people. The second core zone of the historical centre consists of the Guia Fortress, on Guia Hill, incorporating the 1622 Guia Chapel and the Guia Lighthouse, built in 1885 and the oldest lighthouse overlooking the South China Sea.
Photo: Luís Almoster | mspagency.org
The historical centre includes the Barra Square and the 15th century A-Ma Temple, an example of Chinese culture inspired by Confucianism, Taoism, Buddhism and folk beliefs
SEPTEMBER 2011
Gaming | Billions Race
58
High five
Casinos post fifth monthly record for gaming revenue this year as concerns are aired about weakening demand from high-end Chinese players acau’s casinos set a new record for gross gaming revenue last month – the fifth time this year a monthly record has been set. With gross revenue of MOP24.77 billion (US$3.1 billion), August’s take surpassed the MOP24.31 billion record
M
set in May, according to data from the Gaming Inspection and Coordination Bureau. Casino gross gaming revenue in August rose 57 percent in year-onyear terms, the highest rate of growth this year. Total gross gaming revenue for
Gaming Results: Gross Revenue
the first eight months of the year was MOP173.1 billion, a 46.8 percent yearon-year increase. Sometime this month the casinos will surpass the MOP188.34 billion the industry posted in 2010. Last month’s record came as worries surfaced that demand from wealthy
In Million MOP (1HKD:1.03MOP)
26,000
24,306
24,000 22,000
18,869
20,000
18,571
Dec 2010
Jan 2011
19,863
20,087
20,507
Feb 2011
Mar 2011
Apr 2011
24,769
20,792
17,354
18,000 16,000
18,883
24,212
15,773
15,302
Aug 2010
Sep 2010
14,000 12,000 10,000 8,000 6,000 4,000 2,000 0
Oct 2010
SEPTEMBER 2011
Nov 2010
May 2011
Jun 2011
Jul 2011
Aug 2011
59
Gaming Results: Market Share Per Operator 2010
2011
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug*
SJM
29%
30%
32%
31%
30%
31%
31%
34%
30%
32%
29%
28%
27%
Sands China
20%
20%
19%
15%
17%
18%
18%
16%
17%
16%
16%
15%
14%
Galaxy
13%
12%
10%
10%
10%
11%
9%
11%
9%
13%
15%
19%
20%
Wynn
14%
12%
14%
17%
17%
14%
15%
14%
17%
13%
15%
15%
13%
MPEL
17%
17%
14%
15%
15%
15%
15%
14%
17%
14%
14%
16%
15%
MGM
8%
10%
11%
11%
12%
11%
12%
11%
11%
11%
11%
8%
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
Aug 2010
Sep 2010
Oct 2010
Nov 2010
Dec 2010
Jan 2011
Feb 2011
Mar 2011
Apr 2011
May 2011
Jun 2011
Opposing views Even before August’s results were known, several analysts rebuffed Deutsche Bank’s remarks. The critics included Gaming Inspection and Coordination Bureau director Manuel Joaquim das Neves. He told the Macau Daily Times that casino gross gaming revenue should grow “above 35 percent” this year. Union Gaming Research Macau also opposed a near-term VIP slowdown, questioning if demand for luxury goods had fallen. China UnionPay’s Bankcard Consumer Confidence Index had “shown no deterioration over the
past few months and is higher than the levels seen late 2010/early 2011,” the report said. A little less sanguine but nevertheless optimistic was Moody’s Investors Service. The ratings firm said its outlook for the Asia-Pacific gaming sector remained stable, tending positive, adding that Macau’s gaming industry would continue to grow.
Total gross gaming revenue for the first eight months of the year was MOP173.1 billion, a 46.8 percent year-on-year increase. Sometime this month the casinos will surpass the MOP188.34 billion the industry posted in 2010
Aug 2011* * estimated
(Figures are rounded to the nearest unit, therefore they may not add exactly to the rounded total)
Chinese consumers was weakening after a gloomy investors note from Deutsche Bank in the middle of last month. Deutsche analyst Karen Tang pointed out that Macau is dependent on the VIP segment, which represents around three quarters of the city’s gaming revenue. She wrote that gaming growth may disappoint after next month’s Golden Week holiday. In an extreme case, if the global economic woes increase, Macau’s gross gaming revenue growth could fall to as little as 10 percent, Ms Tang wrote.
Jul 2011
“Although there are concerns that tighter credit restrictions by the central government will slow the country’s economic growth and eventually affect gaming spending, we expect the impact to be modest,” the ratings firm wrote. In the casino gross gaming revenue rankings, Galaxy Entertainment Group continued to climb, according to preliminary information compiled by Macau Business. Its market share has continuously expanded since opening the Galaxy Macau resort in Cotai, on May 15. From an April market share of 9 percentage points, Galaxy reached a 20-percent share in August, consolidating the second spot it achieved on the list in July. Stanley Ho Hung Sun’s Sociedade de Jogos de Macau maintained its lead, with a 27 percent market share. SJM’s lead has narrowed since May. Melco Crown had a share of just less than 15 percent, followed by Sands China, with an August market share above 14 percent. Wynn Macau dropped a position and was ranked fifth, with a 13-percent market share. MGM China closed the list with its share hovering around 11 percent, a significant monthon-month improvement. SEPTEMBER 2011
60
Gaming | Stock Watch
Rough weather
A stormy wind in August buffets almost every gaming stock BY RAY CHAN
he summer of 2011 has been one of dissonance for the Macau gaming sector. Profits and revenues again climbed towards record levels in August. Yet Macau gaming stocks fell sharply amid a general disinclination to buy due to uncertainty about the U.S. economy, lingering problems with debt in the eurozone and worries that an eventual slowdown in conspicuous consumption in the mainland could mean lower VIP spending in Macau’s casinos. Although there were signs of recovery in share prices towards the end of the month, the volatility may continue in the short run, according to analysts. Shares in Macau casinos can drop
T
SEPTEMBER 2011
further, says Victor Yip, an analyst at UOB Kay Hian in Hong Kong. “Gaming stocks have outperformed relative to other sectors, year to date, and therefore the sector could be very attractive for shorting and for people to take profit,” he told Reuters. Kenneth Fong, J.P. Morgan’s casino analyst in Hong Kong, says the correction that took place in August presents an opportunity to accumulate. “We believe the correction is overdone because the fundamentals, valuation and outlook of the sector have not changed, or have only become more attractive amid the sell-off,” he said. At the Hong Kong Stock Exchange, the benchmark Hang Seng Index plunged
9.5 percent during August and the gaming sector declined by 7.4 percent.
State of play Exceptionally, Sands China Ltd (1928. HK) ploughed through the market turmoil to advance 1.7 percent. The Las Vegas Sands Corp (LVS.NYSE) subsidiary reported that its first-half net profit doubled to US$539.5 million (MOP4.32 billion) this year from US$250.5 million last year. Sands China’s adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) were a halfyear record of US$754.9 million, rising 36.2 percent. Net revenue rose 19.2 percent to US$2.36 billion. Sands China also announced
61
franchise agreements with the Conrad and Holiday Inn hotel brands for its developments on parcels five and six in Cotai. It officially named these developments Sands Cotai Central. Sands China and its parent gained ground in their court battle in Nevada with fired chief executive Steven Jacobs. Last month the Nevada Supreme Court ordered the judge hearing the case to take another look at whether Sands China, being based in Macau, can be sued in Nevada, and to keep the proceedings on hold until the question is settled. Wynn Macau (1128.HK) reported first-half revenue of HK$14.3 billion, rising 41.3 percent. Its net profit was HK$2.4 billion and earnings per share were HK$0.47, rising 27 percent. Galaxy Entertainment Group Ltd (0027.HK) disappointed by reporting a 20 percent fall in first-half net profit, dragged down by a one-off expense of around HK$767 million arising from the launch of Galaxy Macau on May 15. But adjusted EBITDA rose to HK$1.8 billion, surpassing the HK$1.5 billion
Name
Share price performance (HK$/US$) 52-week high 52-week low
Change (%)
8/31/2011
Month-to-date Year-to-date
SJM Holdings Ltd.
21.0
7.3
17.6
-10.2
42.8
Galaxy Entertainment Group
22.5
5.8
19.2
-5.1
117.7
Wynn Macau Ltd.
29.1
12.4
25.0
-8.3
43.4
Sands China Ltd.
25.5
11.9
23.9
1.7
39.6
Melco Crown Entertainment
16.2
3.9
13.5
-10.6
112.6
Melco International Develop.
10.8
3.0
8.8
-8.9
97.5
MGM China Holdings Ltd.
18.2
12.5
15.0
-13.8
N/A
0.2
0.1
0.1
-24.8
-33.8
Amax Holdings Ltd.
0.9
0.3
0.4
-25.0
15.4
24,988.6
18,868.1
20,308.1
-9.5
-11.8
Las Vegas Sands Corp.
55.5
28.1
47.0
-0.4
2.3
MGM Resorts International
16.9
8.9
11.2
-26.1
-24.8
172.6
74.0
153.5
-0.1
47.8
2.4
1.5
1.6
-13.7
-25.1
Success Universe Group Ltd. Hang Seng Index
Wynn Resorts Ltd. Genting Singapore PLC Penn National Gaming Inc. Dow Jones Indus. Avg. S&P 500 Index
44.3
27.9
39.9
-5.0
13.4
12,876.0
9,941.8
11,560.0
-4.8
-0.2
1,370.6
1,040.9
1,212.9
-6.1
-3.6
SEPTEMBER 2011
62
Gaming | Stock Watch
Share price performance of Hong Kong-listed gaming stocks (Rebased as HK$100) 250 225 200 175 150 125 100 75 50 Jan 2011
Feb 2011
Mar 2011
Apr 2011
May 2011
Jun 2011
Sands China Ltd. SJM Holdings Ltd. Wynn Macau Ltd. Melco International Development Galaxy Entertainment Group Ltd.
Jul 2011
Aug 2011
MGM China Holdings Ltd. Hang Seng Index As of August 30, 2011
Share price performance of U.S.-listed gaming stocks
(Rebased as US$100) 250 225 200 175 150 125 100 75 50 Jan 2011
Feb 2011
Mar 2011
Las Vegas Sands Corp. Penn National Gaming Inc.
Apr 2011
May 2011
Jun 2011
Wynn Resorts Ltd. Melco Crown Entertainment-ADR
Jul 2011
Aug 2011
MGM Resorts International S&P 500 Index As of August 30, 2011
PERMIRA SELLS STAKE IN GALAXY P
rivate equity firm Permira has raised HK$4.78 billion (US$613 million) selling part of its stake in Galaxy Entertainment Group at a price of HK$17.70 per share, it announced in a press release. The deal was completed at more than twice the price per share that Permira paid for a 20 percent stake in the gaming operator back in 2007. The deal reduced Permira’s stake in Galaxy Entertainment Group to 12.8 percent from 19.3 percent. “We are confident of further appreciation in the value of the company and the investment. As such, the Permira funds currently have no immediate plan to dispose of further shares in the company and intend to continue to hold the remaining shares as long-term investment,” Permira said. Galaxy Entertainment Group is majority owned by the family of founding chairman Lui Che Woo and its associates. SEPTEMBER 2011
estimated by analysts. Revenue rose nearly 60 percent to HK$13.7 billion. Melco International Development Ltd (0200.HK) posted first-half net profit of HK$174 million, rebounding from an interim net loss of HK$218 million last year. The company’s main source of income is its 33.4 percent stake in Melco Crown Entertainment Ltd (MPEL.NASDAQ), which has been posting improved results since a batch of successful marketing launches such as the opening of its House of Dancing Water, which is set to celebrate its first anniversary this month.
Studio City casino Melco Crown recorded a net profit of US$66.7 million for the second quarter, compared with a net loss of US$30.1 million a year before. Net revenue was US$960 million, rising 67 percent. Co-chairman and chief executive Lawrence Ho said Melco Crown was working on the design and evaluating the financing of the Studio City project in Cotai, in which it recently acquired the majority stake. He said construction could start as soon as next March. Mr Ho said he was confident the government would approve a casino in Studio City. “In order to make it a reality, of course, you would need the necessary gaming tables to make the project financially viable,” he said. Melco Crown also announced that it is applying for a listing on the Hong Kong Stock Exchange to go with its NASDAQ listing. MGM China Holdings Ltd (2282. HK), which went public in June, reported that first-half net profit soared to HK$1.91 billion this year from HK$397 million last year. EPS jumped to HK$0.502 from HK$0.105. SJM Holdings Ltd (0880.HK) announced first-half net profit of HK$2.67 billion, rising 70 percent. The group’s VIP gaming revenue grew by 50.5 percent, its mass-market table gaming revenue by 22.7 percent and its slot machine operations revenue by 37.9 percent. The second quarter was the company’s 10th straight quarter of growth in revenue. Around the time of the results announcement, Angela Leong On Kei increased her stake in SJM to 8.21 percent from 8.11 percent and Stanley Ho Hung Sun, who considers Ms Leong his fourth wife, reduced his stake to 0.09 percent from 0.18 percent, according to disclosures to the Hong Kong Stock Exchange.
63
LOOKING FOR GROWTH
Gaming Partners International Corporation increases attention on Macau Casino currency and gaming equipment supplier Gaming Partners International Corporation is looking to Macau to boost its bottom line. “We created a new subsidiary based in Macau to provide sales and service support in this region, as it currently represents the area of greatest expansion in gaming worldwide,” said Greg Gronau, GPI’s president and chief executive officer. The company announced last month the appointment of Scott McCarthy as its new vice president of sales for Asia. He will be responsible for the region’s sales and service functions and will oversee the company’s Asia employee base. The former director of cage and count for City of Dreams, Mr McCarthy has over 15 years’ experience in cage currency operations. GPI’s gross profit for the second quarter of 2011 was US$4.6 million (MOP36.8 million) compared to US$8.6 million for the previous year quarter. The decrease – due to a drop in sales in the United States – was partially offset by the US$1.0 million installation of RFID hardware and software solutions at the Galaxy Macau casino. “We were recently selected to provide gaming chips and plaques for the new Sands Cotai Central Project in Macau. This order totals nearly US$3 million and is scheduled for delivery in 2012,” Mr Gronau said.
DANNY MCDONAGH INDUCTED INTO AUSSIE POKER HALL OF FAME Danny McDonagh, PokerStars director of live operations for Asia-Pacific, has become the first nonplayer to be inducted into the Australian Poker Hall of Fame. Mr McDonagh was selected due to his role as a tournament director. “I’m honoured to be the first administrator in the Aussie Hall of Fame alongside such select company like Joe Hachem and Jeff Lisandro,” said Mr McDonagh.
VIP JUNKET POSTS RECORD ROLLING CHIP TURNOVER VIP room promoter Asia Entertainment & Resources Ltd. (AERL) announced a record unaudited rolling chip turnover for July of US$2.21 billion (MOP17.68 billion), up 154 percent year-over-year. This compares with a yearover-year increase in gross gaming revenue for Macau of 48 percent for July. For the first seven months of 2011, AERL’s rolling chip turnover was US$10.618 billion. The company’s VIP rooms, located at StarWorld, Venetian Macao and Galaxy Macau, are primarily focused on high stakes baccarat.
SJM PAYS FOR AIR-CONDITIONED PUBLIC FOOTBRIDGE SJM Holdings is paying for all the on-going renovation works to the public footbridge linking the Outer Harbour ferry terminal with the company’s Oceanus casino. According to Macau Post, the works include the installation of about 40 huge air-conditioners. The government confirmed in a statement to the newspaper that a gaming operator would pay for the renovations to the footbridge, installation of the air conditioners and for all maintenance costs, as well as all electricity charges. Informed sources told Macau Post the gaming operator was SJM Holdings. The project has already drawn criticism from the Macau General Neighbourhood Unions Association, which has expressed concern about the safety of the footbridge and has questioned the need for installing the air-conditioners.
SEPTEMBER 2011
64
Gaming
PLAYING FOR KEEPS GALAXY MACAU IS PROVING TO BE A HANDFUL FOR ITS COMPETITORS AFTER A STELLAR FIRST QUARTER SEPTEMBER 2011
65 ituated on one of the edges of Cotai, the golden towers of the Galaxy Macau hotel-casino are the first sight many punters have of the strip. Those same golden towers have welcomed an average of 35,000 to 40,000 visitors a day since opening in May, reaching up to more than 70,000 people in a single day. Up to 60 percent of those visitors are there to gamble, says Jane Tsai, vicepresident of marketing communications for Galaxy Macau. Many are also staying at one of the resort’s three hotels – Banyan Tree Macau, Hotel Okura Macau and Galaxy Macau – where occupancy reached 92 percent in June. The new complex is proving to be a game changer for its parent company, Galaxy Entertainment Group. The gaming concessionaire has more than doubled its market share in the past three months. At the end of last month, it enjoyed a 20 percent market share by casino gross gaming revenue. On the league table of casino operators, it now sits second having surpassed Cotai rivals Sands China Ltd. and Melco Crown Entertainment. In the first 47 days of operation to the end of June, Galaxy Macau generated HK$2.4 billion (US$310 million) in gaming revenues and delivered adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of HK$376 million. “This is a huge accomplishment,” said Robert Drake, Galaxy Entertainment Group chief financial officer, during last month’s results announcement. “Galaxy Macau opened extremely well”. There were fears Galaxy Macau would cannibalise takings at its sister property on the peninsula, StarWorld. That has not been the case. The latter posted its 12th consecutive quarter of EBITDA growth in the period between April and June, culminating in an adjusted EBITDA of HK$685 million – a record. “We see Galaxy Macau actually strengthening StarWorld’s performance,” said Mr Drake.
