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Macau MOP 35
Hong Kong HK$ 40
Mainland China RMB 35
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58 From the heart Lord Stow’s Bakery has grown from a small bakery into a company with an international presence 60 Breakfast club Business Network International opens its fi rst local group
Gaming 62 Billions race Gross gaming revenue up by 35 percent in January 64 History in the making Mass market baccarat outperforms VIP segment growth 67 The money spinners Wynn Macau again the casino generating the most money 68 Stock watch Macau gaming stocks start the year on a positive note 72 A partnership crumbles Steve Wynn and once-close business partner Kazuo Okada engage in a legal battle 75 Very important promoters Surge in the number of junkets prompts analysts to call for tighter rules 78 Game on Mocha Clubs opens its 10th club 80 Strong bet Bally celebrates 80th anniversary with an eye on Asia 81 Wishing on a star High-end Portuguese restaurant is SJM’s latest non-gaming offer 82 On the hop Playboy Club has a new house
Economy & Finance 24 Growth tapers Monetary authority says economy will grow below 10 percent in the fi rst half of 2012 26 Playing with fi re Feng shui experts at CLSA predict a potential upside for investors in the Year of the Dragon 28 Land of the free Macau again among the freest economies in the world but there is room to improve 31 Old upstart Wing Lung Bank wants to boost its market share of cross-border fi nancial services
Politics 36 To a standstill Taking ages to pass bills into law is becoming a habit in the Legislative Assembly
Legal Affairs 42 See you in court Arbitration and mediation are far from being widely considered the alternative to going to court
Property 46 Market watch Positive discrimination for locals not needed in real estate, industry players say
Business 53 Future fund Cord blood bank Cryolife opens its fi rst Macau branch 56 Love of money Valentine’s Day can work as a revenue booster but not for all businesses
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Gaming 84 Tax-free gaming Korea’s foreigner-only casinos enjoy two-year tax reprieve 86 One step closer Taiwan President Ma Ying-jeou’s re-election paves the way for casino law 88 Sparkling vintage Pagcor set all-time revenue high last year
Hospitality 90 The more the merrier Despite strong growth, experts rule out the need for restrictions on tourist arrivals 94 Accepting a challenge Four Seasons’ general manager is not afraid of Macau’s tight labour market
Meetings & Conventions 99 Uphill struggle After a bad year, the MICE industry looks for better times ahead
Environment 102 Money isn’t everything Government investment in protecting the environment has increased but the results are slim
Marketing 106 Brand morality tale A look into Dolce & Gabanna’s recent marketing crisis in Hong Kong
Human resources 110 Burning the midnight oil Long working hours are nothing new for Macau workers
Arts & Culture 114 Water world Multimedia theatre piece “The Blue Planet” on stage at the Cultural Centre
Opinion 10 From the publisher’s desk Paulo A. Azevedo 13 Editorial Emanuel Graça 27 What can Macau learn from the fi nancial woes of Europe and the U.S.? Ricardo Siu Chi Sen 40 A question of control Bill Kwok-ping Chou 51 Why capital fl ows uphill Keyu Jin 89 The perils of 2012 Joseph E. Stiglitz 97 Throwing sparks Gustavo Cavaliere 105 Green credibility gap José I. Duarte 109 Global fi nance’s supply-chain revolution Andrew Sheng 113 For a few dollars more Keith Morrison 118 Islamic fi nance unbound Mahmoud Mohieldin
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Democracy: no subtitles neededLET ME SEE IF I CAN TRANSLATE THE INTRICATE political rhetoric that some local community leaders like to use.
“Macau society is not ready for democ-racy”. “A democratic system in Macau would serve only to preserve the status quo”. “To this day, we have yet to experience totally clean direct elections”.
These three phrases were used by public fi gures of recognised merit during last month’s public consultation sessions on form-ing the Legislative Assembly and choosing a chief executive.
The trio of comments serve to justify why the pale attempts to democratise the political system have dragged on indefi nitely. They are also used as a justifi cation to raise the number of seats in our lacklustre Leg-islative Assembly to 33, an increase of only four seats, shared equally by directly elected legislators and those chosen by associations.
Let me try to grasp the logic. In 1789, the French were ready for democracy, thus shattering the foundations of France and the whole of Europe. The continent slowly fol-lowed in its footsteps but, 200 years later, the people of Macau are not ready for it?
They argue that changes to the system – that basically guarantees most of the perks from Macau’s development are directed to those who are best positioned and hold the most infl uence – will only further ensure the current state of affairs.
Does that mean not changing the system actually changes the system? In other words, in order to get a reaction, we must make sure there is no action? Fantastic.
And what can be said about the cliché “we have yet to experience totally clean direct elections”?
Where is the transparency in the absence
of an election? Are leaders able to make a completely clean decision behind closed doors, without its rationale being explained to the people?
I believe we are all watching the same movie. No subtitles are required. The unjusti-fi able is being justifi ed.
People now holding infl uential positions seem ready to forget what it is they promised to protect years ago. Equality, fraternity and a raft of other principles have seemingly be-come outdated because it is more benefi cial to some to not change the system.
Devil in the detailEven so, it was quite pleasant to open the newspaper and read that the chief executive was prepared to increase the number of pub-lic consultation sessions to discuss electoral system reform. That came after critics com-plained that just one of the eight sessions was actually open to the man in the street.
Mr Fernando Chui Sai On’s admission is justifi able, especially in the aftermath of the criticism from the only public consultation open to all.
By the way, no more sessions were added.
No one expects Macau to stand up and demand what Hong Kong has achieved and Macau has yet to attempt: to follow a path that will one day lead to the direct election of the chief executive.
But a single session for all the population and seven sessions reserved for associations... Why bother with words? Macau’s political system is representative at best.
The vast majority of opinions, in all sessions, were near unanimous in declaring that it is acceptable to increase the number of seats in the Legislative Assembly from 29
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Where is the transparency in the absence of an election? Are leaders able to make a completely clean decision behind closed doors, without its rationale being explained to the people?
to 33, two directly elected and two indirectly elected. Curiously, that was also the preferred arithmetic of the government.
The way the views came to-gether, it seemed as if it was decided beforehand. All in the name of stabil-ity, harmony and so on.
According to legislator José Pereira Coutinho, the change favours the continuation of the “web of interests and traffi c of infl uences that illegitimately benefi ts some sectors”. This is an outburst from someone who still tries to believe it is possible to change the status quo, the same status quo others say it is only pos-sible to alter if it remains the same.
Talk about devilish logic.Among all the debate surround-
ing the effort to change or to main-tain the situation, I prefer to believe there is an important forgotten ques-tion: how do we select the legislators delivered from the indirect elections? It is a question scholar Jorge Godinho has also asked.
Many of the associations eligible to vote have a dubious existence. Although there are four constituen-cies in the indirect elections, the results are negotiated on the sidelines only taking into account corporate interests, and ending in the unusual situation where all four constituen-cies always present a single list of candidates each, that of course, wins election.
The process drains the Legisla-tive Assembly of its legitimacy. To say otherwise is morally dishonest.
Business as usualTHERE ARE SOME GOVERNMENT bureaus that work and others that simply cruise along. The Transport Bureau is inconse-quential. The Labour Affairs Bureau, a joke. The Infra-structure Development Offi ce urgently needs auditing.
Following a series of budget revisions in other projects, the latest revision for the cost of the new University of Macau campus on Hengqin Island is the proof – as if we needed it – that something serious is happening within the Infrastructure De-velopment Offi ce. Negligence, incompetence or something worse?
Legislator Chan Meng Kam was right to speak out against the budget increase for a project that is half completed and has already seen its costs jump by 50 percent to MOP9.8 billion (US$1.2 billion).
According to the Portu-guese-language press, while justifying the increase, the Infrastructure Development Offi ce’s head Chan Hon Kit said the construction site includes more than 80 buildings, plus the energy and water supply net-work, telecommunication lines and police stations.
What does that mean? Had no one thought about water and electricity supply, about the po-lice and Internet wiring before the budget was announced?
What kind of a reply is this?Additionally, according to
the head of the Infrastructure Development Offi ce, the maxi-mum depth of the tunnel linking Macau to the campus has been doubled. The explanation was bigger boats had to cruise the channel separating Macau from Hengqin Island.
Again, why was this over-looked? It shows a lack of prepa-ration to evaluate projects and a willingness to blindly sign on the dotted line of any given contract.
The over-budgeting fever that multiplies initial costs is nothing new. During the Por-tuguese administration, some companies became experts in submitting projects with the low-est price, thus winning the public tenders, only to rapidly increase costs – and profi ts – once they had won. It all happened with the consent – to say it politely – of many interested parties.
After the handover, the exam-ples continue and are not investi-gated because, apparently, these kinds of debacles involve interests that are disseminated through all society. In the few instances when an inquiry is ordered, as with the 80-percent budget increase of the Macau Dome project, responsibil-ity dies alone.
And so life goes on in Macau, where everybody lives happily, while turning a blind eye. Business as usual.
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Editorial CouncilPaulo A. Azevedo, Albano Martins, Duncan Davidson
VOL.1 Nº94
Founder and PublisherPaulo A. [email protected]
Editor-in-ChiefEmanuel Graç[email protected]
Assistant Editor-in-ChiefSara [email protected]
Executive Director Business DevelopmentLuis [email protected]
Senior AnalystJosé I. [email protected]
Hong Kong BureauMichael Hoare (Chief), Anil [email protected]
Special CorrespondentMuhammad [email protected]
Beijing CorrespondentMaria João [email protected]
Manila CorrespondentMax V. de [email protected]
Assistant to the PublisherLaurentina da [email protected]
Art DirectorsConnie Chong, Luis [email protected]
PhotographyAntónio Mil-Homens, Carmo Correia, Greg Mansfi eld, Gonçalo Lobo Pinheiro,John Si, MSP Agency, Agencies
IllustrationG. Fox, Rui Rasquinho
Contributing EditorsAlexandra Lages, Christina Yang Ting Yan, Derek Proctor (Bangkok), Filipa Queiroz, Helder Beja, Joana Freitas, João Francisco Pinto, José Carlos Matias, Kahon Chan, Kim Lyon, Lia Carvalho, Lois Iwase, Luciana Leitão, Ray Chan, Sara Silva Moreira, Sofi a Jesus, Steven Chan, Tiago Azevedo
Regular Contributors Bill Kwok-Ping Chou, Branko Milanovic, David Cheung, David Green, Dominique Moisi, Eswar Prasad, Frank J. Fahrenkopf Jr., Gustavo Cavaliere, Hideaki Kaneda, José António Ocampo, José Sales Marques, Joseph Stiglitz, Leanda Lee, Keith Morrison, Kenneth Rogoff, Kenneth Tsang, Marvin Goodfriend, Pan Yue, Paulo J. Zak, Peter Singer, Richard Whitfi eld, Rodrigo de Rato, Robert J. Shiller, Sin-ming Shaw, Sudhir Kalé, Sun Shuyun, Vishakha N. Desai, Wenran Jiang
AdvertisingXu Yu, [email protected]
Advertising AgentsBina [email protected]é [email protected]
Media Relations
GRIFFIN Consultoria de Media Limitada
TranslationsPROMPT Editorial Services, Poema Language Services Ltd,TLS Translation and Language Services
AgenciesAFP, Lusa
ExclusivesGambling Compliance, Project Syndicate
Printed in Macau by Welfare LtdPublished every month in Macau. All Rights Reserved. Macau Business magazine is a media product of De Ficção - Multimedia Projects
Disclaimer: In Macau Business magazine, the translation of MOP amounts into US$ amounts (and vice-versa) is made at the rate of MOP 8to US$1 for the purposes of illustration only.
Letters to the [email protected]
Address: Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, No. 679 Av. do Dr. Francisco Vieira Machado, Macau Tel: (853) 2833 1258 / 2870 5909 Fax: (853) 2833 1487 Email: [email protected]
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Phoney reform
Emanuel GraçaEditor-in-Chief
Only someone unfamiliar with Macau’s political scene will wonder why reform of the electoral system creates such timid outcomes. The reason is simple. Most of those in power are determined to block any substantial move
bly elections, which prevents deeper discussion from taking place.
There is more. At last month’s political con-sultation, the government only asked if the meth-ods to form the Legislative Assembly in 2013 and select the chief executive in 2014 should be revised, and if so, how. The questions deliberately didn’t provide room for a longer-term plan to set a step-by-step roadmap towards greater democracy.
Additionally, of the eight public consultation sessions held last month, just one was open to the general public. Conveniently, it was the last one.
Surprisingly or not, the time allotted to discussion was too brief to allow too many people to voice their opinion. At the consultation, each person was only allowed to talk for three min-utes, less than in any other session. Talk about democracy.
Lets not be naïve. Macau is not Hong Kong’s equivalent, politically. And unlike in our neigh-bouring SAR, our Basic Law does not include pro-visions that make universal suffrage the ultimate aim. Add Beijing’s infl uence over politics here and it would be disingenuous to expect any sudden, eye-catching move towards full democracy.
Even so, under the current state of affairs, there is room to increase democratic freedoms by boosting transparency in the political decision-making process.
While the latter is no substitute for the former, transparency is a fi rst step to improve the level of political engagement at all levels of so-ciety. That will eventually lead to a call for more participation in politics.
I can understand that the complexity of forc-es at play when discussing democracy makes dar-ing changes to the electoral system much harder. It does not mean that changes are not needed.
But the same argument is invalid when holding up reforms to make the shady process of granting land for development more transparent. Or to justify why the meetings of the Legislative Assembly’s working committees – the stage at which most of the changes to proposed legislation are negotiated – take place behind closed doors.
Most peculiar of all is that most of the people arguing that Macau’s population is not mature enough for universal suffrage are the gatekeep-ers, controlling public scrutiny of the decision-making process.
They oppose change.Why?
THE PAST MONTH WAS MARKED BY THE PUBLIC consultation on Macau’s electoral system reform, the fi rst step in a process that will most likely culminate in the introduction of minor changes to the way Macau’s leader and legisla-tors are selected.
This month, the second stage takes place, with chief executive Fernando Chui Sai On submitting a pre-proposal on the matter to the Standing Committee of the National People’s Congress.
While there are more steps to be fulfi lled, the fi nal outcome of the process is already clear: an increase in the number of directly and indirectly elected legislators by two seats each, and an increase to the number of people in the committee that chooses the chief executive to either 400 or 450, up from the current 300.
These changes refl ect little real change in the political system.
Perhaps, the most interesting thing in all this is to see what modifi cations will be intro-duced in the current four functional constituen-cies that choose the city’s indirectly elected legislators. Will there be the creation of new constituencies? Or will the extra two seats be distributed among the existing ones?
Details aside, only someone unfamiliar with Macau’s political scene will wonder why reform of the electoral system creates such timid outcomes. The reason is simple. Most of those in power are determined to block any sub-stantial move. And the best way to do so is to pretend they are open to change, while actually monopolising the debate to control its outcome.
That is obvious in the way the current process to reform Macau’s electoral system has been handled so far.
Mr Chui’s announcement last November that the government would conduct a public consultation on this matter took the city by sur-prise. Just a couple of months earlier, the sec-retary for administration and justice Florinda Chan had discarded such a possibility, saying that there was no consensus on the matter.
That handful of months makes a difference.
Crowd controlThese reforms are a lengthy process, made of several stages, some directly involving Beijing authorities. Now, we are rushing to get things done in time for next year’s Legislative Assem-
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Write a letter to the editorTo submit a letter to the editor e-mail [email protected] 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 confi rmation purposes. Letters should be 200 words or fewer and all are subject to editing.
Traumatising experienceA friend and I were leaving the Venetian Macao a couple of weeks ago at around 4am and we tried to get a taxi back home.
As there was a huge line of available taxis at Venetian’s back exit and nobody waiting, we walked up to the fi rst one and tried to open the door. The driver was on the phone and although he could see us, he ignored us.
We went to the second taxi in line, who also didn’t let us inside and pointed to the fi rst taxi. We said he had refused to take us, but this made no difference.
None of the drivers asked us where we were going, their usual reason to refuse a client. I believe their refusal was because we were foreigners, a case of prejudice.
We then saw a group of Chinese walking to the taxi stand. The fi rst driver went to pick them up even though he had blatantly ignored us a minute before.
We decided to take a photo of the second taxi’s license plate to report him, although we knew from previous experience that this is harder than you would think and probably makes no difference whatsoever.
As I walked to the back of the taxi to take the photo, the driver started revving his engine. He then drove around in a crazy way, fast and out of control, stopping with his taxi facing us and revving the engine angrily, threatening to run us over. Finally he got out and started shouting profanities at us in Chinese and English.
We decided to get out of there as soon as pos-sible. Other taxi drivers watching the whole incident also ignored us.
As we were about to exit on foot, the last taxi in line offered to take us. Inside and feeling a bit traumatised by the whole event, we noticed the crazy taxi driver driving alongside of us. I’m not sure if he was following us, but this was even more unsettling. Finally he drove away.
Relieved, we couldn’t believe what we had just experienced. Taxi drivers in Macau are really taking things to the next level. There is no control by their management or the government as to how they be-have. I hope somebody will do something about it.
Rachel Jones
Careless driving goes unpunishedI couldn’t agree more with what Paulo A. Azevedo said about road safety in Macau in the January edition of Macau Business.
I’ve had experience living and driving in London, Vancouver, Hong Kong and Macau. The way people behave on the roads here is the worst.
One has to be brave to drive in Macau. It is pure luck that we don’t see many more traffi c accidents given the way drivers conduct themselves.
There are numerous misbehaviours on the road each day. For example, “Stop” signs don’t mean anything to the majority of drivers.
There is neither respect for the right of way nor for pedestrians’ rights. Drivers may honk you signalling their impatience that you are blocking their way on zebra crossings.
Many drivers change lanes at will, across solid dividing lines, or even double solid dividing lines, with no regard to the danger this may create. Worse still, many do so without signalling.
There is insuffi cient consideration for other road users. Double parking is commonplace creating bottlenecks on busy roads at peak hours.
Speeding is another problem. Many people drive as if they were driving a Formula 1.
Motor scooter drivers are the worst offenders on many accounts. They park wherever they want, even when it means blocking the way for others. They “squeeze” themselves through traffi c ignoring their own safety and that of others. Tiny toddlers are transported on the back of scooters tied to the drivers with nylon belts. Although it is forbidden for children below the age of six to ride as passengers on motorcycles there is no, I repeat no, enforcement of this rule.
I can go on and on. I believe insuffi cient or even lack of, enforcement of the traffi c code may be a major contributor to the many problems we see on the road.
Offi cials looking after traffi c matters could do well to take the lead to guide the general public on. Stricter enforcement to bring in the necessary re-spect for rules on the road and more proactive public education campaigns will drive home the message.
Chris Ma
The De Ficção – Multimedia Projects company, publisher of Macau Business, its Chinese-language sister magazine
Business Intelligence, macaubusiness.comand the very soon to be launch
Business Daily newspaper, is now part of Project Asia Corporation, which also
includes Global Asia Media, the joint-venture that publishes
luxury publication Essential Macau; Goldfi sh creative agency;
MBSK Events, which organises the biggest annual local charity
golf tournament; and Signature Events, a premium events company.
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The Macau government is expected to submit a pre-proposal this month for the reform of Macau’s electoral system, to the Standing Committee of the National People’s Congress. This follows a string of eight public consultation sessions held last month on the issue, with just one open to all interested parties.
Analysts say it is likely that chief executive Fernando Chui Sai On will propose to increase the number of both directly and indirectly elected legislators by two seats each. Indirectly elected members of the Legislative Assembly represent different sectors of society and are elected by that sector’s associations.
Currently, the Legislative Assembly consists of 29 members, 12 from direct elections, 10 from indirect elections, and seven members nominated by the chief executive.
It is also likely that Mr Chui will propose increasing the number of members of the electoral committee for the chief executive to 400 people from 300.
Macau’s political reform is set to be centre-stage in 2012. Beijing has already said it would welcome proposals to see a change in the way the chief executive and members of the Legislative Assembly are selected.
Macau’s next election for the Legislative Assembly takes place in 2013 while the selection of a new chief executive is scheduled for 2014.
NEW HISTORICAL UNEMPLOYMENT LOWThe unemployment rate for the fourth quarter of last year was 2.1 percent, down by 0.2 percentage points over the previous period (September-November 2011). This is the lowest unemployment rate ever registered in Macau, according to the records available from the Statistics and Census Service, which go back until 1996. Of the 7,400 unemployed, around 12.4 percent were fresh entrants to the job market looking for their fi rst job, down by 2.9 percent over the previous period.
ENERGY CONSUMPTION TO INCREASEPower demand is expected to continue to increase this year. Electricity utility CEM says it estimates the total consumption will increase by around 8 percent. Last year, power consumption was up by 5 percent over 2010, and has surged by 127 percent over the last 10 years. To meet the increasing demand for power supply, CEM says it has strengthened infrastructure development. Meanwhile, the price of electricity for businesses increased last month by MOP0.01 per kWh. This, however, will only affect those under the tariff groups B, C and D. Customers in tariff group A, which are all households and low voltage business consumers, will see their tariffs unchanged.
CONSUMERS MORE CONFIDENTPeople are more confi dent in the local economy, the latest Macau Consumer Confi dence Index shows. The overall index for the last quarter of 2011 improved 5.2 percent quarter-to-quarter to 86.9 points. The sub-index for economic confi dence remained the highest among the six sub-sets of indicators, reaching 113.5 points, up by 7.6 percent over the third quarter of 2011. The biggest jump in confi dence took place in regards to infl ation, with a hike of 12.3 percent. Even so, this sub-index remained at 57.7 points. The Macau Consumer Confi dence Index is released quarterly by the University of Science and Technology. Its peak is 200, with 100 being neutral. A total of 1,107 people were surveyed for the latest edition.
BABY STEPSGovernment political reform proposal likely to not bring big changes, analysts say
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MACAU AND INDIA INK TAX DEALIndia has become the latest partner to sign an agreement with Macau that will assist both governments in preventing offshore tax avoidance and evasion. A delegation from India last month signed a tax information exchange agreement with Macau secretary for economy and fi nance, Francis Tam Pak Yuen. This is the 14th such agreement that Macau has inked with other countries or regions. The agreement provides a legal basis for Macau and India to exchange taxpayer information.
SHUN TAK
ALERT ON LABOUR RIGHTSThe infl uential Federation of Trade Unions is worried about labour rights protection in Macau. The federation’s two labour rights centres dealt with over 1,400 cases last year. The majority were about holiday compensation and unfair dismissal. The federation is now petitioning the government to improve the existing procedures for dealing with unpaid salaries, namely by making processes faster and more streamlined. The federation’s representatives say the issue is particularly serious in the construction industry.
JETSTAR TO STOP FLYING TO MACAULow cost airline Jetstar will stop connecting Macau to Singapore starting February 6, after the number of passengers on this route dropped 13.8 percent last year, to less than 80,000. The Civil Aviation Authority confi rmed the news to Jornal Tribuna de Macau. Jetstar is a subsidiary of Australian giant Qantas.
Shun Tak Holdings Ltd. announced last month it plans to raise up to HK$1.95 billion (US$251 million) in a rights offering.The ferry operator and property developer is offering three new rights shares for every eight ordinary shares currently held.The rights shares will be priced at HK$2.02 apiece.
Shun Tak said it will raise a minimum of HK$1.65 billion and a maximum of HK$1.95 billion through the offering.
A stock exchange announcement said the proceeds will go towards “general working capital purposes and for fi nancing new investment opportunities.”
The shares will begin trading ex-rights from February 6 and the newly issued rights shares start trading on March 7.
Underwriters for the rights offering include a company called Megaprosper Investments Ltd., which is fully-owned by three of Stanley Ho Hung Sun’s daughters from his second wife: Pansy Ho Chiu King (Shun Tak’s managing director), Daisy Ho Chiu Fung and Maisy Ho Chiu Ha.
As an underwriter for a portion of the deal, Megaprosper will collect a commission of between HK$6.4 million and HK$9.5 million.
TO RAISE UP TO HK$1.95 BILLIONCompany plans to raise funds through rights offering
Pansy Ho Chiu King, managing director
of Shun Tak
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CAR FAIR GENERATES HK$11 MILLION IN SALESThousands of visitors and buyers went to the Venetian Macao for this year’s Auto Fair from January 5 to 8, where over 200 second-hand cars were on display. As many 66 cars were sold, generating HK$11 million (US$1.4 million) in sales. According to organizers, 10 local automobile companies participated in the four-day event and the total number of visitors went up by 5 percent to 5,400.
NAM KWONG BUYS PUBLIC BUS OPERATORNam Kwong (Group) Co., announced last month the acquisition of public bus operator TCM. The value of the deal, closed last year, was not disclosed, Macau Post reported. Local businessman Ng Fok previously headed TCM. The company posted a MOP29 million (US$3.6 million) profi t in 2010, similar to the amount reported in the previous year. Nam Kwong (Group) Co., Ltd. is a state-owned company with varied business interests in the city. Its predecessor, founded in 1949, was the fi rst Chinese-funded institution in Macau, according to Nam Kwong’s webpage.
TAXI FARES TO GO UPThe government is in talks with taxi drivers to allow for a fare increase. Mid-last year, some local taxi associations requested the government to approve a fl ag fall increase of up to MOP2 (US$0.25) to MOP15. They also requested several changes in the overall fare system, which would push up the prices for longer journeys. However, the government seems to be only willing to approve a fl ag fall increase and by less than 10 percent, the head of the Transport Bureau, Wong Wan, told reporters last month. The new taxi fares are expected to be introduced by the middle of the year. The last time taxi fares were increased was in 2008.
DRAGON BILLS RUSH Government had to double the number of the new MOP10 Year of the Dragon notes due to unexpected high demand
The government last month had to double the number of the new MOP10 (US$1.25) Year of the Dragon commemorative notes to 40 million units.
The move came after hundreds of people had been gathering outside branches of BNU and Bank of China across the city waiting for the notes. The fl ood of clients affected the normal services of both banks, the only two note-issuing institutions in Macau, for several days.
Meanwhile, there were news reports of a “black market” where the Year of the Dragon bills could be worth several times their face value.
The bills are considered auspicious by Chinese people and are the fi rst of a series to be issued yearly until 2023, ahead of the Lunar New Year and dedicated to each animal of the Chinese Zodiac.
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DECEMBER 2011
FOREX RESERVES SOARMacau’s foreign exchange reserves amounted to MOP272.4 billion (US$34.1 billion) by the end of December, according to preliminary estimates from the monetary authority. When compared with a year earlier, the reserves increased by MOP82.2 billion or 43.2 percent.
FEWER PASSENGERS AT AIRPORTThere were 33,800 less passengers choosing to use the Macau International Airport last year, 0.83 percent less than in 2010. The overall number of passengers handled at the airport was 4.05 million. While the number was only slightly down last year, offi cial fi gures released last month by the airport show that this number has been dropping signifi cantly since 2007, when around 5.5 million passengers were recorded. However, compared to the same months in 2010, the monthly passenger numbers have been increasing since June.