S
Surprise packet “Galaxy Macau continues to surprise,” Morgan Stanley said in an investors note after the property’s first set of results were announced. The investment bank said growth is expected to continue until the end of the year. SEPTEMBER 2011
66
Gaming
Analysts Praveen K. Choudhary and Calvin Ho wrote that “further upside surprise could come from continued increase in market share”. The predicted 800 new hotel rooms opening before the end of the year and three recently opened VIP rooms – pushing the property’s total to 10 – could prove to be new tipping points. Although it is presented as a property for the mass-market player, the high-roller segment has been the main driver of success. Its average VIP rolling chip for the first 47 days of operation from May 15 to the end of June reached more than HK$1 billion a day. “Due to our relationship with StarWorld as our sister property, a lot of the VIP operators from there also chose to come over here and open up sister rooms,” says Ms Tsai. That was the case of Nasdaq-listed Asia Entertainment & Resources Ltd. “We actually have a very long waiting list [of junkets] asking to come in, which is good news for us.” In the mass-market segment, things have not gone too badly either. According to a research note from Union Gaming Research Macau, GalSEPTEMBER 2011
axy Macau was ranked fourth in the two first weeks of July among the properties attracting the most mass-market play, with a 12 percent share. “This compares to its share of tables of slightly less than 9 percent, suggesting that the recently opened property is garnering more than its fair share of customers,” the report said. Galaxy assistant vice-president for casino marketing Shirley Tam says she is pleased with revenues from the main gaming floor. She pinpoints the success to two factors: lighting, and food and beverage. “We are definitely a brighter casino than the rest of the casinos in Macau,” she says, explaining mainland players like to have a clear view of what is happening on the table.
She adds the resort has made a particular effort to boost the standard of food and beverage offerings on the gaming floor. The house loyalty programme allows customers to earn points from nongaming spending. The programme’s database is closing in on 150,000 names.
Change, change again It has not been all plain sailing for Galaxy Entertainment Group since May. Construction costs of Galaxy Macau have overrun by 7 percent, to HK$16.5 billion. The company blamed additional labour costs and an accelerated construction timeline. Close to 80 percent of the construction budget has already been spent. The resort’s pre-opening charges
GALAXY’S 47-DAY HOT STREAK VIP gaming Turnover Net win Win %
(In millions)
Mass gaming
HK$50,000
Table drop
HK$2,400
Slot machines Slot handle
HK$1,800
HK$1,780
Net win
HK$410
Net win
HK$114
3.5%
Hold %
17.5%
Hold %
6.3%
67 were also much higher than expected, reaching HK$767 million. Some analysts were expecting a figure less than half of that. Pre-opening expenses were a major reason why the company posted a first-half profit of HK$378.3 million, a 20.4 percent year-on-year decrease. Running a big property such as Galaxy Macau, with a swarm of 7,500 employees, required fine-tuning says Ms Tsai. Productivity and service delivery are also expected to improve as staff bed down. “We started first focusing on effectiveness in terms of delivering our brand promise and our product positioning,” she says. “The next step for us in the coming months will be to make it more efficient and increase our margins.” Expect changes on the ground, including revised pricing strategies, new gaming products and a revised layout that will see about 15 percent of the gaming floor moved. The property opened with about 450 gaming tables and 1,100 slot machines. The gaming floor can accommodate an increase of about one-third
to both, the company says. A shift in focus is also planned for marketing. An initial HK$28-million campaign that saw all of Hong Kong’s Tsim Sha Tsui MTR station decked out in Galaxy livery for the opening will shift focus to individual aspects of the property. Galaxy Entertainment Group chairman Lui Che Woo says business will continue to expand. Galaxy Macau has a “unique” positioning, he says, with its claim of being the “first Asian centric destination resort” in the territory. The company has another 1.45 million square metres of land in Cotai to develop. That would be about enough to build three more buildings the size of Galaxy Macau. The company says it is still studying the market and has made no plan public. If the short-term prospects are bright, next year will bring increased competition. Sands China Ltd. will open the first phase of its Sands Cotai Central project, formerly known as parcels five and six, adding more gaming facilities and 1,800 hotel rooms to the strip.
Galaxy Entertainment Group chairman Lui Che Woo says business will continue to expand
PASS THE POPCORN U
nlike its rival properties in Cotai, there is no real entertainment drawcard at Galaxy Macau. That will change by the end of the year when the resort opens Macau’s first 3D Cineplex and its China Rouge club. The property’s biggest entertainment feature is its sky-top wave pool for hotel guests only. Galaxy Macau vice-president for marketing communications Jane Tsai says the attraction has been “really popular” but there are no plans to open it to non-hotel guests. The UA Galaxy Cinemas will see Galaxy Macau enter a partnership with UA Cinemas to develop a grand theatre with balcony boxes, four VIP houses and four traditional houses with more than 1,000 seats in total. All nine screens will be able to show 3D movies. The 16,000-square-metre facility will employ about 200 people. UA has 25 years’ experience managing cinemas in Hong Kong and currently operates nine complexes with more than 40 screens. The company has also expanded into leading mainland cities such as Shanghai, Chongqing, Wuhan, Shenzhen and Guangzhou. Galaxy Entertainment Group has signalled it wants to use the venue for international premieres. “We are planning several premieres in conjunction with our opening as well as major local and regional film events,” a spokesman said. The gaming operator did not provide estimates on attendance, revenue and profit for the cinema complex. The Macau Government Tourist Office has welcomed the project, which it expects will draw more non-gaming tourists. “We congratulate Galaxy for the initiative and expect the cinema complex to entice more visitors to come to Macau, especially families, as they will have one more reason to visit the city and stay longer.” BY KIM LYON SEPTEMBER 2011
68
Gaming
2020
vision
The year when the first round of gaming licenses will expire looms as a potential issue for the government, banks and the casinos BY ALEXANDRA LAGES
asino concessions in Macau will begin to expire in 2020. But the worries have already begun about the chances of some of the city’s six casino operators failing to have their licences renewed. These worries are likely to make it harder for operators to borrow to pay for their projects in Cotai. The licences of SJM Holdings Ltd. and MGM China Holdings Ltd. will be the first to expire, on March 31, 2020. Although that is less than nine years away, both companies are pressing ahead with expansion in Cotai. The other four licences will expire on June 26, 2022. Despite optimism that the status quo will be maintained, chief executive Fernando Chui Sai On’s cabinet is being urged to put its cards on the table as soon as possible. The government’s message is that the operators should not fret. “No specific timetable regarding the gaming concession renewal process is being set out yet,” a spokesperson for the Gaming Inspection and Coordination Bureau told Macau Business. “However, rest assured that the government is paying close attention to the various impacts on project financing of the gaming concessionaires.” So far, the gaming operators have expressed little concern. Galaxy Entertainment Group Ltd. opened Galaxy Macau in Cotai on May 15 but two-thirds of its plot of land remain undeveloped. “Galaxy Entertainment Group, with its growth in the past four years, has proven that it is very solidly here to stay,” says Jane Tsai, vice-president
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SEPTEMBER 2011
of marketing communications of the Galaxy Macau. She says the company expects to have its licence renewed.
Anxiety issues “It would be a big mistake to let 2020 anxiety become a major factor,” Wynn Macau Ltd. chairman Steve Wynn said in May. “That would represent mismanagement by the government and it would be the first time I’d seen that in the nine years I’ve been in Macau,” the South China Morning Post quoted Mr Wynn as saying. “I think that if there was a chance that this was going to end in 2020 or 2022, we would have been told not to build the buildings.” Wynn Macau is planning a MOP20 billion (US$2.5 billion) project in Cotai. The development, which is waiting for government approval, is due to open by 2015, the company said. Macau Business contacted the other four operators but they either declined to comment or failed to reply. Economists and gaming analysts say the operators would be right to worry about the renewal of their licences. David Green, managing partner of gaming consultancy Newpage Consulting, said in July that it now took longer for operators to recoup their investment in new casinos because their projects were bigger and they had to borrow more to pay for them. “So it’s a realistic concern for [the lenders] to ask what will happen after 2020 or 2022,” he said. But Mr Green feels it is too early to sound the alarm, as the government has the power to extend gaming concessions until 2027, giving operators that
open new casinos in the next five years enough time to recoup their investment and repay lenders. “In historical terms in Macau, that’s a pretty good payback period.” Mr Green does not expect the issue to be settled soon. “I wouldn’t be expecting this administration to provide an answer, simply because even if the current chief executive serves two terms, he won’t be the chief executive in 2020,” he says.
Pick one “Renewal of licences is a valid concern for operators and regarding these
69
“No specific timetable regarding the gaming concession renewal process is being set out yet,” a spokesperson for the Gaming Inspection and Coordination Bureau told Macau Business
Cotai projects,” says Union Gaming Research’s Macau analyst Grant Govertsen. “From the lender’s standpoint, you naturally want the person who gets the money to pay it back as soon as possible and this increases the risk that the loans might not be paid back.” Mr Govertsen urged the government to indicate how and when licences may be renewed to free up lenders to finance new projects. And it must act soon, he says. “The next two or three years will definitely require some policymaking from the government and some debate around
the problem of financing for upcoming projects.” Lawyer and former Sands China executive Luís Mesquita de Melo says doubt about licence renewal makes large projects in Cotai riskier. Although unless something goes wrong, he says the current licence holders will be fine come 2020. He thinks the operators can expect the government to do one of three things: to keep quiet until 2020, to give some kind of promise that licences will be renewed, or allow concessionaires to start re-negotiating renewals. Mr Melo SEPTEMBER 2011
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Gaming
“It would be a big mistake to let 2020 anxiety become a major factor,” Wynn Macau Ltd. chairman Steve Wynn said in May suggests that the operators will press for the third option and so give lenders a measure of reassurance. “For banks, this uncertainty may bring higher interest rates,” says Mr Govertsen. “In their turn, operators want the costs of financing to be as low as possible. If the government says what’s going to happen, this will make a large difference for returns.” Mainland banks have the best doors to knock on while doubt remains about licence renewals, says economist José Morgado. “Mainland banks may have a different perspective from the Western ones, as they have been showing less concern over this situation. That’s because they are better informed on what China’s policies are regarding Macau,” he says.
Stick or twist Mr Morgado expects all six operators to have their concessions renewed. “Operators should not worry too much about expiration. They only have to make sure
SEPTEMBER 2011
they manage their business properly.” Mr Govertsen of Union Gaming Research and former Sands China executive Mr Melo are similarly sanguine. “Macau has become a bright spot for gaming worldwide and China should be proud of that. It makes sense that licences will be renewed to the current concessionaries,” says Mr Govertsen. The rules say that if the government declines to renew a licence, all the operator’s casino premises and gaming equipment will be transferred to the government without compensation. This happened to the Casino Lisboa in 2002, when Stanley Ho Hung Sun’s Sociedade de Turismo e Diversões de Macau (STDM) lost its gaming monopoly. STDM’s successor, SJM, eventually got the casino back from the government. Come 2020, “the only thing we can expect is more control,” says Mr Morgado. Mr Melo believes the government will take the opportunity to diversify the economy.
“There have been concerns that some operators may be using Macau’s profits to invest in other places. So increasing the gaming tax can be a way to make sure that the money stays in Macau and that the fruits of the stunning growth of the casino industry can be better split between operators and the territory.” What is more, Mr Melo says, the government may impose new investment requirements on the operators. “In this way, the government could easily achieve the objective of economic diversification, because instead of only investing in gaming, operators would be forced to put money into other areas.” In contrast, Mr Govertsen believes the tax burden will stay the same or even ease to protect Macau from competitors. “In all likelihood, other gaming jurisdictions like Japan or South Korea might have comparable gaming projects to Macau. With lower taxes, Macau will stay competitive,” he says.
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SEPTEMBER 2011 For more information visit macaubusiness.com or write to golf@macaubusiness.com
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INSECURITY CAMERAS
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A BUSTED SHUFFLING MACHINE SCAM AT ONE OF MACAU’S CASINOS CREATES A DIFFICULT QUESTION: IS THIS THE START OF A FLOOD OF HIGH-TECH SCAMS ON THE GAMING FLOOR? BY LUCIANA LEITÃO ILLUSTRATION BY RUI RASQUINHO t had all the elements for the plot of the next instalment of the “Ocean’s Eleven” movie series: shuffling machines that were changed without security noticing, microcameras, infrared transmitters and a casino bilked out of millions of patacas. But this was no Hollywood production. It was the latest big gaming scam to be uncovered in Macau. And it raises the question, are the cheats going high-tech? The head of the Gaming Inspection and Coordination Bureau, Manuel Joaquim das Neves, believes some scammers do use upto-the-minute technology to cheat but it is uncommon in Macau. One deterrent are the security systems used in several casinos, which are among the most sophisticated available. “There are not many cases of resorting to high-tech,” Mr Neves says. Casino game protection expert Sal Piacente thinks otherwise. He believes a new trend has arrived. In particular, hidden video cameras may be the way to go for cheats. “It’s so hard to catch,” the U.S.-based expert says. The scam that made the news in July put local casinos on the alert. The police arrested seven men from the mainland and are still investigating whether croupiers were involved. The scammers used modified shuffling machines on baccarat tables. The shufflers were fitted with mirrors to reflect the images of the cards into the lenses of micro video cameras, which then relayed the images via infrared transmitters. The card order was filmed, the data were analysed remotely, and the conclusions of the analysis relayed to the scammers, who placed their bets. They used at least five modified shufflers and perpetrated the scam in at least one casino, which has not been publicly identified.
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The modified machines were first discovered in January during regular maintenance but it was not until March 28 that the suspects were identified.
Bling warning This is not the first case in Asia of a high-tech scam using video to cheat at baccarat. Recently the Philippine Amusement and Gaming Corp. lost about MOP30 million (US$3.75 million) to a foreign gambling syndicate. Last year there were reports in the media about security teams in Macau casinos paying special attention to high rollers wearing lots of jewellery. There were concerns that scanners or cameras might be concealed in the bling. Mr Piacente says casinos should be particularly alert to the cutter scam. “When the players cut the deck, they actually have a camera up their sleeves and record the order,” he says. The security expert says some practices make casinos more vulnerable to scams. He says gaming operators usually get their decks pre-shuffled in the factory but still opt to put them in a shuffling machine or to do a quick hand shuffle. “This makes them very vulnerable and nullifies the preshuffling. The more times a human element is involved, the more it makes [the casino] vulnerable,” he says. “That’s why it
The head of the Gaming Inspection and Coordination Bureau, Manuel Joaquim das Neves, believes some scammers do use up-to-the-minute technology to cheat but it is uncommon in Macau SEPTEMBER 2011
is so important to get the equipment from reliable companies.” Mr Piacente says that while cameras may be useful for perpetrating scams, conversely, closed circuit television monitoring is the favoured weapon for preventing scams. “The best is digital cameras. However, remember you can have a milliondollar system but you’re only as good as the people that are watching it,” he says.
THE WEAKEST LINK R
ather than use hightech stunts, cheats in Macau (at least, those that are caught) are more likely to look for a partner in crime among the city’s army of croupiers. The head of Macau’s Gaming Inspection and Coordination Bureau, Manuel Joaquim das Neves, believes such partnerships are infrequent. “There has to be a very solid relationship based on trust between both parties when we’re talking about huge
Technological challenge The most commonly detected way of cheating in Macau is to use counterfeit chips but cheats are trying this less and less often because casinos now use sophisticated technology to validate chips. However, scammers try to keep one step ahead. “The latest [fake] chips that have been detected at casinos are almost perfect. Criminals are keeping up with the security systems. They are already getting very sophisticated,” says Mr Neves, the gaming regulator. Mr Neves recalls a notable case that occurred at the Sands casino right after it opened in 2004. A group swindled HK$30 million (US$3.85 million) from the casino by swapping cards with accomplices at the baccarat table to build up a multimilliondollar winning streak. At the time, Sands had yet to install shuffling machines equipped with an electronic eye capable of identifying the cards and it was difficult to prove the scam, he says. Now, such shufflers are everywhere on the gaming floor, as well as other high-tech equipment intended to prevent cheating. Gaming operators use automatic shufflers, with the capacity to shuffle up to eight decks, making simple scams that entail counting cards very difficult, Mr Neves says.
‘Software’ fails He says hardware alone cannot do everything. In the shuffler scam, it is still not clear how the surveillance teams failed to
amounts of money,” he says. On the other hand, only good, old-fashioned human intelligence is capable of detecting these criminal partnerships, Mr Neves says. “All casinos have informants. The casinos keep their identities secret and, in return, they are heavily compensated.” Sometimes the casinos recruit former cheats, he says. Often the house is alerted to a scam only after the scammers have had time to inflict an appreciable amount of losses on the casino. In every game, there is a mathematical formula for calculating what the house can expect to win. A casino should be taking a certain percentage, Mr Neves says. “If it’s not, then it’s a sign something has happened.”
A GOOD SCAM C
asino scams have long been an inspiration source for the film industry. With the rise of Macau as the world’s new gaming capital, film crews are now choosing the city to shoot their plots. City of Dreams is already taking advantage of this opportunity to increase its brand awareness abroad. The property will be featured as one of the main sets of “The Thieves”, a new Korean movie directed by Choi Donghoon, and starring Gianna Jun and Kim Yun-seok. “The Thieves” revolves around a crew of Korean thieves who descend on Macau to steal a legendary diamond that has been hidden in a casino. The film has been dubbed as the Korean “Ocean’s Eleven” and should be released later this year.
75 75 detect the swapping of the machines. The shuffler scam is hardly surprising, says Ken Jolly, vice-president for Asia of gaming equipment supplier Shuffle Master. “There has always been people who try to cheat the technology,” he says. This applies to slot machines, table games or shufflers. Mr Jolly points out that the shuffling machines that were tampered with did not come from his company. But wherever they came from, the scam reveals shortcomings in security, he says. “The way in which someone was able to obtain some of these units, put a camera in there, and then was able to swap it over to a table, obviously leaves a lot of questions to be asked about surveillance.” Have casinos taken extra precautions since the bust? Mr Jolly says gaming operators have asked his company to check their Shuffle Master equipment to see if it has been tampered with. He says his company provides locks for shufflers, but that some casinos opt not to use them. Macau Business contacted all six local casino concessionaries but none wished to talk about their security practices. The police did not reply to Macau Business questions about the number of casino scams they have busted in Macau and the methods the scammers used.
Casino game protection expert Sal Piacente says a new trend has arrived. In particular, hidden video cameras may be the way to go for cheats. “It’s so hard to catch”
POACHER TURNED GAMEKEEPER A
n ex-professional cheat who is now a security adviser to casinos around the world says scammers are using hidden cameras to cheat in casinos everywhere, including Macau. Richard Marcus’s name is all over the Internet. Having published books on scamming, he is now advising casinos on how to act against professional cheats. At the same time, he keeps in contact with professional scammers, some of them operating here. Baccarat, Mr Marcus says, is the game most vulnerable to high-tech scams, because its outcome is decided solely by the order of the cards. All you need is a digital camera, perhaps hidden inside the shuffling machine or disguised as a piece of jewellery, and a sloppy croupier. In passing the cards, some croupiers, instead of sliding them across the surface of the table, flick them. “This is good enough to film the cards when they are being passed as they are flying through the air. The camera films the cards, [the information] goes back to the computer and information is sent to the people at the tables,” Mr Marcus says. Alternatively, the cards can be filmed as they are cut by a camera hidden in, say, a ring. Mr Marcus says the cheats usually work in teams. “They’ll bet the maximum, but some of them will be betting on player and some of them will be betting on banker, before the slug arrives. [It] looks like they are big gamblers, but they are offsetting each other,” he says. All such scams have been heard of in Macau. “These digital camera scams have been going on for 10 years and started in England. Things don’t start in Macau, they usually get to Macau.” However, high-tech scams are easier to detect than old-fashioned, low-tech cheating, Mr Marcus says. This is because the scammers use the technology to get higher, faster returns – which gets the attention of casino staff. “Casinos still lose more money to low-tech cheating than to high-tech cheating,” he says. “The low-tech cheaters are looking to get HK$20,000, and since Macau casinos are so big and get so much action, they can go there and win HK$20,000 every week.”
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Exclusive slot
Macau’s non-racing sports betting monopoly rolled over BY MARTIN JOHN WILLIAMS*
he Macau government has renewed its contract with Macau Slot for another year, the third consecutive 12-month extension for the de facto monopoly holder of non-racing sports betting in the territory. The contract with Macau Slot — full name Sociedade de Lotarias e Apostas Mutuas de Macau Lda — was signed on July 28 and gazetted on August 10. According to the gazette entry, the extension took effect on June 6 and will expire on June 5, 2012, while the contract remains “renewable by mutual agreement”. The government’s decision to stick with the company, a subsidiary of gambling patriarch Stanley Ho Hung Sun’s Sociedade de Turismo e Diversões de Macau (STDM), came to light more than three months ago. On May 26, chief executive Fernando Chui Sai On signed an executive order authorising secretary for economy and finance Francis Tam Pak Yuen to negotiate and sign a 12-month deal with Macau Slot, according to a gazette notice on May 30. The renewed contract contains no other amendments, therefore, extending the status quo for one of Macau’s least lucrative and least competitive sources of gaming revenue. The third one-year renewal for the company’s gaming activities follows five-year extensions in 1999 and 2004. Founded in 1989 as an instant lottery monopoly, Macau Slot’s sports betting license dates to just before the FIFA World Cup in 1998. Football was later joined by basketball, but no codes have been added since. When the first of the 12-month renewals was announced in 2009, the final year of former chief executive Edmund Ho Hau Wah’s term, expectations were raised that his successor would end Macau Slot’s monopoly on odds-setting, which has stifled rival operators interested in sports betting services. Macau’s six casino concessionaires are also permitted to run such services under certain conditions.
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Stalled reform In 2008, with political change in the offing and a shorter renewal announced for Macau Slot, William Hill and Ladbrokes were among several foreign sports betting companies that
STILL STUDYING IT T
he Macau government doesn’t have any plans to change Macau Slot’s non-racing sports betting de facto monopoly, at least not in the short term. The Gaming Inspection and Coordination Bureau “is still in the process of studying the feasibility of enhancing the current operational module of sports lottery in Macau,” a spokesperson told Macau Business. “However, it is estimated that the decision making process shall take some time as the government will certainly need to take into consideration the possible social impacts, such as problem gambling, arising from any changes,” the spokesperson added. SEPTEMBER 2011
reportedly expressed interest in entering the market. Galaxy Entertainment Group and Melco Crown Entertainment also publicly stated an interest in opening sports betting on casino floors, which they, like other Macau casino operators, would be able to do under the terms of their concessions. But without permission to determine odds, none of the casino concessionaires or foreign companies has set up sports betting facilities, exacerbated by offers of superior and/or untaxed payouts from illegal bookmakers, a developed market in Hong Kong and easy access to phone betting and foreign operator websites. Notwithstanding the signal suggested by 12-month extensions, momentum for reform has stalled amid greater fiscal priorities and possible government concerns over Beijing’s hard line on sports betting. Despite amounting to a tiny fraction of Macau’s gaming income, recent figures suggest there remains room for growth in the regulated market. Quarterly results released by the Gaming Inspection and Coordination Bureau show that revenue from betting on football and basketball has steadily improved from a five-year low in 2007. Soccer betting volume for the first half of 2011 amounted to MOP2.31 billion (US$289 million), down 11.6 percent yearon-year because of the FIFA World Cup in June and July 2010. However, betting revenue for the first half of 2011 rose 14.3 percent year-on-year to MOP176 million. The less popular sport of basketball also posted first half increases in betting volume and revenue year-on-year, with volume rising 26.1 percent to MOP662 million and revenue up 30.8 percent at MOP51 million. * EXCLUSIVE GAMBLINGCOMPLIANCE/MACAU BUSINESS
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BETTER OFF Gaming workers earning more
The average earnings of full-time employees in the gaming sector stood at MOP16,460 (US$2,058) in June, up by 7 percent year-on-year. According to data from the Statistics and Census Service, the average earnings of dealers increased by 7.1 percent to MOP14,560 and that of hard and soft count clerks, cage cashiers, pit bosses, casino floor staff and betting service operators rose by 8.2 percent to MOP20,420 a month. Average earnings of casino and slot machine attendants, security guards and surveillance room operators amounted to MOP10,560, up 5.4 percent year-on-year. At the end of the second quarter, the gaming sector had 47,300 employees, up 7.9 percent year-on-year, of which 20,800 people were dealers, an 11.4-percent rise. There were 2,140 vacancies in the sector, of which 800 positions were for dealers.
KERKORIAN REDUCES STAKE IN MGM RESORTS
MGM Resorts International founder and major shareholder Kirk Kerkorian sold 20 million shares in the company. The deal was worth US$214.9 million (MOP1.72 billion) and reduced his stake in the casino operator to 22.8 percent from 27 percent. MGM Resorts International is the majority shareholder of MGM China Holdings, with a 51 percent stake.
LESS CASINO-RELATED CRIMES
The number of casino-related crimes dropped in the first half of 2011, according to data made public last month by the secretary for security, Cheong Kuoc Va. There were 358 cases reported in the first six months of the year, a 17 percent year-on-year drop. Loan sharking (70 cases), pick pocketing (43) and theft of gambling chips (32) were the three major casino-related cases detected from January to June. Mr Lau also showed some concern regarding the overall increase of kidnapping cases in Macau from 31 to 51, a rise he said was “related to gaming activities”. The official said the government would strengthen policing in casino areas and improve awareness to fight casino-related crimes.
PONTE 16 HOSTS “LEGENDS” AUCTION
World-renowned entertainment auction house Julien’s Auctions will host its second annual “Legends” auction on October 22, again at Ponte 16. The “Legends” auction returns with a showcase of film and music memorabilia from some of the world’s biggest superstars including Marilyn Monroe and Michael Jackson. Other iconic pieces to be offered include personal effects from Elvis Presley, The Beatles, Madonna, Princess Diana and many others. Before the auction itself, the props will tour the mainland, where several exhibitions are scheduled starting this month. The memorabilia will also be on display in Macau from October 13 to October 22, before the auction takes place.
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Beach games Vietnam’s Ho Tram Strip is starting to take shape with U.S. gaming companies MGM and Pinnacle already on board. Asia Coast Development says Ho Tram will be “a big deal” BY MUHAMMAD COHEN
he Asian gaming landscape already includes Sands and Oceanus and it will soon have the beach. Not just any beach but a 2.2-km stretch of white sand on the crystalline blue South China Sea, with international casino operators, entertainment, conference facilities and a golf course de-
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signed by Greg Norman. “Our site is spectacular,” says Asia Coast Development Ltd. chief executive Lloyd Nathan. “It’s a stunning beach and when we got to the fifth storey of our tower construction and could see over the sand dunes to the protected forest, it was quite amazing.”
Place that natural beauty in Vietnam, “a hospitable, economically pragmatic country” of around 90 million people with a “government committed to doing things the right way”, Mr Nathan says, and it adds up to a “tremendous opportunity”. Asia Coast Development is the
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Asia Coast Development is the driving force behind the US$4.2 billion Ho Tram Strip in Ba Ria Vung Tau province
driving force behind the US$4.2 billion (MOP33.6 billion) Ho Tram Strip in Ba Ria Vung Tau province, the leading edge of Vietnam’s drive to become an international tourism destination. MGM Resorts International’s MGM Grand Ho Tram will be the first of five gaming resorts Asia Coast Development plans for its beachfront, 127 km south of Ho Chi Minh City and about one hour by a new road from the city’s new international airport, which is scheduled to open in 2020. In May, United States casino company Pinnacle Entertainment Inc. agreed to operate the second resort and take a 26 percent stake in Asia Coast Development for US$90 million. Listed on the New York Stock Exchange, Pinnacle operates seven casinos, one in Nevada and the rest around the Midwest and New Orleans, plus a horseracing track.
Ideas aligned Pinnacle, which once owned two casinos in Argentina, and Asia Coast Development jointly plan to create a hospitality brand at Ho Tram for use in Asia and beyond. “There was a lot of interest in the second resort,” Mr Nathan says. “Everyone thought this would be a big deal in Asia. “However, as we got deeper into the selection process, Pinnacle rapidly became our first choice. They are philosophically aligned with us in terms of operational efficiencies, appropriate governance and a broad vision for Vietnam and Asia.” There are still three more resort sites available. “The Ho Tram Strip is not just based on gaming,” says Mr Nathan, who was for many years an MGM executive and attorney. “We have a prime beachfront location located within one of the main tourist destinations for Vietnam, with diverse and appealing ancillary resort facilities including entertainment, restaurants, conference, spa and retail. Vietnam also has a growing economy and a large, young and well-educated population providing an increasing domestic consumer base for the hotel and other non-gaming amenities.” The MGM Grand Ho Tram, scheduled to open in early 2013 and costing about US$430 million, will have 541 rooms, a conference centre, a theatre and shopping in a 19-storey tower. The casino will initially have 90 gaming
CASINO DEVELOPMENT CHEMISTRY
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sia Coast Development Ltd. chief executive Lloyd Nathan knows the Ho Tram Strip project from both sides of the table. As MGM Resorts International’s global gaming unit president, Mr Nathan helped make and manage the 2008 deal that brought the casino and hospitality giant to Ho Tram. In April last year, Mr Nathan joined Asia Coast Development as its boss. This has created the mistaken impression that MGM owns Ho Tram. In fact, it has no equity in the project. Asia Coast Development’s biggest investor is Harbinger Capital Partners LLC, a US$10-billion (MOP80 billion) New York private equity fund. Pinnacle Entertainment, the United States casino company that will operate Ho Tram’s second resort, owns 26 percent of Asia Coast Development. Mr Nathan is a graduate of the London School of Economics and a lawyer licensed to practise in England and California. His history with MGM goes back two decades to when he was the company’s outside legal counsel. He joined the company as its European managing director in 2002 and also served as an executive vicepresident and international managing director in Hong Kong. Despite having left the company, there is still good chemistry between Mr Nathan and MGM. “We have significant confidence in Lloyd Nathan’s experience and his role as a leader in this project,” says MGM Grand Ho Tram president John Shigley. “MGM has been doing business here in the region for 30 years,” Mr Nathan says. “Having the MGM marketing machine is going to drive a tremendous amount of business to Ho Tram.” SEPTEMBER 2011
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ROOM TO GROW FOR CAESARS OR SANDS? A
MGM Resorts International’s MGM Grand Ho Tram will be the first of five gaming resorts Asia Coast Development plans for its beachfront, 127 km south of Ho Chi Minh City tables and 500 machines. The second phase will add a matching tower, bringing the room count up to 1,100. “It is very exciting to be part of the initial development of a new area and help define its direction and personality,” says MGM Grand Ho Tram president John Shigley.
Numbers game “Ho Tram will be a multi-faceted destination resort with broad appeal to many customer segments, SEPTEMBER 2011
gaming and non-gaming,” says Mr Shigley. “For gaming, the project’s target customers will be pan-Asian, in addition to local expatriates and foreign passport holders.” He adds: “It is likely that MGM Grand Ho Tram will use junket operators.” Mr Shigley, who was appointed in April, having previously worked for MGM in Macau and Las Vegas, does not believe MGM Macau will be harmed by the opening of Ho Tram. “There is significant excess demand in Asia for casino gaming,
sia Coast Development Ltd. has agreements with U.S. casino operators MGM Resorts International and Pinnacle Entertainment Inc. to run casino-hotels at its Ho Tram Strip development but it still has three more prime casino resort sites available. There are many players that are likely to be interested. Las Vegas Sands Corp. vice-president of communications Ron Reese says his company “continues to pursue a variety of potential development opportunities” in South Korea, Japan, Taiwan, Vietnam and Thailand. “Certain opportunities are probably further down the road than others but, for competitive reasons, we are not in a position to discuss specifics,” he says. What about Caesars Entertainment Corp? The self-proclaimed “world’s largest casino company”, formerly known as Harrah ’s Entertainment, with a presence in more than 50 places on four continents, has failed in its efforts to get a gaming foothold in Asia, beaten out for licenses in Macau and Singapore. In April, the company announced plans to build mid-range hotels without casinos in India, China and Southeast Asia, under its classic Las Vegas brand names Caesars and Flamingo. “There were a large number of parties who were interested in the opportunity and it would be fair to say that there was practically no gaming operator we did not speak to,” Asia Coast Development Ltd chief executive office Lloyd Nathan says. “We are receiving significant interest in the other [sites for] resorts, but we have not yet determined our best options.” Caesars director of corporate communications Gary Thompson says: “While I can’t provide specifics at this time, we are committed to introducing the Caesars brand and its legacy of world-class hospitality and gaming entertainment to new customers and venues throughout Asia, which we believe is the world’s most dynamic growth market.” “I’m sure that there would be some discussions between Caesars and Asia Coast Development, but Caesars has a very high threshold for what makes, strategically, sense for them,” says independent gaming and leisure industry strategist Jonathan Galaviz. “I think Caesars Entertainment chose to pass on this opportunity because, while an opportunity, it is not that great an opportunity,” says Gaming Market Advisors principal Andrew Klebanow. He cites the project’s limited international and local transport infrastructure, Vietnam’s unsettled regulatory and tax regimes, plus the ban on Vietnamese from gambling as factors limiting its appeal. “Ho Tram may attract other gaming companies once a clearer picture emerges as gaming regulations are formulated and tax rates are established,” Mr Klebanow says. “Until then, most casino companies will remain on the sidelines.”