MANUFACTURERS LESS OPTIMISTICOnly 24 percent of Macau’s manufacturers in the third quarter of last year were optimistic about the territory’s exports in the coming six months, an offi cial survey released by the Economic Services Bureau shows. The fi gure is 13.1 percentage points below the previous quarter. Less than one percent of the exporters expected exports to post a strong increase in the coming six months. Some 31 percent of the interviewed manufacturers deemed that exports would slow down in the coming six months.
SOMEBODY CALL THE POLICEThe number of crimes reported in Macau went up last year.
The head of the Judiciary Police, Wong Sio Chak blames the economic boom and the increase in visitors but says Macau is still a safe place
7.2%The annual increase in the number
of criminal cases handled by the Judiciary Police last year.
Overall, the force handled 10,600 cases in 2011
4The number of homicide cases that
took place in Macau last year. This is double that reported in 2010
but one less than in the 2009
2,064The number of theft cases reported
to the Judiciary Police last year, up by more than one third
year-on-year. The force also handled 163 robbery cases, 11 more
than in 2010
22.5%The yearly increase in the number
of crime cases that occurred inside casinos. The Judiciary Police
handled over 2,000 such cases. There were also increases
in criminality related to gambling, like unlawful detention (20 cases, four more than in 2010) and loan
sharking (175 cases)
18The number of drug mules caught
at the airport in 2011, two more than the year before. The number of overall drug-traffi cking crimes
dropped by 6 percent to 96 cases. There were also 102 cases of drug
abuse, 30 fewer than in 2010
124The number of online and computer
fraud cases last year. This marks a sharp increase over 2010, when
only 18 cases were reported. The number of phone frauds was
also up, to 84 cases from 68 in 2010
23
FEBRUARY 2012
23
FEBRUARY 2012
23232323232323Sponsored Feature
The ‘Mandarin Oriental’ brand is a worldwide reference for unparalleled quality in the hospitality industry, yet inherently linked to its exotic oriental roots. In Macau,
there is no difference.Surrounded by luxury retail and with spectacular views
over the city, Mandarin Oriental, Macau welcomes guests into a world of warmth and charm, says Kurt Wachtveitl, special adviser to Mandarin Oriental Hotel Group.
The only high-end hotel on the peninsula without a casino on its premises, Mandarin Oriental, Macau’s success derives from its elegance and comfort. “We have a product that is very modern. We have modern facilities and beautiful rooms,” Mr Wachtveitl says.
Suiting the tastes and needs of both business people on work-related visits and discerning tourists, the hotel offers rooms for meetings and conferences coupled with top food and beverage options, plus a luxurious spa.
“We are very unique in Macau because everywhere else there are casinos and masses of people. In here, when you enter, you have personalised service,” Mr Wachtveitl highlights. He ensures that once guests stay for the first time at Mandarin Oriental, Macau staff will diligently record all their preferences to better serve them on future visits.
A sense of placeLike the Mandarin Oriental brand, Mr Wachtveitl is himself a legend in the hospitality world. He stayed a staggering 41 years as general manager of Mandarin Oriental, Bangkok, considered one of the best hotels in Asia.
Mr Wachtveitl now acts as brand ambassador at Mandarin Oriental events worldwide. He also assists in the recruitment and development of talented employees, as well as offering advice on spa, restaurant and development opportunities for the Group.
Mandarin Oriental plans each property based on a different
Legendary hospitalityMandarin Oriental, Macau strives to delight guests with its own distinct personality and passionate service
concept inspired by the characteristics of the host city, Mr Wachtveitl says. “We always want to instil a sense of place. We really look at the characteristics of each city or culture we’re going into.”
The concept ensures Mandarin Oriental hotels their uniqueness. “That’s how we get the famous people, the models, the people from the entertainment world. This is a hotel for a niche market,” he says.
The group carefully selects its human resources, providing them with the finest training available. “In the end, it is the front-line staff, the employees, the butler you have in your suite, the man who pushes the button in the elevator, that count,” Mr Wachtveitl says.
Mandarin Oriental, Macau | Avenida Dr Sun Yat Sen, NAPE, Macau Reservations and enquiries: +853 8805 8822 | [email protected]
Kurt Wachtveitl
The Monetary Authority of Macau says real gross do-mestic product will grow “at a high-single-digit rate” in the fi rst six months of this year, a substantial decline
from last year.Macau posted an estimated growth of about 20.0 percent
last year, the body says in its latest “Monetary and Financial Stability Review”, released last month.
GDP grew by 21.8 percent year-on-year in real terms across the fi rst three quarters of 2011, a decrease from the 27.1-percent growth rate registered in 2010, according to offi -cial data. The Statistics and Census Service will only disclose the fi nal numbers for 2011 next month.
The forecast from Macau’s de facto central bank is be-low estimates from Dagong Global Credit Rating Co. Ltd., the mainland’s rating agency. In December, it forecast a growth rate for Macau of 16 percent for the whole of 2012. The Econo-mist Intelligence Unit estimated 12-percent growth for 2012 in its November forecast.
The government does not issue a precise forecast for the expansion of the local economy.
The monetary authority says casino gross gaming reve-nue will experience “softer growth” in the fi rst half, a victim of the slowdown in Asian economies. The consensus among gaming analysts is that the gaming sector will grow by be-
Growth tapers
tween 15 and 20 percent. Gaming revenue grew 42.2 percent last year.
Homemade demandDomestic demand should provide some impetus for economic growth, the monetary authority’s report says. Investment will keep expanding, fuelled by public-sector projects that include the government’s ambitious public housing construction pro-gramme, the light rail transit system, Hengqin Island devel-opment and work on the Zhuhai-Hong Kong-Macau Bridge. Private sector investments will fl ow from ongoing tourism-related construction in Cotai.
Favourable job prospects, higher household income and an infl ux of workers will spur domestic consumption.
The report predicts that the unemployment rate will de-crease to about 2.3 percent this year from 2.5 percent last year. “The local employment situation would continue to stay favour-able when the demand for labour in the services and construc-tion sectors is likely to remain strong,” the report says.
But the monetary authority says the labour market is “tre-mendously tight”, with the city at full employment since the fi rst quarter of 2010 and the unemployment rate below 3 percent.
“In view of the scarce supply of local human resources, the number of non-resident workers is expected to exceed
The economy is forecast to grow by less than 10 percent in the fi rst half of this year
Economy & Finance24
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: Lu
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r
100,000 in the near future,” the monetary authority says.The unemployment rate was already at 2.1 percent in the
fourth quarter of last year.
High infl ationThe report isolates infl ation as the major headache for policy-makers and consumers this year, with the consumer price index expected to rise by between 4 and 6 percent in the fi rst half.
“While global food and commodity prices, infl ation in countries exporting to Macau as well as exchange rates of the domestic currency have exhibited signs of stabilisation, sus-tained economic growth under tight supply constraints would continue to exert upward pressure on domestic costs,” the re-port says.
The Statistics and Census Service says last year’s infl ation rate stood at 5.81 percent, which was a sharp increase over the 2.81-percent rate recorded the previous year. Higher prices for meals, clothing and fuel contributed to the increase.
The property market will be heading the other way, with the monetary authority anticipating a “relatively large contrac-tion in both transaction volume and value”. That follows the “slowing signs” already in place since the mid-last year.
The slowdown is partially due to the 19,000 public housing units approaching completion. “In addition, the uncertainties
surrounding the global economy and the SAR government’s specifi c measures including the special stamp duty and lower loan-to-value ratios will continue to restrain speculative ac-tivities.”
The monetary authority says the “consolidation” in the real estate market “is expected to be benefi cial for fi nancial stability in the long run, given that real estate mortgage is a major component in the loan portfolio of the local banking sector.”
The monetary authority’s report also highlights Macau’s strong fi scal position. The government is debt free.
Based on this year’s budget documents, the monetary authority says the growing pace of public revenue will slow-down as gross gaming revenue falls. Commitments to large-scale infrastructure will conversely see public expenditure rise sharply. A surplus of at least MOP38 billion (US$4.75 billion) is expected.
The government has recorded surpluses for 12 years and a fi scal reserve fund with initial capital of about MOP100 billion was established at the start of the year.
“Such an institutional reform is expected to ensure the ad-equacy of international reserves on the one hand and further strengthen Macau’s fi scal management and discipline on the other,” the authority says.
25
26
FEBRUARY 2012
With the bunny out of the picture, a Water Dragon takes control of the Chinese zodiac this year, splashing about a potential upside for investors but
also brining the risk of having their fi ngers burnt.That is the view of the 18th CLSA Feng Shui Index re-
port, a light-hearted forecast from the Hong Kong-based independent brokerage and investment group. The report assesses the future for equities, commodities, property, ce-lebrities and the signs of the zodiac.
Playing with fi reInvestors turning to the Chinese zodiac for investment advice can expect a year of volatility
If the celestial readings are right, the Hang Seng Index will turn in a sluggish performance during the fi rst half of the year, with a tipping point in August. September should be one of the year’s best trading months, creating an upward trend that will be sustained into October and November, without a major correction before the end of the year.
The sectors deemed strongest in this Year of the Water Dragon are gaming and transport, with the report predicting a “fab year” ahead. Expect a fairly good year for the fi nancial and retail sector, and for gold.
For the rest?The colourful report paints a grim picture and predicts a
“fairly foul year” for the utilities sector, technology, telecom-munications and Internet, as well as oil and gas.
Broken down by signs of the zodiac, there is a great year ahead for most of the 12 signs but particularly so for rats, tigers, rabbits, monkeys and roosters. Pooches and moos are warned to take a little extra care.
Auspicious dates are August 13, September 26, Octo-ber 24 and 30, December 7 and January 16. The least auspi-cious are June 6 and 21, July 12, September 22, November 14 and 28.
The CLSA Feng Shui Index was launched in 1992 but paused for a break during the bull run from 2005 to 2008. It was revived in 2009.
Last year’s feng shui forecast scored two “spot-on” calls for the Hang Seng Index versus fi ve “dead wrong” predic-tions, according to the broker’s own assessment.
HOPE ON THE HORIZONHSBC is optimistic that the Year of the Dragon will have a posi-
tive tone. In its latest global economic outlook report, the bank says although there is little hope this year for global economies “some asset classes still offer decent investment opportunities”.
Countries whose economies are forecast to grow in 2012 are the United States by 2.1 percent; Japan by 2 percent; and India by 7.5 percent. There is no hope of growth for the eurozone, where the forecast is negative.
Growth in Asia will also slow but the region will keep on grow-ing and will exceed most other parts of the world. It is not all bad news, Philip Poole, global head of macro and investment strategy at HSBC says, “because these economies have been growing too rapidly, unsustainably rapidly”.
The report highlights investment opportunities in Asian equi-ties, as investors have the opportunity to enter the market at affordable levels.
And more good news: there will not be another global eco-nomic recession, Mr Poole says.
Economy & Finance
27
FEBRUARY 2012
What can Macau learn from the fi nancial woes of Europe and the U.S.?
Governments in Europe and the United States have increased their expenditure on social welfare programmes and other public services since the end of World War Two. Many
governments started paying for the added expense by issuing long-term bonds, falling into the traps of deep budget defi cits and national debt. The consequences of such policies are now obvious in the fi nancial diffi culties those countries face.
But governments cannot shirk responsibility for the social and economic problems that the free market cannot effectively solve. And looking at what has happened in Europe and United States, clearly it is much easier to increase spending on social welfare and other public services than to cut it.
What makes matters worse is the snowball effect of the universal practice of pandering to the voters, which increases expenditure year after year, and so aggravates fi nancial diffi culties. This further weakens the ability of a government to manage society and the economy, and intensifi es the volatility of the economy and fi nancial markets.
The fact that Macau is not an independent state makes comparisons of its government’s policies and fi nances with those of the U.S. and countries in Europe imprecise. But Macau’s government, enterprises and society need to draw lessons from the causes of the fi nancial diffi culties of those countries and their consequences.
On the rocksThe most important lesson is about the relationship between a government’s social and economic welfare policies and its fi nances, and how that relationship may affect social and economic development. In Europe and United States, unchecked expansion of social and economic welfare policies created bloated and rigid government expenditure.
Once a government’s ability to raise money is impaired, by a decrease in tax revenue or by borrowing more than it can afford, it may have to reduce spending on social and economic welfare, to the detriment of society and the economy.
The former Portuguese administration did not invest in social welfare. In contrast, as a result of higher gaming tax revenue since the part-liberalisation of the gaming sector after the handover, the current administration has greatly increased expenditure on welfare. This has undoubtedly helped some disadvantaged people and some old-fashioned companies that were unable to adapt to the rapid changes in the economic environment. Those subsidies now seem to have become a burden, with budgets increasing year after year.
The government’s expenditure on subsidies and wealth-sharing schemes shot up from less than MOP3 billion (US$375 million) in 2009 to nearly MOP5 billion last year. This year, they will cost a whopping MOP8.5 billion. Meanwhile, the cost of non-gaming tax exemptions and reductions is expected to amount to MOP1.5 billion this year, compared with MOP1.1 billion in 2009.
Apart from spending on social and economic welfare, the government has also boosted investment in various infrastructure
projects, throwing in annually no less than MOP10 billion.Because of big increases in gaming tax revenue every year
(gaming tax revenue exceeded MOP90 billion last year), the government still registers a comfortable budget surplus even with all its additional welfare expenditure. Therefore, there are quite a number of voices outside the government expressing the wish for a wider variety of welfare benefi ts.
Nevertheless, in good times we must prepare for the challenges ahead. This means keeping in mind some facts that Macau must inevitably face, particularly:- The increasing problem of an ageing population;- The danger of more and more people and old-fashioned small or medium enterprises becoming economically obsolete because they are uncompetitive;- The public expenditure required to integrate Macau with the Pearl River Delta region; and- The narrow tax base.
The right pathIn view of these constraints, the government should look deeply into the long-term feasibility of its current spending, so that it can prevent short-term social and economic welfare expenditure from becoming a fi scal burden in the future.
Another lesson Macau can learn from the fi nancial diffi culties of Europe and the United States is about the dangers of continuously increasing government expenditure. Many economists agree that the generous and ever more costly social and economic welfare systems seen in Europe and in the United States are one of the main reasons why individual initiative and economic competitiveness have suffered.
John Stuart Mill, the 19th century British economist and philosopher, explored this phenomenon in depth, especially the relationship between welfare policies and individual freedom, and the lack of initiative among welfare recipients.
Macau’s government should look into how to foster initiative and competitiveness, while helping the disadvantaged, and small and medium enterprises. With its abundance of revenue, the government – apart from offering various subsidies and wealth-sharing schemes – should better plan its investments and be visionary. It should also promote the development of human resources to create a business environment for small- and medium-enterprises to transform themselves, thus actually improving, rather than just embellishing, the performance and competitiveness of the business sector.
The government seems to be on the right path by establishing a fi scal reserve system. Yet how to use the system to ensure the stability of social and economic development is a skill the authorities must constantly hone.
Otherwise, unnecessary or misdirected expenditure will only exacerbate social and economic instability in the long term. Conversely, excessive accumulation of surpluses is a waste of resources.
RICARDO SIU CHI SEN ASSOCIATE PROFESSOR OF BUSINESS ECONOMICS, UNIVERSITY OF MACAU
THE FINANCIAL PROBLEMS OF EUROPE AND THE UNITED STATES PROVIDE LESSONS ON HOW TO SPEND PUBLIC FUNDS IN MACAU
THIS IS A TRANSLATION BY BENNY CHAN OF A CHINESE-LANGUAGE ARTICLE ORIGINALLY PUBLISHED IN THE JANUARY ISSUE OF BUSINESS INTELLIGENCE MAGAZINE.
28
FEBRUARY 2012
179 countries it ranks, the main aspects being the degree of supremacy of the rule of law, the amount of government in-terference, regulatory effi ciency and the openness of markets.
In the Asia-Pacifi c region, Macau is ranked 6th among 41 economies, behind Hong Kong, Singapore, Australia, New Zealand and Taiwan.
The Heritage Foundation says Macau’s score is well above the world and regional averages. The score is slightly worse than last year’s mainly because of a “decline in labour free-dom, freedom from corruption and the control of government spending”, the foundation says. The business environment is “generally effi cient and streamlined” and “foreign investors
Land of the freeMacau has again been ranked the 19th freest economy in the world but experts say there is still work to be doneBY SARA FARR
Macau is sitting comfortably among the 20 freest econ-omies in the world. In fi rst place is Hong Kong, fol-lowed by Singapore, both of which have topped the
Index of Economic Freedom for the past 18 years.A United States think-tank, the Heritage Foundation, re-
leased its latest report on economic freedom worldwide last month, ranking Macau 19th with 71.8 points, in the same posi-tion as in 2011 but with 1.3 fewer points. Macau’s economy is again classifi ed as “mostly free”.
The index ranges from zero to 100 points, with 100 denot-ing maximum economic freedom. The Heritage Foundation bases the index on 10 aspects of the economy in each of the
Economy & Finance
29
FEBRUARY 2012
RULE OF LAWProperty rights: Macau 60.0 points, world average 43.4Freedom from corruption: Macau 50.0, world average 40.4
Macau performs above average in the protection of property rights, although the enforcement of intellectual property rights here “remains weak and ineffi cient”, the Heritage Foundation says in the report accompanying its 2012 Index of Economic Freedom.
In freedom from corruption Macau sits right in the middle of the scale, with 50.0 points, slightly above the world average. A public outreach campaign has led to a “signifi cant” increase in the number of complaints handled by the Commission Against Corruption, the foundation says.
Frederico Rato, a Macau lawyer, says the Civil Code and Commercial Code are examples of “good development and consolidation of economic freedom”. However, Mr Rato says the laws should be more liberal. In particular, he says more skilled workers should be allowed in to meet the needs of the economy.
REGULATORY EFFICIENCYBusiness freedom: Macau 60.0, world average 64.7Labour freedom: Macau 55.0, world average 61.4Monetary freedom: Macau 84.2, world average 74.4
The foundation says Macau “continues to lack a dynamic and broad-based labour market, in part due to the absence of serious reform efforts”.
Academics agree and suggest improvements. Jacky So Yuk Chow, dean of the Faculty of Business Administration at the University of Macau and an expert in international fi nance and business, says some regulations need updating. Mr So says that while the government is under pressure to ensure employment opportunities are given to local residents, the quota system for imported workers may not be as good an idea as originally thought.
“In the long term there won’t be enough room for progress,” he says. He suggests that Macau learn from the United States, where there are seasonal work visas for unskilled foreign workers that are in high demand at certain times of the year. Citizens of 58 countries can qualify for this type of visa, and only 66,000 such visas are granted per year.
Local lawyer Frederico Rato says Macau’s labour arrangements are not in line with the rules of a free market. “The non-existence of legal and institutional trade unions, the right to strike and the absence of collective negotiation are negative facts that distort the free market and jeopardise the free economy,” he says.
Mr So says “this overprotection of locals’ rights will mean no economic growth for Macau in the long run.”
MEASURING UP
can conduct business on the same terms as nationals”.Some important sectors of the economy are monopolies or
oligopolies, such as gaming, aviation, electricity, water and tel-ecommunications (the market for which will be opened up only this year). But Anthony Kim, a policy analyst at the foundation, says that “what is more notable is the direction of the country’s economic policy in recent years.”
Mr Kim explains that “although the monopolistic nature still exists in some sectors, various markets of the economy have been opening up to more competition and greater effi cien-cy.” He says this has become more evident as the government tries to make the economy more diverse.
30
FEBRUARY 2012
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MEASURING UP
LIMITED GOVERNMENTFiscal freedom: Macau 75.8, world average 76.9Government spending: Macau 88.1, world average 59.8
The foundation ranks Macau well above the world average when it comes to government spending, while fi scal freedom in the city is just about average.
“Gambling [tax] revenue has outpaced public spending growth, generating considerable surpluses,” the foundation says.
Jenny Huang Bihong, a public fi nance and taxation expert at the University of Macau, says this description is fairly consistent with reality. “The key problem is: how can the Macau government manage such a large amount of surplus so that its value will not depreciate in the future?” Ms Huang says.
She says that since Macau’s economy relies heavily on the mainland, “the government is not entirely free to do what it wants.” The most important decisions “usually require the support and approval from Beijing”, she says.
Economist Albano Martins, however, says that the foundation’s calculations are wrong. The foundation says the top rate of corporate tax is 39 percent, but Mr Martins says 39 percent is the rate of tax on gross gaming revenue paid by casino operators, and that the top rate of corporate tax for other kinds of corporations is actually 12 percent.
He also contests the foundation’s fi gures for government spending. “Figures from 2010 show that government spending is equivalent to around 10 percent of total domestic product, not 19.9 percent,” Mr Martins says.
OPEN MARKETSTrade freedom: Macau 90.0, world average 74.5Investment freedom: Macau 85.0, world average 50.7Financial freedom: Macau 70.0, world average 48.6
This is where Macau outstrips the world averages. In trade freedom, the city scores 90.0 points and is number onein the world.
“The trade regime is open, with no tariffs imposed on imports. However, non-tariff barriers continue to raise the cost of trade,” says the foundation.
Anthony Kim, a policy analyst at the Heritage Foundation, says “Macau’s relatively high level of economic freedom is supported by its openness to global trade, an effi cient investment framework, monetary stability and a fairly simple tax regime.” The foundation says there is no “offi cial” discrimination between foreign and domestic investors, “but there are a few restrictions in services markets”.
Economist Albano Martins says there is, in fact, discrimination, especially against foreigners wanting to set up small or medium enterprises, who face limits.
But Mr Kim concludes that “all in all, Macau’s dynamic economic development has clearly benefi ted from a high level of openness and fl exibility owing to policies that support economic freedom”.
Economy & Finance
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FEBRUARY 2012
Wing Lung Bank Ltd’s Macau branch, open now for one year, is the most recent addition to
the city’s already crowded banking sec-tor. The bank’s general manager, Guo Zhihang, welcomes the challenge.
With slightly more than half a mil-lion people, Macau has 28 banks, giving it one of the highest ratios of banks to population in the world, all for an econo-my with a gross domestic product of less than MOP230 billion (US$28.75 bil-lion) in 2010, about one-eighth of Hong Kong’s.
“Though a micro-economy, Macau attracts new projects and new investors every year,” Mr Guo says. “Therefore, we are not here to undercut our com-
Old upstart
BY CRIS JIANG
Wing Lung Bank has celebrated its fi rst year in Macau, and is eyeing bigger slices of the cross-border fi nancial services and individual wealth management markets
petitors but to cooperate with them to expand the market.”
The bank, which opened its doors at the Finance and IT Centre building in December 2010, is part of Hong Kong’s Wing Lung Bank, one of the oldest Chi-nese banks there, founded in 1933. Wing Lung was acquired in its entirety by the Shenzhen-based China Merchants Bank in 2008.
Wing Lung has 50 banking outlets in Hong Kong, the mainland, Macau and abroad, with a staff of more than 1,500. At the end of last June its consolidated assets were worth HK$152.8 billion.
The bank is expanding with a view to becoming more competitive in cross-border fi nancial services, especially in
Hong Kong, Macau and Guangdong.Mr Guo says the Macau branch can
make full use of the customer network and business advantages the bank has in Hong Kong and the mainland. For instance, these allow it to offer special cross-border services in Macau such as renminbi bank accounts domiciled in the mainland, with customers able to take advantage of higher interest rates for fi xed deposits there. The bank pitch-es itself as catering to Macau and cross-border business, an approach Mr Guo calls “walking on two legs”.
Happy returnThis is Wing Lung’s second stint in Macau. In 1941, when the Japanese in-vaded Hong Kong, the bank moved some of its staff to Macau, and the rest to Liuzhou in Guangxi province, and continued to serve its clients. After the Japanese surrendered in 1945, the bank resumed operations in Hong Kong.
Wing Lung is building a customer base in Macau. Mr Guo says the bank is keen on increasing its contacts with the city’s chambers of commerce. He says 80 percent of the bank’s customers are corporations, mostly operating in the gaming, real estate and trading sectors.
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Guo Zhihang
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FEBRUARY 2012
Wing Lung is lender to the city’s ca-sino operators. It was one of the consor-tium that got together to lend Sands Chi-na Ltd. US$3.7 billion last September. Mr Guo says his bank’s commitment was US$100 million, its largest so far in Macau. Last June, Wing Lung contrib-uted US$45 million to a syndicated loan to Melco Crown Entertainment Ltd.
“The gaming sector is Macau’s backbone industry, with robust business potential, high demand in loans and rel-atively controllable risks,” he says. But he notes that syndicated loans to casino operators, although huge, are rare, so the bank wants to serve a greater variety of industries.
Wing Lung also wants to increase the retail banking business it does with the city’s rich. In the mainland, parent China Merchants Bank Co. Ltd. offers its premium wealth management serv-ices to customers worth RMB10 mil-lion (MOP12.7 million) or more, but in Macau Wing Lung is likely to woo less wealthy customers. “For Macau, we are looking at lowering the threshold, as there’s only a limited number of people who can meet this bottom line here,” Mr Guo says.
Temptation islandThe bank’s total number of premium customers is still low. “Wing Lung has had very little cooperation with mid- to high-end individuals in Macau. This is mainly because the bank is still very young and our system and human re-sources are yet to be improved and opti-mised,” Mr Guo says.
“As a new bank in Macau, we need more time and there’s still a long way to go. At present, corporate loans are still the core service we provide, while our
MACAU BANKS MORE PROFITABLEMacau’s banking sector witnessed an improvement in profi tability
in 2011. As of the end of November, the operating profi ts of local banks had already exceeded the profi ts for the whole year of 2010.
For the fi rst 11 months of last year, the total operating profi ts of the local banking system increased 34.8 percent year-on-year to MOP4.8 billion (US$600 million). This indicates that the local banking sector most likely posted a new 12-month profi tability record in 2011. This would only not be the case if banks ended December with sharp losses, an unlikely scenario.
The previous record was set in 2006, when operating profi ts reached MOP4.05 billion.
The total number of banks in Macau stands at 28, including 25 commercial banks, one postal savings bank and two offshore banking units.
personal services are still at a develop-ing stage, with basic services provided.”
Mr Guo admits staffi ng continues to be one of his main headaches. He says Wing Lung has been focusing on training young staff, offering employees promotion opportunities and internal social activities to enhance their sense of achievement and satisfaction. His branch has around 30 employees.
He estimates that it cost Wing Lung less than MOP40 million to set up its branch in Macau. By mid-November the bank had lent MOP1.2 billion to en-terprises in the city, the money coming mainly from deposits here or funds from its head offi ce in Hong Kong.
Mr Guo says the bank is likely to expand in Macau in the medium term. “For the convenience of individual cus-tomers, more outlets will be added in a year or two, but not many, for sure,” he says.
Hengqin Island could well get one of the new outlets, he says. A Hengqin outlet would cooperate with China Mer-chants Bank’s Zhuhai branch in lending fi nancial support to develop the island.