81 as has been evidenced by growth rates in Macau and Singapore,” he says. “I doubt there’s such a thing as unlimited demand but there’s no doubt demand exceeds supply in Asia,” says Asia Coast Development’s Mr Nathan. “This region has 50 percent of the world’s population and 5 percent of licensed gaming venues. It’s going to take a very long time to fill that supply gap.” Apart from gaming, “Ho Tram will offer the first fivestar resort experience on the south coast of Vietnam, and we believe that many Ho Chi Minh City locals will be attracted for non-gaming experiences, including entertainment, dining, weddings, meetings, conventions and exhibits,” Mr Shigley says. “MGM is developing a hotel resort brand in addition to its casino brand,” says Gaming Market Advisors principal Andrew Klebanow. “Ho Tram will fit nicely in with that strategy of developing luxury hotel resorts.” Mr Klebanow thinks the strategy, conversely, fits Ho Tram. “I am not a big believer in the Ho Tram project as being a game-changer in the Asian gaming market. It will be a nice resort area but I do not see it evolving into a major gaming centre,” he says.
Risk management Independent gaming and leisure industry strategist Jonathan Galaviz sees Vietnam as a “high-risk market in both the context of economics [because] there is tremendous inflation there, and in the context of government transparency”. At present, Vietnam is still drafting its gaming laws and a tax regime for Ho Tram. Despite MGM’s problems with New Jersey regulators over its Macau partnership with Pansy Ho Chiu King, Mr Shigley does not believe its Ho Tram casino will cause
trouble with the U.S. authorities. “We have kept U.S. regulators informed of our activities in Vietnam. Senior Vietnamese government officials responsible for the Vietnamese gaming regulations have also met on more than one occasion with U.S. regulators. All parties concerned understand the need for an appropriate regulatory environment, that is compliant with foreign gaming statutes of all jurisdictions in which MGM currently operates.” Mr Nathan says Vietnam’s government is aware of the dynamics of its Asian competition, which are driven by tax rates. The law prohibits Vietnamese, except those also holding foreign passports, from gambling in Vietnam’s handful of small slot parlours and casinos and there is little likelihood of the law being changed for Ho Tram. “When a government prohibits its citizenry from gambling it severely limits the revenue potential for its casinos and the investment potential from foreign companies,” says Mr Klebanow. “What the country gets are some nice, quaint casino properties that provide a reasonable amount of employment, perhaps 1,000 employees per property, and some modest amount of capital investment from foreign companies. What it does not get is the capital investment one sees in Macau and Singapore or the tens of thousands of jobs those casinos create.” So Asia Coast Development must depend on expatriates, 5 million tourist arrivals a year and the resident holders of foreign passports, including Vietnamese that have returned from abroad and recently been granted the right to keep second passports. “We only need to capture a tiny percentage of those groups to succeed,” Mr Nathan says.
Unleashing ideas in a world of change
SEPTEMBER 2011
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No good Taiwan deputy minister rejects viability of offshore casinos BY MARTIN JOHN WILLIAMS*
issenting government voices are emerging over Taiwan’s proposal to develop integrated resorts on outlying islands, with a senior official warning that foreign companies have little or no interest in remotely located casinos. San Gee, deputy minister of the cabinet’s Council for Economic Planning and Development, said last month that development of a viable industry requires significant expansion of a regulatory regime that currently limits potential casino operations to offshore areas. “Based on my information, international [companies] are not interested in going to the outlying islands to set up [business],” he was quoted as saying by the Chinese-language Economic Daily News. Mr San said outlying islands are unlikely to attract investment from global gaming companies even if residents approve referendums on casino development, as required by law. The comments are the first by a ministerial-level official to contradict the Ministry of Transportation and Communications’ promises of a massive revenue windfall for central and local governments. The ministry is responsible for bringing the casino project to fruition, while the minister himself is one of several cabinet officials who sit on the Council for Economic Planning and Development. Taiwan has not legalised gambling, but in January 2009 the legislature permitted offshore casino operations in an attempt to boost tourism and economic development in remote areas. However, a casino referendum in the Taiwan Strait island county of Penghu unexpectedly failed to pass in September 2009, forcing the pro-casino reform KMT government to revise its strategy. The failed campaign also eventually resulted in the liquidation in June 2011 of AMZ Holdings PLC, a company whose affiliates secured beachfront land for the development.
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Problems, problems The government has since commissioned Taipei law firm Lin & Partners to draft gaming legislation for the operation of casinos on outlying islands. The draft remains a work in progress after the ministry held local and industry meetings to discuss its contents between April and June. It is now unclear when the draft will be submitted to cabinet, and it is unlikely the legislature will debate the bill before combined presidential and legislative elections on January 14, 2012. Mr San said a lack of interest from major foreign investors would instead result in small-to-medium sized, domestically run operations that would do little for tourist volume and give only a minor boost to employment. “If there are SEPTEMBER 2011
San Gee, deputy minister of the cabinet’s Council for Economic Planning and Development, said last month that development of a viable industry requires significant expansion of a regulatory regime that currently limits potential casino operations to offshore areas only going to be medium-sized companies involved, the benefits will not be significant,” Apple Daily newspaper quoted Mr San as saying. He said China might also heavily restrict gamblers from travelling to Taiwanese casinos, a problem that would result in an unstable customer base, especially in locations most dependent on Chinese tourists such as Kinmen and Matsu, island groups only kilometres from the Chinese coast. Casinos on Taiwan’s outlying islands will also need a
83 Transportation and Communications for reference. However, the report’s author, Wu Ja-Lin, told GamblingCompliance that the deputy minister’s comments were consistent with his report, which he said he initiated. He said the economic side of the casino project needs discussion and clarification, and that the drafting process is insufficiently informed on the economic dynamics of the industry. In 2009, Mr Wu completed a Master’s thesis examining the regulatory structures in Macau and Singapore that he says was Taiwan’s first study of gambling law. The study stressed the importance of strict regulation while assessing economic gain and social costs in establishing a gaming industry. “Gambling amounts only to the transfer of wealth and not to a change in the overall level of wealth in society, and for this reason does not create substantial economic benefit,” he wrote. Liu Day-Yang, a government consultant on gaming and an economics professor at the National Taiwan University of Science and Technology, said deputy minister Mr San is an “important decision-maker”, but “I think he may not have a true understanding of the full potential of the casino operators. He may not have all the information on this issue”. Asked about Mr San’s influence in cabinet, Mr Liu said: “In regard to casino issues, so far I haven’t seen any changes made from the premier’s office, so you don’t need to take the comments seriously.” A number of global gaming companies have continued to express interest in Taiwan’s casino push despite years of setbacks and delays. * EXCLUSIVE GAMBLINGCOMPLIANCE/MACAU BUSINESS
large-scale and expensive advertising campaign to attract business, he said. By contrast, in Singapore, “they don’t need to do any advertising because visitors going to Singapore for meetings, exhibitions or shopping will naturally go [to the casinos] to have fun,” the Economic Daily News quoted Mr San as saying. The government would have to invest heavily in infrastructure, such as increasing police services and other administrative functions, Mr San said. “People have done the sums,” he said. “On the whole, it will not be cost-effective.” Therefore, Taiwan must step forward confidently and expand the scope of its gaming legislation if the taxpayer is to see any gains from the industry, he noted.
No substantial benefit When directly asked by a reporter if casinos should be allowed on Taiwan proper, Mr San said, “I won’t answer that question”. Mr San was speaking at the launch of a research paper by the council’s Centre for Economic Deregulation and Innovation on legal and policy problems with investment in future casinos. The council invited selected media to attend the launch, and while press liaison Jill Wang told GamblingCompliance that the reports on Nr San’s comments were accurate, she declined to provide a copy of the paper as it is a “preliminary internal report” on a sensitive subject and represented the views of the author alone. She said the contents of a fuller version would eventually be sent to the Ministry of
It’s your daily business
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Local advantage
Wynn and Las Vegas Sands face uphill battle in Massachusetts BY SCOTT VAN VOORHIS*
olitically-wired local developers are the likely early front-runners for casino licenses in Massachusetts should the New England state finally legalize Las Vegas-style gambling. Despite budding interest in the Bay State by various casino tycoons, Massachusetts players, from track owners to Indian tribes, are seen as favoured under a recently unveiled casino bill. Revealed just last month, the casino bill is now on a fast track to clear the Legislature by the latter half of this month, after which it is expected to be signed by Gov. Deval Patrick. Even a side battle over a measure that may give one of the casino licenses to an Indian tribe appears unlikely to pose any serious problem to the legislation’s chances
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of passing, industry observers say. Yet while the casino legislation would appear to open up Massachusetts to the titans of the gaming industry, local favourites for the quartet of lucrative gambling licenses have already emerged. “The people who have been on the ground for the past two or three years clearly have the advantage now,” said Clyde Barrow, director of the Centre for Policy Analysis at the University of Massachusetts Dartmouth. Would-be casino developers will have to shell out at least US$85 million (MOP680 million) to get a license to build in Massachusetts under the recently unveiled gambling bill. However, the legislation is not set up to encourage
a free-wheeling bidding war that would tip the competition in favour of a Las Vegas Sands’ Sheldon Adelson or a Steve Wynn, both of whom have expressed interest in Massachusetts. Rather, bidders will have to come to the table with both land to build on and, just as crucially, the backing of the local community they’ve chosen for their casino. That includes both a referendum and a memorandum of understanding with local officials.
The frontrunners With that well-known criteria in mind, three to four local casino development groups have spent years buying land and shoring up political support in various communities.
85 Gambling developer Richard Fields, who controls the Suffolk Downs racetrack in Boston, holds the inside position when it comes to winning the state’s most valuable casino license. The legislation divides Massachusetts up to three casino zones and Mr Fields has hundreds of acres in Boston, the state capital and regional economic powerhouse. His main challenger is David Nunes, a veteran local developer who has teamed up with a smaller Las Vegas operator, nailing down land and local support in Milford, a town on the edge of the Boston suburbs. Similarly, Mohegan Sun has built up a sizeable early lead, having acquired land and won support of local officials in the Western Massachusetts town of Palmer. Mohegan’s biggest challenge may be in getting its own finances in order, with the tribal casino operator scrambling to refinance well more than US$1 billion in debt by the end of the business quarter. The South-eastern Massachusetts license is the one likely to generate the most competition. Two recognized Indian tribes are eyeing it. The legislation would give either tribe a monopoly if it can pull together a comprehensive casino deal with state and local officials by next July. But that measure remains bitterly contested by would-be commercial casino developers with hopes of building a gambling complex in the old port city of New Bedford. The recently unveiled casino legislation also calls for a single slot parlour license to be put out bid, and, here again, a local player has the early lead. Gary Piontkowski, head of a local investment group that controls the Plainridge racetrack near the Rhode Island border, has spent a decade lobbying for tracks and lining up crucial local support.
Looking for partners For big out-of-state investors and casino operators, the best bet as it stands now is finding a local player – with land and political support – to back. Caesars Entertainment, one of the largest casino companies in the world, has teamed up with owners of Suffolk Downs, the racetrack strategically poised within Boston city limits. Caesars is headed by Gary Loveman, a former Harvard business professor who has long been interested in building a casino in the Bay State.
Las Vegas-based Warner Gaming is backing Mr Nunes, as he prepares to challenge Suffolk and Caesars for control of the Greater Boston casino license with his own tract of land in the suburban Milford. For its part, the Mashpee Wampanoag tribe is backed by Asian casino giant Genting. Still, that leaves at least three other major U.S. casino operators circling Massachusetts, either looking for a local partner or for a site they can build on directly. Penn National may be in the best position of this group, with its extensive racino (a combined race track and casino) experience giving it a key chip to play were it to compete for the single slot parlour license that will be put out to bid. Penn could team up with one of the two local racetrack owners that will be competing for the slot license, or attempt to buy its own site and compete on its own.
On the sidelines But Mr Adelson, whose Las Vegas Sands Corp. is the world’s most valued casino company, and Mr Wynn may face tougher challenges. Mr Wynn swept into Boston a few months ago, talking up the potential of building a casino on the city’s waterfront. The proposal went over like a lead balloon, with long-time Mayor Thomas M. Menino having long ago ruled out casino development on the city’s waterfront – and having already thrown his support behind a proposed casino at Suffolk Downs. Mr Adelson, a native of Boston’s Dorchester neighbourhood, has long expressed interest in building a casino in his home state, but has yet to make a major move. In addition, Mr Adelson suggested to analysts in April that he might be wary of backing a multi-million dollar development in Massachusetts were legislation to allow more than two casinos. Meanwhile, other states in the New England region are watching the casino deliberations in neighbouring Massachusetts with apprehension. “The impact from Massachusetts will be upwards of 30 to 35 percent of our business,” said John Taylor, chairman of the board for Twin Rivers, Rhode Island’s flagship slot complex. “It is obviously something we are and have been quite concerned about,” he said. * EXCLUSIVE GAMBLINGCOMPLIANCE/MACAU BUSINESS SEPTEMBER 2011
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Gaming
Las Vegas goes Macau-style Strip boosted by booming baccarat but analysts still apprehensive about overall recovery BY SCOTT LONGLEY*
near five-fold leap in baccarat revenues was the driving force behind a 32 percent rise in yearon-year casino revenues on the Las Vegas Strip in June, according to the latest statistics from the Nevada Gaming Control Board. Analysts at Jefferies declared that the latest monthly statistics provided “qualitative indications of the broader
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health” of all the Nevada gaming markets. Total revenues for the state were up 16 percent year-on-year to US$885.7 million (MOP7.09 billion), but it was the US$506.7 million total for the Strip which provided the highlight. A rebound in both drop and hold percentage at the baccarat tables led to a 489 percent rise in baccarat revenue to US$107.2 million. Volume rose 32 per-
Nevada Las Vegas Strip Area - Monthly Breakdown of Win US$m 600
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Change year-on-year
cent while the hold percentage came in at 15.7 percent, a marked improvement on last year’s comparable figure of 3.5 percent and, according to analysts at Union Gaming, 4.1 percent above the fiveyear average of 11.5 percent. Slot win was up 1.6 percent while table games ex-baccarat was up 22.7 percent, helped by a 14.3 percent gain in volumes. The results for the locals market were less ambiguously positive. North Las Vegas (off by 2.7 percent), downtown (down 4.1 percent) and the balance of Clark county (down 1.9 percent) numbers were in negative, but Boulder Strip was up 5.7 percent.