“If there’s demand in the develop-ment of Hengqin, given that the risks involved are controllable, the bank may prepare certain credit quota facilities in support of enterprises to develop in Hengqin,” Mr Guo says.
Economy & Finance
33
FEBRUARY 2012
33
JANUARY 2012NOVEMBER 2011OCTOBER 2011SEPTEMBER 2011
GDP current (in MOP)
Consumption (in MOP)
Investment (in MOP)
Government (in MOP)
Trade balance: goods (in MOP)
Trade balance: services (in MOP)
GDP constant (2009) (in MOP)
217,324
17,496
27,727
17,496
- 42,676
164,086
207,194
34,721
243,247
130,677
237,627
104.25
0.50
75,396
15,706
9,715
4,982
-16,672
61,664
66,750
31.4
9.8
- 13.6
9.3
21.5
54.2
26.2
30.7
15.6
20.7
15.4
46.8
43.1
21.1
Output and expenditure2010 % var Latest % var
Notes
Notes
M1 (in MOP)
M2 (in MOP)
Credit (in MOP)
Deposits (in MOP)
IPC/Infl ation rate (*)
AMCM base rate
13.4
14.6
29.2
14.6
2.81
--
14.9
19.5
35.2
19.7
6.65
--
Money and prices % var Latest % var
October
October
October
October
November
December
Q3
Q3
Q3
Q3
Q3
Q3
Q3
Notes
Notes
Notes
Notes
Population
Labour force
Median wage rate (in MOP)
Unemployment
Started
Finished
Cement (Apparent consumption)
Transactions/Commercial (in MOP)
Transaction/Residential (in MOP)
Gross revenue (in MOP)
Casinos
Tables
Machines
Visitors
Average expenditure (in MOP)
Average stay
Hotel rooms
Occupation rate
Average hotel stay
522,300
330,900
9,000
3.0 %
1,835,174
1,271,509
214,166
6,580
45,939
189,588
33
4,791
14,050
24,965,000
1,812
0.90
20,091
79.8
1.54
2,418,000
1,633
1.00
22,330
85.55
1.55
23,142
34
5,302
15,098
-1.9
0.5
4.7
-0.1
- 19.8
- 9.6
- 22.6
117.0
113.0
57.0
2
0.4
2.2
15.0
0.3
- 0.2
4.3
8.43
0.04
20.1
6.8
--
12.5
3.06
0.06
2.1
4.5
11.1
-0.5
1219.5
--
88.0
15.1
-773.0
32.6
1
10.7
14.3
Population/Labour force
Construction
Gaming
Tourism
2010
2010
2010
2010
2010
% var
% var
% var
% var
Latest
Latest
Latest
Latest
% var
% var
% var
% var
Q3
Q3
Q3
Oct, var
November
November
October
November
November
November
Q4, var, ytd
Q4, ytd
Q4, ytd
November
Q3
Q3, var
October
Oct, var
Oct, var
560,100
344,300
10,000
2.3 %
24,695
--
34,485
668
1,714
So
urce
s: D
SE
C (S
tatis
tics
and
Cen
sus
Ser
vice
), A
MC
M (M
one
tary
Aut
hori
ty o
f Mac
au),
DIC
J (G
amin
g In
spec
tion
and
Co
ord
inat
ion
Bur
eau)
Ma
jor
sect
ors
Eco
nom
ic A
ctiv
ity
%var - % change on homologous period; var - absolute variation; ytd - % change, year-to-date; x - discontinuous series
million
million
million
million
million
million
million
million
million
million
million
base - 2008
%
million
million
million
million
base - 2008
%
million
million
million
million
million
million
million
37,016
292,077
165,335
286,216
112.56
0.50
m2
m2
tons
million
million
m2
m2
tons
million
million
million million
% nights
days
%nights
(*) Important note: The infl ation base period has changed ( New base: April 2008 to March 2009 = 100)
days
Economic Trends by José I. Duarte
34
FEBRUARY 2012
Measuring wealth
Reform to open up the gambling sector has helped spur Macau’s development. Since the liberalisation of the sector in 2002, gross domestic product has almost doubled.In fact, GDP grew relatively consistently at about 11.6 percent each year between 2005 and 2010. Those numbers roughly correspond to a doubling of the size of the economy every 6.5 years.This growth has had an obvious impact on the wealth of residents but GDP is not necessarily the best measure for the job. As might be expected in an open economy – and one where foreign direct investment weighs considerably – income outfl ows represent a signifi cant share of the overall economy.A better measure is gross national income. The downside is data for GNI is often only available well after data for GDP is released. However the two indicators are also closely correlated, so the latter can be used as a more timely proxy.
The fi rst graph illustrates that there is a sizeable net outfl ow of income every year in Macau. Notice too, that both GDP and GNI have grown in lockstep.
Net outfl ows of income are relatively consistent throughout the period of this analysis, averaging about 10.5 percent of GDP annually.The outlier in the seven years of data is 2007. Ignoring this data, the average would increase by just over one percentage point.
The increase in population from the end of 2004 to 2010 had an impact on the per capita rates of economic growth and GNI.On a per-capita basis, rates of growth for both GDP and GNI average about 8 percent a year between 2005 and 2010. If that trend was sustained, the income of a typical resident would double every nine years.The growth patterns of these indicators are strongly correlated. Together they represent a signifi cant increase, overall and on average, of the region’s economy and the wealth of its residents.Of course, these fi gures, by themselves, tell us nothing about the distribution of the resident’s rising affl uence.
GRAPH 1
GRAPH 2
GRAPH 3
Economic Trends by José I. Duarte
GRAPH 1 - The relationship between GDP and GNI
GRAPH 2 - Net outfl ows of income as a percentage of GDP
GRAPH 3 - GDP and GNI, indexed and per capita growth
-50
0%
0
200
150
10%
5%
50
100
250
15%
200
180
160
140
120
100
2004 2005 2006 2007 2008 2009 2010
2004
2004
2005
2005
2006
2006
2007
2007
2008
2008
2009
2009
2010
2010
Real GDP Net fl ow
Yearly net income outfl ow as a percentage of GDP
Real GNI
2004-2010 average
(Base: 2004)
MOP billion (in chained 2009 dollars)
GDP GNI per capitaGNI GDP per capita
35
FEBRUARY 2012
2001 2011
Demographic changes
The Statistics and Census Service has recently released a set of preliminary results from last year’s census. The data raises some interesting public policy questions.
There has been a signifi cant change in the population structure between 2001 and last year. The proportion of census takers in the oldest segment, aged 65 years and up, remained almost unchanged. There was an increase in the proportion of residents old enough to work and a decrease in the number of children younger than 14 years.In a sense, Macau is benefi ting from what might be called a demographic dividend, which has dramatically brought down the dependency ratios. The caveat is, however, that this dividend comes from imported labour.The decrease in the youngest segment of population by about 10 percentage points indicates the population is ageing. On the strength of the current trend and without a signifi cant jump in population, that trend will accelerate quickly.
Macau’s population grew by 117,000 between the end of 2001 and last year.During that period, the number of Macau-born people contributed just 31 percent to the total increase in population, growing at an annual average growth rate of 1.7 percent.The biggest slice of population growth came from immigration, particularly the mainland and Hong Kong, whose numbers rose by 24 percent and 32 percent, respectively.The fastest growing segment was the “Rest of the World”. At an increase of about 8.3 percent a year, their population has more than doubled in 10 years.The results indicate that it is the right time to discuss long-term social security policies and their relationship with imported labour policies.
The fi nal chart on housing unit occupancy provides a snapshot of the residential sector last year. Although the preliminary data from the census does not include exact data, an estimate can be created using details collected on the number of housing units and tenure.The most interesting issue the graph raises is not how “tight” the real estate market is – since one in 10 homes are vacant – but about the nature of the drive to build more public housing.With just over an estimated 40,000 units taken by tenants and assuming that many of them are unlikely to be eligible for public housing either because they are non-residents or too wealthy and so on, the rationale behind government promises to build thousands of public housing units is questionable.The merits of the building programme are further put in doubt when the city fl aunts one of the highest incomes per capita in the world – and rising.
Macau Mainland Hong Kong Rest of the world
GRAPH 5 - Population growth by geographic origin
GRAPH 6 - A snapshot of the residential sector
GRAPH 4 - Population age structure
GRAPH 4
GRAPH 5
GRAPH 6
100%
300,000
20,000
80%
60%
200,000
40%
20%
100,000
150,000
50,000
0%
0
≥ 65 years≤ 14 years 15-64 years
Net2001 total 2011 total
Owner-occupied unitsRented units
Employer-provided units
VacantOther tenure types
36
FEBRUARY 2012
To a standstillImportant bills have been languishing in the Legislative Assembly for up to a year; the government is not the only party wearing the blame
BY LUCIANA LEITÃO
Politics36
Ph
oto
: Lu
ís A
lmo
ste
r
37
FEBRUARY 2012
37
Members of the Legislative Assembly created quite a stir when they strongly criticised the government last month after offi cials inadvertently struck several
provisions from the bill to regulate real estate agencies and their brokers that they had been agreed on earlier.
This was the latest version of a bill the government fi rst presented to legislators last February. It was part of a package of measures announced in September 2010 to rein in the resi-dential property market.
Taking ages to pass bills into law is becoming a habit in the Legislative Assembly. Several important bills are lan-guishing there, raising doubts about their usefulness once they are eventually enacted.
Legislators and analysts alike blame the government for the delays but admit there are other reasons. Macau Business approached the Law Reform and International Law Bureau, which helps the government make laws, for comment but the bureau had not replied by the time of going to print.
By the end of January, the Legislative Assembly was con-sidering 13 bills. Eight of those bills had been presented by the government at least half a year before.
One piece of potential legislation proposes raising the minimum age for entry to the city’s casinos from 18 to 21. It was submitted for review last June. Another bill that has been
pending for almost a year outlines how the city’s older districts should be rejuvenated.
The bill that has been longest in the backlog amends the copyright law. The government submitted it in November 2010.
Shifting dynamicsEilo Yu Wing Yat, a professor teaching public administration at the University of Macau, says such delays are a recent phe-nomenon, having become more pronounced in the past two years. He says that previously most of the government’s output was by-laws, which are enacted by the chief executive alone, without having to pass through the Legislative Assembly. The dynamic has now changed, especially with the need for legis-lation on critical issues.
“The government bureaus face new challenges from the legislators,” says Mr Yu. He says offi cials have yet to adjust by better managing their relations with the assembly.
“Sometimes, government bureaus have to reconsider a bill that has just been proposed. That means the draft presented is not in good shape or its content is not good.”
He suggests that offi cials prepare bills more carefully, to avoid losing so much time revising them after they are submit-ted. “Now legislators quite seriously scrutinise each proposal and this generates a lot of pressure on the government.”
38
FEBRUARY 2012
Politics
Bills on divisive issues take the longest to be passed be-cause they are usually revised several times. This was the case with the tobacco control law, which bans smoking in public places and took over 15 months to pass. Similarly, the bill deal-ing with imported labour was fi rst presented in February 2008. It became a law only in October 2009, one and a half years later.
A bill’s progressThe legislative procedure in Macau is a three-step process, where the government typically is in the driver’s seat as a bill’s proponent.
Although members of the Legislative Assembly may in-troduce bills and propose their amendments, they rarely do. The last time this happened was in December 2009, when Tsui Wai Kwan and Lam Heong Sang proposed changes in the ca-reer structure of the assembly’s staff.
Any bill presented to the assembly receives its fi rst read-ing in a plenary session. If approved, it is then assigned to one of three working committees for detailed examination. After the committee has issued a report on the bill, it returns to the full assembly for its second and fi nal reading.
The committee stage is the lengthiest and may be skipped in exceptional cases. Each committee comprises nine legisla-tors meeting behind closed doors. Usually, representatives of the government are required to attend some meetings to an-swer questions on the bill. The government is also required to write in amendments put forward by members of the assembly or the government itself.
Professor Larry So Man Yum, a political analyst at the Macau Polytechnic Institute, says the government is slow in writing in amendments. Mr So says the government should plan its legislative programme better, to avoid taking so much time revising the bills it submits.
Communication breakdownHe also says members of the assembly are partly to blame for delays in passing legislation. “Our legislators are far too busy. We only have two or three that can be called full-time legislators.”
Mr So says many fail to scrutinise each bill properly be-fore its fi rst reading, only getting assistants to brief them. As a result, questions that should be raised on the fi rst reading are raised only in the committee stage.
The president of the Legislative Assembly, Lau Cheok Va, says the body is not a rubber stamp for the government. He adds that legislators are quite serious when analysing a bill and says the differences between the Legislative Assembly and the gov-ernment on some bills just add credibility to legislators work.
Mr Lau admits some bills are more urgent than others and that delaying their approval can have a negative impact. He
39
FEBRUARY 2012
says the workload for legislators is likely to increase this year, as the government has already announced plans to send up to 13 bills for approval.
Directly elected legislator Ng Kuok Cheong says “the gov-ernment does not have suffi cient ability to make law propos-als. That’s why we discover many problems in the bills sent to the Legislative Assembly.” Mr Ng says only a cabinet reshuffl e can change this. He accuses senior offi cials of having insuf-fi cient skills in drafting legislation and of an unwillingness to employ people better qualifi ed than they are.
Another directly elected member, José Pereira Coutinho, also blames the government for delays in passing legislation. He says several bills submitted to the assembly last year had to be revised in the committee stage after just one or two meet-ings because they contained obvious fl aws.
“This whole process takes half to one year,” he says. In the public’s eyes it looks like the committees are delaying the legislative process, he complains.
Asked why the government takes so long to revise bills, Mr Coutinho says there “is a diffi culty in fi nding competent legal advisers”. Even so, he acknowledges an apparent im-provement over the past couple of months, after the president and the vice-president of the assembly publicly complained last summer about the delays.
Structural fl awsGovernment-appointed legislator Gabriel Tong Io Cheng, who is a law professor at the University of Macau, says the delays
are sometimes due to bureaucracy and at other times due to disagreement among members of the assembly.
Although analysts generally label most legislators as pro-government, the majority is not formally organised as a pro-government group and does not behave as such. On the con-trary, the assembly is highly fragmented.
Unlike in a political system where there is a formal par-liamentary majority that gets government bills passed without undue hindrance, in Macau offi cials must actively negotiate with members of the Legislative Assembly, many of whom look out for the interests of their individual constituencies.
While there has been no recent case of the assembly de-clining to pass a government bill, on at least one occasion the government has had to withdraw legislation in the committee stage because the committee was unable to reach a consensus. A bill to reduce the age of criminal responsibility to 14 from 16 for extremely serious crimes was withdrawn for this reason six months after it was presented in February 2009.
Another government-appointed legislator, Tommy Lau Veng Seng, says the speed at which the assembly deals with a bill depends on what the bill is about and how well govern-ment offi cials respond to the deliberations of members in the committee stage.
Mr Lau says the government should decide what should be dealt with fi rst. “We cannot do everything at the same time.”
A lack of legal experts in some government bureaus is also a problem, he says. “If the government can hire more people to work in those bureaus, I think they can speed up everything.”
40
FEBRUARY 2012
A question of controlThe government has gone to great
pains to try to revise the Press Law and the Broadcasting Law. It has
already spent more than MOP3.5 million (US$438,000) in organising a deliberative poll to measure the public’s thinking on the need to establish a press council and a broadcasting council.
When defending itself against the media’s rebuke that it is attempting to interfere with the freedom of the press, the government has reiterated that it does not have a predetermined position.
I was invited to be one of the poll observers and had the opportunity to hear the offi cial explanation fi rsthand. Still, I cannot accept the reasons given for the revision of the two laws and establishing the two councils.
In the beginning, the government claimed revising the laws would ensure freedom of the press. Yet, from the perspective of the media, press freedom is improved when the power of the government is curbed, preventing interference in interviews and investigations.
The debate over revising both laws has focused on creating the two councils to beef up regulation of the media. That can only tighten – rather than ease – restrictions on the media. Heightened regulation and control can only mean press freedoms are degraded.
One-sided debateFaced with strong opposition from the media and eager to measure public opinion, the government made much ado about holding its all-day deliberative poll. It took place in December and more than 300 citizens and 60 observers were invited to participate.
In view of the public’s limited knowledge about both the press and broadcasting laws and why they might need revision, the organisers selected a panel of professionals to provide their insights. Among them were supporters of enhanced regulation of the media and those who kept their silence, but nobody stood up against changes to the laws.
With this kind of arrangement, it is impossible for the public to gain a complete picture of the issue, let alone understand the negative effects that
public attendees were most concerned was left out and the one point about which people were least interested was highlighted. This is apparently “respecting public opinion”.
Some on the panel that argued for a revision of the laws said the government would not play a key role in the two councils but would provide technical support. The form and extent of that support was not made clear.
In the most extreme cases, technical support could mean asking a reporter to disclose the identity of a source or issuing the legal authority to search a newspaper’s offi ces, sending law enforcement offi cers to investigate journalists and their management.
In other words, technical support has the potential to be a weapon used to interfere with reporting the news.
As to what problems the government has identifi ed that led it to ponder setting up the two councils, it has paltered since the beginning. And now that it is clear the public is most concerned about the quality of the television and radio they consume, which cannot be improved by legal means, topics such as the revision of the two laws and the establishment of the two councils seem unnecessary.
Why then is the government bothered with revising the Press Law and the Broadcasting Law? I am unsure. But it seems it can only be explained with conspiracy theories.
BILL KWOK-PING CHOU ASSOCIATE PROFESSOR OF POLITICAL SCIENCE, UNIVERSITY OF MACAU
THE GOVERNMENT’S DRIVE TO FORGE NEW CONTROLS OVER THE MEDIA HAS NOT BEEN PROPERLY EXPLAINED AND IGNORES THE WISHES OF BOTH JOURNALISTS AND THE PUBLIC
tighter media regulation might have on press freedom.
It was under these circumstances that the 300 citizens invited to the poll were asked to fi ll out a questionnaire. It is probable that the fi nal results will tend to favour stricter regulation.
It was claimed prior to the poll that “balanced data” were distributed to participants to keep them informed of each option’s rationale. As reported in the media, the “balanced materials” and the questionnaire completed on the day of the poll were suggestive, with their contents prone to favour establishing the two councils that would lead to tightened media regulations.
Not listeningOn the day of the poll, Government Information Bureau director Victor Chan Chi Ping repeatedly said the government respected public opinion. As I observed then, the poor quality of television and radio programmes attracted most of the complaints from the poll’s participants. Mr Chan did not respond to those complaints.
The professional panel tried repeatedly to draw the participants into a discussion on whether or not to and how to establish the two councils. It was a topic that the participants did not outwardly care about, nor fully understand.
Perversely, the topic about which the
42
FEBRUARY 2012
See you in courtBY ALEXANDRA LAGES
Arbitration is not new, nor is it popular but if Macau is to create a thriving industry out of its unique laws and location, arbitrators say the government must help
Legal Affairs42
43
FEBRUARY 2012
In the 13 years it has operated, the World Trade Centre Macau arbitra-tion centre has had only two com-
mercial disputes to settle. The arbi-tration centre of the Macau Lawyers Association, created in 1998, has just received its fi rst case. In 10 years, the Monetary Authority of Macau’s Centre for Arbitration of Disputes in Insurance and Private Pension Funds has settled two cases, both through mediation.
Clearly, arbitration and mediation are far from being widely considered the alternative to going to court.
The vice-president of the World Trade Centre Macau arbitration centre, Alberto Marçal, says a case can be set-tled by arbitration within six months. Lawyer and arbitrator Julia Brockman says it can take up to one and a half years when the dispute is more complicated. However, businesses seem unaware of the advantages of arbitration.
“We need to change people’s mind and habits,” Mr Marçal says. “People still think that it is safer going to court.”
The secretary-general of the Macau Lawyers Association, Paulino Coman-dante, agrees. “We need more promo-tion so the local population can get more confi dent in this alternative form of solving disputes, in the same way they trust in the courts.”
The monetary authority admits it has the same problem. “The very weak demand for the services of the arbitra-tion centre can be attributed mainly to the fact that consumers want the mon-etary authority, even though it can act only as a mediator, to use its infl uence as a regulatory authority in resolving the disputes,” says the authority’s executive director, António Félix Pontes.
“Many times we have tried to chan-nel the complaint cases to the arbitration centre but this has not been possible be-cause of lack of agreement on the part of both or one of the parties involved in the dispute.”
Cultural obstacleMediation is a non-binding process in which a neutral third party, the media-tor, works with the parties in a dispute to reach a mutually agreed settlement. The mediator has no authority to impose a binding decision.
On the other hand, arbitrators hear evidence, much like a judge, and make a decision that is binding on the par-ties. The parties normally cannot appeal against the arbitrator’s decision.
Arbitration is often used to settle commercial and employment disputes. Arbitration and mediation are usually quicker and cheaper than litigation.
Macau’s business culture partly ex-plains the weak demand for arbitration, says the director of the Small and Me-dium Enterprises Association, Kenneth Lei. “Most of the Chinese businessmen do not believe in arbitration and me-diation as a way to solve disputes. They would rather use their own ways to solve problems,” says Mr Lei.
“This Chinese business culture happens in Chinese communities eve-rywhere, like in the mainland, Taiwan, Hong Kong and Macau. Usually, Chi-nese people like to solve commercial disputes by negotiating directly with the other parties. If the case still can’t be solved, they will seek the advice of the family’s lawyers,” he says.
Even so, more and more big cor-porations in Macau include arbitration clauses in contracts. But they set Hong Kong as the arbitration centre.
The president of the British Business Association of Macau, Henry Brock-man, is himself aware of the advantages of arbitration but says there is a general lack of awareness and understanding of arbitration and its benefi ts. He is the hus-band of Ms Brockman.
Quicker, not cheaper“Few people in Macau have had any ex-perience of arbitration,” Mr Brockman says. “So people are wary. I don’t think there is criticism of the legal infrastruc-tures that have been created for holding arbitration. Everything is in place. A number of lawyers in Macau have taken courses supervised by bar associations to become arbitrators.
“However, from the business com-munity perspective, it is untested. Some-body has got to go fi rst,” he says.
“We can fi nd an arbitration expert in the commercial fi eld. It’s fairer for both sides because it takes less time and ef-fort to explain to the arbitrator than to a judge. And the judgement is fi nal and one cannot appeal.”
Mr Brockman says it is not easy to get details of cases handled by arbitra-tors in Macau because the arbitration process is usually confi dential.
As a lawyer who specialises in com-mercial litigation, Ms Brockman is cur-rently involved in two cases up for ar-bitration offering legal advice to Hong Kong arbitrators.
44
FEBRUARY 2012
UNLOVED AND UNDERWORKED
“There is a certain lack of confi -dence of people that come from overseas in regards to the local legal system,” she says. That’s why most of the inter-national companies with investment in Macau that include arbitration clauses in their contracts refer to Hong Kong as the place of arbitration, Ms Brockman says.
“According to my experience, in most of cases, even if the contract is un-der the local law, parties prefer to choose an international arbitration, instead of domestic.
“That happens very often with gam-ing operators. They feel more comforta-ble in opting for this kind of arbitration.”
Trust in Common LawLawyer Carlos Simões says there are two main reasons for the weak demand for Macau’s arbitration services. He says parties locked in dispute would rather go to Hong Kong to be sure of getting a neutral arbiter “because they perceive that the [Macau] government might in-terfere in the arbitration”.
And he says they go to Hong Kong for its system of Common Law. “The English legal system is perceived by multinationals as a system they can trust. It’s what they know well.”
Hong Kong has almost 20 years of experience in arbitration and mediation, says Mr Comandante. “And it is well po-sitioned in the commercial area in Asia, only behind Singapore. Currently, we cannot compete,” he says.
Mr Marçal says Hong Kong’s arbi-trators have a lot of experience and are among the best in Asia. Of the 26 arbi-trators in his centre, 10 are from Hong Kong – an attempt to “solve the handi-cap of the centre”, Mr Marçal says. But this does not seem to be boosting the number of cases handled.
The Hong Kong International Arbi-tration Centre was established in 1985.
three Macau commercial disputes and one case of litigation in the construction industry.
Mr Comandante believes greater use of arbitration here could reduce the number of cases pending that are jam-ming up the courts.
Several government contracts have
It handled 624 disputes in 2010. These included 291 disputes up for arbitration, 226 disputes up for mediation and 107 domain name disputes.
The centre’s secretary-general Chi-ann Bao says there were two commer-cial disputes from Macau handled there last year. In 2010, the centre handled
For a city of half a million people, the Consumer Council’s Consumer Arbitration Centre appears to have handled a
disproportionately low number of cases between shoppers and merchants since it was established in 1998 – just 444 disputes.
A spokesperson for the Consumer Council says any dispute put up for arbitration will be transferred to the centre and sched-uled for arbitration within two weeks.
Most disputes have been about laundry services and telecom-munications, with 74 cases of each. There have been 29 disputes about furniture or household products, and 23 cases each about audio-visual products and jewellery or handcrafts.
The Consumer Council would not comment on whether the num-ber of cases handled by the centre so far is considered satisfactory.
The Housing Bureau created its Arbitration Centre for Building Management Affairs last June. So far, it has received 49 enquiries but handled no cases.
“Because all requests were unilateral, the arbitration centre has not yet accepted them,” a spokesperson says.
“Activation of arbitration to settle disputes in building man-agement depends on the agreement of the parties. If only one party submits the application, the case cannot be activated.”
“We will strengthen the information activities in the future, increasing the population’s awareness.”
Nine of the 49 en quiries were passed on to the Housing Bureau and fi ve disputes were settled by negotiation, one could not be settled by negotiation and three are still pending.
Legal Affairs
45
FEBRUARY 2012
A SPEAKING ROLEHong Kong is consolidating its position
as an arbitration centre for interna-tional commercial disputes and Macau could adopt a similar role. The city is being considered as an arbitration centre for dis-putes between parties in the mainland and Portuguese-speaking countries.
At the latest ministerial confer-ence of the Forum for Economic and Trade Cooperation between China and Portuguese-Speaking Countries, in 2010, representatives of all governments signed an agreement to consider Macau as an arbitration centre for international commer-cial disputes.
Fernando Simões, an expert on resolu-tion of international commercial disputes at the University of Macau, says the city has all the necessary qualifi cations. Mr Simões has just fi nished researching the potential for creating an arbitration centre and the challenges it might face.
“It has a future. A lot has been written about Macau as a contact and service plat-form between China and Portuguese-speak-ing countries. In the future, Macau will assert itself not only as a platform of contacts but also in a further stage, as an arbitration cen-tre, when disputes arise,” he says.
There are some legal hurdles to be over-come. Some Portuguese-speaking countries do not yet fully comply with internationally recognised arbitration standards or don’t have adequate rules on the recognition and enforcement of foreign arbitral decisions. And the mainland and the Portuguese-speaking countries have to narrow the gap between their arbitration systems.
Mr Simões says that Macau is the best place to start because it can provide translators and interpreters for an arbitra-tion centre.