Remaining cautious Bill Lerner at Union Gaming said he remained “apprehensive” about the overall recovery in the local market. “Although the absolute unemployment numbers in the Las Vegas metropolitan area are improving slightly, they remain notably higher than the national unemployment rate. “In our view, the fall in year-on-year state-wide unemployment is a false positive and has been a result of out migration and a declining workforce rather than economic improvement.” But David Katz, lead analyst at Jefferies, was still upbeat on their prospects: “The Las Vegas Strip data likely reflects favourable international visitation and spend trends, which is consistent with management commentary, as well as slightly improving free independent traveller spend in general.” However, over at Bank of America/ Merrill Lynch, analyst Shaun Kelley said the larger U.S. gaming plays are still vulnerable should U.S. growth slip back into negative territory. “Las Vegas is susceptible to a double dip,” he said, pointing out that he had lowered his 2012 Las Vegas Strip estimates to “reflect a more tepid recovery and higher leverage”. Felicia Hendrix at Barclays was also cautious on Las Vegas’ exposure to a worsening economic backdrop. “The broad-based volume strength in June on the Las Vegas Strip indicates strengthening visitation and spend in Las Vegas throughout the second quarter even as economic uncertainty began to increase. We will continue to monitor gaming revenue and visitation data for any signs of a slowdown.” * EXCLUSIVE GAMBLINGCOMPLIANCE/MACAU BUSINESS
Grand gaming G2E IS BACK WITH NEW DATES AND A NEW VENUE Shuffle Master to display new i-Table Roulette Aruze presents follow-up to “Paradise Fishing” Discover Aristocrat’s latest licensed game titles
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The show goes on G2E alters its date and venue but the goal remains the same: to exhibit the latest trends in the gaming sector and create a platform for industry players to meet and exchange ideas
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he premier trade show and conference event for the international gaming entertainment industry, Global Gaming Expo (G2E) is back. With new dates and a new venue, the 2011 edition is set to continue to be the most in-depth source of new products, latest information and networking opportunities for the casino industry. This year, G2E moves forward by one month in comparison to previous editions, to October 3 to 6. The event, organised by the American Gaming Association and Reed Exhibitions, will also be relocated to a new venue – from the Las Vegas Convention Centre to the Sands Expo and Convention Centre. “The gaming industry is one that is ever-changing with new SEPTEMBER 2011
trends and developments affecting all aspects of our business, from customer service to backof-the-house to the gaming floor. And so G2E is making its own changes,” says Frank Fahrenkopf, president and chief executive of the American Gaming Association. “Not only are we changing the dates and location of G2E this year, but we’re also changing everything from the exhibit floor to the networking and conferences.” The venue change means all exhibits will be available on one completely redesigned exhibit hall floor with more through aisles for easier exhibit hall navigation. There will also be Las Vegas street signs to help delegates and attendees to navigate around the exhibition. The new layout includes a new
feature for the show floor called Fremont Street Experience at G2E, a nod to classic Las Vegas and one of the most energetic and fun places in the city. Organisers have planned a number of highlights to take place on the Fremont Street aisle, to keep the fun going on. Last year, more than 25,000 people attended G2E. Some 530 companies exhibited at the event. Right to the point On the conference side, there are also several changes at G2E 2011. Overall, there will be more than 100 sessions in 14 specially designed tracks spreading from October 4 to 6.The tracks range from casino design to gaming technology and human resources, just to name a few. “G2E’s conference programs
89 89 span all aspects of the gaming industry,” Mr Fahrenkopf says. For those interested in the Asian gaming industry in general and in Macau in particular, the Global Market Forum is a must attend. One of the sessions will be dedicated to Asian gaming opportunities, while another panel will focus on a comparison between the operating models of Macau and Singapore – both will take place on the afternoon of October 4. Before the official three-day conference programme starts, several dedicated conferences will take place on October 3. One of these will be the new “Social Media Boot Camp” to help casino operators better understand how to use social media like Twitter, Facebook and YouTube to market their properties. Some of the topics to be covered include how to use social media to create buzz and brand awareness. On the same day, the revamped Advanced Gaming Institute will take place with workshop style training developed in partnership with leading universities and gaming organizations. Concurrently, the Leadership Academy targets to help develop new leadership for the gaming industry. The six-hour workshop will focus on the role of leaders in developing a culture of change and on understanding what is needed to manage the constant demands for making adjustments in casinos.
G2E will this year cater to a new initiative of the American Gaming Association connecting women across the global gaming industry. The American Gaming Association’s program will launch at G2E 2011 on October 5, comprising several events intended to create a dialogue among women of all levels in all jurisdictions doing business with the gaming industry, including commercial and Native American operators, sup-
pliers, regulators, consultants and other key female stakeholders. To help attendees and delegates better manage their time at the event, the G2E guide for mobile phones has been expanded. It includes an interactive floor plan and venue map, along with information about the conference, new products and networking events, among other features. All to make sure attendees and delegates don’t miss a thing!
Women power Also on October 3, will be the iGaming Congress, returning after its debut in 2010. The largest conference in North America for Internet-based gaming will address the latest legalization possibilities and tax structures for the United States market, as well as the overall business of acquiring players, protecting players, processing payments and much more. Another dedicated conference to also take place on October 3 is the Security and Surveillance Institute, where the latest discovered scams will be unveiled and debated. SEPTEMBER 2011
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Smart talk
G2E 2011 keynotes to feature panel discussions on innovation and tribal gaming
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lobal Gaming Expo (G2E) 2011 will combine entertainment and industry perspectives to feature a lively series of keynote events, including an opening day address by Penn Jillette and panels consisting of gaming industry leaders and tribal gaming experts. “As an event created by the industry, for the industry, G2E’s keynote events are designed to provide attendees with the one-ofa-kind entertainment and educational experiences that will help them thrive in today’s gaming industry,” says Frank J. Fahrenkopf, Jr., president and chief executive officer of the American Gaming Association. “We are excited to kick off G2E 2011 with a keynote address by Penn Jillette, one of Las Vegas’ most sought-after entertainers. Attendees will also hear from commercial casino and tribal gaming experts as they candidly discuss the latest industry trends, innovations and issues impacting the modern gaming industry.” Immediately following the ribbon-cutting ceremony on October 4, G2E 2011 will begin with a keynote address by Mr Jillette – magician, comedian, author and the larger, vocal half of “Penn & Teller.” Mr Jillette has been entertaining audiences for more than 35 years and currently appears nightly alongside his stage partner Teller at the Rio All-Suite Hotel & Casino in Las Vegas. October 5’s keynote session, “State of the Industry: Innovating for a Stronger Future,” will feature industry experts who will discuss the trends driving the industry forward, and how to harness innovation and technology to meet the challenges that lie ahead. SEPTEMBER 2011
Jim Murren
In conjunction with a new initiative by the American Gaming Association to increase the participation of women in the industry, the panel also will discuss the role of women in gaming. Panellists will include some of the most successful women in the industry: Jan L. Jones, senior vice president of communications and government relations, Caesars Entertainment; Virginia McDowell, president and chief executive officer, Isle of Capri Casinos, Inc.; Patti Hart, president and CEO, International Game Technology; and Sheila Morago, executive director, Oklahoma Indian Gaming Association. Judy Patterson, senior vice president and executive director of the American Gaming Association, will moderate the discussion. Exclusive Jim Murren The G2E 2011 keynote events will conclude on October 6 with
“Tribal Gaming Roundtable: The Indian Casino of the Future.” The final keynote session will bring together experts to examine what lies ahead for the many different aspects of Indian gaming, with a focus on operations, design and construction, financing, marketing, the gaming floor, non-gaming amenities and the potential role for tribal gaming in the online world. Rochanne Hackett, managing director of national gaming development for Wells Fargo Bank N.A., will moderate, and panellists will include Mark Birtha, president and chief development officer, Sol Casinos and AVA Amphitheatre; Gideon Bierer, executive vice president of new media, International Gaming Technology; and Chief Boyd, partner, Thalden Boyd Emery Architects. The keynote addresses will take place at the same time each day, from 10:30am to 11:30am, in the Titian Ballroom. The keynote sessions are open to all G2E attendees free of charge, and no advance registration is required. Additionally, James J. Murren, chairman and CEO of MGM Resorts International, will deliver an exclusive conference keynote at G2E 2011. He plans to address where the industry is today, what growth opportunities exist and what those opportunities mean for the gaming industry as a whole. Additionally, Mr Murren will discuss the significance of MGM Resorts International’s expanded focus on corporate social responsibility. Mr Murren’s conference keynote address will be held on October 5, from 3:15pm to 4:15pm in the Titian Ballroom and will be open to G2E 2011 conference delegates only.
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Future in the making Companies from all around the world are preparing to launch new products at G2E
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he Global Gaming Expo (G2E) is arguably the largest and most successful annual trade show and conference event for the gaming industry worldwide. No wonder then that several companies have chosen to launch their latest products during the event’s exhibition, set to take place this year from October 4 to 6. One of those companies is leading multiplayer specialists Interblock, a subsidiary of Slovenian Elektroncek. The company will premiere at the event its brand new “G4 Organic Virtual 07 with Blackjack”. Dubbed the world’s first electro-mechanical card generator, G4 Organic is able to deal up to eight decks of cards without requiring any human assistance. Unlike in other games offered on G4 Organic, where the outcome of each individual game is identical on all connected playstations, this is not the case with blackjack, namely due to the philosophy and
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rules of this game. The difference when playing blackjack is that each player gets their own cards, which means two players cannot be given the same cards; the advantage for the player is that they can decide how they want to play the game and their decision affects the next player. For blackjack, Interblock offers two designs with either six or seven playstations. Joining forces Atronic and Spielo will also use G2E to reveal their new identity. The two companies will attend the show under a new, unified corporate identity that encompasses both organizations. The new name will be announced later this month. The sister companies, overseen by Italian gaming giant Lottomatica, have been moving toward functional integration over the past two years.
Returning to G2E will be German gaming supplier Merkur Gaming. “Following on from our successful debut in Las Vegas 2010, we will display a wide range of innovations for the South American, Latin American and Mexican regions as well as for the international casino market,” says Uwe Horn, managing director at Merkur Gaming. “We are very excited about the show and the possibility of convincing visitors once again of the proven German quality,” he adds. U.S.-based Crane Payment Solutions is also looking forward to the exhibition. “G2E is a truly global show,” says Tony Morrison, Crane Payment Solutions’ vice-president of European sales. “G2E has a new date and venue this year so it’s a new start all around.” At the show, Crane Payment Solutions will feature products from its core brands, NRI, CashCode and Money Controls.
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Winning horse Konami to showcase its “Beat the Field” and “Rock Around the Clock” > Konami is preparing to ride the winning horse at G2E with its latest community-style mystery progressive game, “Beat the Field”. The product targets to bring all the excitement of a day at the races to the casino floor environment. The community play is a virtualised horse race, in which all players contributing to a linked machine can participate for one of four progressive jackpot levels or a bonus prize. New Konami games in the Podium video and/or Advantage 5 stepper cabinets can be linked together to the four-level mystery progressive. Participating players trigger the mystery bonus, and players qualify to participate according to their bet levels. The higher the bet level on the triggering spin, the more horses are allotted to the player for the bonus race. When the bonus is triggered, the overhead LCD display features the “Run of the Roses” horse race, and eligible players are each allotted horses. The race plays out on individual game screens (or top screens for stepper) and big screens. During the race, players compete with each other for one of the four progressive prizes, which is awarded to the winning horse. Players who don’t win the race, receive a Community Bonus Award prize. Progressive jackpot parameters are operator configurable depending on a venue’s preferred jackpot levels. Another innovation by Konami available shortly, will be “Rock Around the Clock”. Initially launched on the Advantage 5 stepper platform, “Rock Around the Clock” will have patrons bopping away to the old time tunes of Bill Haley and the Comet’s 1954 recording of “Rock Around the Clock”. The first two titles for these stand-alone progressives are aptly named “Rock All Day” and “Party All Night”. SEPTEMBER 2011
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Place your bets Shuffle Master to display its new i-Table Roulette > American gaming supplier Shuffle Master is set to present an impressive array of products at G2E. The company will use the show to highlight key innovations from its several product categories, including utility products and entertainment solutions. Shuffle Master will specially present new options in progressive table links that will be available in Asia soon. One of the company’s bets for G2E is the new i-Table Roulette that introduces individual player stations housed within a traditional roulette table design. Capturing the advantages of electronic player terminals - automated pays, results, and the elimination of dealer errors - the i-Table brings addiSEPTEMBER 2011
tional spins per hour, increased excitement, and increased profits to casinos. The i-Table Roulette allows staff to spend a greater amount of their time providing customer service by interacting with guests while spending less time calculating payouts and stacking chips. As more casinos move to using new ways to deliver favourite games, the i-Table allows greater flexibility in staffing - anyone from a seasoned veteran to a new dealer can easily learn and operate the game with minimal training, says Shuffle Master. At G2E, the company will showcase its slot machine titles for the Equinox cabinet. It will also exhibit its selection of rapid table games
and proprietary table games. World-renowned for its engineering and performance, Shuffle Master’s card shufflers will obviously be featured at the show. The new MD2CR is the company’s latest offering in this field – it counts and shuffles up to eight decks of cards quickly and quietly, and significantly reduces wear and tear, making cards last longer. Another key utility offering by Shuffle Master is the new Easy Chipper D, which provides quick and accurate chip sorting, which increases the number of spins per hour. The Easy Chipper D is enhanced with an easy to use touch-screen interface that makes it easier to set the machine’s features.
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Innovation time Aruze to present the follow-up to its award-winning “Paradise Fishing”: “Amazon Fishing”
> Aruze Gaming America, Inc. is bringing an expanded line-up of innovative products for G2E in Las Vegas, including some new titles. “Aruze continues to release products with innovative game mechanics, strong mathematics, and superior and attractive content. Our games have a broad thematic appeal that captures and entertains all players around the world,” says Takahiro Usui, Aruze Gaming senior general manager. “We are very excited to showcase our continued success at G2E in Las Vegas.” The company again brings together a fusion of traditional gaming concepts with an innovative new mechanic with its Innovator product line featuring Radiant Reels, a spin on stepper technology. Designed with large reels il-
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luminated by 240 multi-coloured LED lights and variable spin speeds to build anticipation for winning combinations, Innovator games target to capture the players’ attention and provide a more engaging and energetic stepper experience. Among the Innovator titles on display in Las Vegas will be “Fu Lu Shou”, “Four Chinese Beasts”, “Bamboo Panda”, and “King of Dragons”. As a follow-up to the awardwinning “Paradise Fishing”, Aruze will introduce “Amazon Fishing”, another G-Link title featuring Reel Feel Gaming Technology, which again puts the action of fishing in the palm of the players’ hands. “Amazon Fishing” takes players to an all-new locale with all new fish, some so large they can’t even fit on just one of the three 60”
LCD monitors. As a new feature, players can now select their own bait to attract the types of fish they would like to catch according to their own style of play. Aruze will also debut its latest premium range of G-Deluxe interactive top box products including “Rock You Queen III” and “The Four Heavenly Kings”, each featuring a base game with several interactive bonus events. “Aruze truly shows that ‘We’ve got it all’ in such a dynamically diverse product line that can meet the needs of any operator,” says Steve Walther, vice-president of marketing. “The momentum we have gained from such engaging products has made Aruze Gaming a company to watch and attendees will continue to be impressed with our award-winning line-up this year.”
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Looking for fun Aristocrat brings new licensed game titles to G2E 2011 > At G2E 2011, Aristocrat will show an exciting line-up of licensed game titles. The event will mark the return of Aristocrat’s “Zorro” game, one of the company’s top-performing titles for years. Now the hero is back in “Zorro: The Legend Returns” and in “Zorro: The Mask & The Rose”. Housed in the Viridian Hybrid cabinet with Aristocrat’s exclusive Nteractiv LCD buttons, both new Zorro games are three-level progressives with five different features. “Tarzan Lord of the Jungle” is hands-down one of the top performing games in North America. At G2E, the journey continues with “Tarzan the Adventures Return”, with allnew features. Aristocrat will also be unveiling an additional new Tarzan link. Aristocrat invites players to accept a mission on the newest entertainment-style video slot, “Mission: Impossible”, which features a wide area progressive with a US$250,000 (MOP2 million) top award and with
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three local area progressive jackpots and six bonus features. It is housed in a Verve hd cabinet and utilizes a 31.5” portrait monitor. The “Jaws” slot series introduces its fourth title in “Jaws Bounty Hunter”. This proven top-performing licensed theme game is better than ever with a new chair which enhances the players audio experience. The “Ghost Who Walks” will soon be leaving his legendary “Good Mark” at casinos everywhere, because Aristocrat is bringing the myth of “The Phantom” to life in a new Class III video slot game. This title has done extremely well in Australia for the past six months, and is now making its North America debut. Offering a diverse range of products and services including electronic gaming machines and casino management systems, Aristocrat will demonstrate at G2E why the company is licensed by more than 200 regulators, with a footprint in more than 90 countries around the world.
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The lord of the prizes Bally Technologies continues award streak > Leading gaming manufacturer Bally Technologies, Inc. will exhibit its long line of multi-awardwinning products at G2E. “Over the past three years, Bally has won more than 35 awards for innovation - a true testament to the work being done here,” says Bally Technologies’ chief executive officer Richard Haddrill. Just recently, Bally won four prizes in Casino Enterprise Management magazine’s second annual Hospitality Operations Technology Awards. The company’s winning products were the Service Tracking Manager, Bally TableView Chip Recognition; iView Display Manager with Elite Bonusing Suite; and Bally CoolSign. The Service Tracking Manager is a browser-based dispatch system that interfaces with handheld smart devices such as the iPhone SEPTEMBER 2011
and iPad for faster routing of casino-floor personnel to customers. When a service request is generated through the system such as a machine malfunction or patron pressing the service button, casino personnel closest to the patron are immediately notified, increasing the efficiency of casino operations and customer satisfaction. Bally’s new TableView Chip Recognition is a cutting-edge tablegames technology that employs high-tech cameras to identify and track a casino’s existing chips being wagered at the gaming tables. This provides casino operators with the ability to perform instant table audits and advanced patron tracking. The iView Display Manager is an on-device marketing tool that delivers content to players on the main game screen or the top game
display with picture-in-picture capability. This backward-compatible player-user-interface works on all gaming devices that have a touch-enabled video monitor, including non-Bally games from any manufacturer. When combined with Elite Bonusing Suite, which features nine different apps including floorwide bonusing events, this synergistic combination is designed to keep players in their seats and instantly reward them at the point-of-play. CoolSign media-management software delivers comprehensive digital-signage solutions to help stimulate increased guest spending. It allows the operator to display information such as jackpot winners, unique system-driven messages, and floor-wide bonusing events.