“Arbitration would never be easy between both sides because there must be translation services. Macau has a competi-tive advantage in this regard,” he says.
But he admits there is a need to train interpreters and translators properly in the use of legal and commercial jargon.
“We do not necessarily need legal experts in arbitration because most of the time arbitrations are about very technical issues, such as product labelling.”
Mr Simões says arbitration of interna-tional disputes has several advantages, one being that it is neutral. “There is always a prejudice against foreign courts. For instance, a company from Mozambique will always regard the Chinese legal system with some mistrust because it doesn’t know it. However, the Macau law can serve as a neutral law and the territory can be a neutral forum.”
Arbitration is fl exible, Mr Simões says. The parties can choose who will do it, where it will be done, what language it will be done in and what rules will govern it.
arbitration clauses, including its con-tract with telecommunications company CTM.
Legal experts, arbitrators and busi-nesspeople suggest more education for business about arbitration and media-tion, and more government support.
Incentive offerMr Marçal wants offi cials to look at the example of Hong Kong. In 2010, the city made mediation the primary alternative means of dispute settlement.
“If they cannot settle the disputes through mediation, parties have to sign a document including the reasons for go-ing to court,” Mr Marçal says.
If the case ends up being decided in court, the winning party may be pe-nalised if it is proven to have failed un-reasonably to engage in mediation. The winning party may not be awarded all or any of its costs.
“This is a way to encourage people to use more and more mediation. Macau could follow this example,” Mr Marçal says. He says that apart from promoting itself, his arbitration centre is planning an accreditation system for arbitrators.
The Legal and Judicial Training Centre organised three arbitration train-ing programmes – in Portuguese, Eng-lish and Chinese – between 2006 and last year, each attracting an average of 30 participants. It also held fi ve media-tion and negotiation programmes, with an average of 20 to 30 trainees, and one advanced programme.
A spokesperson for the govern-ment’s Law Reform and International Law Bureau said the bureau would study how to increase the use of methods of settling disputes such as arbitration and mediation, and would review litigation rules. The spokesperson did not say when this would take place however.
46
FEBRUARY 2012
BY SARA FARR
Positive discriminationA Hong Kong non-profi t institution that develops affordable housing will discriminate in favour of residents. Why can’t Macau do the same?
Year 2010
2011
Value of residential units sold as per record of stamp duty*
Value (MOP million)
3,1401,9952,8066,1804,2813,3192,6421,8893,6873,4217,5695,0103,7901,9187,704
19,2447,9026,1142,3591,7441,8151,6611,714
Month January
February
March
April
May
June
July
August
September
October
November
December
January
February
March
April
May
June
July
August
September
October
November
Residential units sold as per record of stamp duty*
Number of Transactions1,2971,0841,5032,2021,6271,5431,204
9401,5051,3121,8181,9541,541
7882,2253,4852,4022,368
878645671606681
MonthJanuary
February
March
April
May
June
July
August
September
October
November
December
January
February
March
April
May
June
July
August
September
October
November
Year 2010
2011
* Notes: 1. The data includes transactions of residential units exempted from stamp duty. 2. The data covers residential units with stamp duty paid during the reporting month.S
ourc
e: D
SE
C
A non-profi t developer of affordable housing in Hong Kong last month took the unprecedented step of giving Hong
Kongers priority in buying new homes from its developments. The Hong Kong Housing Society also banned corporations from buying into their properties. The move opens another front in the battle against property speculators.
In Macau, property industry players and academics say the move smacks of protection-ism. Their opinion is the scheme could not work here.
The Housing Society is a non-profi t insti-tution that builds housing for sale at reasona-ble prices by cutting out the frills and concen-trating on effi ciency. It was set up in 1945 after
the Japanese occupation left one in four resi-dents homeless. There was no public housing programme at the time and volunteers raised funds for the cause. It has tried to provide af-fordable housing for the people of Hong Kong ever since.
Apart from selling housing at market val-ue to the general public, the Housing Society also develops subsidised housing, being the biggest provider of subsidised housing after the government. “The Housing Society plays a supplementary role to the Transport and Hous-ing Bureau to fi ll the niche markets with de-mand not currently met,” a spokesperson says.
Macau has nothing like it and for those in the real estate industry, it is not required.
Property | Market Watch46
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lmo
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r
ANNUAL ASSESSMENT FOR PREMIUMSThe government will change the regime it uses to as-
sess the premium it charges for land concessions. Chief executive Fernando Chui Sai On said the govern-ment would start making annual assessments to allow land premiums to move with market prices.
Mr Chui acknowledged that there are differences in opinion on the revision of the law on land grants, but said the aim was to present a bill to the Legislative As-sembly this year.
He also said the government hoped to have the fi nal draft of the urban plan bill ready by the end of this year.
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Sou
rce:
DS
EC
Sou
rce:
Fin
anci
al S
ervi
ces
Bur
eau
Value (MOP thousand)
Average transaction value of residential properties as per record of stamp duty
Average transaction price of residential units per square metre
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.
60,000
55,000
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
* 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.
MarJan Jan Mar Jul Sep NovMayMay Sep NovJul2010 2011
Feb Apr Oct DecAugJunApr Jun Aug Oct DecFeb2010 2011
(MOP)
idents buy between 10 and 15 percent of homes sold in Macau. He argues there is no need for a “residents fi rst” policy for the housing market. Instead, the govern-ment should put more effort into provid-ing subsidised housing.
A little more fi ghtIn the fi rst 11 months of last year, 16,290 homes were sold and their value was MOP56 billion (US$7 billion). Non-residents accounted for 12 percent of buyers, but the units they bought were mostly high-end – their overall value was about one quarter of the total.
In the third quarter of last year, more than 400 of the homes – about 23 percent of the total – sold for more than MOP4 million each. The average price per square metre in Macau is skewed by high-end projects.
That was the case in December, when the average price per square metre jumped to MOP53,254 – a 39 percent increase over November. The Financial Services Bureau said the spike was caused by sales in three big, high-end developments – on the peninsula, Taipa and Coloane.
Macau may be too small for an in-stitution similar to Hong Kong’s Housing Society, property market observers say. But José Pereira Coutinho, a member of the Legislative Assembly, accuses busi-nessmen of resisting change. Mr Coutin-ho says the government should join forc-es with private developers. “It’s the only way to fi ght speculation,” he says.
Rose Lai Neng, an associate profes-sor of fi nance at the University of Macau and a real estate expert, argues that it would be more economical for the gov-ernment to tender projects to developers. Even then, she has misgivings.
“It will be too much of an ideal to think that developers will willingly co-operate to build smaller units that will be more affordable when they can build a little bigger but can sell at a lot higher price,” she said.
Property market observers agree that fi nding enough land for new hous-ing is most important. “With enough land reserve for housing, the prices will also go down,” says Mr Lau.
The government has promised that some of Macau’s newly reclaimed land will be reserved for housing, although how much is uncertain. “I am sure there will be enough land for housing,” Mr Lau says, adding that that the authorities “will decide what to do when the time is right”.
Tommy Lau Veng Seng, a government-appointed member of the Legislative As-sembly and president of the Association of Building Contractors and Developers, opposes what he regards as protectionist measures but admits there is a need to strike a balance between the interests of foreign investors and residents.
In Macau and Hong Kong, hous-ing affordability is a constant concern. As household incomes have increased, many would-be homeowners now earn too much to qualify for public housing,
but not enough to meet the cost of buy-ing a home in the open market, where profi t is maximised by catering to the most affl uent.
For years the Macau government has promised to deal with the issue. It has said it would provide more public hous-ing, aiming to build 19,000 homes be-tween 2007 and this year, and has relaxed eligibility criteria. It has also taken meas-ures to curb increases in home prices.
Jeff Wong, head of residential prop-erty at Jones Lang LaSalle, says non-res-
Non-Residents25%
Residents75%12%
Residents88%Non-Residents
Proportion of buyers
Total value of residential transactions in the fi rst 11 months of 2011:
56.0 billion
Total number of buyers in residential transactions in the fi rst 11 months of 2011:
21,973Proportion of buyers
Property | Market WatchS
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Note: L/F - Low fl oor; M/F - Middle fl oor; H/F - High fl oor
District Property Price per sq.ft. (HK$)Sale price (HK$)Floor area (sq. ft) Unit
Source: Centaline & Midland
Type Building/Street Price per sq.ft. (HK$)Sale price (HK$)Floor area (sq. ft) Unit
Note: L/F - Low fl oor; M/F - Middle fl oor; H/F - High fl oor
Notable residential property transactions - 01/12 to 31/12, 2011
Macau One Central Block 3, M/F, unit B 3,006 27,048,000 8,000
Macau One Central Block 3, H/F, unit A 2,729 19,376,000 7,100
Macau One Central Block 5, M/F, unit B 2,312 15,952,800 6,900
Taipa Jardins do Oceano Rose Court, L/F, unit A (with car park) 3,707 15,000,000 4,046
Taipa Supreme Flower City Block 1, H/F, unit C (with car park) 2,060 9,380,000 4,553
Taipa Flower City Lei Pou Kok, H/F, unit D (with car park) 2,060 9,300,000 4,514
Macau The Paragon L/F, unit G 1,241 9,200,000 7,413
Macau L’Arc Macau H/F, unit C 1,821 8,850,000 4,859
Taipa Edf. Panorama Block 2, L/F, unit B (with car park) 4,512 8,570,000 1,899
Taipa Nova City Block 11, H/F, unit C (with car park) 1,975 8,500,000 4,303
Taipa Prince Flower City Block 2, H/F, unit J (with car park) 1,794 8,080,000 4,503
Taipa Prince Flower City Block 1, H/F, unit A (with car park) 1,665 7,800,000 4,684
Macau Lake View Tower Block 2, M/F, unit G 1,567 7,500,000 4,786
Taipa Prince Flower City Block 1, H/F, unit A 1,665 7,500,000 4,504
Taipa Nova City Block 15, M/F, unit E (with car park) 1,630 7,300,000 4,478
Taipa Nova City Block 15, M/F, unit E (with car park) 1,630 7,300,000 4,478
Taipa Nova City Block 15, M/F, unit E (with car park) 1,634 7,280,000 4,455
Taipa Nova City Block 15, H/F, unit B 1,520 6,800,000 4,473
Taipa Nova City Block 15, H/F, unit E 1,630 6,800,000 4,171
Taipa Prince Flower City Block 1, L/F, unit A (with car park) 1,665 6,660,000 4,000
Taipa Edf. Jardim de Wa Bao Block 4, M/F, units U+V 2,742 6,630,000 2,417
Macau One Central Block 1, H/F, unit D 918 6,500,000 7,080
Macau The Bayview Block 5, H/F, unit F (with car park) 1,582 6,416,000 4,055
Macau The Bayview Block 5, H/F, unit F (wth car park) 1,582 6,353,000 4,015
Taipa Prince Flower City Block 2, M/F, unit H (with car park) 1,522 6,300,000 4,139
Macau The Bayview Block 2, M/F, unit D 1,582 6,236,000 3,941
Taipa Jardins do Oceano Magnolia Court, M/F, unit G (with car park) 1,503 6,150,000 4,091
Macau The Praia Block 1, M/F, unit C 1,558 6,150,000 3,947
Taipa Nova City Block 15, L/F, unit D 1,556 5,980,000 3,843
Macau The Bayview Block 2, M/F, unit B 1,603 5,862,000 3,656
Macau La Cité Block 3, M/F, unit C 1,522 5,800,000 3,810
Macau Edf. Hung On Torre Block 3, M/F, unit Q 1,801 5,500,000 3,053
Macau One Central Block 1, H/F, unit D 654 5,380,000 8,226
Taipa The Buckingham L/F, unit F (with car park) 1,186 5,200,000 4,384
Macau The Residencia Macau Block 4, L/F, unit C 1,209 5,200,000 4,301
Macau Edf. Zhu Kuan M/F, unit Z 1,647 5,000,000 3,035
Taipa Nova City Block 4, L/F, unit B 1,318 4,800,000 3,641
Taipa Nova City Block 4, M/F, unit F 1,339 4,650,000 3,472
Macau Dynasty Plaza Block B, L/F, unit Y 1,800 4,575,000 2,542
Taipa Nova City Block 4, L/F, unit E 1,318 4,500,000 3,414
Macau Villa de Mer Block 1, H/F, unit E 940 4,400,000 4,680
Taipa The Buckingham L/F, unit F 1,186 4,380,000 3,693
Macau The Praia Block 1, M/F, unit B 1,239 4,300,000 3,470
Macau La Cité Block 2, L/F, unit A 1,180 4,280,000 3,627
Taipa Nova City Block 6, L/F, unit D 1,045 3,666,000 3,508
Source: CentalineNotable commercial property transactions - 01/12 to 31/12, 2011
Shop Rua dos Mercadores All whole 2,421 35,000,000 14,426
Shop Rua do General Ivens Ferraz Shop 2,214 9,800,000 4,426
Shop Rua de Entre-Campos Shop 3,900 8,500,000 2,179
Shop Rua de Sacadura Cabral Shop 1,652 7,500,000 4,539
Shop Rua de Aveiro Shop 327 6,000,000 18,348
Shop Rua de Marques de Oliveira Shop 1,820 5,300,000 2,912
Shop Rua do Volong Shop 1,926 4,950,000 2,570
Shop Rua do Gamboa Shop 904 3,350,000 3,705
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5050 Property | Market Watch
Source: Centaline
Note: L/F - Low fl oor; M/F - Middle fl oor; H/F - High fl oor
Note: L/F - Low fl oor; M/F - Middle fl oor; H/F - High fl oor
District
Type
Property
Property
Price per sq.ft. (HK$)
Price per sq.ft. (HK$)
Rent price (HK$)
Rent price (HK$)
Floor area (sq. ft)
Floor area (sq. ft)
Unit
Unit
Source: Centaline & MidlandNotable residential property rentals - 01/12 to 31/12, 2011
Macau One Central Block 6, M/F, unit B 2,528 48,000 18.99
Macau One Central Block 4, H/F, unit A 2,326 38,000 16.34
Macau One Central Block 1, H/F, unit F 1,815 35,000 19.28
Macau One Central Block 4, M/F, unit A 2,326 32,000 13.76
Macau One Central Block 1, M/F, unit A 1,273 25,000 19.64
Macau L’Arc Macau M/F, unit C 1,803 23,500 13.03
Macau One Central Block 1, H/F, unit B 1,272 23,000 18.08
Taipa Nova Taipa Garden Block 27, M/F, unit G 2,135 22,000 10.30
Taipa Pearl On The Lough Block 1, L/F, unit C (with car park) 2,839 22,000 7.75
Macau One Central Block 1, L/F, unit C 895 20,000 22.35
Macau One Central Block 7, M/F, unit D 1,176 20,000 17.01
Macau One Central Block 1, H/F, unit A 1,273 20,000 15.71
Macau Lake View Tower Block 2, M/F, unit E 1,443 20,000 13.86
Macau Lake View Tower Block 1, M/F, unit A 1,511 20,000 13.24
Macau Lake View Tower Block 1, L/F, unit C 1,515 20,000 13.20
Macau Nam Van Peninsula Block 1, L/F, unit I 2,901 20,000 6.89
Macau Lake View Tower Block 2, M/F, unit E 1,443 19,000 13.17
Taipa Chung Villa L/F, unit A 1,979 16,000 8.08
Macau Wan Yu Villas Block 2, M/F, unit H 1,183 15,000 12.68
Macau Bo Fung Court Block 2, L/F, unit L 1,630 15,000 9.20
Macau One Central Block 1, M/F, unit D 654 14,000 21.41
Taipa The Pacifi ca Garden Block 1, L/F, unit E 1,196 14,000 11.71
Taipa Chong Fok Garden Liking, L/F, unit B 1,600 13,800 8.63
Taipa Prince Flower City Block 1, M/F, unit D 1,665 13,800 8.29
Taipa Edf. Mei Keng Garden Block 1, M/F, unit E 2,008 13,500 6.72
Macau One Central Block 1, H/F, unit D 654 13,000 19.88
Taipa Nova City Block 12, M/F, unit B 1,314 13,000 9.89
Taipa Nova City Block 10, M/F, unit D 1,045 12,500 11.96
Taipa Nova City Block 12, L/F, unit B 1,318 12,000 9.10
Macau Edf. Fung King Garden L/F, unit J 1,225 12,000 9.08
Taipa Nova City Block 12, L/F, unit F 1,340 12,000 8.96
Taipa Nova City Block 16, L/F, unit B 1,318 11,800 8.95
Macau The Residencia Macau Block 4, L/F, unit C 1,209 11,000 9.10
Macau The Residencia Macau Block 4, M/F, unit A 1,222 11,000 9.00
Taipa Nova City Block 14, M/F, unit B 1,314 11,000 8.37
Taipa Nova City Block 8, L/F, unit C 1,318 11,000 8.35
Taipa Chong Fok Garden Nice Court, L/F, unit G 1,470 11,000 7.48
Macau La Cité Block 1, H/F, unit C 1,067 10,000 9.37
Taipa Hillsville M/F, unit B 1,394 10,000 7.17
Notable commercial property rentals - 01/12 to 31/12, 2011
Shop Rua de Pedro Coutinho Shop 804 60,000 74.63
Shop Rua de Pedro Coutinho Shop 974 40,000 41.07
Shop Flower City - Edf. Peonia Shop 2,000 40,000 20.00
Shop Rua Dr. Pedro José Lobo Shop 530 30,000 56.60
Offi ce Edf. Zhu Kuan L/F, unit G 2,366 23,660 10.00
Offi ce Edf. Walorly M/F, unit H 1,619 19,428 12.00
Offi ce Macau Square M/F, unit K 1,854 16,000 8.63
Offi ce Edf. Zhu Kuan L/F, unit B 1,133 13,596 12.00
Offi ce Edf. Comercial Si Toi M/F, unit K 1,178 13,500 11.46
Shop Rua de S. Domingos Shop 363 12,500 34.44
Shop Rua de Coelho do Amaral Shop 640 8,000 12.50
Offi ce Edf. Walorly M/F, unit F 605 7,260 12.00
Offi ce Edf. Walorly M/F, unit G 605 7,260 12.00
Shop Calçada da Barra Shop 400 5,500 13.75
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Why capital fl ows uphillAt fi rst, it seems diffi cult to grasp: global capital is fl owing
from poor to rich countries. Emerging-market countries run current-account surpluses, while advanced economies
have defi cits. One would expect fast-growing, capital-scarce (and young) developing countries to be importing capital from the rest of world to fi nance consumption and investment. So, why are they sending capital to richer countries, instead?
China is a case in point. With its current-account surplus averaging 5.5 percent of gross domestic product in 2000-2008, China has become one of the world’s largest lenders. Despite its rapid growth and promising investment opportunities, the country has persistently been sending a signifi cant portion of its savings overseas.
And China is not alone. Other emerging markets – including Brazil, Russia, India, Mexico, Argentina, Thailand, Indonesia, Malaysia and the Middle Eastern oil exporters – have all increased their current-account surpluses signifi cantly since the early 1990’s. Collectively, capital-scarce developing countries are lending to capital-abundant advanced economies.
Many observers believe that these global imbalances refl ect developing economies’ fi nancial integration, coupled with underdevelopment of domestic fi nancial markets. According to this view, these countries’ demand for assets cannot be met – in terms of both quantity and quality – at home, so they deploy part of their savings to countries like the U.S., which can offer a more diverse array of quality assets.
While plausible, this argument suggests that, as fi nancial markets improve over time in developing countries, the global imbalances are bound to shrink. But such a reversal is nowhere in sight. Why?
Meeting different needsA crucial dimension of globalisation has been trade liberalisation. For China, foreign trade as a percentage of GDP soared from 25 percent in 1989 to 66 percent in 2006, largely owing to its admission to the World Trade Organization in 2001.
Most of what China and other developing countries produce and export are labour-intensive goods such as textiles and apparel. This has allowed advanced economies, in turn, to produce and export more capital-intensive, higher-value-added products. Globalisation of trade enabled countries to tap the effi ciency gains that specialisation in their sectors of comparative advantage has brought about.
With a slight mental stretch, one can imagine that what a country produces and trades may affect its savings and investment decisions. An economy in which the main productive activity is berry picking, for example, has little need for investment and capital accumulation. Its labourers earn wages, consume and save part of that income. Since the production process requires little capital, there is no demand for domestic investment – and thus no savings vehicles. Instead, the only way to save is by purchasing capital abroad – in economies with capital-intensive production and demand for investment. This economy will always export its savings.
That may be an extreme example, but it illustrates a more general point about how merchandise trade can infl uence fi nancial fl ows. Countries that produce and export more labour-intensive goods – perhaps owing to increased trade openness, or faster labour-force and productivity growth, all of which are true of China – may experience a rise in saving, but a less-than-equivalent increase in demand for capital.
Rich countries, by contrast, are able to export more capital-intensive goods, and thus have a greater need for investment. So they may be importing more capital – resulting in a greater current-account defi cit – simply because they are producing more capital-intensive goods.
Not so puzzlingWith developing countries – in particular, China, India and the ex-Soviet bloc – bringing almost 1.5 billion workers into the world economy since the early 1990’s, it is not diffi cult to understand the potential impact of this effect. After all, much of this labour force was absorbed by labour-intensive industries that eventually churned out products exported to the rest of the world. Indeed, that massive addition of labour helped to drive down the relative price of labour-intensive goods, which fell by roughly 15 percent between 1989 and 2008.
As developing countries increased their labour-intensive production and exports, their current-account surpluses rose – by almost 3.6 percentage points, on average, between 1989-1993 and 2002-2006. China’s current-account surplus increased by almost 11 percentage points over the same period, India’s by 2.5 percentage points and Russia’s by 7 percentage points. These countries, as well as other large surplus economies, such as Brazil, Saudi Arabia and Iran, all experienced a simultaneous increase in the labour content of exports.
This pattern contrasts with that of the United States and many other advanced countries, which have experienced a deterioration of their current-account balances as their production and exports have become more capital-intensive.
Many might doubt the view that China is exporting more labour-intensive goods, rather than upgrading its exports on the capital- and skill-intensity ladder. But trade data suggest the opposite, perhaps because China’s accession to the WTO led to tariff reductions that released more labour-intensive production.
In fact, trade data may underestimate the true extent of China’s labour intensity and overstate the capital and skill intensity of China’s exports. China has witnessed rapid growth in the processing trade: assembling intermediate inputs – imported from countries like the U.S. and Japan – that have high capital and skill content. So, while the exports of these fi nal goods may count towards China’s own capital and skill content, the country’s real role was only in the labour-intensive process of assembly.
A country’s production structure may very well determine how much capital it supplies and how much it needs. So the fact that capital may fl ow towards rich countries that produce and export more capital-intensive goods should not be so puzzling, after all.
KEYU JIN LECTURER IN ECONOMICS, LONDON SCHOOL OF ECONOMICS
A COUNTRY’S PRODUCTION STRUCTURE MAY VERY WELL DETERMINE HOW MUCH CAPITAL IT SUPPLIES AND HOW MUCH IT NEEDS
52
FEBRUARY 2012
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COMING SOON
For more information visit macaubusiness.com or write to [email protected]
53
FEBRUARY 2012
Not everyone will need it but stem cell therapy may be the ideal insurance policy for families
preparing for the worst. It was with this in mind that Cryolife began harvesting blood from umbilical cords in 1998.
Last month, the Hong Kong-based company opened its fi rst Macau branch to handle an expected increase in in-quiries and sales in a year that most in Macau consider highly auspicious.
Cryolife collects blood from the placenta and umbilical cord, keeping it storage in a Hong Kong laboratory. The company also offers a service to store the umbilical cord itself. The blood from a mothers’ afterbirth is rich in embry-onic stem cells, and these can help adult tissues grow or regenerate after serious illness and physical trauma.
Cryolife chief executive offi cer Va-danee Lau says the company pioneered the commercial storage of blood from
BY SARA FARR
Future fundExpecting a Dragon Year bump in birth rate, a facility that specialises in the long-term storage of blood from umbilical cords has opened an offi ce in Macau to drive sales
Storage for 18 years costs HK$37,400 (US$4,820), increasing to HK$45,380 for 28 years’ storage – the maximum avail-able. The cost to store both blood and the umbilical cord can reach HK$90,760 for a 28-year plan. The Cryolife Macau of-fi ce is in the city centre. Customers have a 24-hour customer service hotline and can access a live webcast from the laboratory.
The company has more than 15,000 samples stored from families all around the world. “We’ve had clients from the U.S. living in Hong Kong and when they move back we still keep the samples here for storage. If they need it, we ship it over,” Ms Lau says. That was the case in 2009 when the company sent samples to Duke University in North Carolina.
Dragon baby boomMs Lau says company revenue reached HK$40 million last year, an increase of about 10 percent year-on-year. The
umbilical cords for families in Asia. “They can use it when they’re sick. This is to protect your own future,” Ms Lau says.
Cryolife is owned by United Easy Investments Ltd. and has its head offi ce, laboratory and storage facility in Hong Kong. Over the past 15 years it has served up to 500 Macau families. “We go to the two hospitals and collect samples, and we take them for processing and storage in Hong Kong,” Ms Lau says.
Business
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FEBRUARY 2012
company saw its client base expand by 15 percent in the same period. Ms Lau says the company’s growth has been “very stable” over the past decade.
The company is predicting a signifi -cant increase in clients this year as many Chinese families believe the Year of the Dragon is a good time to have children. “And that’s one of our key reasons for wanting to provide better client service and hence the opening of our branch of-fi ce in Macau.”
Superstitious Chinese believe chil-dren born during the Year of the Dragon – the symbol of ancient emperors – will be courageous and wise and bring luck to the entire family. Doctors estimate that couples gunning for a lucky baby will have to conceive by May 2 in order to stand a chance of giving birth by the tail end of the dragon year, which ends on February 9, 2013.
The number of live births in Macau has risen steadily since 2003, a baby boom related to the city’s economic growth. In the fi rst 11 months of last year there were 5,286 live births, which exceeded all births for 2010.
In the previous Year of the Dragon in 2000, a total of 3,849 live births were registered in Macau, down 7.2 percent from a year earlier, offi cial data shows,
which can be partially explained with the uncertain environment surround-ing the handover period. In 1988, also a dragon year, live births went up by 4.6 percent year-on-year.
Ms Lau says her industry has devel-oped considerably over the past decade. In 1996, Cryolife claimed to be the fi rst private cord blood bank in Asia. In 1998, the service was offi cially launched with a laboratory in Sha Tin and an offi ce in Kowloon, and offered throughout Asia.
While more families are becom-ing aware of stem cell treatments and are storing their child’s cord blood, she says there is a need to boost medical re-search into stem cell treatments. Some treatments, such as those proposed for cerebral palsy, require the patient’s own cord blood.
“We need to engage doctors,” Ms Lau says, adding that since Cryolife opened its fi rst offi ce, there has been a drastic improvement in the quality of service provided in Macau and the mainland.