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Asian soul
Aspect Gaming launches slot machine themed on one of Hong Kong’s biggest TV and movie stars
> Aspect Gaming (Aspect International Limited) is a premier solutions provider focused exclusively on the Asian gaming industry. The company’s products are tailor-made for each market that it serves, concentrating on games that aim to deliver higher return on investment to operators and offer more captivating entertainment to players. Just recently, the company partnered with Hong Kong’s favourite lovable rogue Eric Tsang to launch “5 Ghosts”, an innovation in Asian slot machine entertainment. “5 Ghosts” first appeared in the Macau market at the city’s newest integrated destination resort, Galaxy Macau. “We were thrilled when Eric agreed to become part of the development of a dedicated Asian slot machine for the Asian market,” says Andrew Macaulay, managing director of Aspect Gaming. “Eric is an absolute legend in China’s film and entertainment industry, and his contribution to the design and theme of ‘5 Ghosts’ was critical to its success.” Combining the traditional Chinese tale of the Five Ghosts with one of Hong Kong’s most accomplished film industry giants, Aspect Gaming has produced a high-tech machine that drives directly to the imagination of Asia’s players. “Aspect Gaming’s business model is built on the motto ‘from Asia, for Asians’, Mr Macaulay says. “‘5 Ghosts’ is the perfect example of the company’s unique ability to identify synergies for the market that work locally for both player and operator.” “The unique gaming style that is emerging in Asia requires a dedicated and knowledgeable team to address players who are maturing very rapidly,” explains Mr Macaulay. “We are equipped with the resources, drive and know-how to tailor-make sophisticated new slot machines that Asia’s players are growing to expect.” With a firm and dedicated eye on the organically evolving Asian business, Aspect Gaming says it will continue to produce slot machines that satisfy the needs and expectations of both players and operators. SEPTEMBER 2011
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Tourism
Tough task A year after the law on unlicensed accommodation took effect the government admits it needs to revise its strategy for tackling illegal inns dapt to survive has been the motto of unlicensed accommodation providers, facing the government’s campaign to clamp down on illegal, cheap, no-frills establishments. The government concedes it needs to change its modus operandi and adds, “combating illegal accommodation is a long-term operation.” It has been a year since the law to clamp down on unlicensed inns came into force. In that period, the government team in charge of enforcing the law has raided more than 1,000 suspected premises, pursued day-to-day inquiries and midway through last month had closed down 152 establishments. There have been 46 operators fined MOP200,000 (US$25,000), however, only two voluntarily paid the fine on time. The government says the law has had a deterrent effect. After a period of investigating and tracking, 219 premises suspected of previously providing illegal accommodation are believed to have stopped doing so. Although the results seem positive, the breakdown of the data shows otherwise. Around two-thirds of the illegal inns shut down were detected in the first six months after the law came into effect. In the following six months, policing has become more difficult. “In the process of law enforcement, there were challenges, involving chang-
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he number of hotel and guest-house guests increased by 5 percent year-onyear in the first six months of the year to 3.99 million, according to official data. The average occupancy rate of hotels and guesthouses stood at 82.0 percent, up by 3.3 percentage points compared with the same time last year. At the end of June, Macau had a total of 21,700 rooms available, with those of five-star hotels accounting for 62.6 percent of all rooms. SEPTEMBER 2011
ing of operating patterns of these illegal activities,” the government admits. “Therefore, it is necessary for the Macau Government Tourist Office to conduct analysis and adjust its strategy to cope with the new situation.” The government’s tourism bureau is recruiting staff to step up enforcement. Apart from actively closing down illegal premises, the government has also printed posters and leaflets for distribution and launched promotional video and commercials on television and radio stations. Videos encouraging visitors to stay in legal accommodation have also been
airing on mainland television networks and on monitors at immigration checkpoints. Similar messages are sent to mobile phones of mainland visitors. The war on illegal inns has also been fought online. The tourist office is cooperating with search engine providers such as Yahoo! and Google to show promotional information on the law and legal accommodation. Estimates made last year put the number of suspected illegal inns in Macau at up to 300, most around the International Centre complex and in the buildings behind the Holiday Inn in the ZAPE district.
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NUMBER OF VISITORS SOARS Visitor arrivals to Macau increased by 18.0 percent year-on-year to 2.55 million in July. Same-day visitors accounted for 51.9 percent of total visitor arrivals, according to the Statistics and Census Service. Analyzed by place of residence, visitors from the mainland increased by 27.9 percent year-on-year to 1.46 million (57.3 percent of total), mostly coming from Guangdong province (751,000), Fujian province (87,000) and Zhejiang province (57,000). Visitors from Hong Kong (720,000), Taiwan (126,000), South Korea (35,000) and Malaysia (21,000) increased by 7.3 percent, 4.1 percent, 23.6 percent and 16.4 percent respectively.
MACAU A TOP CHOICE FOR HONG KONG TRAVELLERS Macau is the third most sought after destination by Hong Kong travellers, according to the latest MasterCard survey on Consumer Purchasing Priorities: Travel. The most popular destinations for Hong Kong travellers are the mainland, Taiwan and Macau, respectively. Australia and South Korea ranked fourth and fifth respectively. The survey was conducted from March 15 to April 27 and involved 10,374 consumers from 14 markets, including Asian-Pacific regions such as Hong Kong, Vietnam and Australia.
CASH-FUELLED Tourists are spending more, with mainland tourists leading
CITY’S BIGGEST ATTRACTION IS CASINOS: SURVEY The first Macau Visitor Profile Study concluded that tourists see the city’s casinos as its biggest attraction. According to the research, conducted by the Faculty of Business Administration at the University of Macau, 44.5 percent of respondents said casinos were the most attractive item in Macau, followed by shopping centres (19.2 percent) and world heritage sites (10.6 percent). Most visitors (49.1 percent) said they came to Macau to sightsee, while gambling or other gaming-related activities were only listed third (16.4 percent), after shopping. Nevertheless, almost half of the overall tourists admitted to gambling while in Macau (48.4 percent). For the study, 3,808 visitors aged over 18 were interviewed during the first six months of 2011.
The total spending of visitors, excluding gaming expenses, reached MOP10.1 billion (US$1.26 billion) in the second quarter of 2011, up by 15 percent year-on-year, according to official data. Per-capita spending of visitors amounted to MOP1,482, an increase of 3 percent compared with a year before. Per-capita spending of mainland visitors was MOP1,868, still leading the list, followed by that of Japanese visitors at MOP1,303. In the second quarter of 2011, per-capita non-shopping spending of visitors stood at MOP784, up by 7 percent from a year earlier. Total spending and per-capita spending of visitors for the second quarter were extrapolated from about 51,600 questionnaires collected by the Statistic and Census Service.
MACAU AND MAINLAND SIGN PACT TO BOOST TOUR QUALITY The Macau Government Tourist Office and its mainland counterpart have inked a pact to fight malpractice involving tours from the mainland to Macau. The agreement, already in effect, includes several requirements for contracts signed between mainland and Macau travel agencies for tour services in the territory. The contracts have to clearly state arrangements like meals, accommodation, transportation, sightseeing, shopping and entertainment. The contracts also need to detail the tour fees. If there are optional itineraries for which visitors need to pay separately, the price and content must also be stated in the contract. Agencies are not allowed to attract tourists by offering prices below cost without visitor consent. Tour guides are also forbidden from forcing tourists to shop or to participate in optional itineraries.
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September Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail: Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:
October
8th
Macau CIO Leadership Forum 2011
Macau Tower Computerworld Hong Kong | Questex Media 13/F, 88 Hing Fat Street, Causeway Bay, Hong Kong (852) 2559 2772 (852) 2559 7002 cioforum.questexevents.net/2011/mo jchung@questexasia.com 9 th
5th Delta Inter Chamber Event
Macau Tower Macau Business | Delta Bridges 9/F Flat H, Block C, Nam Fong Ind. Bld., 679 Av. Dr. Francisco Vieira Machado - Macau (853) 28331258 (853) 28331487 deltainterchamber.com dice@macaubusiness.com
Date: Event:
20 th - 22nd
Venue: Organiser: Address: Tel: Website: E-mail:
MIC, Milan, Italy Clarion Gaming Earls Court Exhibition Centre, London SW5 9TA, UK (44) 0 20 7370 8579 www.eigexpo.com yeemay.huang@clariongaming.com
Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail: Date: Event:
European iGaming Congress and Expo
th
26 - 27
th
2nd Annual Green Tech Asia
Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:
3rd - 6th
G2E Las Vegas
Sands Expo & Convention Center, Las Vegas AGA | Reed Expo 1299 Pennsylvania Ave., NW, Suite 1175, Washington, D.C. 20004, USA (1) 888 314 1378 (1) 203 840 9626 www.g2e.com info@globalgamingexpo.com
Date: Event:
10 th - 12th
Venue: Organiser: Address: Tel: Fax: Website: E-mail:
Monte Carlo’s Grimaldi Forum Monaco Mediax 4 bd du Jardin Exotique, MC 98000 MONACO (377) 93 30 20 32 (377) 93 30 20 33 www.igaming-monaco.com info@igaming-monaco.com
Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:
12th - 14th
Date: Event:
MiE – Monaco iGaming Exchanges
ENADA Rome
Fiera di Roma, Rome, Italy Rimini Fiera Via emilia, 155 - 47921 - Rimini (RN), Italy (39) 0541 744111 (39) 0541 744200 en.enada.it centralino@riminifiera.it 20 th - 23th
16th MIF | Macau International Trade & Investment Fair
GTower Hotel, Kuala Lumpur, Malaysia Comfori E-02-03, East Wing, Subang Square Business Centre, Jalan SS15/4G, 47500 Subang Jaya, Selangor, Malaysia (603) 5621 3630 (603) 5638 8248 www.comfori.com/greentech/ lydia.aziz@comfori.com
Venue: The Venetian Macao-Resort-Hotel Organiser: IPIM Address: Alameda Dr. Carlos d’Assumpção No 263, Edif. China Civil Plaza, 20˚ andar, Macau Tel: (853) 2882 8711 Fax: (853) 2882 8722 Website: www.mif.com.mo E-mail: info@mif.com.mo
30 th September – 2nd October
Date: Event:
International Association of Gaming Advisors Gaming Conference
Venue: Vegas, NV, US Organiser: IAGA Address: 1930 Village Center Circle, #3, Box 501, Las Vegas, Nevada 89134 Tel: (1) 702 355.4512 Fax: (1) 702 543.6159 Website: www.theiaga.org E-mail: iaga@cox.net
SEPTEMBER 2011
Venue:
23rd - 27th
International Association of Gaming Regulators Conference
Cape Town International Convention Centre, South Africa, Organiser: IAGR Address: State Gaming Control Board, 555 East Washington Avenue, Las Vegas, NV 89101 Fax: (1) 702 486 2045 Website: www.iagr.org E-mail: ghutto@gcb.nv.gov
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November Date: Event: Venue:
rd
3 -5
th
4th China (Zhongshan) International Games & Amusement Fair
Complex Hall of Zhongshan Expo Center, Zhongshan, China Organiser: China Zhongshan Municipal Government/ Guangzhou Grandeur Address: 2nd Floor, No.318 Chebei Road, Guangzhou, 510660, China Tel: (86) 20 2210 6418 Fax: (86) 20 82579220 Website: www.zsgaf.com E-mail: info1@grandeurhk.com Date: Event:
9 th - 10 th
Asian Casino and Gaming Congress
Venue: Marina Bay Sands, Singapore Organiser: Beacon Events Address: 20/F Siu On Ctr, 188 Lockhart Rd, Wanchai, Hong Kong Tel: (852) 2531 6107 Fax: (852) 2586 1999 Website: www.beaconevents.com E-mail: cs@BeaconEvents.com Date: Event: Venue:
9 th - 11th
SAGSE – South American Gaming Suppliers Expo & Congress
Centro Costa Salguiero, Av. Costanera and J. Salguero Organiser: Monografie S. A. Address: Av. Alvear 1883 Loc. 21, (C1129AAA) Cdad. Aut. de Buenos Aires, Argentina. Tel: (54) 11 4805 4623 Fax: (54) 11 48054791 Website: www.monografie.com E-mail: info@monografie.com
Date: Event:
11th
Asian Sports and Welfare Lottery Summit
Venue: Marina Bay Sands, Singapore Organiser: Beacon Events Address: 20/F Siu On Ctr, 188 Lockhart Rd, Wanchai, Hong Kong Tel: (852) 2531 6107 Fax: (852) 2586 1999 Website: www.beaconevents.com E-mail: cs@BeaconEvents.com Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:
14th - 16th
2nd Annual Integrated Resorts
Resorts World Sentosa, Singapore marcus evans CP21, Suite 2101, Level 21, Central Plaza, 34, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia (603) 2723 6736 (603) 2723 6699 www.integratedresorts-lse.com estherw@marcusevanskl.com
Date: Event:
29 th - 30 th
Venue: Organiser: Address: Tel: Fax: Website: E-mail:
TBC American Conference Institute 45 West 25th Street, 11th Floor, New York, NY 10010 (1) 212 352-3220 (1) 212 352-3231 www.americanconference.com info@americanconference.com
C5 International Gaming Law Summit - US
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
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Environment
Green guide A new government fund subsidising environmentally friendly equipment for business lacks a proper certification system to steer purchases BY SARA FARR
t is big, bold and meant to make Macau a little greener. The newly created MOP200-million Environmental Protection and Energy Conservation Fund is open for business. The fund’s first financial support plan is to subsidise the acquisition of green technology, products and plant by local companies and associations. They can apply for grants of up to 80 percent of the total to a maximum of MOP500,000. Beneficiaries can only receive financial support once a year. Expenses related to construction, installation or additional refurbishment works are not covered by the fund.
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The fund will first focus on reducing air pollution, including emissions by vehicles and exhaust fumes created by the hospitality industry. According to the Environmental Protection Bureau, atmospheric pollution is regarded as the main environmental issue. Most complaints received by the government are related to the emission of smoke and bad smells from restaurants and bars, as well as gas emissions from workshops and factories. So kitchen fume extractors with electrostatic filters will be one of the appliances the government will help
fund. These can reduce gas emissions by up to 90 percent, according to the Environmental Protection Bureau.
Help required With the financial support plan set to start receiving applications on September 12, it is still unclear which items are eligible for subsidies. The fund’s role is made more confused by a lack of guidelines telling consumers which products are considered environmentally friendly, or providing a structure outlining how an assessment should be conducted. As early as last March, several associations called for the government to
111 set up a centre to provide tests and certification on environmentally friendly or energy-saving products. The body would be also in charge of setting up guidelines for the sector. It was expected that the government would publish a set of rules before the financial support plan was launched. That only adds more question marks against the criteria to be used by the fund managers to approve grants. As the Macau government works to become more transparent, environmentalists want clarity on the fund’s rules. In a written response to Macau Business, the Environmental Protection Bureau rebuffed such worries. The body said there are already several international certification systems in place; if the government was to set extra rules, the applications could become more restrictive. The Environmental Protection Bureau added that the eco-evaluation of each subsidy request would be based on the information provided by applicants. Macau’s environmentalists agree that the fund should cover a wide
With the financial support plan set to start receiving applications this month, it is still unclear which items are eligible for subsidies. The fund’s role is made more confused by a lack of guidelines telling consumers which products are considered environmentally friendly
variety of products, including products to reduce air pollutants. In addition, they argue energy-saving home appliances like boilers, heaters, airconditioning systems and refrigerators should also also subsidised by the fund. In Australia and Hong Kong, for example, home appliances come with a label indicating their level of energy consumption. Ho Wai Tin from the Macao Ecological Society says it would be difficult for the government to devise one in the short term. The Environmental Protection Bureau says it is already working on it. Teething problems aside, the fund has been warmly received. Mr Ho says it will help promote energy-saving products. Environmentalist Adelino Airosa agrees but hopes this is the first step of many more to come. He says smalland medium-sized enterprises will still have to spend their own money when it comes to installation, modification and maintenance. “In the current scenario, I see SMEs having other priorities,” Mr Airosa says.
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JOSÉ I. DUARTE ECONOMIST, MACAU BUSINESS SENIOR ANALYST - jid@macaubusiness.com
Verdant dream
ANY USEFUL DEBATE ABOUT THE STATE OF OUR ENVIRONMENT DRIFTS TO PURE ARGUMENT WITHOUT ACCURATE DATA he debate surrounding the environment and, by extension, quality of life in Macau is often a difficult one. Most people agree the environment should be protected and that quality of life should be preserved. Alas, that is also often the extent of the agreement. Get into the specifics and consensus breaks down. The arguments tend to fall into somewhat extreme positions. Either one is for the environment, a “real green”, truly concerned by Mother Nature’s degradation; or pro-development, meaning that economic concerns – money – trumps everything. The middle path becomes untenable within the bounds of courteous and reasoned argument. Nonetheless, this is a worthy, meaningful debate and it is regrettable that it is not the subject of more considered discourse. Any reasonable and useful discussion or policy must be supported by reliable data. That is, evidence, figures and indicators about whose accuracy we all can be fairly confident, regardless of our opinions. Last issue, in a different section of this magazine, I raised some concerns about the quality and reliability of some of the environmental data publicly available for Macau. Allow me to return to that issue. Regardless of any changes on a technical level, one should expect that a solid set of data tracking environmental matters was available. That does not seem to be the case.
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Frequently incomplete
Since 1998, the government has had a legal obligation to issue an annual report on the state of the environment. Apparently, that report has not been a top priority. The reports for 2007, 2008 and 2009 were made available online only a couple of months ago. Moreover, the 2008 and 2009 reports were aggregated into a single document. That the reports are not published annually reduces their usefulness for developing policy and suggests their substance is not taken seriously. The importance the government places on environmental matters might also be inferred from the way meaningful indicators such as acid rain and the city’s green space are monitored. Acid rain is likely to have an undeniable impact on the city’s buildings, infrastructure and green cover. What does the
Regardless of any changes on a technical level, one should expect that a solid set of data tracking environmental matters was available. That does not seem to be the case SEPTEMBER 2011
published data tell us about this indicator? It is a pity that the published statistics list only the outlying values by the year and month – or months. The intensity and frequency of strongly acidic rainfall cannot be gauged with precision. The way the data is published also prevents any useful comparison between geographical areas or over time. It gets worse. Until 2004, Macau had two stations measuring acidity; one in Taipa, the other in Coloane. The Taipa station failed first. The footnote to the published statistics tells us that data “were not available due to malfunction of equipment”. The second station malfunctioned in May 2006. For the remainder of that year, there was no data available at all. Only in 2007 did the Taipa station become operational again. No further reference has been made to the measurement station in Coloane – it has disappeared from the statistics. And this is an indicator of environmental health that any secondary school lab should be able to measure with reasonable accuracy.
Magical growth
Data measuring the city’s total green area also appears to have integrity issues. Two public bodies, the Civic and Municipal Affairs Bureau and the Cartography and Cadastre Bureau, used to share the responsibility for collecting data. Despite their joint efforts, in 2005 there was no estimate of the total size of the territory’s parkland. There is a blank in the data series, as figures for that year were “not available due to construction works in progress”. In 2006, compared to 2004 – construction works notwithstanding – a slight fall in green cover was recorded. In 2008, the city’s green area increased by about 920,000 square meters under what could only have been new data collection criteria. That area is roughly equivalent to about 130 professional-sized soccer fields. The Cotai reclamation provided a minor contribution towards the reported increase – less than four soccer fields. But nothing compares to the jump in green area between 2009 and last year when the Civic and Municipal Affairs Bureau alone took responsibility for monitoring this indicator of our environment’s health. Green cover rose by – not “to”, I must emphasise – about 657 soccer fields. To break down that surprising result, there were the equivalent of about 210 soccer fields of new green cover on the Macau peninsula, 274 fields in Taipa, 36 soccer fields in Coloane and the equivalent of 137 full-size soccer fields of new green cover in Cotai. These are figures that defy any rational argument. Did the department use a new baseline or criteria? Inevitably, there are reservations about the reliability and usefulness of this data. Wouldn’t a formal explanation be appropriate? Until a plausible alternative is put forward, Macau’s residents may be forgiven if they understand the territory’s real environmental policy to be summed up by two ideas: support objectives that are broad and uncontroversial, and the less that is known (or done) about specific issues, the better.
Technology
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Defences down
Information technology security breaches are common in Macau but little is being done to secure digital data wo out of every three companies and public sector agencies in Macau claim at least one technology-related security incident per year, according to the latest data available. That alarming statistic includes infection by viruses and malicious software, unauthorised access by hackers, system failures and data corruption. The Macau Information Security Survey 2011 says organisations in Macau seem reluctant to upgrade their information technology practices. The survey doesn’t mention the dollar cost to companies of information technology security breaches. Digital security hit the headlines last month when the Hong Kong Stock Exchange fought a high-profile battle against hackers for the control of its website. It was the latest in a number of cyber attacks targeting corporate websites such as PayPal and MasterCard or government institutions, including the United States’ Central Intelligence Agency. An attack of an equivalent magnitude on a Macau institution could have a far greater impact. The Macau security survey claims about 42 percent of the organisations surveyed had no procedures in place to manage a digital security breach. Even so, both the government and the private sector organisations surveyed rated their information security practices as satisfactory.
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For the better The bright spot in this year’s report is that there has been an improvement in the past 12 months. More than 90 percent of organisations in the survey used firewalls, anti-virus software, passwords and personal accounts to restrict access to information and to protect
LEADING FROM THE CENTRE
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he government is centralising the management of its information systems to improve data security. Last November it established a central data management centre which is currently being used by 14 bureaus. This year, the centre will certify its information security management system. It will also introduce a disaster recovery platform, according to the Public Administration and Civil Service Bureau. The bureau says each public agency had previously enforced its own policy on digital security. It translated into a “lack of effective control” and a “passive approach”, something the new centre wants to change.
communications. Less common is the encryption of computerto-computer calls made using Voice Over Internet Protocol, or the use of biometric technologies to limit access to systems. There is clearly a long way to go. For instance, 11 percent of the governmental organisations in the survey did not have a documented information security policy and none of the private sector companies surveyed had fully implemented such a measure. Small organisational size and relatively limited use of IT were cited as major reasons for the gap in policy. The low priority afforded to digital security translates into low levels of expenditure. The majority of the private sector and government organisations in this year’s survey allocate less than 10 percent of their IT budget to security. The Macau Information Security Survey was conducted in March and involved more than 70 organisations, ranging from governmental departments to small and medium enterprises. The research was coordinated by the Macau New Technologies Incubator Centre, with assistance from the Public Administration and Civil Service Bureau, the Information Systems Audit and Control Association - Macau Chapter and the Macau Computer Emergency Response Team Coordination Centre. SEPTEMBER 2011
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Lifestyle
White-collar curse Irritability and anxiety are commonplace among employees returning to work after a break in the sunshine BY JOANA FREITAS
ne minute it is coconut-water days on a paradisiacal beach abroad. The next, you are back in the office, battling through accumulated paperwork and grabbing a quick bite from a lunchbox. Sound familiar? For many white-collar workers in Macau, August is the favourite month for a summer break. But as September means business as usual again, many are affected by waves of post-holiday stress. Irritability, anxiety, sleeplessness and fatigue are some of the symptoms. According to several psychologists, post-holiday stress is transitory and should not be mistaken for depression. After a couple of weeks the symptoms should disappear, without the need for professional counselling. One of the big drawbacks of postholiday stress, however, is the loss of the benefit derived from the rest and relaxation afforded by vacations. Zenon Udani, an expert in human resources management at the University of Macau, says post-holiday stress can emerge for a number of reasons. “In most cases, what causes people to feel unease or stressed with the idea of going back to work is the fact there are difficult people like bosses, subordinates, peers or clients whom they have to deal with,” he says. Add to this the work that piles up while one is on holiday. This can include hundreds of unread emails and dozens of documents to deal with.
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Inner demons Robert Taormina, a specialist in organisational socialisation and managerial psychology at the University of Macau, explains that stress can be caused by internal or external factors. In the case of post-holiday stress, external factors are usually to blame. “There are two ways to view vacations as a precursor to the stress felt SEPTEMBER 2011
when returning to work,” he says. There is the conventional idea that after a period of mental relaxation associated with vacations, one does not wish to re-assume the mental burdens associated with work. And then there is the idea that changes in routine that can occur during holidays, such as exceptional amounts of physical activity or travelling to a different time zone, can alter one’s biorhythms drastically. Post-holiday stress is nothing new and is a worldwide problem. According to a 2010 study by Britain’s Institute of Leadership and Management, four out of 10 managers felt more anxious when returning to work than before they went on vacation. Overflowing inboxes were an important factor, the research concluded. Mr Udani says some individuals may be more susceptible than others to post-holiday stress.
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HAPPY TO BE BACK?
One of the big drawbacks of postholiday stress, however, is the loss of the benefit derived from the rest and relaxation afforded by vacations
“DON’T THINK ABOUT WORK ON VACATION”
John Galati Chief executive of Jet Asia Ltd.
“After a two-week vacation away from Macau, I’m looking forward to getting back into my daily routine,” says John Galati, the boss of private jet operator Jet Asia. Having worked in Macau for more than 10 years, Mr Galati says he has never suffered from post-holiday stress. He believes the main reason for post-holiday stress is job dissatisfaction. Mr Galati’s secret is to plan his holidays well in advance, booking all tickets and accommodation in good time, to avoid last-minute surprises. Then he can enjoy the break fully and “not think about work when on vacation”. Mr Galati never stays in Macau when he gets a break. He uses time off to visit friends or family abroad.
“WORK NEVER STOPS”
Benjamin Fox
General manager of Off-Site Connections Macau
Benjamin Fox admits he suffers from post-holiday stress. “The work never stops, even in slow seasons,” says the general manager of event organiser Off-Site Connections, who has lived in Macau for almost two years. Mr Fox says post-holiday stress may be due to the lack of a proper “cool-off” period between a break and returning to work. “It’s a hard transition to make,” he says. So one of his habits is to return to Macau a couple of days before starting work again “to get used to life back at home”. Organisational structure can also help counter post-holiday stress, Mr Fox says. In his company, the workload is shared by a number of executives, meaning that it is business as usual even if one is away.
“RESUMING WORK IS ALWAYS EXCITING”
Guy Lesquoy
Senior manager for entertainment at the Venetian Macao
Guy Lesquoy has lived in Macau for more than 30 years, and says starting work again after vacations is rarely stressful for him. “I work in entertainment. Resuming work is normally always exciting, so no real post-holiday stress for me,” says the man in charge of the street performances at the Venetian Macao. Even so, vacations are a “very pleasant change from professional commitments”, he says. Mr Lesquoy admits to having one post-holiday problem: exhaustion and jet lag after the 22-hour journey to Macau from Corsica, his mother’s home and usual holiday destination. But the similarities between Macau and Corsica help him cope. “Corsica island is also like Macau: a closed territory where people have the same dependence on the sea.” SEPTEMBER 2011
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Lifestyle
“Stress can also be a result of a person’s temperament and bad habits. A pessimist does not need an external force to throw him into a state of stress. And a person who hardly gets sleep is prone to a lot of stress,” he says. Post-holiday stress is not necessarily correlated with certain occupations or industries, Mr Taormina says. Other things such as a company’s structure, relationships with colleagues and what kind of boss one has should also be factored-in, he says. Rik D’Amato, a researcher on personality and performance assessment at the University of Macau, says: “When people are on vacation they get a glimpse of what it will be like to be retired. They get into a retired pattern of living and that makes coming back to work a stressful change agent.”
Post-break breaks Mr D’Amato suggests that one way to avoid post-holiday stress is to have some tasks that you enjoy doing on hand when returning to work. Of course, he adds, it is important that you are satisfied with your job in general.
SEPTEMBER 2011
He says switching off the holiday state-of-mind a day or two in advance and preparing to go back to work by having a proper rest can help avert postholiday stress. As people opt increasingly for exotic or extreme vacations, this transition period becomes more important to allow for a softer landing in the workplace. When back at work, it is also important to continue to include some free time in your schedule, be it for exercise, reading or other leisure activities. Such moments help put emails, phone calls and paperwork out of your mind and so keep stress levels under control. Steps to counter post-holiday stress should be taken even before going on vacation, experts advise. If you have work to finish before going on a break, do not wait until the 11th hour, but keep your last day at work stress-free. Plan ahead for your absence. Do not scribble handover notes at the last minute but start giving colleagues clear instructions a week or two before you leave. Smart email management systems can help counter post-holiday stress.
First, do not forget to set up your automatic “out of the office” reply and to tell your main contacts that you will be away. This will reduce the number of messages you will be sent in your absence. By using priority tags, you can set up an automatic email filing system so that non-urgent messages go into a separate folder to be checked later on. In some systems, alerts can be created for certain contacts, such as your best customer or your boss, whose emails you cannot afford to miss. Most important, make sure your inbox limits are generous enough to prevent it from filling up completely. Worse than tons of unread emails is missing critical messages because your inbox is jam-packed. If you have to check emails while on holiday do so only once or twice a day and switch off your computer or smartphone in between. When back at work, do the first things first. Do only the really important tasks during your first few days. Also, having meetings with contacts may be a better way of bringing yourself up to date than trawling through their emails.
117 GUSTAVO CAVALIERE HOSPITALITY INDUSTRY EXPERT - gustavo.cavaliere@gmail.com
Let’s be unreasonable REASONABLE PEOPLE ONLY SURVIVE CIRCUMSTANCES; THOSE WHO ARE UNREASONABLE POSSESS THE TOOLS TO SHAPE THEM
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ost of us live and work in an environment that we believe is in need of change. However, very few of us really help transformations happen. If you listen carefully to your own conversations and those of others, you can hear that a lot of time people talk about their lives and the need for changes as if they were talking about a movie or football match. It is like they do not possess any kind of control over the outcome. This has reflections in the corporate world. Often I ask people in organisations how long they spend in meetings and how the results of such meetings are assessed. This is while those same people complain that they do not have enough time to perform their tasks properly. The simple answer for this problem would be to have fewer but more productive meetings. However, this solution easily finds opponents in organisations, all with a long list of why so many meetings are needed and why they cannot be more productive. Eventually this leads to resignation across the company. Ultimately, people accept the status quo and carry on with the same old routine, without big expectations that things will ever change.
Go for goal
This situation is likely to be familiar to you. In the corporate world, a big chunk of office time is spent in meetings. Add exchanging email and phone conversations (which can also be considered kinds of meetings) and probably meetings take up more than half of your working time. Note that meetings in themselves are never a problem. Actually, they can be eye-opening, extraordinary, even life-changing. Unfortunately, on average, they are lengthy, unproductive or unsatisfactory. This is largely because many meetings get stuck, owing to lack of commitment to settling differences. To boost a meeting’s productivity, people should be prepared to commit themselves to achieving a final goal. They
should prepare their interventions with that goal in mind. More importantly, people should not just sit there, only reacting to what others say. They should become players, trying to present out-of-the-box options for getting things done. Co-founder of the London School of Economics and Nobel Prize winner George Bernard Shaw once said: “Reasonable people adapt to the circumstances. Unreasonable people adapt circumstances to suit themselves. All progress, therefore, depends on unreasonable people.” This highlights the dilemma we face when considering how to make fundamental changes in our lives, working environment or business culture. If we expect something to change, we need to be unreasonable and change it by ourselves. Specifically, we need to make unreasonable commitments.
Don’t be a fool
Commitment is the difference between living in a context of responsibility, in which people negotiate to move forward ultimately, and living in a context in which people just endure whatever circumstances they find themselves in, with no clear target in mind. If we confine ourselves only to what we think is reasonable and practicable, we are limiting ourselves, by definition, to more of the same, to living adrift. Note, however, that being unreasonable is not the same as being unrealistic. To be unreasonable means acting in a manner that is inconsistent with conventional wisdom and common sense. It does not mean being a fool. In history, any significant change in civilization began with someone who saw a possibility where others at the time saw only an impossibility. If nobody had challenged the status quo, we would still be in the Stone Age. The answers that allow us to achieve extraordinary results seldom lie in what we already know. The key is in what is beyond our present mental framework. If we look at reality from a different perspective, our vision will inevitably become wider. Eventually, that will expand our potential for further growth and development. SEPTEMBER 2011
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Arts & Culture
Weber’s “Der Freischütz” brings the International Music Festival to a spectacular close he Macau Cultural Centre is set to stage one of the milestone works in the history of opera, Carl Maria von Weber’s “Der Freischütz”, in a production specially commissioned by the Macao International Music Festival. The show runs for three nights and will bring this year’s festival – and the silver jubilee of the city’s biggest annual music event – to a close. Maestro Lü Jia conducts the Macao Orchestra, and an international cast sings in this unforgettable piece of musical theatre, joined by the Lithuanian National Opera and Ballet Theatre Chorus. “Der Freischütz”, which translates
as the free-shooter or more often simply translated as the marksman, holds a unique place in the repertory of German opera houses and every great German and Austrian singer has appeared in its principal roles. The resounding success of the 1821 premiere of “Der Freischütz” practically guaranteed its status as a manifesto for German Romantic opera, one that would become a significant formative influence on Richard Wagner. By 1830, “Der Freischütz”, with its libretto by Johann Friedrich Kind, had been translated into and presented in Czech, Polish, Russian, Hungarian, French, Dutch, Danish, Swedish and English. However, its runaway success
DER FREISCHÜTZ
OPERA IN THREE ACTS BY CARL MARIA VON WEBER WHEN: WHERE:
Nov. 2, 4, 5 at 8pm Grand Auditorium, Macau Cultural Centre HOW LONG: About 2 hours and 30 minutes, including one interval LANGUAGE: German, with subtitles in Chinese, Portuguese and English TICKETS: From MOP100 to MOP400
MAGIC BUL TRULY GERMAN Carl Maria von Weber (1786-1826) sought a truly German expression of opera. His “Der Freischütz” is the first opera to successfully define a new German Romanticism. The later composer, Richard Wagner (1813-1883), recognised the work as “the most German of all operas”. Weber’s later “Euryanthe” and “Oberon” further helped to define the basis of the Romantic opera in Germany. Upon Weber’s death from tuberculosis in London, German Romanticism remained semi-dormant until the rise of Wagner. Wagner held Weber in such high regard that it was he and the German composer Giacomo Meyerbeer (1791-1864) that moved Weber’s remains from London to Dresden in 1844.