“There are more hospitals [in Chi-na] doing clinical trials. It’s a huge dif-ference. Back in 1996, when we started, many doctors did not know or under-stand what stem cells were. But that’s different now,” she says.
Business
Cryolife is predicting a signifi cant increase in clients this year. “And that’s one of our key reasons for wanting to provide better client service and hence the opening of our branch offi ce in Macau,” says chief executive offi cer Vadanee Lau
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FEBRUARY 2012
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FEBRUARY 2012
Businesses throughout the world love Valentine’s Day. Consumers express their love with gifts, fl owers and dinner at a restaurant, creating a spike in revenue for
the businesses in the retail and hospitality sectors.Although Macau’s lovebirds celebrate Valentine’s Day
twice – the Western celebration in February and the Chinese version that typically falls in August – it is the fi rst that leads to more sales, business owners say. But not all businesses ben-efi t equally, with hotels and high-end restaurants giving the twin celebrations a bigger push in their marketing calendars.
Judit Huguet I Sola, chief fl orist at Tiffany Fleur at Ho-tel Lan Kwai Fong Macau, says Valentine’s Day is great for business with both the Western and Chinese versions boost-ing the bottom line. Revenue increases sharply, thanks in part to the fact that most customers look for bouquets of 99
red roses, meaning “love forever”.The owner of French restaurant La Bonne Heure, Suzanne
Chuek, says the Western Valentine’s Day does make a differ-ence generating extra revenue. “People start to book a table in January and usually the restaurant would be fully booked some days before February 14,” she says.
Ms Chuek says there is no comparison between the two celebrations, in terms of turnover. “The Western Valentine’s Day is better for business. The Chinese one is just like a nor-mal day.”
Saint Valentine’s Day, commonly shorted to Valentine’s Day and always held on February 14, is a celebration of Chris-tian martyrs. In the Middle Ages, the day became associated with romantic love and more recently meant an exchange of gifts.
Business
Love of moneyValentine’s Day can create a big boost for the retail and hospitality sectors but which businesses make the most of the celebration?BY LUCIANA LEITÃO
57
FEBRUARY 2012
Chinese Valentine’s or, more correctly, the Qixi Festival, is celebrated on the lunar calendar’s seventh day of the seventh month – August 23 this year. The festival commemorates the tale of the cowherd and the weaver, a princess who escaped from heaven, and the one day each year they are permitted to meet.
Another holiday with romantic associations is the 15th day of the Lunar New Year, on which the Lantern Festival Day is held. Historically, this was one of the few moments during the year when single girls were allowed out unescorted.
Resorts’ specialSeveral hotel and resorts offer special menus and packages for February’s Valentine’s. They appear to be promoting the cel-ebration the hardest.
Galaxy Macau has prepared themed menus and special accommodation packages. At MGM Macau’s Aux Beaux Arts French restaurant, there will be a romantic menu, including oysters in citrus dressing and pink champagne foam, and a desert consisting of a smoking strawberry parfait in chocolate heart and spicy hot chocolate sauce.
Art director of hairdresser Base Hair Culture, Man Cheong, says there is no signifi cant jump in business during the February celebration. “There’s nothing special, maybe some ladies looking for a [different] hairdo or brushing for dinner, but nothing more,” he says.
Even so, Mr Man says it is more popular than the Chinese holiday. “Most people in Macau celebrate Western Valentine’s Day but, still, we don’t see a big increase in business.”
Ronaldo Gnanavelu, owner of the Indian Garden Restau-rant, says his Chinese customers do not equate his venue with romantic dinners. “For this culture, an Indian restaurant is not very appealing. It’s not very romantic,” he says.
Mr Gnanavelu says Indian food is “not exactly pretty”. In his view, the most romantic cuisines are probably French or Japanese.
The bottom line is that business is unchanged during Western Valentine’s Day. Perhaps Chinese Valentine’s Day is “maybe a little bit better.”
Paolo Cheng is the owner of Mugs Talk bar and restau-rant. Neither day is very helpful to his business. He holds back from preparing a special menu, so that singles dropping by on February 14 do not feel left out. “We don’t want to make it un-comfortable for others, so we’re not charging anything special, it’s just a regular day.”
The same happens during Chinese Valentine’s Day. “There’s no difference,” he says. “Maybe for some hotels and restaurants it has an impact. For us, it is normal business.”
we live inside ideas.
www.goldfishmacau.com
+853 2833 1258
Although Macau’s lovebirds celebrate Valentine’s Day twice – the Western celebration in February and the Chinese version that typically falls in August – it is the fi rst that leads to more sales, business owners say. But not all businesses benefi t equally
58
FEBRUARY 2012
From the heart
Lord Stow’s Bakery has become one of Macau’s leading tourist attractions. From the small Coloane shop that began selling its signature egg tarts two decades ago,
the company has grown to fi ve venues across the city, has an exclusive licensing deal with the Excelsior Hotel Hong Kong, and also has franchises in South Korea, Japan and the Philippines.
Mr Stow, an industrial pharmacist, tasted a traditional Portuguese egg tart for the fi rst time while honeymooning in 1988 in Portugal with his then wife Margaret Wong, who now owns and runs Margaret’s Café e Nata, in downtown Macau.
Mr Stow moved to Macau in 1979 and ended up working at the former Hyatt hotel in Taipa, now the Regency Hotel. It was there that he had an idea that would change his life.
“Andrew realised there was not a single place, apart from hotels, where Westerners could buy bread. So he decided to open a bakery to start distribution to supermarkets,” his sister Eileen recalls.
From the heart
BY PATRICIA NEVES*PHOTOS CARMO CORREIA*
Englishman Andrew Stow conquered the hearts of thousands by baking egg tarts that have since taken Asia by storm
Englishman Andrew Stow conquered the hearts of thousands by baking egg tarts that have since taken Asia by storm
The venture did not turn out the way he expected but it led to the establishment of Lord Stow’s Bakery in Coloane Village in 1989, which Eileen has run since her brother’s death in 2006.
Sweet successAware that most Portuguese immigrants in Macau longed for their traditional egg tarts – and that no one had come up with the idea before – Mr Stow took to the kitchen to make his own version of the delicacy in early 1990.
“But he didn’t have the recipe and being an arrogant Brit, he wasn’t going to ask a Portuguese for it. So, he made his own,” his sister says.
His Portuguese friends were less than impressed with his hard work, claiming the product was not a real egg tart. Mr Stow told them it was the best he could do. “If you don’t like it, don’t eat it,” was his reply.
What was less than a hit with the city’s Portuguese com-munity proved otherwise for Chinese consumers. His egg tarts
Business
59
FEBRUARY 2012
* LUSA NEWS AGENCY
were an overnight success. The same egg tarts ultimately saw Mr Stow win the Medal for Merit for Tourism from the gov-ernment in 2006.
“If Andrew had dreamt of the success it would be, he’d have named them ‘Macau egg tarts’ instead,” his sister said, adding that they initially sold an average of 200 single egg tarts a day but that number has now jumped to about 10,000.
Lord Stow’s egg tarts have since taken Asia by storm.By the end of the 1990s, Mr Stow and Eileen, who had
already moved to Macau to help him manage the business, launched franchises in Taiwan and Thailand. These eventually folded but the brand is still sold overseas through the fran-chisees.
Mr Stow’s former wife has also achieved considerable success of her own by selling egg tarts. Aside from selling them at Margaret’s Café e Nata, Ms Wong has signed a deal to distribute them in the mainland through fast-food chain Ken-tucky Fried Chicken.
Lord Stow’s Bakery initially sold an average of 200 single egg tarts a day but that number has now jumped to about 10,000
Eileen Stow
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bizintelligenceonline.com
60
FEBRUARY 2012
Early-morning networking sessions may be the ticket to new business, if managers can deal with the disciplineBY SARA FARR
the organisation more than 25 years ago in the United States. It now bills itself as “the largest business networking organi-sation in the world” with 134,000 mem-bers all around the globe and 6.5 mil-lion referrals made in 2010, generating about US$2.8 billion (MOP22.4 billion) in business for members.
Membership is by invitation and each chapter has only one member rep-resenting each profession to limit com-petition for referrals. Different chapters usually don’t interact.
“If needs be, we will open a new chapter for other members of the same fi eld,” says Robby Kwok, the executive director of BNI Macau.
The network creates business by word of mouth and through referrals. At the breakfast meetings, typically held once a week, each member is asked to
Business
opment offi cer for Ponte 16 Tak Heng (Macau) Seafood Hot Pot Group Ltd. The company manages several restau-rants. Other chapter members represent the banking and fi nance sector, e-busi-ness, recruitment, information technol-ogy, health and beauty.
Professional powerThe driving force behind the organisa-tion is building a business network, with members responsible for expanding the group by introducing new members from different professional fi elds.
The BNI members that Macau Busi-ness spoke to said the network was not a system that offered jobs but a generator of referrals, which companies and indi-viduals can turn to in order to expand their business.
BNI chairman Ivan Misner started
If your idea of a good start to the day is breakfast at 6.30am with another 100 businesspeople, then Business
Network International have got it right.BNI, for short, has opened its fi rst
local group – the Macau Elite Chap-ter. At last month’s launch, as many as 120 businesspeople met at the Banyan Tree Macau’s ballroom for two hours of structured networking.
A typical BNI meeting begins with members assembling in a circle, with greetings and a welcome to guests. With the introductions made and business cards exchanged, the spotlight falls on a handful of members who introduce their businesses with a 60-second promotion-al pitch. Some members are entitled to a longer presentation, on a rotating basis.
The president of the Macau Elite Chapter is Leo Chan, a business devel-
Breakfast club
60
61
FEBRUARY 2012
chapter structure suits franchise owners’ interests, who boost their profi t through increased membership fees.
Mr Kwok rebuffs such claims. Can-didates must, however, agree to two con-ditions to join, he says.
The fi rst is “givers gain”.“Basically we give out what we have
and get a reward,” Mr Kwok says. He says the philosophy allows members to help each other through referrals or even by doing direct business. A member who owns a restaurant could give other mem-bers a discount each time they dine at the restaurant.
“This is a win-win situation, be-cause every time we want to dine or book a table for a large group, we just pick up the phone and call that member,” Mr Kwok says.
The second condition is “farming not hunting,” meaning members should help each other and not look out for themselves. “BNI is like a team. We bond together,” Mr Kwok says.
The membership fee is MOP6,000 for one year. The weekly breakfast meetings cost extra.
bring new referrals for fellow members and a guest to fuel the group’s growth.
BNI is a for-profi t corporation. The membership fee provides access to the network and training. Chapters are man-aged at a regional level by franchisees.
Bad pressThe BNI network has also been under fi re, especially in the United States, where former members have complained the organisation is a rip-off.
There are mixed opinions on how effective the BNI mechanism is in cre-ating business for members and on the quality of the business leads it generates.
Some members fi nd the referral sys-tem awkward, saying they do not feel comfortable in recommending people or companies they have not used. There is a similar hurdle in using other members’ services when they have their own estab-lished relationships.
Bloggers have also criticised the way BNI runs its business. A common complaint is that the rules are too strict and the pressure on members to recruit is too strong. The argument runs that the
BNI chairman Ivan Misner started the organisation more than 25 years ago in the United States
62
FEBRUARY 2012
Gaming | Billions Race
Gaming Results: Gross Revenue In Million MOP (1HKD:1.03MOP)
Mar 2011 Apr 2011 May 2011 Jun 2011 Aug 2011 Sep 2011 Oct 2011 Dec 2011 Jan 2012Nov 2011Jul 2011Jan 2011 Feb 2011
28,000
26,000
24,000
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
18,571 19,863 20,087 20,507
24,306
20,792
24,21224,769
21,244
26,851
23,058 23,60825,040
In what was the second-best take ever for Macau’s casinos, gross gaming revenue shot up 34.8 percent year-
on-year last month to MOP25.04 billion (US$3.1 billion), the most recent govern-ment fi gures show. The record, set last October, is MOP26.85 billion.
Beyond comparisonThe city’s casinos posted their second-best result last month, infl uenced by the Chinese New Year holiday
Although towards the high end of some estimates, the sum came in behind some analyst predictions, which sug-gested a new all-time record.
The results were strongly affected by holidaymakers over the Chinese New Year break and analysts say they will
only have a handle on the year ahead af-ter February’s numbers are released.
The festival was earlier this year – typically it falls in February – making year-on-year comparisons much harder.
In its note to investors, Union Gam-ing Research Macau said January “was
63
FEBRUARY 2012
SJM
Sands China
Galaxy
Wynn
MPEL
MGM
TOTAL
Feb
31%
18%
9%
15%
15%
12%
100%
Mar
34%
16%
11%
14%
14%
11%
100%
Apr
30%
17%
9%
17%
17%
11%
100%
May
32%
16%
13%
13%
14%
11%
100%
Jun
29%
16%
15%
15%
14%
11%
100%
Jul
28%
15%
19%
15%
16%
8%
100%
Aug
27%
14%
20%
13%
15%
11%
100%
Oct
26%
14%
21%
13%
15%
11%
100%
Nov
27%
16%
20%
13%
13%
11%
100%
Dec
26%
17%
19%
14%
14%
10%
100%
Jan
27%
19%
19%
13%
13%
10%
100%
Sep
29%
14%
20%
12%
16%
10%
100%
Jan
31%
18%
11%
14%
15%
11%
100%
20122011
Gaming Results: Market Share Per Operator
*
SJM Sands China Galaxy Wynn MPEL MGM
Mar 2011 Apr 2011 May 2011 Jun 2011 Jul 2011 Aug 2011 Sep 2011 Oct 2011 Dec 2011 Jan 2012Nov 2011Jan 2011 Feb 2011
40
30
20
10
0
(Figures are rounded to the nearest unit, therefore they may not add exactly to the rounded total) * estimated
*
an ‘easy’ calendar comparison” as Janu-ary 2011 did not include Chinese New Year.
“As compared to February 2011, which did have Chinese New Year, Janu-ary grew 26 percent, although after ad-justing for three fewer days in February, we estimate year-on-year growth was closer to 15 percent.”
Union Gaming’s analysts say Janu-ary’s return was not as strong as they had predicted due “to lower VIP vol-umes” and because “several operators also played a bit unlucky (but not dra-matically)”.
“Given the shift of Chinese New Year into January, we believe February will pose a diffi cult comparison for the market, despite the extra day,” Deutsche Bank gaming analyst Carlo Santarelli told investors. “As such, we believe looking at the aggregate of January and February for comparison purposes is more appropriate.”
For that two-month period, Union Gaming is expecting a 20 percent year-on-year growth.
Reading tealeavesUntil then investors and analysts will stay cautious, pricing in a slowdown in
growth from 42.2 percent for the whole of last year to 15 to 20 percent this year.
Union Gaming Research is fore-casting 30 percent gross gaming rev-enue growth for casinos in the fi rst half of the year. “We continue to believe the VIP segment should remain strong through at least the early part of 2012, as our channel checks suggest VIP de-mand is growing, not shrinking (despite macro-China fears) with junkets ask-ing for additional tables at many/most properties,” it says.
Union Gaming expects Sands Cotai
Central to be a driver of demand, much as other new properties have done pre-viously, the most recent case being Gal-axy Macau.
The company is still forecast-ing 20 percent gross gaming revenue growth for Macau this year for a take of MOP321 billion.
Morgan Stanley says Macau can expect 15 percent gaming growth this year. The investment bank says that the mass market will grow by 24 percent, double that of the VIP segment. HSBC Global Research’s analyst Sean Mona-ghan is sticking to his full-year forecast of 16 percent.
Meanwhile, last month brought some changes in the market share of the Macau-based casino operators. SJM Holdings Ltd. leads the market with a 27-percent market share but is now fol-lowed by Sands China Ltd. with a share close to 19 percent. Galaxy Entertain-ment Group Ltd. fell to third position by only a fraction of a percentage point.
Melco Crown Entertainment Ltd. held onto fourth in the league table with a 13-percent share, closely followed by Wynn Macau Ltd., with a share ap-proaching 13 percent. MGM China Holdings Ltd. has a 10-percent share.
Union Gaming Research is forecasting 30 percent gross gaming revenue growth for casinos in the fi rst half of the year
64
FEBRUARY 2012
Gaming
VIP baccarat continued to drive Macau’s gaming revenue growth in 2011, but mass market baccarat
easily outperformed it in terms of rev-enue growth for a second consecutive quarter.
Mass market baccarat revenue clocked in at MOP13.94 billion (US$1.74 billion) for the fourth quarter, a 43.8 per-cent increase over the fourth quarter of 2010 and a 10.2 percent increase over the third quarter of 2011, according to the Gaming Inspection and Coordina-tion Bureau data released last month.
While earning a record MOP53.27 billion for the fourth quarter, VIP bac-carat revenue was up at a relatively modest 31.6 percent over the fourth quarter of 2010 and only 2.9 percent sequentially.
“We have been expecting mass market [baccarat] to outpace VIP for more than fi ve years and it seems to fi nally be happening,” said Aaron
BY MARTIN JOHN WILLIAMS*
History in the makingMacau mass market baccarat outpacing VIP growth
Fischer, the Hong Kong-based head of consumer and gaming research at CLSA Asia Pacifi c Markets.
“We think the mass market will maintain strong momentum this year with the opening of the 6,000-room Sands Cotai Central,” Mr Fischer told GamblingCompliance. “We have long believed that there is a massive shortage of hotel rooms in Macau.”
Sands China Ltd., whose latest property in Cotai is scheduled to open by the end of the next month, is one of several operators in Macau attempt-ing to increase mass market custom to balance the volatile, junket-driven VIP segment.
In the third quarter, sequential mass market baccarat growth of 9.9 percent topped VIP growth of 6.6 percent over the same period, pushing VIP baccarat’s share from 74.0 percent to 73.7 percent. With the latest results and widening gap in growth rates, VIP baccarat’s share of
the “games of fortune” market — casi-nos and non-casino slots — fell to 72.5 percent, while mass baccarat’s share rose from 18 percent to 19 percent.
Still kingFor the full year, however, the VIP seg-ment remained king, with MOP196.13 billion in revenue, up 44.6 percent on 2010’s MOP135.65 billion. Mass bac-carat recorded MOP48.67 billion for 2011, up 39.4 percent.
Slot machine revenue for 2011, meanwhile, rose by a solid 32.6 percent to MOP11.43 billion, slightly above the 32.5 percent rise from 2009 to 2010.
Last month’s fi gures also arrested a temporary negative trend in slot unit revenue, with MOP189,462 in revenue per unit recorded in the fourth quarter, as the number of licensed machines rose by 156 to 16,056. Unit revenue had de-creased in the second quarter of 2011 and again in the third after hitting a record
65
FEBRUARY 2012
65
of MOP197,505 in the fi rst quarter.Other casino games generally grew
at rates well below the baccarat cat-egories for the year, though live multi game — in its fi rst full year comparison — and mahjong stood out with yearly growth rates of 103.3 percent and 105.9 percent respectively. Other revenue-topping games such as sic bo (listed by the gaming regulator as “cussec”) and blackjack grew 34.3 percent and 18.4 percent, respectively, while roulette revenue advanced 16.5 percent for the year.
The Gaming Inspection and Coor-dination Bureau results also indicated that the number of licensed gaming tables across the market dropped from 5,379 to 5,302 in the fourth quarter, a curious development given strong de-mand for tables amid dramatic revenue growth and ahead of the opening of Sands Cotai Central this year.
“The high number of gaming ta-bles in the third quarter of 2011 is ba-sically due to business operation needs of gaming concessionaires to deal with the infl ux of tourists during Golden Week in October,” Gaming Inspection
billion produced by Macau’s casinos and non-casino slots alone.
Other gaming revenue sources such as horse racing and sports lot-teries showed little movement, though the basketball lottery reached a new high of MOP86 million, up 8.9 percent from 2010.
Greyhound racing, meanwhile, completed a second year of decline with a 12.6 percent drop in revenue against 2010 to MOP297 million.
The latest negative result coincided with a new overseas offensive against animal cruelty at the Canidrome. Ani-mal rights group Grey2K alleged that four animals per race are injured in Macau dog racing and that 8 percent of injured dogs suffer bone damage, ac-cording to a report in the South China Morning Post.
Meanwhile, Sociedade de Lotarias Wing Hing, Ltda. will have its monopoly contract on Chinese lottery extended un-til the year-end, according to the offi cial gazette. The gazette mentioned there will be some modifi cations to the con-tract but no details were provided.
* EXCLUSIVE GAMBLINGCOMPLIANCE/MACAU BUSINESS
and Coordination Bureau media coor-dinator Wendy Wong said in an email to GamblingCompliance.
“As Golden Week has passed, the need for extra gaming tables is not nec-essary, thus resulting in a drop in the number in the fourth quarter,” she said.
Room to breatheA 5,500-table cap imposed by the gov-ernment on the industry until next year, followed by a 3 percent yearly increase for 10 years, had led analysts to won-der how Sands China would supply its new Cotai property with enough tables, while industry sources had suggested the cap would not apply to the property.
With the readjustment of the table fi gure, Sands could now apply for 198 tables without breaching the cap and add these to stored tables from other properties and certain types of elec-tronic tables exempt from the cap.
The rest of the Gaming Inspec-tion and Coordination Bureau’s data indicated that gross gaming revenue for 2011 reached MOP269.06 billion, up 41.9 percent year-on-year and only marginally more than the MOP267.87
66
FEBRUARY 2012
Source: Gaming Inspection and Coordination Bureau
TotalGames of Fortune (total)
VIP BaccaratBaccaratSlot MachinesCussecBlack JackStud PokerRoulette3-Card BaccaratTexas Holdem PokerFantanCasino War3-Card PokerFish-Prawn-CrabPaikaoCrapsLucky WheelMakccaratMahjongTombolaLive Multi Game
Horse RacingGreyhound RacingSports Lottery - FootballSports Lottery - BasketballChinese LotteryInstant Lottery
4Q2009
36,47636,16124,9767,2591,820
7795092622574542423727281326
716
0.5n/a1021108021
10.001
13.9%13.8%14.9%11.1%12.6%7.7%7.6%3.6%
59.6%-15.1%
7.7%-14.3%-17.8%22.7%
-22.2%8.3%
13.0%16.7%
-50.0%-14.3%25.0%
n/a45.7%- 0.9%33.3%75.0%0.0%
150.0%
41,24840,95128,7618,0241,948
8695942731355548453929281919
827
0.522
124915227
20.0002
13.1%13.2%15.2%10.5%
7.0%11.6%16.7%
4.2%- 47.5%
22.2%14.3%
7.1%5.4%7.4%0.0%
46.2%- 26.9%
14.3%100.0%16.7%
0.0%n/a
21.6%- 17.3%- 35.0%
28.6%100.0%- 80.0%
1Q2010
Macau Patacas (Million)
QoQ%
Gross revenue from different gaming activities4Q
2010
55,39855,10640,472
9,6982,407
9476272652225764433838212488719
0.446987292292
0.0005
16.1%16.3%18.9%
9.2%7.6%7.1%
18.8%3.9%
44.2%9.6%
23.1%-17.3%
0.0%15.2%
5.0%4.3%
158.8%-12.5%
0.0%-10.0%
0.04.5%
- 8.4%-15.3%
- 31.3%163.6%100.0%-16.7%
1Q2011
58,83558,52142,57010,5582,7231,067
663303188
656746454618302582
100.352
1167689331
0.0006
6.2%6.2%5.2%8.9%
13.1%12.7%5.7%
14.3%-15.3%14.0%4.7%7.0%
18.4%21.1%
-14.3%25.0%
-71.6%14.3%
100.0%11.1%
-0.313.0%18.4%5.6%
-3.3%13.8%
-50.0%20.0%
2Q2011
65,90065,60548,53911,5122,8281,137
6433001527571535248142936
81.6160.456
107818718
20.0012
12.0%12.1%14.0%9.0%3.9%6.6%
-3.0%-1.0%
-19.1%15.4%6.0%
15.2%15.6%4.3%
-22.2%-3.3%44.0%0.0%
-20.0%60%
0.37.7%
-7.8%6.6%
-2.2%-45.5%100.0%66.7%
4Q2011
3Q2011
73,80273,51753,26713,9433,0421,302
75036325572715771488
27548
n/a270.4
11410458
103192
0.0012
70,52170,22451,75012,6562,8321,268
657344189706755584811283610
n/a17
0.389
1138284172
0.0007
4.7%4.7%2.9%
10.2%7.4%2.7%
14.2%5.5%
34.9%2.9%6.0%3.6%
22.4%0.0%
-27.3%-3.6%50.0%
-20.0%n/a
58.8%33.3%28.1%-8.0%
-29.3%22.6%11.8%0.0%
71.4%
7.0%7.0%6.6%9.9%0.1%
11.5%2.2%
14.7%24.3%-6.7%-5.6%3.8%
11.5%0.0%
-21.4%-3.4%0.0%
25.0%n/a
6.3%-25.0%58.9%5.6%1.2%
-3.4%-5.6%0.0%
-41.7%
3Q2010
47,72347,38434,047
8,8842,236
884528255154525252383320233481
100.444
10785
134111
0.0006
5.5%5.5%5.2%6.9%
10.3%3.3%
-2.4%-4.1%-4.3%-5.5%0.0%
20.9%-7.3%10.0%
-16.7%15.0%54.5%
-11.1%400.0%25.0%
0.0%7.3%
-2.7%-6.6%31.4%-8.3%0.0%
- 40.0%
TotalGames of Fortune
VIP BaccaratBaccaratSlot MachinesCussecBlack JackStud PokerRoulette3-Card BaccaratTexas Holdem PokerFantanCasino War3-Card PokerFish-Prawn-CrabPaikaoCrapsLucky WheelMakccaratMahjongTombolaLive Multi Game
Horse RacingGreyhound RacingSports Lottery - FootballSports Lottery - BasketballChinese LotteryInstant Lottery
2Q2010
45,21944,90232,368
8,3102,028
85654126616155524341302420229
0.28
0.441
11091
102121
0.001
9.6%9.6%
12.5%3.6%4.1%
-1.5%-8.9%-2.6%19.3%
0.0%8.3%
-4.4%5.1%3.4%
-14.3%5.3%
15.8%12.5%
-90.0%14.3%
-20.0%86.4%
-11.3%0.0%
96.2%-55.6%-50.0%400.0%
Gaming | Billions Race
67
FEBRUARY 2012
Wynn Macau casino was the biggest single generator of gross gaming revenues in the city in 2011. Wynn Macau’s casino take was
around MOP35 billion (US$4.4 billion), sources told Macau Business.
Local regulators consider Encore an extension of the Wynn Macau casino.
MGM Macau came in second place with MOP26 billion in revenue, while City of Dreams ranked third, with MOP24 billion.
Galaxy Macau, although only opened on May 15, was still able to grab a spot in the top-10. It comes in seventh place, with gross gaming revenue of about MOP15 billion.
Note that the number of gaming tables and slot machines differs from property to property.