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in Germany was not necessarily reproduced abroad. That was partly because at that time foreign producers had no qualms about seriously modifying – or mangling – an opera. “Der Freischütz” is based on an old German tradition that seven unerring bullets may be obtained by selling one’s soul to the Demon Hunter. Redemption can be achieved only by providing another victim within the appointed term. It has always been a popular favourite in Germanic countries.
The story of a forest gamekeeper who makes a deal with the dark side to win a shooting contest and the hand of his beloved, “Der Freischütz” broke new ground with its potent mixture of supernatural elements, dreams, folk melodies, evocations of nature and symphonic tone painting. The overture, extensively incorporating melodies from the opera itself, was a new operatic practice established by Weber. The famously eerie “Wolf’s Glen” provides some powerful ensembles.
LETS
“FAME” TIMES FIVE Owing to overwhelming demand, the organisers of the Macao International Music Festival have thrown in an extra performance for “Fame – The Musical”. Besides the four presentations originally scheduled, there will be a performance on October 8 at 3pm, also at the Macau Cultural Centre. Tickets are already on sale. “Fame – The Musical” is the opening show of the festival. It is coproduced by the festival and Barkley Kalpak Associates Inc, the creative team that brought Macau “Chicago” and “Guys and Dolls” in seasons past.
MUSICAL CROSSROADS It promises to be one of the most exotic musical journeys ever offered by the Macao International Music Festival. Portuguese early music consorts Ensemble Vocal Introitus and Sete Lágrimas join hands for a unique concert entitled “Donde tengo el amor: The sacred and the profane in Mediterranean traditions”. The vocal ensemble Introitus was formed 10 years ago by vocalists from various backgrounds. The group set out to interpret musical pieces ranging from Gregorian chant to works from the 21st century, with a special emphasis on music from the 12th to 16th centuries and works by Portuguese writers. Under the artistic direction of Filipe Faria and Sergio Péixoto, Sete Lágrimas is one of Europe’s most innovative consorts. Specialising in ancient and contemporary music, the group seeks a dialogue between the ancient and the contemporary and explores the blurred frontier between art music and popular traditions. The concert is presented as a visit to a crossroads in Europe’s musical history, featuring choral pieces that give insight into the vast musical panorama of the Mediterranean region. All ticket revenue from this concert will be donated to Orbis for their new medical project in Nepal, adding a humanitarian side to the International Music Festival.
DONDE TENGO EL AMOR: THE SACRED AND THE PROFANE IN MEDITERRANEAN TRADITIONS
WHO:
Ensemble Vocal Introitus and Sete Lágrimas (Portugal) WHEN: Oct. 13 at 8pm WHERE: Grand Auditorium, Macau Cultural Centre HOW LONG: About 1 hour and 35 minutes TICKETS: From MOP100 to MOP200 HOW LONG: Approximately 1 hour and 35 minutes TICKETS: From MOP100 to MOP200
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FIERY DELIGHTS PREPARE FOR A CHORUS OF ‘OOHS’ AND ‘AAHS’ AS THIS YEAR’S INTERNATIONAL FIREWORKS DISPLAY CONTEST BRINGS IN HEAVY ARTILLERY TO LIGHT UP THE SKIES SEPTEMBER 2011
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Entertainment
he Macau International Fireworks Display Contest is ready to blast off. The competition for the top spot will be as fierce as ever, with this year’s edition featuring several past winners. The contest includes pyrotechnic companies from Canada, South Korea, Japan, Britain, Austria, Taiwan, The Philippines, Portugal, France and the mainland. “We believe that the teams will present breathtaking fireworks displays that will thrill spectators,” says João Manuel Costa Antunes, the director of the Macau Government Tourist Office, the competition’s organiser. Japan’s Tamaya Kitahara Fireworks Co. Ltd., a four-time champion, is a leading contender for this year’s trophy. The company has won back-to-back contests, largely because of its unique technique for making shells that are perfectly spherical. “We are definitely aiming to grab the first place for the third year in a row,” says Josh Kabasawa of the company’s international marketing department. He adds the Japanese team has new tricks up its sleeve to show the Macau audience. Mr Kabasawa says this year’s competition is special for Tamaya Kitahara Fireworks, in view of the earthquake and tsunami that ruined parts of Japan in March and the subsequent radiation leak. “We take this competition as an opportunity to encourage our own people in Japan, and to show the world Japan is active.”
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The mainland’s Panda Fireworks Group Co. Ltd., which won second prize in its debut performance last year, is also among this year’s favourites for the top spot. The company staged the fireworks display to mark the 10th anniversary of the Macau SAR and took part in the fireworks extravaganza at the Beijing Olympics in 2008.
Seven wonders This year’s Panda Fireworks show will have the theme “Marvellous Macau”, says the company’s creative director, Meng Xuegeng. The show will be divided into five sections: “The Lotus”, “The Tower”, “The Sailing”, “The River” and “The Dream”. “We want to present Macau’s character and passion through our special fireworks design,” says Mr Meng. “At the beginning of the show, the word ‘Macau’ will appear as two huge Chinese characters. In each section, there will be fireworks pictures that will correspond with the section’s title.” Platinum Fireworks Inc., which gained third place last year for the Philippines, will revisit Macau to vie for glory again. “We expect the competition to be very tight this year, with the presence of previous champions,” says the company’s president, Joel Sta Ana. “But we believe we can surpass our last year’s showing, considering that we can now see ourselves as more experienced, and we are already very familiar with what the jury wants.”
Platinum Fireworks (Philippines) SEPTEMBER 2011
FOR YOUR DIARY
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Saturday, September 10 9pm Sirius Pyrotechnics (Canada) 10pm Woori Fireworks (South Korea) Monday, September 12 9pm Tamaya Kitahara Fireworks (Japan) 10pm MLE Pyrotechnics (Britain) Saturday, September 17 9pm Fireevent Die Feuerwerker (Austria) 10pm San Tai Fireworks (Taiwan) Saturday, September 24 9pm Platinum Fireworks (Philippines) 10pm Pirotecnia Lanhelas (Portugal) Saturday, October 1 9pm Brezac Artifices (France) 10pm Panda Fireworks (China)
Woori Fireworks (South Korea)
HIGH PRAISE T
he Macau International Fireworks Display Contest is among the best in the world – and that is the verdict of the teams that compete in it. Josh Kabasawa of defending champions Tamaya Kitahara Fireworks Co. Ltd. of Japan describes the event as “Asia’s biggest fireworks competition”, bringing together “the best pyrotechnic companies from all over the world”. “I honestly believe that it belongs to the top five fireworks competitions all over the world,” says Joel Sta Ana, president of Platinum Fireworks Inc. of the Philippines. “With its 23rd running, I may consider it as one of the most prestigious and most sought-after by fireworks companies.” The contest “is one of the most famous fireworks competitions in the world,” says Meng Xuegeng, creative director of China’s Panda Fireworks Group Co. Ltd. “It has a long history and has a great influence on the international fireworks field.” Mr Meng says the competition is technically demanding. “The platform of this fireworks contest is only a ship, so to have an 18-minute excellent performance in a very limited space is a big challenge for all the participants. It needs to be done with great creativity, cautious installation and very good products.” Kelly Guille from Sirius Pyrotechnics of Canada agrees. “Every time a display is produced on barges or fl oating platforms, there seems to be another challenge that arises,” she says.
Panda Fireworks (China) SEPTEMBER 2011
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The Philippine team promises to boost its special effects this year. “The audience should expect a lot from our show,” says Mr Sta Ana. Other teams are no pushovers. Brezac Artifices from France has won the contest twice in three attempts. “Our aim in each participation is winning but we are also testing new shows in competition for the French market,” says designer Dominique Brezac. The company’s show will have a new theme that will be rolled out more widely next year, based on the “Seven Wonders of the Modern World”: Chichen Itza in Mexico, Christ the Redeemer in Brazil, the Coliseum in Italy, the Great Wall of China, Machu Picchu in Peru, Petra in Jordan and the Taj Mahal in India. Another past champion competing again this year is San Tai Fireworks Industrial Co. Ltd. from Taiwan, which has won once in five attempts. Pirotecnia Lanhelas Lda of Portugal has previously won second prize. Sirius Pyrotechnics of Canada is the only newcomer this year. It performed during the opening and closing ceremonies
of the 2010 Winter Olympics in Canada last year, and specialises in big pyrotechnic productions. “Sirius wants to deliver an experience rather than simply a visual presentation,” says company representative Kelly Guille. “Our intention is to evoke emotion.” As for Fireevent Die Feuerwerker, the Austrian team promises a show that “will be like champagne to the eyes,” according to team member Manuela Rzehak. “The usage of high quality Austrian products, the best you can find, unique colours and the absolute harmony between the firework effects and the music effects will make this show an extraordinary example of the finest pyrotechnic art.”
Music plays on The International Fireworks Display Contest has grown over the years into an internationally acclaimed event and a major tourist attraction. It began in 1989, as a way to celebrate Macau’s firecracker industry (see report), with just five teams participating. By 1995, it had 10 entrants, with two teams showing their
BLAST FROM THE PAST M
aking firecrackers used to be one of three main crafts in Macau, along with making joss sticks and matches. To celebrate this cultural inheritance, in 1989 the city inaugurated the annual Macau International Fireworks Display Contest. The craft of making firecrackers arrived in the city late in the 18th century. When the industry was at its peak, Macau was among the biggest exporters of firecrackers in Asia, supplying countries such as the United States and Australia. The city had several factories and the industry employed thousands. Firecracker manufacturing was far from safe. Explosions or fires in workshops were frequent and often fatal. The industry began to fade after World War II, as workers were drawn to better-paid and safer work in textiles and toy factories, and as the mainland established itself as a firecracker-manufacturing behemoth. The industry fizzled out in Macau in the 1990s with the closure of the Po Sing Firecracker Factory. Today, some old factories still stand as reminders of the old days. One is the Kwong Hing Tai workshop by the Inner Harbour and another is the Iec Long factory in Taipa.
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The best spots to watch from are the waterfront of the Macau Tower Outdoor Plaza, the Macau Tower Street waterfront area, and the square in front of the Kun Iam statue on Dr Sun Yat Sen Avenue
expertise each night. Since its inception, more than 100 teams from around the world have taken part. This year’s contest, the 23rd edition of the event, will run from September 10 until October 1. As usual, the competition will take place on the waterfront by Macau Tower. Each show will last for approximately 18 minutes, with two displays per evening, at 9pm and 10pm. All entrants are asked to complement their displays with music. The best spots to watch from are the waterfront of the Macau Tower Outdoor Plaza, the Macau Tower Street waterfront area, and the square in front of the Kun Iam statue on Dr Sun Yat Sen Avenue. Sound systems will be installed to relay the music synchronised with the fireworks. Spectators can also listen to the musical accompaniment on Radio Macau on FM100.7. The organisers have introduced parallel attractions for the public, the photography contest being one of the most popular. The tourist office and the General Union of Neighbours Associations of Macau will once again jointly present a fireworks carnival.
Tamaya Kitahara Fireworks (Japan) SEPTEMBER 2011
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Entertainment
MACAU TOASTS FRANCE The French community in Macau and friends got together in mid-July to commemorate the French National Day, traditionally celebrated on July 14 in France. The ConsulGeneral of France in Hong Kong and Macau, Alliance Française de Macau and the France Macau Business Association joined hands to organize a cocktail reception followed by a dinner and a dance party with French DJ Mango at Sofitel Macau at Ponte 16. Macau Business was one of the partners of the event. Mehdi Kerchouni, Annie Ip Sin Io, John Galati, Alfred Ng and José Braz Gomes
José Pereira Coutinho, Echo Chan Keng Hong, Ung Vai Meng and Paul Pun Chi Meng
Florinda Chan and Arnaud Barthelemy
Jean-Christophe Marten Perolin and Ivy Cheong
Sam Lei, Wong Pan Seng, Leong Siu Pui and Lao Ngai Leong
Jill Rigg and Guillaume Le Reverend
Jocelyne Tran and Emilie Tran
Rita Santos and Daniel Fung Sio Weng
Jean Alberti, Irene Sam and Kelvin Kong
Petra Leong, Bernard Peres and Susana Fong
Kiran Lei and Annie L.M. Chan
Eric Sautedé, David Rouault and Melody Wang
Jona Chiu and Mei Ling Fung
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WANTED: BEAN COUNTERS
MISSING THE BUS Guess what: the first day of the revamped public bus system was a complete mess. Around one-fifth of the buses were late, there were 12 bus-related accidents, and the electronic payment card system was not working properly. Things have meanwhile improved, but are still a far cry away from what was promised by officials. Frozen Spy hates to play along with the pessimists, but what was the government thinking would happen? When you start a very ambitious public bus service short of drivers, problems are bound to occur. Moreover, when you increase the number of public buses on the road without taking proper measures to ensure they can circulate, traffic will get stuck during rush hours. Frozen Spy has a piece of advice for Macau’s officials: next time, stick to SimCity.
KINGDOM OF THE BLIND You do not get tickets in Macau for bad or dangerous driving, only for illegal parking – and even then, only sometimes. This sequence of photos was taken in Areia Preta. The first shows a police officer diligently ticketing illegally parked motorcycles. Wait a minute, look around. Nearby, machinery from a garage is illegally occupying a public parking space. You guessed it: the infringement went unpunished. Also nearby, a shop uses a trolley to hog another public parking space. Did the police officer do anything? You are right again: nothing. Frozen Spy wonders why this is. Are Macau’s traffic police such specialists now that they have guys to attend exclusively to motorcycles? Only that could explain why officers like the one in the photos turn a blind eye to other transgressions, which are a greater public nuisance.
Last month it was announced that the Public Administration and Civil Service Bureau will be reorganised, with its staff doubled over four years and more divisions added. Frozen Spy is amazed. Macau is most probably the only place in the developed world where the modernisation of public administration means more employees and bureaucracy. Funnily enough, the government does not have a clue how much the overhaul will cost. Maybe the Public Administration and Civil Service Bureau really is short of staff – staff to budget its expansion plan.
DODGY FOUNDATIONS As the grants given out by the Macau Foundation during the second quarter of the year were announced, it was pounded by a recurrent wave of criticism. Again, there was a demand for its processes to be made more open. The Macau Foundation is a corporate public body autonomous in administration. It is known chiefly for the grants it gives to support local associations and other bodies. The Macau University of Science and Technology has always been among the main recipients of support. That has generated a lot of criticism, because several of the decisionmakers at the Macau Foundation have had or currently have close ties with the institution. The president of the foundation, Wu Zhiliang, admitted a long time ago that the reasons for the grants need to be better explained to the public. Still, nothing has changed. Frozen Spy wonders who profits from the present state of affairs.
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September 2011
index
7 Luck Casino
BC
www.7luck.com
Aristocrat
Page 101
www.aristocratgaming.com
Aruze Gaming
Page 99
www.aruzegaming.com
Aspect Gaming
Page 91
www.aspectgaming.com
Bally Technologies
Page 103
www.ballytech.com
BNU
Page 17
www.bnu.com.mo
CEM
Page 25
www.cem-macau.com
Galaxy Entertainment Group
Pages 15 & IBC
www.galaxyentertainment.com
Icon Communications
Page 85
www.icon-communications.com
Jumbo Technology
Page 89
www.jumbogames.com.tw
Konami
Page 95
www.konamigaming.com
Macau Post Office
Page 116
www.macaupost.gov.mo
Macau TrailHiker
Page 105
www.macau-trailhiker.com
MGM Macau
Page 03
www.mgmmacau.com
MGTO
Page IFC
www.macautourism.gov.mo
Morton’s The Steakhouse
Page 70
www.mortons.com
Our Dental Clinic
Page 40
www.ooioc.com
PokerStars Macau
Page 05
www.pokerstarsmacau.com
Sands China
Page 19 & 44-47
www.sandschinaltd.com
Shuffle Master
Page 97
www.shufflemaster.com
SJM
Page 111
www.sjmholdings.com
Zung Fu Motors – Mercedes
Page 01
www.zungfu.com.mo
SEPTEMBER 2011