The money spinnersWynn Macau was the property posting the highest gross gaming revenue for last year
No. Property Rank in 2010Gross Gaming Revenue 2011 (Estimated)
Wynn Macau
MGM Macau
City of Dreams
Grand Lisboa
StarWorld
Venetian Macao
Galaxy Macau
Altira
Sands Macao
Lisboa
35 billion
26 billion
24 billion
23 billion
22 billion
21 billion
15 billion
13 billion
11 billion
10 billion
1st
3rd
5th
6th
4th
2nd
Not open
8th
7th
9th
1
2
3
4
5
6
7
8
9
10
Wynn Macau MGM Macau
City of Dreams Grand Lisboa
68
FEBRUARY 2012
Macau gaming stocks have start-ed the year on a positive note, as investors bet on a good per-
formance by the city’s casinos during the Lunar New Year holidays. There was a correction in the last two days of Janu-ary, as the fi rst estimates of the month’s casino gross gaming revenue fell short of investors’ expectations. Eventually, that was not the case, with January’s rev-enue number ending towards the higher end of analyst estimates.
This month kicks off the results season, which is expected to drive stock performance.
Morgan Stanley analyst Praveen Choudhary says in a note to investors he expects Macau’s casino industry to report annual growth of 55 percent in earnings before interest, taxes, deprecia-tion and amortisation (EBITDA) for the fourth quarter of last year, and quarterly
BY RAY CHAN
Bright prospects
growth of 12 percent.Sands China Ltd. (1928.HK) re-
ported its fourth quarter results early this month, through its parent company, Las Vegas Sands Corp. (LVS.US). The Macau casino operator reported adjust-ed property EBITDA of US$430.1 mil-lion (MOP3.4 billion), 29.2 percent more than a year before. Its net profi t rose by 43.8 percent to US$306.7 million.
Also early this month, Wynn Macau Ltd. announced a profi t of US$239.9 million for the last quarter of 2011, up by 15 percent year-on-year. Net revenues reached US$995.5 million, a 9.1 percent year-on-year increase. Adjusted proper-ty EBITDA in the fourth quarter of 2011 was US$313.1 million, up 5.5 percent from US$296.8 million in the fourth quarter of 2010.
Mr Choudhary expects MGM Chi-na Holdings Ltd (2282.HK) and Galaxy
Results season has started, with good news coming from Sands China Ltd.
NameTicker Share price performance (HK$/US$) Change (%)
52-week high 26/01/201252-week low Year-to-date
SJM Holdings Ltd.
Galaxy Entertainment Group
Wynn Macau Ltd.
Sands China Ltd.
Melco International Develop.
Melco Crown Entertainment Ltd.
Melco Crown Entertainment
MGM China Holdings Ltd.
Hang Seng Index
Las Vegas Sands Corp.
MGM Resorts International
Wynn Resorts Ltd.
Penn National Gaming Inc.
Dow Jones Indus. Avg.
S&P 500 Index
21.00
22.45
27.48
27.50
10.76
29.35
16.15
18.20
24,468.64
50.65
16.05
165.49
44.29
12,876.00
1,370.58
10.22
8.69
14.81
14.90
4.30
22.40
6.46
8.05
16,170.35
36.05
7.40
101.02
31.68
10,404.49
1,074.77
14.26
17.94
21.00
26.95
6.91
29.35
11.29
11.92
20,439.14
49.74
13.11
120.42
40.56
12,756.96
1,326.06
12.46
25.98
7.69
22.78
19.76
19.80
17.36
17.32
10.88
16.41
25.70
8.99
6.54
4.41
5.44
0880.HK
0027.HK
1128.HK
1928.HK
0200.HK
6883.HK
MPEL.US
2282.HK
HIS.IND
LVS.US
MGM.US
WYNN.US
PENN.US
UNDU.IND
SPX.IND
Gaming | Stock Watch
69
FEBRUARY 2012
ON TOP OF THE WORLDMacau dominates the new list of the big-
gest gaming companies in the world.The Global Betting and Gaming Consult-
ants index of the 50 biggest casino opera-tors by gambling market capitalisation has fi ve Macau operators in the top 10, with only Melco Crown Entertainment Ltd. absent, al-beit in 12th place. The list is compiled using each company’s share of revenue derived from gaming.
There are seven Asian fi rms in the latest edition of the top 10, led by Sands China Ltd. at number two, Wynn Macau Ltd. at number three and Genting Singapore Plc at number four. Top-placed Las Vegas Sands Corp and aWynn Resorts Ltd, in fi fth place, also have signifi cant revenue from Asia.
SJM Holdings Ltd. is sixth, followed by Galaxy Entertainment Group Ltd., while MGM China Holdings Ltd. rounds out the top 10.
The presence of so many Asian fi rms in the top spots “simply refl ects the fact that Asia has become the largest gambling region in the world, overtaking Europe and North America,” says Lorien Pilling, the research director of Global Betting and Gaming Consultants.
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As of January 26, 2012
MELCO CROWN LOOKS FOR MONEYMelco Crown Entertainment Ltd. is looking to
borrow up to US$2 billion (MOP16 billion) to pay for its Macau Studio City project in Cotai, unnamed sources have told Reuters. The com-pany will seek a loan of US$1.25 billion and also issue bonds, one of the sources said.
The government last month stressed once more that it has yet to approve the inclusion of a casino in the Macao Studio City project. “The approval is not completed,” said the secretary for transport and public works Lau Si Io.
Mr Lau denied the existence of any “secret deal” on a casino between the government and Melco Crown, which acquired the majority stake in the project last year. Melco Crown has said several times that it is confi dent that it will be able to include a casino in the project.
Melco Crown is also working on big changes for City of Dreams, starting with a re-branding of the development, a source in the company told Macau Business. “The re-branding is still very secret but will go ahead this year,” the source said.
On February 5, the signature restaurant at City of Dreams, Horizons, closed for a two-month renovation. When it reopens it might offer a menu by French chef Guillaume Galliot that could come into consideration for a Michelin star. The new Horizons will feature a new en-trance and private dining rooms, and a bar that will introduce guests to fi ne dining.
City of Dreams is also aiming to open an-other Chinese restaurant in July.
Entertainment Group Ltd. (0027.HK) to post double-digit quarterly growth in EBITDA for the fourth quarter. MGM China Holdings Ltd. will have the best growth rate, 29 percent, giving it EBIT-DA of HK$1.42 billion, Morgan Stanley estimates. Its estimate for Galaxy En-tertainment Group Ltd. is HK$1.97 bil-lion, an increase of 10 percent.
Melco Crown Entertainment Ltd. (6883.HK, MPEL.US) is expected to post EBITDA of US$224 million, 7 percent less than in the third quarter but 68 percent more than a year before, according to Morgan Stanley.
SJM Holdings Ltd. (0880.HK) is forecast to post EBITDA of HK$1.77 billion, also 7 percent more than in the third quarter.
New best ideaMorgan Stanley says it now prefers companies with exposure to Cotai, namely Sands China, Galaxy Entertain-ment and Melco Crown. Its analysts ex-pect slower growth for companies with casinos on the peninsula. As a result,
Galaxy Entertainment Group Ltd.Melco Crown Entertainment
Wynn Macau Ltd.SJM Holdings Ltd. Sands China Ltd.Melco International Development MGM China Holdings Ltd.
Hang Seng Index
Share price performance of Hong Kong-listed gaming stocks (Rebased as HK$100)
1-Jan2011
1-Feb2011
1-Mar2011
1-Apr2011
1-May2011
1-Jun2011
1-Jul2011
1-Aug2011
1-Sep2011
1-Oct2011
1-Nov2011
1-Dec2011
1-Jan2012
300
250
200
150
100
50
-
Morgan Stanley has replaced SJM on its “Best Ideas” list with Sands China.
Late last month Sands China declared its fi rst dividend. Wynn Macau and SJM are the only other Macau casino operators to have ever paid a dividend. Sands China told the stock exchange it expects the interim
dividend of HK$0.58 per share to be paid on February 28 to shareholders on February 20.
Sands China says it “has suffi cient reserves, after the payment of this in-terim dividend, to fi nance its opera-tions and the expansion of its business, including the development of additional
Gaming | Stock Watch
71
FEBRUARY 2012
As of January 26, 2012
Wynn Resorts Ltd. MGM Resorts InternationalLas Vegas Sands Corp.Penn National Gaming Inc. Melco Crown Entertainment-ADR S&P 500 Index
Share price performance of U.S.-listed gaming stocks (Rebased as US$100)
1-Jan2011
1-Feb2011
1-Mar2011
1-Apr2011
1-May2011
1-Jun2011
1-Jul2011
1-Aug2011
1-Sep2011
1-Oct2011
1-Nov2011
1-Dec2011
1-Jan2012
300
250
200
150
100
50
-
WHEELS OF JUSTICE
integrated resorts in Macau”. The com-pany is expected to inaugurate its Sands Cotai Central project next month.
HSBC Global Research analyst Sean Monaghan says the fi rst phase of the development is on schedule to open between March 22 and 27. The fi rst phase will include a 9,850 square-metre
casino with VIP gaming areas. When work is complete, the development will have more than 5,800 hotel rooms.
Mr Monaghan estimates that Sands Cotai Central will account for 28 per-cent of Sands China’s EBITDA in 2013. He also expects Sands China to be the stock that dominates this year.
A court has begun hearing the ap-peal by Sands China Ltd. against the
government’s rejection of its application for a land concession for parcels seven and eight in Cotai, a source close to the proceedings told Macau Business. The fi rst hearing was just before the Lunar New Year. The appeal was lodged in January last year.
Sands China long ago submitted to the government a detailed application to develop parcels seven and eight. But in December 2010 the Lands, Public Works and Transport Bureau announced that it
would not grant the land to Sands China and instead would keep it in reserve.
Sands China asked the chief ex-ecutive for a review of the decision and later appealed to the Court of Second Instance, which is now hearing the case. Even if Sands China wins its appeal, the chief executive could still deny it a land concession on public policy grounds, the company has said.
Sands China has said it invested more than US$100 million (MOP800 million) de-veloping the land before the government’s decision.
It’s your daily
business
It’s your daily
business
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FEBRUARY 2012
A partnership crumbles
There are always two sides to every story. To Japanese gaming mag-nate Kazuo Okada, the chairman
of pachinko machine maker Universal Entertainment Corp. and owner of 19.7 percent of Wynn Resorts Ltd., it looks like Wynn Resorts is hiding its fi nan-cial records. To Wynn Resorts, headed by Steve Wynn, it looks like Mr Okada is miffed by the Las Vegas casino op-erator’s lack of interest in his big casino project in Manila.
Wynn Resorts says it removed Mr Okada as its vice-chairman in October. On January 11, Mr Okada fi led a lawsuit in Nevada against Wynn Resorts seek-ing access to the company’s books and records. A hearing on the lawsuit was scheduled for February 9.
Mr Okada alleges that the company is denying him access to its fi nancial records, in particular its records of his investments of up to US$120 million
(MOP960 million), dating back to 2002, which, he alleges, he made at Mr Wynn’s request to fund in part the Wynn Macau project.
Mr Okada was a partner of Mr Wynn when Mr Wynn decided to estab-lish the predecessor of Wynn Resorts in 2000 after losing control of Mirage Re-sorts Inc. An outsider took over Mirage Resorts largely because investors were unhappy with Mr Wynn’s high spending on projects and a multi-million-dollar corporate art collection.
Mr Okada says recent events, includ-ing a Wynn Resorts pledge of MOP1.1 billion to the University of Macau, led him to demand to exercise his right as a director to review the books and records of the company. Wynn Macau Ltd., the local subsidiary of Wynn Re-sorts, pledged the money to the Univer-sity of Macau Development Foundation last May. It donated MOP200 million
straight away and promised to donate MOP80 million more each year from 2012 to 2022 inclusive. Wynn Macau’s gaming concession expires in June 2022.
Mr Okada says he formally objected to this pledge. He alleges that there was no discussion about whether such a large gift over such a long period is an appro-priate use of corporate funds.
Boardroom divorceHowever, Mr Okada was present at the presentation of the fi rst cheque to the university, along with Mr Wynn and Macau’s former chief executive, Ed-mund Ho Hau Wah, now vice-chairman of the national committee of the Chinese People’s Political Consultative Confer-ence. Some analysts say the donation was part of Mr Wynn’s effort to ensure political support and goodwill for Wynn Macau’s project in Cotai, which is await-ing government approval.
Gaming
A partnership crumblesSteve Wynn and once-close business partner Kazuo Okada are engaged in a legal struggle over access to the Wynn Resorts books
Ph
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FEBRUARY 2012
Wynn Resorts issued a written statement saying Mr Okada’s allegations were “preposterous and without merit” and that the company would defend it-self vigorously.
In a court fi ling, the company says Mr Okada’s allegation that he was de-nied access to the company’s fi nancial books is “innuendo, hyperbole, half-truths and sweeping generalizations.” According to Wynn Resorts, Mr Okada “has failed to justify the request.”
The company says Mr Okada’s re-quest to access the company’s books are nothing more than stockholder inspec-tion requests. Wynn Resorts adds that, under Nevada law, shareholders have no rights to inspect the books “of publicly-owned companies that are timely with SEC fi lings (as Wynn is).”
Wynn Resorts says that to try to get around this problem, Mr Okada had presented his request as a director rather than a shareholder, a “maneuver” the company expects to be “fl atly rejected by the court”.
Mr Okada has the largest single shareholding in Wynn Resorts. Mr Wynn and his former wife Elaine had a similar stake, but they divided it equal-ly among themselves in January last year when they divorced, reducing Mr Wynn’s stake to about 9 percent.
At the time, Mr Okada and Mr and Mrs Wynn signed an agreement to lock up their shareholdings and vote their shares in unison. Mr Okada now intends to use that agreement to increase his rep-resentation on the company’s board.
He has nominated four people for seats on the board, including Mrs Wynn’s seat, in case she decides to va-cate it. The company’s annual meeting is expected to be held in May.
If Mr Okada’s nominees all won seats, fi ve of the 12 directors would be in his camp and two of Mr Wynn’s clos-
est confi dants would be off the board: chief operating offi cer Marc Schorr and Linda Chen, president of interna-tional marketing and chief operating offi cer of Wynn Macau. Mr Okada told the stock exchange that his nominees would “strengthen the board and provide strong, independent directors to enhance the company’s corporate governance.”
Friendship souredThe confrontation between Mr Okada and Mr Wynn appears to be connected with the casino resort that Mr Okada’s Universal Entertainment is building in Manila. The US$2-billion development is meant to cater to gamblers from the mainland, Hong Kong, South Korea, Japan and Singapore. Mr Okada broke ground for the project on January 16, only days after he fi led his lawsuit.
Wynn Resorts has said that the project is the result of Mr Okada’s “deci-sion to directly compete with the com-pany ... despite repeated admonishments from the board.” It issued a written state-ment saying that Mr Okada misused his position as director of the company “to imply the company’s participation in projects that [Wynn Resorts] had made fi rm decisions to avoid.”
In a conference call early this month, Mr Wynn said the action is an attempt by Mr Okada to defl ect attention away from the dispute between the Japa-nese businessman and Wynn Resorts re-lated to Mr Okada’s Philippines project.
“We have a sharp disagreement” with Mr Okada in regards to the Phil-ippines, Mr Wynn said. “We have ex-pressed our convictions that it was not an appropriate business opportunity for us for a couple of years now. For reasons that are best known to Mr. Okada, he has
not enjoyed that disagreement.”“We’ve also taken a very strong
opinion about not wanting to give the impression that Wynn Resorts was the developer of the land that he has ac-quired in the Philippines. And this has created some stress between us unfortu-nately,” Mr Wynn said.
In 2008, when asked if he would participate in Mr Okada’s Manila project, Mr Wynn said: “This is some-thing that Kazuo Okada and his compa-ny ... has done on its own initiative. He consults me and has discussed it with me extensively. And I’ve given him my own personal thoughts ... and advice. And to the extent that he comes to me for any more advice or input, all of us here at the company would be glad to give him our opinion. But that is short of saying that this is a Wynn Resorts project.”
Analysts think Mr Okada’s lawsuit may be intended to prod Wynn Resorts into buying him out of the company so he can fi nance Universal Entertainment casino projects in Asia. “We believe Mr Okada’s motivation could relate to Uni-versal’s liquidity needs in order to de-velop casino resorts in the Philippines (Manila) and South Korea (Incheon), in addition to what he may have in mind for casino development in Japan should legislation eventually pass,” Bill Lerner of Union Gaming Research wrote in a research report.
The confrontation with Mr Okada seems to not have pinched Mr Wynn’s philanthropic vein. Shortly after Mr Okada’s lawsuit made the news, it was reported that Mr Wynn had donated MOP2 million to Anima – Society for the Protection of Animals (Macau) and would become the society’s honorary chairman.
Kazuo Okada (third from the right), Edmund Ho Hau Wah (centre) and Steve Wynn (fourth from the left) at the presentation ceremony of the fi rst tranche of the MOP1.1 billion donation to the University of Macau
Steve Wynn says the action is an attempt by Kazuo Okada to defl ect attention away from the dispute between the Japanese businessman and Wynn Resorts related to Mr Okada’s Philippines project
74
FEBRUARY 2012
75
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BY LUCIANA LEITÃO ILLUSTRATIONS RUI RASQUINHO
Very important promotersThe number of licensed VIP gambling junket operators continues to rise, provoking calls for greater transparency
junket operators are middlemen who bring high rollers to Macau’s casinos and lend them money to play.
Casting a netThe VIP gaming industry has three ele-ments: the casinos, junket operators and their representatives.
The junket operators strike deals with the casinos to promote VIP rooms, and they typically commit themselves to a minimum amount of rolling chip pur-chases a month, set by the casino. The junket operators then enter into arrange-ments with their representatives, who have direct relations with the gamblers and bring the high rollers, especially from the mainland, to the VIP gaming rooms. A casino may strike deals with several junket operators to supply gam-blers for different VIP rooms, with all the junket operators being in competi-tion with each other.
The junket operator supplies the players. All the gaming is run by the ca-sino, which provides the croupiers and gaming managers.
Big junket operators use a multi-tier system to rustle up business, with a network of representatives and sub-rep-
resentatives spread over the mainland and familiar with the credit history of players. Some estimates put the number of people in the junket business as high as 10,000, but only a few are offi cially known to the regulator.
The Macau Public Prosecutions Offi ce said last year that the number of money-laundering cases connected with the gaming industry, mainly with illegal gambling in VIP rooms, was increasing. Other sources speak of a considerable amount of gaming revenue going unre-ported because it is from side-betting agreements between the junket operator and gambler.
Deeply integratedIn Singapore, Asia’s second-biggest gaming market, the regulator has yet to issue its fi rst junket licence and there is no clear indication that it will do so before the end of this year. The proc-ess of screening prospective junket op-erators is continuing amid a tightening of money-lending and money-transfer regulations. Meanwhile, “shadow jun-kets” are reportedly exploiting gaps in enforcement to sneak a steady supply of Malaysian and Chinese high rollers into the city’s two casinos.
In Macau, roughly two out of eve-ry fi ve gaming tables are VIP tables, a source told Macau Business. That means there are more than 2,000 VIP tables. The source said that at the end of Sep-tember SJM Holdings Ltd. had 28 per-cent of the VIP tables, Sands China Ltd. and Melco Crown Entertainment Ltd. about 17 percent each, Galaxy Entertain-ment Group Ltd. about 16 percent, Wynn Macau Ltd. about 13 percent and MGM China Holdings Ltd. about 9 percent. The gaming regulator determines how many tables each casino operator is allowed to have for the VIP or mass markets.
Offi cial data shows that the num-ber of VIP gaming promoters operating legally in Macau is
the highest ever. There are 219 licensed companies and individuals, 13 percent more than a year ago, annual data re-leased last month by the Gaming Inspec-tion and Coordination Bureau shows.
That is an average of six licensed junket operators per casino.
The average daily winnings for each VIP gaming table in Macau reached about US$34,000 (MOP272,000) last year, Union Gaming Research Macau estimates. VIP baccarat generated gross revenue of MOP196.1 billion (US$24.5 billion) last year, up by 44.6 percent and accounting for 73 percent of the sector’s revenue, although there are signs that mass market baccarat is starting to grow at a faster rate (see story in this section).
The surge in the number of junket operators and in VIP gaming revenue has prompted several analysts to call for more openness in the industry.
But Kenny Leong Siak Hung, chief executive of Asia Entertainment and Resources Ltd., one of Macau’s listed VIP junket companies, says gaming promoters are now more transparent than ever. He says most junket operators are ordinary businessmen. Last year, his company had a rolling chip turnover of US$19.9 billion, an average of US$1.66 billion a month, 91 percent more than the year before.
The head of the Gaming Inspec-tion and Coordination Bureau, Manuel Joaquim das Neves, believes manda-tory annual renewal of licences serves to bring any shady businesses to light. Analysts, however, remain suspicious.
VIP gaming revenue depends main-ly on junket operators, although some casinos are making limited efforts to promote direct VIP gaming. Put simply,
The head of the Gaming Inspection and Coordination Bureau, Manuel Joaquim das Neves, believes mandatory annual renewal of licences serves to bring any shady businesses to light
Gaming
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The Macau junket system was es-tablished during the Portuguese Admin-istration, when Sociedade de Turismo e Diversões de Macau SA had a monopoly on gaming. The rules were different then and less stringent. With the liberalisation of the gaming industry, new regulations came into force, covering the vetting and licensing of junket operators, their reg-istration with the gaming operators and the payment of commissions.
“They are required to be associ-ated to a casino operator. There are no freelance junkets,” Mr Neves says. “We have refused licences to junkets a cou-ple of times. Things such as the criminal record are to be taken into account.’’
Mystery menA contract between a junket operator and a casino operator must be written, determining the amount and method of payment of commissions, how the junket operator will operate, and where. A copy must be fi led with the gaming regulator.
There are two ways to pay junket operators. They either take a fi xed com-mission, an agreed percentage of rolling chip turnover, capped at 1.25 percent, or they accept an agreed percentage of the winnings in the VIP gaming room, plus certain incentive allowances that may also mean they bear the same percent-age of any losses.
The rules should not be more re-strictive, says Mr Neves. “Things have been going well and, internationally, through contact with other regulators, I hear compliments,” he says.
Jonathan Galaviz, managing direc-tor of Las Vegas consulting fi rm Galaviz & Co, says otherwise. Mr Galaviz says the junket licensing regime is weak and not comprehensive enough. He wants more comprehensive 10-year back-ground checks on junkets instead of re-lying solely on criminal records.
The director of the Institute for the Study of Commercial Gaming at the University of Macau, Davis Fong Ka Chio, says that if there were more regu-lations for VIP operations, it would in-crease cash fl ows for casinos by elimi-nating side betting and cleaning up the business. “From time to time, a lot of people whose backgrounds we don’t know exactly actually get involved in the junket operations,” he says.
Mr Fong suggests thorough back-ground checks, and that all junket opera-tors and their representatives be made to wear identifi cation, as the law requires.
He says police should be allowed to go undercover to detect crime in the VIP gaming world.
David Green, a gaming consultant at Newpage Consulting, says casino op-erators are also legally responsible for the actions of junket operators, so it is in their interest to investigate thoroughly any junket operator they intend to deal with.
The casino operators here that are subsidiaries of Las Vegas casino op-erators – MGM China Holdings Ltd., Sands China Ltd. and Wynn Macau Ltd. – must ensure that their operations in Macau comply with Nevada regulations, says Mr Green. This includes ensuring the suitability of business partners.
On alertMeanwhile, junket operators are con-tinuing to look for mainstream sources of capital and corporate respectability by listing shares. Apart from Asia En-tertainment and Resources, major listed junket operators include Neptune Group Ltd. and Dore Holdings Ltd.
Suncity Group has the reputation of being the biggest junket operator in town, with more than 10 VIP rooms.
Mr Neves believes it is an exaggera-tion to say that VIP junkets are inevitably linked with corruption and other illicit practices. “The junket licences have one-year duration and every year they have to renew the licence. If something is wrong, we simply do not renew,” he says.
That has happened previously. “Sometimes, some junkets do not fully comply with the regulations. Fortunate-ly, nowadays, things are much better,” Mr Neves says.
A common accusation is that junket operators have close connections with organised crime. Mr Neves says his bu-reau and the police are on the alert for such connections.
As for debt collecting in places like the mainland, where gambling debts cannot be collected through the courts and junket operators may resort to extra-judicial measures, Mr Neves says there is little the regulator can do. “We could have more restrictive legislation but it would be useless, since debts are never collected in Macau.”
Mr Neves says the present system is open enough. “Directly or through the operator, junkets are required to submit reports. And there is joint responsibility, which means that if something is wrong, the operator is also responsible.”
Risk managementMr Fong thinks the VIP gaming system should be transformed gradually, espe-cially debt collection. “We could develop a system where we could transfer the credit function from the junket to the ca-sino operator,” he says. Mr Fong says that even if junkets could no longer funnel high rollers into Macau, casino operators could bear the decline in gaming revenue because the market as a whole is so big.
Junket operators, says Mr Galaviz, exist because of restrictions on main-landers that travel to Macau, principally limits on the amount of money they can bring with them. Should junkets become illegal, casino revenue would be cut by more than half, he estimates.
Mr Green says junkets exist because gambling debts cannot be collected through the courts in the mainland and because casino operators cannot make tax deductions for bad gambling debts. “They [junket operators] take on the risk and source the high rollers, who ulti-mately generate the revenue for the host concessionaire. Risk mitigation is rather like insurance. In order to contain the risk, a price has to be paid to the party who assumes it,” he says.
The price paid by casinos is, cus-tomarily, 40 percent of VIP room rev-enue. The government takes another 40 percent in taxes, leaving the casino with just 20 percent.
Industry insiders say several junket operators have meanwhile found a way of circumventing the mainland authorities’ refusal to recognise gambling debts while working within the confi nes of the law – by getting a moneylender’s licence.
Jonathan Galaviz, from Las Vegas consulting fi rm Galaviz & Co, says the junket licensing regime is weak and not comprehensive enough. He wants more comprehensive 10-year background checks on junkets instead of relying solely on criminal records
Gaming
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Bally Technologies Inc. celebrates its 80th anniversary this year. The company only opened a
Macau offi ce in 2006 but the territory has already become very important for the fi rm, says new Asia-Pacifi c manag-ing director Kurt Gissane.
“The Asia-Pacifi c region is ex-tremely important to Bally,” Mr Gissane tells Macau Business. “The two largest gaming markets in the world are now offi cially in the Asia-Pacifi c rim, Macau and Singapore, and it is highly probable that with all the developments underway in the Philippines, the Asia-Pacifi c will be the home to the three largest gaming markets in the world in the not too dis-tant future.”
Mr Gissane has the diffi cult job of replacing Cath Burns, who established the company’s Asia-Pacifi c head offi ce in Macau in 2006 and managed large-scale systems installation projects for several of the city’s new casinos. She left the company last November, moving to TCS John Huxley as global chief execu-tive offi cer. She starts next month.
Strong betU.S. gaming supplier Bally Technologies has its eye on mobile gaming and Asia to drive growth
Mr Gissane says he is not concerned.“Macau has been an extremely sig-
nifi cant part of Bally Asia-Pacifi c’s busi-ness over the past fi ve years and this will continue. Although there may be a slight slowdown in the number of large-scale integrated resorts due to open in the next couple of years, we are in the technology business and technology does not stand still,” he says.
“We have a huge array of exciting product developments across both our games and systems [divisions], and we will continue to work with our partners to implement such products across their operations.”
From his Macau offi ce, Mr Gissane oversees Bally’s expansion around Asia-Pacifi c. “There are also a number of great business opportunities elsewhere in the region,” he says, highlighting the large-scale integrated resorts scheduled to open in the Philippines.
“We see signifi cant business op-portunities there in the next two to fi ve years.”
There are business opportunities in Vietnam and the company is talking to operators there, he says.
Looking at Bally’s past, Mr Gissane says the company has survived for 80 years in an industry as competitive as gaming by continuously innovating.
“Bally has always been at the fore-front of innovation. Since the develop-ment of the fi rst slot machine in 1936, the Bally Baby, we have not stopped intro-ducing industry’s-fi rst products,” he says.
“I don’t look at it as though I have replaced Cath Burns,” Mr Gissane says. He praised her achievements, saying he was very fortunate to be left with a leg-acy “which is a strong business across both games and systems but, more im-portantly, a tremendous team”.
One of Mr Gissane’s immediate challenges is to grab a share of the slot machine orders Sands China Ltd. will place as the Sands Cotai Central project gears up. Previous reports mentioned Bally was hopeful of taking a 20-per-cent share of the order.
He says both companies have “an extremely strong partnership” globally. While Mr Gissane would not provide any details, he is confi dent Bally will have an appropriate footprint in the property.
Changing gearsAfter Cotai Sands Central is opened, there will be at least three years until a new mega-casino opens in Macau and the big contracts for slot machines are again up for grabs.
Gaming
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BALLY BETS ON MOONWALK MONEYMAKERBally Technologies Inc. is preparing the
launch of a handful of new games at the upcoming G2E Asia this May.
“Bally is proud to have acquired two globally-recognised brands in ‘Michael Jack-son King of P op’ and ‘Grease’. These games are scheduled to be launched this year in the Asia-Pacifi c region during G2E Asia,” says the company’s managing director for Asia-Pacifi c, Kurt Gissane.
“I am particularly, extremely excited about the launch of the Michael Jackson game. He was an incredible performer with tremendous global appeal and I believe this game will resonate with the Asian players.”
The Michael Jackson King of Pop video slot is presented on the new Pro Series V22/32 cabinet with Bally’s Pro surround-sound chair. The game features bonus events based on and featuring Michael Jack-son hits like “Beat It” and “Billie Jean”.
The company is also introducing the award-winning “Fish’n for Loot” game, the fi rst to feature the iDeck virtual button deck as an arcade-like, player-input device.
On the systems side, Bally will continue to push its in-game player-user-interface iView Display Manager and data analysis application Bally Business Intelligence.
“Lastly, Service Track-ing Manager is another product we feel will have a great impact here,” Mr Gissane says. Its automated dispatch and alert system creates and assigns tasks to casino personnel by intercepting mes-sages from Bally’s suite of systems products. The goal, he says, is to increase the effi ciency of casino op-erations by monitoring, managing, executing and providing sta-tistical analysis.
“We created the fi rst electro-me-chanical slot machine with a bottomless hopper in 1963 and in 1976 we intro-duced SDS, the fi rst slot management system.”
Bally reported revenue of US$210.5 million (MOP1.68 billion) for the three months ended December, a 15.2-percent increase on the same period the year before. Profi t was down 10.9 percent to US$24.3 million.
This year, the company is launch-ing Bally Interactive, its new business
division focusing on mobile, Internet and social initiatives, complement-ing its traditional games and systems business lines. At last month’s ICE Totally Gaming in London, Bally displayed a suite of Internet games, interactive versions of existing Bally games.
“Bally Interactive solutions will enable casinos to deliver a powerful experience to their patrons whether they are on the casino fl oor, at home, or on the move,” Mr Gissane says.
“Macau has been an extremely signifi cant part of Bally Asia-Pacifi c’s business over the past fi ve years and this will continue,” says new Asia-Pacifi c managing director Kurt Gissane
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FEBRUARY 2012
Mocha Clubs opened its 10th club last month, in one of Macau’s busiest locations. Located at Hotel Golden Dragon, the all-new venue operates around the clock
and is spread over three fl oors.The new club hosts about 300 slot machines and electron-
ic tables over a fl oor area of about 1,850 square metres, which includes two VIP rooms.
The Mocha Golden Dragon is “located in one of the busi-est spots in Macau while enjoying proximity to sightseeing spots, hotels, the ferry pier and transportation,” said Con-stance Hsu, president of Mocha Clubs.
The new slots raise Mocha’s total inventory to 2,100, the company said in a statement. At the end of last year, Macau’s gaming industry had around 16,000 slots and electronic gam-ing machines. Mocha is one of the biggest non-casino gaming operations in the city and is a subsidiary of Melco Crown En-tertainment Ltd.
But while it has just opened a new venue, Mocha Clubs may have to soon close another. A new set of rules on the lo-cation of slot machine parlours is to be enacted soon and it may lead to the closure of Mocha Marina Plaza parlour in Rua de Pequim.
Little impactThe head of the Gaming Inspection and Coordination Bureau, Manuel Joaquim das Neves, said a bylaw banning parlours in residential areas would be ready by the end of next month. In a written reply to an enquiry from legislator Au Kam San, Mr Neves said the government would also work with the gaming industry to set a schedule for all parlours operating in residen-tial areas to be removed.
Aside from Mocha Marina Plaza, only Yat Yuen Canid-rome Slot Lounge in Fai Chi Kei is considered to be in a resi-dential area. The venue is owned by SJM Holdings Ltd.
Union Gaming Research Macau said these new rules would have little infl uence on either Melco Crown or SJM. “We believe the closure of these two slot parlours will have virtually no impact on our forecasted 2012 adjusted earnings before interest, taxes, depreciation and amortisation (EBIT-DA) for both Melco Crown and SJM Holdings,” the company said in a recent report.
Game onThe newest Mocha slot parlour at Hotel Golden Dragon pushes the company’s inventory to 2,100 machines
Analysts estimate that the Mocha Marina Plaza contrib-utes about 0.5 percent of Melco Crown’s EBITDA. Mocha Clubs’ adjusted EBITDA for the fi rst nine months of last year stood at US$30.3 million (MOP242 million), while parent Melco Crown’s total EBITDA reached US$557.9 million.
Asked in September whether Mocha Clubs was worried by the prospect of having to shut down the Mocha Marina Plaza, Ms Hsu was laconic. “We are always supportive and cooperative to the government’s policy and any plan in the near future shall be in line with the measures by the govern-ment,” she said.
The government fi rst proposed a ban on slot-machine par-lours in residential districts in 2007.
Local authorities also plan to issue a set of technical standards for electronic gaming machines this year.
The Mocha Golden Dragon hosts about 300 slot machines and electronic tables over a fl oor area of about 1,850 square metres, which includes two VIP rooms. The new slots raise Mocha’s total inventory to 2,100
Constance Hsu, president of Mocha Clubs
Gaming
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FEBRUARY 2012
“Portuguese cuisine is always associated with being cheap, unclassy food and what we aim to do is show that it’s a lot more than just that,” chef Martinho Moniz says
The newest addition at the Ho-tel Lisboa is Guincho a Galera, a Portuguese restaurant led by
a talented young chef who promises to “revolutionise” diners’ taste buds. The restaurant opened last month and aims to “bring the best of Portugal to Macau”.
Martinho Moniz, 31, was selected by SJM Holdings Ltd. to run the kitch-en. He faces a considerable challenge given that the restaurant is paired with the Fortaleza do Guincho, an eatery in Portugal with a single Michelin star that is also part of the Stanley Ho Hung Sun’s family business empire.
Hotel Lisboa general manager Samuel Yeung says that the Lisboa ho-tels complex is “the only hospitality property in Macau with three Miche-lin-starred restaurants and we hope to increase this number”.
Mr Yeung says the hotel felt it was necessary to introduce a restaurant that offered fi ne Portuguese cuisine “be-cause tourists come here from all over the world and they want to try genuine Portuguese food”.
Mr Moniz has twice been awarded Lisbon’s Best Chef of the Year and last year decided he wanted to move to Asia. He started as head chef at Casa Lisboa, a Portuguese restaurant in Hong Kong. Now in Macau, Mr Moniz promises a gourmet menu featuring the best of Portuguese ingredients.
“Portuguese cuisine is always asso-ciated with being cheap, unclassy food and what we aim to do is show that it’s a lot more than just that,” Mr Moniz says. “[Portuguese cuisine] is not as limited as people try to sell it in Macau.”
The Hotel Lisboa and Grand Lis-boa have three Michelin-starred restau-rants: Robuchon a Galera, Macau’s only three Michelin-starred restaurant; The Eight, with two stars; and Tim’s Kitch-en, with one star.
Guincho a Galera is located in the space left vacant when Robuchon a Galera was moved to the Grand Lisboa and was renamed Robuchon au Dôme.
Wishing on a starSJM Holdings’ new hospitality play is an up-scale Portuguese restaurant with big ambitions
LUSA NEWS AGENCY
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FEBRUARY 2012
A year after it opened, the Play-boy Club has moved from the top fl oor of the Sands Macao to
another Sands China Ltd. property, the Venetian Macao. Since November last year, the bunny hutch has been at the Bellini Lounge, off the main gaming fl oor of the casino.
The motives behind the move are unclear. No one at Sands China could shed light on why the club switched ven-ues. Likewise, no one was able to con-fi rm if plans to open a Playboy Mansion at Sands Cotai Central were progressing or if they had been changed.
The company did confi rm that the 1,114-square-metre area where the Play-boy Club once was is being transformed into a VIP gaming area. But the compa-ny has released no details on it. The club already included gaming rooms when it
On the hopThe Playboy Club’s move to the Venetian raises doubts over plans to open a replica of the Playboy Mansion at Cotai CentralBY SARA FARR
opened in November 2010.“It’s still under design so we can’t
confi rm the details,” a spokesperson for the gaming operator told Macau Busi-ness, adding that “the design can take quite some time, as the junket operators are involved in it”.
When the club opened, Playboy and Sands China had plans to open a much bigger 2,800-square-metre club at Sands Cotai Central.
“[The Cotai project] will be bigger and grander in every respect,” Playboy Enterprises’ chief executive, Scott Flan-ders, told Macau Business in an exclu-sive interview at the time.
“It will be our fi rst [Playboy] man-sion replica in the world. It is targeted to open in 2012 but, of course, that depends on the progress they make in fi nishing off those parcels.”
Last November, The Business Times in Singapore reported that management from Sands China said plans for a Play-boy Mansion at Cotai Central had been discarded. Instead, the Playboy Club Macao would move to the Venetian. The newspaper report said moving the club from the gaming-centric Sands Macao to a resort setting would broaden the po-tential clientele.
Playboy planned to open in Cotai before joining forces with Sands China.
The company had an agreement with the developers of Macao Studio City to open a club there but backed out in 2009 when the project was at a standstill.
“We signed with the Sands in May [2010] and six months later we are open. That speaks to how competent a part-ner they are,” Mr Flanders said back in November 2010.
Gaming
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FEBRUARY 2012
STANLEY HO OFF FORBES RICH LISTAngela Leong On Kei and Pansy Ho Chiu King make their debut on the ranking for Hong Kong’s top 40 richest
For the fi rst time in many years, casino mogul Stanley Ho Hung Sun is off the latest Forbes list of Hong Kong’s richest people, published last month. This comes after Mr Ho restructured his empire last year, passing on a big chunk of his wealth to his four families.
Mr Ho ranked 13th last year, with an estimated net worth of US$3.1 billion (MOP24.8 billion).
One of the people that benefi ted the most from the restructuring process was Angela Leong On Kei, who Mr Ho calls his fourth wife. Ms Leong made her debut on the Forbes list this year at number 21, with a net worth of US$1.6 billion.
Mr Ho’s daughter from his second wife, Pansy Ho Chiu King, also made her fi rst appearance on the list, having benefi ted from MGM China Holdings Ltd.’s IPO in Hong Kong in mid-2011. She ranked number 12, with a net worth of US$3.3 billion.
Another well-known fi gure to Macau, the chairman of Galaxy Entertainment Group Ltd., Lui Che Woo, jumped to spot number 8 from 14 last year. Mr Lui’s net worth soared by 53 percent, to US$4.6 billion.
Li Ka-shing led the 2012 Hong Kong’s 40 Richest Forbes list, with wealth estimated at US$22 billion, 8.3 percent less than last year.
ADELSON FAMILY PUTS MILLIONS INTO REPUBLICAN CAMPAIGNLas Vegas Sands Corp. boss Sheldon Adelson and his wife are supporting Newt Gingrich in the U.S. Republican presidential primaries to become the party’s presidential candidate. The Adelsons last month donated US$10 million (MOP80 million) to the campaign of Mr Gingrich, the former Republican speaker of the U.S. House of Representatives, several media reported. According to CBS News, this makes them the largest donor to date in the 2012 presidential campaign. Other candidates include former Massachusetts governor Mitt Romney, former Pennsylvania senator Rick Santorum and Texas congressman Ron Paul. The Republican Party primaries run until June 26. The U.S. presidential election will be held on November 6.
MGM AND SANDS INCREASE WAGESMGM Macau last month announced a 5-percent increase of the salaries of all non-management workers plus a Chinese New Year bonus payout. Sands China Ltd. will also increase the salaries of its full-time, non-managerial employees by 6 percent. The company issued a bonus payout for 2011 to all employees. In November, chief executive Fernando Chui Sai On urged employers to raise the salaries of locals to allow them to catch up with the economic developments. Two months ago, SJM Holdings Ltd. announced all its workers would receive a pay rise of between fi ve and 10 percent this year.
GALAXY DOUBLES NUMBER OF INTERNSGalaxy Entertainment Group Ltd. trained a total of 73 students from various universities last year, doubling the number of 2010, the company announced. A total of 21 students from the Institute for Tourism Studies, the Swiss Hotel Management School and the University of Nevada, Las Vegas (Singapore campus) successfully completed the internship program offered by the gaming operator in the second half of 2011. The number of departments involved in the internship program last year also increased from 14 to 31.
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South Korea’s National Assembly has postponed the introduction of a consumption tax for foreigner-
only casinos for two years as the gov-ernment tries to increase the sector’s regional clout.
The tax, which was to have been introduced at the beginning of the year, will now come into force on January 1, 2014, after the assembly’s Committee on Fiscal Affairs passed an amendment to the Individual Consumption Tax Act in late December.
The revision aims to “help strength-en the competitiveness of casinos and stimulate tourism,” said Hwoo Yang, an analyst with Samsung Securities in Seoul, as sector analysts raised the ca-
Tax-free gamingKorea’s foreigner-only casinos enjoy two-year tax reprieveBY MARTIN JOHN WILLIAMS*
sinos’ earnings estimates and target prices. “It is positive that legislators perceived the need to strengthen com-petitiveness of foreigner-only casinos,” he wrote.
Shin Young Securities analyst Seung-ho Han said the deferral is “de-signed to boost the tourism industry by luring more Chinese inbound travellers”, the industry’s fastest growing customer base.
But Kangwon Land, the only one of South Korea’s 17 casinos to admit lo-cals and easily the most lucrative in the country, will be required to pay the tax, as well as to pay 25 percent of its pre-tax profi t to the Abandoned Mine Develop-ment Fund, an increase from 20 percent.
Seung-ho Han told GamblingCom-pliance last month that by increasing the tax burden on Kangwon Land, the gov-ernment was in part reacting to “revenue ... that has increased very fast, so it is a little bit necessary to slow down the increase in government revenue”.
“Problems about casino addiction of local people” infl uenced the move, he said, refl ecting frequent media atten-tion paid to public and political concerns over problem gambling.
Not all bad newsSamsung Securities’ Hwoo Yang said there was an upside for Kangwon Land.
“Although it appears that casi-nos for Koreans are subject to tighter
A foreigner-only casino in central Seoul
Gaming
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FEBRUARY 2012
regulations, we expect measures to off-set the additional taxation. As a result, Kangwon Land will likely add capacity this year,” he said.
In addition, the National Assembly extended Kangwon Land’s licence from the end of 2015, to December 31, 2025, through an amendment to the Special Act on the Assistance to the Develop-ment of Abandoned Mine Areas. Woori Investment Securities analyst Joseph Chung stated that the extension would allow Kangwon Land to “maintain its exclusive rights as the only casino open to Korean nationals through 2025”.
That wording overlooks concerted efforts by sections of the government, tourism authorities and several promi-nent casino developers such as Las Ve-gas Sands Corp. and Wynn Resorts Ltd. to allow local access to casinos ahead of the possible construction of a string of integrated resorts. One industry con-sultant said the Kangwon Land licence extension would have no impact on the push to liberalise the industry.
“When Kangwon Land claims that it has ‘exclusivity’, it really means ... a
monopoly status until another operator/location is found to qualify for a similar ‘exemption’,” said Steve Park, a former National Assembly policy adviser and a consultant to the Korea Tourism Or-ganisation, a government agency that is pushing for reform.
“All laws can be amended, espe-cially a special temporary act that cre-ates loopholes in existing laws like the Korea Tourism Promotion Act,” he told GamblingCompliance by email. “It would be a gross exaggeration to say that no new domestic casinos can open in Korea prior to 2025 because of this latest extension,” he said.
Airport casinoIn June last year, the Minister of Cul-ture, Sports and Tourism Jung Byung-gook said he supported locals having access to new casino resorts rather than the existing 16 foreigner-only es-tablishments. Wynn Resorts chairman Steve Wynn said in May that he was ready to invest in such a facility in Ko-rea as long as Koreans were allowed to gamble, citing the airport district in the
city of Incheon as a prime location for development.
Last month, Bloomberg reported that Incheon International Airport Corp. is about four months away from signing a deal with an unnamed U.S. company to develop a US$3 billion (MOP24 billion) casino resort in the area, to woo increas-ingly wealthy travellers from China and elsewhere in Asia.
The new resort, to be built near the airport 50 kilometres west of Seoul, would feature facilities such as a hotel, casinos, convention centres, shopping malls and hospitals, a spokeswoman for the airport told AFP. “We plan to develop the property like the resorts in Las Vegas or Macau,” she said, adding negotiations to select a developer are underway.
The airport already earns 65 per-cent of its revenue from hotels, duty-free sales and other services not di-rectly linked to fl ying. Spending by Chinese and Japanese travellers ac-count for more than a quarter of duty-free sales.
* EXCLUSIVE GAMBLINGCOMPLIANCE/MACAU BUSINESS
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FEBRUARY 2012
Taiwan President Ma Ying-jeou won re-election last month and his Kuomintang (KMT) party
retained control of the legislature, pav-ing the way for passage of an offshore casino law this year. But an anti-casino legislator earned a surprise victory in Penghu, one of two favoured locations for gaming development.
Mr Ma secured a second and fi nal term with 51.6 percent of the vote, ahead of Tsai Ing-wen of the Democratic Pro-gressive Party (DPP) with 45.6 percent, while the KMT maintained a comfort-able majority in the legislature despite the loss of several seats.
The KMT leader suffered a 7 per-cent swing against him, but the comfort-able 6 percent margin of victory was larger than many polls had predicted and delivered Mr Ma a mandate to continue with his policy of more intimate com-mercial and fi nancial ties with China.
One step closerBY MARTIN JOHN WILLIAMS*
Ms Tsai, who had expressed strong opposition to casino development prior to a casino referendum in Penghu in September 2009, but who softened her approach at the outset of her campaign, announced her resignation as DPP lead-er following the electoral defeat.
Liu Day-Yang, a government con-sultant and a professor and gaming spe-cialist at the National Taiwan University of Science and Technology, said the fo-cus of the government will now turn to improving communication with offshore island residents.
“The local government and the cen-tral government have to work together. They have to build a comprehensive strategy” to convince locals that the “huge difference” to the local commu-nity will benefi t it, Mr Liu said.
“More preparation needs to be done,” he said. “After Chinese New Year, a lot of things could happen. I expect Penghu and
Kinmen islands will both see movement on the casino legislation.”
Surprise, surpriseThe KMT government has strongly supported the development of a casino industry on Taiwan’s outlying islands, and the Ministry of Transportation and Communications and its sub-agency, the Tourism Bureau, have been developing draft casino and integrated resort legis-lation, respectively.
The two bills, which have been developed by Lin and Partners, a lo-cal law fi rm, and Macau-based Ocean Tech Group, are in the process of being harmonised by the ministry following delays in delivery, a number of incon-sistencies between the drafts and an un-happy reception in Kinmen and Penghu, the leading contenders for casino opera-tion locations.
When complete, the drafts will be
Taiwan casino legislation in sight after Kuomintang victory
One step closer
Gaming
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tion victory last month, may weigh more heavily on those investing in the island group’s gaming future.
Still confi dentAshley Hines, a consultant to CR201 Holdings Ltd., a company that bought the Penghu land assets of the defunct AMZ Holdings, which had anticipated deals with casino investors before the 2009 referendum defeat, said he re-mained confi dent that Penghu would pass a second referendum.
Mr Hines said the Penghu election might have been infl uenced by hostil-ity toward Penghu’s county commis-sioner and the cancellation of more than 40 fl ights from Taiwan on election day because of poor visibility at Penghu air-port. The incumbent, he said, had been expected to dominate the votes of those returning to their registered voting loca-tions. Taiwan has no absentee polling.
“Penghu remains pro-KMT,” Mr Hines said. “Ma Ying-jeou still got the majority in Penghu [in the presidential vote].”
He added that in a meeting before the 2009 referendum, Mr Yang spoke of a more pragmatic stance on a casino, similar to Ms Tsai’s softer stance of de-manding thorough regulatory prepara-tions before considering a “yes” vote.
In any case, Mr Hines said: “For gaming, the big picture of a KMT vic-tory will come to bear more on the result of the referendum rather than Mr Yang.”
During the election campaign, Mr Yang signed a pledge linked to the Anti-Gambling Legislation Alliance, which held a small demonstration last month near the Presidential Offi ce in Taipei. The alliance announced that not only had Ms Tsai informed it she would op-pose the development of casinos if elect-ed president, but also that Mr Yang and a legislative candidate from each of Kin-men and Lienchiang counties — neither of whom was elected — had signed a pledge to “not agree to any legislation or amendment intending to open up casino development”.
Out of the campaignMeanwhile, Kinmen, which lies only a few kilometres off the coast of China and is considered by industry sources to be the favoured location for a fi rst casino licence, elected a KMT legislator by a narrow margin after more than a decade of minority party legislators friendly to the KMT.
In Lienchiang County, also known as Matsu, there was no evidence that the dumping of a KMT legislator for an in-dependent candidate would affect the lo-cal enthusiasm for a casino resort.
But the islands, which are also a short distance from the Chinese coast, have been struggling to secure investor interest owing to their small populations, remoteness and lack of infrastructure.
Offshore casinos did not rate as a campaign issue, with the media focus-ing more on allegations of illegal elec-tion betting. Last month, police said the chief executive offi cer of Funtown, a gaming website, was being probed over allegations that the company took bets on election outcomes. The allegations, if proven, would violate gambling laws and restrictions on the use of poll data in a 10-day blackout period before elec-tion day.
* EXCLUSIVE GAMBLINGCOMPLIANCE/MACAU BUSINESS
presented to the cabinet before going to the legislature. After passage through the legislature, referendum proposals must be passed by individual island counties before investors can apply for government licences.
However, the surprise victory of a DPP candidate in the island county of Penghu may increase the chances of the bill being held up in legislative commit-tees, which approve draft legislation be-fore general debate on the fl oor of the chamber. What had been dubbed by local media as a “prawn versus whale” battle saw long-shot anti-casino DPP candidate Yang Yao displace a fi ve-term legislator who had supported building a casino re-sort in the Taiwan Strait island group.
Mr Yang’s agenda of change for Penghu is much wider than a hostile stance on gaming development but the failure of Penghu’s casino referendum in 2009, together with Mr Yang’s elec-
The KMT government has strongly supported the development of a casino industry on Taiwan’s outlying islands
Taiwan President Ma Ying-jeou
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FEBRUARY 2012
Gaming
An all-time revenue record was set by the Philippine Amusement and Gaming Corporation last
year. Pagcor, the state-owned gaming company and regulator, reported reve-nue of 36.65 billion pesos (MOP6.77 bil-lion), a 16.5 percent increase over 2010.
Pagcor chairman and chief execu-tive offi cer Cristino Naguiat says the
company set a monthly income record six times last year to defi ne a “record-setting year”.
“We ended 2011 on a high note when we earned a staggering 3.50 bil-lion pesos gross income last December. This is by far the highest revenue ever earned by Pagcor for a single month in its history,” Mr Naguiat said in a state-
ment released by Pagcor in the middle of last month.
Income from Pagcor’s gaming oper-ations reached 25 billion pesos last year, up by 14.3 percent over the previous year. The company’s previous record for annual gaming income was 23.28 billion pesos set in 2008.
Mr Naguiat says Pagcor’s impres-sive performance came from “a more aggressive campaign” to improve gam-ing operations at its casinos.
“We also employed a more practical approach to spending for our marketing-related expenses. We are more effi cient and cost-effective now in terms of doing our marketing programmes, particularly those programmes intended for our for-eign players.”
Fuelling the annual result was also revenue collected from gambling regu-lation, 11 billion pesos.
Reversal of fortune“When the new Pagcor management as-sumed offi ce in July 2010, there were a lot of uncertainties, one of which is whether we could remain competitive or survive considering the presence of big-ger casinos run by private licensees,” Mr Naguiat says.
“Our 2011 performance proves that indeed we can compete. Pagcor can sur-vive the competition if we work hard enough.”
The outlook for this year and into next year is more challenging. Pagcor will brace for increased competition from domestic and international play-ers as the fi rst hotels and casinos at En-tertainment City Manila are scheduled to open.
“Two proponents, namely Bloomb-erry’s Solaire and the SM Consortium’s Belle Grande are expected to open by 2013 at the Entertainment City Manila. That means we will be up against two more integrated resorts with a gaming component by next year,” Mr Naguiat says.
Erosion of Pagcor earnings is not something he is concerned about. Last year’s performance underlines a “pre-vailing optimistic outlook for the global gaming industry”.
Pagcor is in an enviable position. It will always profi t from an improved performance from its competition at Entertainment City Manila. “As a regu-lator, we expect to get substantial earn-ings in the form of regulatory fees,” Mr Naguiat says.
Sparkling vintagePhilippines government-controlled gaming company Pagcor has ended a remarkable year after growing 16 percent
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FEBRUARY 2012
The perils of 2012The year 2011 will be remembered as the time when
many ever-optimistic Americans began to give up hope. President John F. Kennedy once said that a rising tide
lifts all boats. But now, in the receding tide, Americans are beginning to see not only that those with taller masts had been lifted far higher, but also that many of the smaller boats had been dashed to pieces in their wake.
In that brief moment when the rising tide was indeed rising, millions of people believed that they might have a fair chance of realising the “American Dream”. Now those dreams, too, are receding. By 2011, the savings of those who had lost their jobs in 2008 or 2009 had been spent. Unemployment checks had run out. Headlines announcing new hiring – still not enough to keep pace with the number of those who would normally have entered the labour force – meant little to the 50 year olds with little hope of ever holding a job again.
Indeed, middle-aged people who thought that they would be unemployed for a few months have now realized that they were, in fact, forcibly retired. Young people who graduated from college with tens of thousands of dollars of education debt cannot fi nd any jobs at all. People who moved in with friends and relatives have become homeless. Houses bought during the property boom are still on the market or have been sold at a loss. More than seven million American families have lost their homes.
The dark underbelly of the previous decade’s fi nancial boom has been fully exposed in Europe as well. Dithering over Greece and key national governments’ devotion to austerity began to exact a heavy toll last year. Contagion spread to Italy. Spain’s unemployment, which had been near 20 percent since the beginning of the recession, crept even higher. The unthinkable – the end of the euro – began to seem like a real possibility.
Even worseThis year is set to be even worse. It is possible, of course, that the United States will solve its political problems and fi nally adopt the stimulus measures that it needs to bring
down unemployment to 6 percent or 7 percent (the pre-crisis level of 4 percent or 5 percent is too much to hope for). But this is as unlikely as it is that Europe will fi gure out that austerity alone will not solve its problems. On the contrary, austerity will only exacerbate the economic slowdown. Without growth, the debt crisis – and the euro crisis – will only worsen. And the long crisis that began with the collapse of the housing bubble in 2007 and the subsequent recession will continue.
Moreover, the major emerging-market countries, which steered successfully through the storms of 2008 and 2009, may not cope as well with the problems looming on the horizon. Brazil’s growth has already stalled, fuelling anxiety among its neighbours in Latin America.
Meanwhile, long-term problems – including climate change and other environmental threats, and increasing inequality in most countries around the world – have not gone away. Some have grown more severe. For example, high unemployment has depressed wages and increased poverty.
The good news is that addressing these long-term problems would actually help to solve the short-term problems. Increased investment to retrofi t the economy for global warming would help to stimulate economic activity, growth and job creation. More progressive taxation, in effect redistributing income from the top to the middle and bottom, would simultaneously reduce inequality and increase employment by boosting total demand. Higher taxes at the top could generate revenues to fi nance needed public investment and to provide some social protection for those at the bottom, including the unemployed.
Rebalancing of powerEven without widening the fi scal defi cit, such “balanced budget” increases in taxes and spending would lower unemployment and increase output. The worry, however, is that politics and ideology on both sides of the Atlantic, but especially in the U.S., will not allow any of this to occur. Fixation on the defi cit will induce cutbacks in social spending, worsening inequality. Likewise, the enduring attraction of supply-side economics, despite all of the evidence against it (especially in a period in which there is high unemployment), will prevent raising taxes at the top.
Even before the crisis, there was a rebalancing of economic power – in fact, a correction of a 200-year historical anomaly, in which Asia’s share of global GDP fell from nearly 50 percent to, at one point, below 10 percent. The pragmatic commitment to growth that one sees in Asia and other emerging markets today stands in contrast to the West’s misguided policies, which, driven by a combination of ideology and vested interests, almost seem to refl ect a commitment not to grow.
As a result, global economic rebalancing is likely to accelerate, almost inevitably giving rise to political tensions. With all of the problems confronting the global economy, we will be lucky if these strains do not begin to manifest themselves within the next twelve months.
JOSEPH E. STIGLITZ NOBEL LAUREATE IN ECONOMICS
GLOBAL ECONOMIC REBALANCING IS LIKELY TO ACCELERATE, ALMOST INEVITABLY GIVING RISE TO POLITICAL TENSIONS
The pragmatic commitment to growth that one sees in Asia and other emerging markets today stands in contrast to the West’s misguided policies, which, driven by a combination of ideology and vested interests, almost seem to refl ect a commitment not to grow
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Hospitality90
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Too much of a good thing can be bad. Macau has always wanted to make a name for itself as an international
tourist destination, particularly after the gaming industry was liberalised in 2002. Now that Macau is on the map, millions of visitors fl ock to the city every year. The question is whether it can cope with the annual double-digit increase in tourist arrivals.
The number of visitors rose last year to a record 28 million, 12.2 percent more than in 2010. Most came from the Greater China region. More than 16 million visi-tors were from the mainland, 22.2 percent more than the year before.
The number of visitors from outside Greater China rose by just 2.1 percent to about 3 million. Visitors from the United States, Britain and New Zealand stayed the longest. Russia and Dubai will be this year’s main target markets, especially as Russian visitors can enter Macau without a visa.
Macau Government Tourist Offi ce di-rector João Manuel Costa Antunes told a
BY SARA FARRILLUSTRATIONS RUI RASQUINHO
THE MORE THE MERRIER
Macau crams 560,100 people into an area of just 29.7 square kilometres and absorbed 28 million visitors last year. Is it time to cap tourist numbers?
91
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press conference last month that breaking records was not everything. He said offi cials had to ensure visitors left satis-fi ed and wanted to return. A new department under the Tour-ist Offi ce to be set up this year is expected to lay down plans to meet the needs of tourists.
But can Macau handle even more visitors?
Fixed-menu optionMr Costa Antunes says the city will cope with more tour-ists, ruling out any restrictions. “What needs to be done is to come up with more places of interest and tourist attractions for visitors to stay here longer,” he says.
Some nations do limit tourist arrivals. Bhutan is the most well known, although it does not set an annual quota. “The number of tourists visiting Bhutan is managed according to our absorptive capacity to ensure promotion of our natural and cultural heritage through high-value tourism,” says the Tourism Council of Bhutan.
Carlos Marreiros, a Macau architect with a background in urban planning, says the city has room for more tourists. “We have the capacity to welcome as many as 30 million visitors [a year],” he says.
But Mr Marreiros says more should be done to attract visitors to cultural performances, for example. “We’ve man-aged to combine the gaming side of the city with the heritage side of things,” he says. “But more needs to be done to pro-mote the cuisine and intangible heritage.”
Mr Marreiros suggests tour packages that would let visi-tors experience a bit of everything, from gaming to the world heritage sites, fi ne traditional food and cultural performanc-es. “These could be either performances organised by local associations or even the international festivals, such as the arts or music festivals, that people would not get to see in their home countries.”
He wants more intensive training for tour guides and travel agents in an effort to create different tours apart from the routine of visiting shops that pay commissions to the travel industry. “The [tourist bus] underground parking lot in Tap Seac was designed to attract visitors to Lou Lim Ieoc
Garden but the reality is that it doesn’t work this way,” Mr Marreiros says. “We hardly see visitors in that garden, which is full of history and has a great architectural combination of neo-classicism.”
Ferry, train, taxiMember of the Legislative Assembly Kwan Tsui Hang also wants a focus on developing heritage and cultural tourism but no restrictions on tourist numbers. She is concerned about the pressure that more visitors will place on infrastruc-ture, although her solution is straightforward. “The govern-ment should allocate more resources to further improve the
Tourist Offi ce director João Manuel Costa Antunes says the city will cope with more tourists. “What needs to be done is to come up with more places of interest and tourist attractions for visitors to stay here longer,” he says
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overall infrastructure,” she says, adding that access by air and sea is poor.
If the city’s streets are congested, it is not because of an excess of tourists, says Grant Govertsen, the manag-ing partner and lead analyst at Union Gaming Research Macau. “We don’t have a tourist problem,” Mr Govertsen says. The problem, he notes, is the inadequacy of the infra-structure.
He says work on the Light Rail Transit network should be accelerated and the taxi fl eet expanded. The government has said it will boost the number of taxi licences by 200 this year.
Mr Govertsen agrees with the construction of a new fer-ry terminal in Taipa. The Pac On terminal is expected
to be fi nished by the middle of next year and will have the capacity to handle 15 million passengers
a year.There has been some debate over
whether the new terminal should be the city’s main maritime gateway, instead of the Outer Harbour terminal, and whether
the latter should be relocated or even shut down. Mr Costa Antunes said last month he was
in favour of having two ferry terminals to cope with the number of visitors.
The head of the Maritime Administration, Susana Wong Soi Man, has already ensured the Outer Harbour ter-minal will not be relocated before 2017, as the government is getting ready to invest MOP50 million (US$6.25 million) in upgrading its facilities.
Inevitable increaseMr Marreiros blames congestion on the Transport Bureau. “I’d hate to see the transport authorities say the same as the health authorities did, when they said they had not foreseen the population growth,” he says. Macau could easily afford to bring in international experts “who know what they are doing” to assess the road network with a view to improving traffi c fl ow, he suggests.
The number of visitors is likely to increase regardless, Mr Govertsen says, because of improved infrastructure in the mainland, in particular the new railway connecting Guangzhou to Zhuhai. The Zhuhai terminus, just on the oth-er side of the Border Gate, is due to be ready by the end of
this year. On top of that, there is the Hong Kong-Macau-Zhuhai Bridge, he says.
But Macau remains a “one-trick pony” since most visitors come from the mainland and their main reason for coming is to gamble, Mr Gov-ertsen says. This, he stresses, is not necessarily a bad thing. The number of new resorts expect-ed to open, combined with the rule that only
Macau Identity Card holders can be croupiers, will mean higher pay over the years, Mr Govert-
sen says. “There could be a 10-percent increase in wages with the development in Cotai.”
He says Macau will remain mainly a gambling des-tination since that is what most mainland visitors want and their visits are short. However, if they are presented with other options “then maybe the consumer behaviour would change,” he admits. For that to happen, Mr Gov-
ertsen says attractions need to be better promoted.
RECORD CHECK-INSOnce the fi nal fi gure is calculated, it will show 2011 was
another record year for hotels in Macau.Hotels and guesthouses accommodated 7.79 million guests
in the fi rst 11 months of last year, 10.9 percent more guests than in the corresponding period a year before, and more than the record 7.76 million guests welcomed in 2010.
The average occupancy rate of hotels and guesthouses in the fi rst 11 months was 83.6 percent, an increase of 4.5-per-centage points at the same stage a year before.
By the end of November, Macau had an inventory of 22,300 rooms, 63.5 percent were in fi ve-star hotels.
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BY SARA FARR
Accepting a challengeFew people thrive on handling Macau’s manpower shortages but the general manager at the Four Seasons Hotel has always welcomed a good challenge
of the Lehman Brothers bankruptcy that sparked the global fi nancial crisis. Mr Rowe says that compared to those days of uncertainty and the stability of the past two years, he is expecting this will be a good year.
Mr Rowe would not discuss specif-ics but says the room occupancy rate will rest above 80 percent this year. Last
Having called Asia home since 1992, Royal Rowe was only too ready to accept the opportunity
to move to Macau in January two years ago to become the general manager of the Four Seasons Hotel Macao.
He has witnessed fi rsthand the great change in the city but also at the prop-erty he now runs in Cotai. Perhaps the
most welcome change has been the in-crease in occupancy rates.
“It has [now] begun to show signs of stabilising,” Mr Rowe says, adding that there were more visitors coming not just from Hong Kong but also from the mainland.
The Four Seasons Hotel Macao opened in August 2008, a month ahead
Hospitality
LURE OF THE ORIENTRoyal Rowe joined the
Four Seasons Hotels and Resorts group at the age of 27. His fi rst job was as a waiter but within three months he had been promoted to room service manager.
Born in Virginia, Mr Rowe held various managerial positions in food and bever-age and human resources in Washington D.C., Houston and Austin.
His love affair with Asia began in 1992 with a move to Bali to handle the pre-opening phase of the Four Seasons Re-sort Bali at Jimbaran Bay. Two years later he was promoted to executive assistant manager and was appointed to handle the pre-opening of another property at Sayan in May 1997. He became the hotel’s general manager in 2001.
A brief spell in Chiang Mai was followed by another pre-opening management role in Langkawi in March 2003. In 2007, he moved on to the Four Seasons Resort Maldives at Landaa Giraavaru and to Macau in 2010, where he says he feels very much at home.Royal Rowe
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year it sat in the high 70s.It is not just occupancy that is on the
rise, the average length of stay at the hotel has also increased from about 1.25 nights to two nights – signifi cantly higher than the city-wide average of 1.5 nights.
“The other thing I’ve really noticed, and this is from Chinese New Year to Chinese New Year, is the sophistica-tion of our guests,” Mr Rowe says. “The guests that stay at this hotel have mark-edly improved each year.”
While new resorts, such as Galaxy Macau that boasts three hotels, spring up around the neighbourhood, Mr Rowe welcomes the competition.
He says he is not too worried about numbers dropping at the hotel. The guest numbers prove otherwise, even af-ter Galaxy opened last year.
The 37,000-square-metre, 20-sto-rey high Four Seasons has 360 rooms. It was designed by Steelman Partners and includes a spa, three restaurants and two lounges.
Having opened its fi rst hotel in 1961 in Toronto, Canada, Four Seasons Hotels and Resorts now manages 86 properties in 35 countries.
Being the bestFor a man who has travelled throughout Asia and likes a bit of adventure, Mr Rowe says his biggest challenge is striv-ing to raise “the quality of our service levels, to be able to service the increased number of people”.
Despite that being his biggest chal-lenge, Mr Rowe says Macau provides more opportunities than pitfalls. “That is what I am supposed to be doing, to be able to react to positive situations that develop and get the staff going,” he says. “So those have been good challenges, not adverse things.”
While many of the different sec-tors and industries, from small to big, complain of the lack of manpower, Mr Rowe says it is a question of working ac-cording to the regulations in place. “You
have to work within the system. That’s just something we have to deal with.”
Mr Rowe says labour is tight here and the only time he ever worked in a similar situation was when he fi rst moved to Texas in the early 1980s in the middle of an economic boom.
“The unemployment rate was very low, literally about the way it is in Macau [now]. And it was challenging, you had to hire the best people you could fi nd,” Mr Rowe says, adding that it was not al-ways easy and more had to be spent on training.
“It’s very similar to that here. But it’s a positive thing.”
Mr Rowe’s bright-side-to-life atti-tude is refl ected in his positive outlook on the hotel and business.
“It could be a lot worse. We could be losing business. I’d rather train peo-ple than have to lay them off.”
Future plans at the hotel will see it transition to a resort that caters more to families.
The average length of stay at the hotel has also increased from about 1.25 nights to two nights – signifi cantly higher than the city-wide average of 1.5 nights, says general manager Royal Rowe
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861,000The number of tourists Macau welcomed during
the Chinese New Year holiday, an increase of 6.9 percent over the same period last year.
14.5%The year-on-year increase in the number
of mainland tourists visiting Macau during the week-long festival.
The total fi gure stood at 546,000.
750,000The estimated number of people who visited
the Venetian Macao during the Chinese New Year holiday. Sands China Ltd. said its properties in Macau
welcomed over one million visitors during the period, up by around 6 percent.
20,200The daily average number of hotel
and guesthouse rooms sold during the holiday season, up 19.2 percent year-on-year.
95%The average occupancy rate of fi ve-star hotels
during the Chinese New Year holiday, up 3.7 percentage points over the previous year.
MOP2,400The average room rate of fi ve-star hotels
during the Chinese New Year festival, an increase of 6.3 percent compared
with the same period last year.
28.1%The year-on-year increase in the room rate of guesthouses during the festive season. The price stood at an average of MOP558.
3The number of cases handled by the Macau Government
Tourist Offi ce during the Chinese New Year holiday regarding tourists alleging that tour guides didn’t comply
with the itinerary they were sold.
SOURCES: MACAU GOVERNMENT TOURIST OFFICE; BLOOMBERG
ENTER THE DRAGONThe Year of the Dragon started on a high note for the tourism industry.
During the holiday season, from January 23 to January 29,both the number of visitors and hotel guests went up
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Throwing sparksLeadership is a topic frequently discussed in the corporate
world but seldom is its importance fully understood. True leaders are scarce and often mistaken for people who hold
a managerial position but lack leadership skills, particularly the capacity to inspire those around them.
This is a situation within several leading international hospitality companies. In any part of the world, hotel managers need to engage their employees but few can do so effectively.
Motivating others is not hard. Most bosses resort to external factors, such as fi nancial incentives or promotions to keep their staff motivated. A true leader goes beyond that. They inspire employees, boosting their commitment through processes that have little to do with pay.
True leaders create a following of engaged workers by energising them. An energised employee works for the greater good of the company not because they feel forced into doing so, but because they are stimulated to do so.
For inspired workers, the motivation to excel is deeply personal. These employees are less likely to be persuaded into new jobs by higher wages, and in many cases will pay a premium or suffer inconveniences to stay part of the team.
Hotels that have great leaders in their ranks usually have the most loyal employees and the most loyal customers. These organisations also tend to be more profi table than the industry average. Hotels such as these tend to be more innovative and, most importantly, are able to sustain these competitive advantages over the long term.
Inspired employees make for stronger companies and stronger economies.
We belongWhy would a hotel think small and aspire to having only a few good leaders in key managerial positions? What if we could develop hotel employees who could think, act and communicate like those who inspire them? Just imagine the change that this could bring to society, not to mention to the hotels that were able to implement these programmes.
If that were to happen, we would live in a place where people loved their jobs. This is no small transformation. Satisfi ed employees are more productive and more creative. They are happier and treat colleagues and customers better.
Unfortunately, as mentioned previously, although software is the primary differentiator of hotels, local hoteliers continue to focus on the hardware.
The problem is that there is barely one type of hotel room in Macau that is exclusive. For most products, if not all, customers can shop around and reserve the same type of accommodation with the same features and quality for about the same price at more than one hotel.
Hardware is easily copied. Properties that enjoy a fi rst-mover advantage by introducing a new product to the market are likely to lose their edge in a matter of months. If a hotel is offering something truly novel and successful, someone will soon come up with a similar product.
What is disturbing is that Macau hoteliers are not aware of this. If you ask local hotel managers why customers chose their property, most mention the superior quality of their hotels, the features and competitive prices – all selling points related to hardware. Wrong.
In other words, most companies operating in Macau have no clue why their customers stay with them. This is both fascinating and disturbing.
If companies do not know why their customers choose them, odds are they do not know why their employees work for them. These hotels will be incapable of boosting loyalty.
Loyalty surgeClients and employees are equally drawn to leaders and organisations that are good at communicating their vision and that do so in an inspirational way. Their ability to make people feel like they belong to something, to make them feel special, is essential.
Those who are considered great leaders all have an ability to draw us closer and to boost our loyalty towards them. And we feel a stronger bond with others who are also drawn by the same leaders and organisations.
Hotels in Macau unfortunately don’t know how to communicate in an inspirational way with their employees. Because of this we experience unmotivated workers with no sense of loyalty. In hospitality, leadership-driven loyalty means employees will stick with their employer even when the bad times come.
Loyalty is not easily won. Managers need to earn it.Hotel companies must realise that in order to obtain their
employees’ commitment they fi rst need to develop great leaders; people who can inspire their staff, people who can communicate with them and provide them with a sense of belonging.
Regrettably, this is not the case in the local hospitality industry. It hurts the thing hotel bosses say they care about the most: customers.
It is time for Macau hoteliers to wake up. Leave your desk. Walk your hotels. Look at your employees and hire leaders who can inspire them.
GUSTAVO CAVALIERE HOSPITALITY INDUSTRY EXPERT - [email protected]
HOTELS ARE DESPERATELY SEEKING LEADERS THAT CAN FIRE-UP THEIR STAFF BY INSPIRING THEM
Hotels in Macau unfortunately don’t know how to communicate in an inspirational way with their employees. Because of this we experience unmotivated workers with no sense of loyalty
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FEBRUARY 2012
TOURISTS PAY MORE
ANGER OVER PACKAGE TOUR ACCOMMODATION ARRANGEMENTSA group of mainland tourists got into an argument last month with their Macau tour guide expecting to spend the night in the city. It was another case of package tour gone wrong. The group came to Macau on a tour organised by a Shenzhen travel agency. Expecting to spend a night in the SAR as part of the package tour, the local tour guide had received different instructions: to tour the city with the tourists during the day and send them off to Zhuhai where they would spend the night. The dispute was settled only with the help of the Travel Industry Council of Macau and the Macau Government Tourist Offi ce. According to the Tourist Offi ce, there was nothing illegal about what the tour guide had done.
MORE PEOPLE TO INSPECT ILLEGAL INNSThe Macau Government Tourist Offi ce announced it is recruiting more staff to better enforce the law on the provision of illegal accommodation. The bureau pledged in a press release it would continue to fi ght against illegal inns. The Tourist Offi ce has sealed more than 180 premises suspected of providing illegal accommodation since the new law on illegal accommodation was enacted, in August 2010. Over 1,100 apartments have been inspected.
SHERATON MACAU TO OPEN SEPT 15Sheraton Macau Hotel, at Sands Cotai Central, will open its doors on September 15 according to the property’s website. The hotel’s twin towers will feature 4,000 guestrooms, several restaurants and lounges, around 5,000 square metres of meeting space, as well as health clubs and outdoor swimming pools.
The average Tourist Price Index for the whole year of 2011 increased by 15.5 percent from 2010
The Tourist Price Index for the fourth quarter of 2011 increased by 18.9 percent year-on-year. The increment was caused by dearer accommodation prices, the Statistics and Census Service said.
The sub-price indexes of accommodation and restaurant services were up 35.0 percent and 19.2 percent, respectively.
The Tourist Price Index rose by 9.8 percent quarter-to-quarter, impacted by a substantial increase in hotel room rates during the National Day, the Macau Grand Prix and Christmas holidays.
The average Tourist Price Index for the whole year of 2011 increased by 15.5 percent from 2010, well ahead of infl ation in Macau, which stood at 5.81 percent for the same period.
The Tourist Price Index refl ects the price changes of goods and services purchased by visitors.
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The meetings, incentives, conven-tions and exhibitions industry is struggling. There were 771 MICE
events in the fi rst nine months of last year, a 24-percent drop over the same period a year before and it is unclear if the industry can turn its performance around this year.
Eva Lou, president of the Macao Convention and Exhibition Associa-tion, forecasts a better year. She says the number of events may rise by about 10 percent based on early bookings. “There are medical manufacturers bringing meetings to Macau and there’s an an-nual car show, yacht show, as well as the Macau International Fair and the Macao International Environmental Coopera-tion Forum and Exhibition.”
Less sanguine about the industry’s future is Charles Greco, the president and chief executive of trade show and event management company Universal Event Management LLC, with offi ces in the United States, Macau and India.
“The reason is tied to many factors,” says Mr Greco, who was formerly the
executive director of Asian trade shows for the Venetian Macao. “Hotels and casinos will not be interested in really developing MICE business when their hotel rooms are fi lled at 98 percent of their rack rates.”
Mr Greco says the situation will not change until hotels begin to “over-develop”, making it more diffi cult to fi ll their rooms. Only then will they resort to MICE events to shift their inventory.
Last month, the chairman of the Macao Convention and Exhibition As-sociation Li Zhizhong told a forum on Macau’s MICE industry that business could be boosted by the establishment of an international bidding centre for MICE events. The aim would be to at-tract big international events, giving the city global exposure.
Visibility is keyThe idea to create an international bid-ding centre for MICE events in Macau was fi rst presented to the government by leading industry representatives in December. A spokeswoman for the
Economic Services Bureau said the proposal was aired during a meeting of the Committee for the Development of Conventions and Exhibitions, a body created by the chief executive in 2010 that includes industry and government representatives.
The idea would receive further at-tention from the body in the coming months, she said.
Even without a bidding centre, “the government has plans to acceler-ate growth in the industry on multiple fronts, one of which being the hosting and co-organising of important confer-ences and exhibitions,” the spokeswom-an said.
Experts from neighbouring coun-tries, including Malaysia and Singapore, told the industry forum that Macau should set new goals and devise a new strategy for the MICE sector.
Glenn McCartney, assistant profes-sor of hospitality and gaming manage-ment at the University of Macau, says Singapore has superior coordination, with all parties involved in the industry,
BY SARA FARR
Uphill struggleThe number of conventions and exhibitions held in the city has fallen for three straight quarters and it is anyone’s guess what this year has in store
Uphill struggle
Meetings & Conventions
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FEBRUARY 2012
from transport to hospitality businesses, sharing information. “It’s not perfect but it does have a destination image and that’s at the top of everyone’s agenda.”
Mr McCartney says Macau should make itself more conspicuous interna-tionally. The points-of-contact for con-vention organisers “need to say Macau is a good destination, that it is a preferred destination”. He says many MICE events are repeat events, so Macau cannot af-ford shortcomings in simple things such as urban transport and lighting equip-ment in venues.
Offi cial fi gures show Macau’s MICE industry is currently far from lucrative.
In the fi rst nine months of last year the combined revenue of exhibition organis-ers was MOP32.5 million (US$4.1 mil-lion) but their expenditure was MOP44.2 million.
Disincentives segmentGary Grimmer, the head of internation-al consultancy Gaining Edge, argued at last month’s forum that the government alone cannot do everything. Ms Lou says otherwise. “Conventions run by the gov-ernment would be the right way [to go] because not all exhibitors are big spend-ers and can afford rents at the Venetian, for example,” she says.
If Macau’s MICE industry as a whole performed poorly last year, the incentives segment had a year really best forgotten. Just 45 incentive events took place in the fi rst nine months of last year, down two-thirds from the same time a year before.
In an effort to turn the business around, the Macau Government Tour-ist Offi ce started last month a year-long programme to stimulate incentive travel and team-building activities. The aim is for each event to have at least 50 over-seas participants staying at least two nights in a Macau hotel.
Events such as these will be eligi-ble for a maximum subsidy of MOP300 for each participant not holding a Macau identity card. The tourist offi ce will also hand out complimentary tourist in-formation kits, welcome gifts and free admission to the Wine Museum and Grand Prix Museum. Ms Lou says the programme is likely to boost the number of incentive events held here.
Spaced outThe Tourist Offi ce launched its fi rst stra-tegic MICE subsidy programme in 2009 to help counter the negative effects the global fi nancial crisis was having on cor-porate travel of all kinds. The latest ver-sion of the programme is continuing un-der the Economic Services Bureau. The government is also considering offering training and sponsorship to present and prospective MICE organisers.
Mr Greco’s Universal Event Man-agement last month began studying the feasibility of a multi-purpose con-vention centre in Macau, primarily for business-to-business conventions. While he acknowledges the city cannot fi ll all the convention space it already has, Mr Greco says Macau lacks the right kind of space.
“What has been built already is a centre for the future [the Venetian Ma-cao], not the present,” he says. “More important than the size and shape of the structure will be its components.”
University of Macau academic Mr McCartney is sceptical. “You can judge occupancy and say there aren’t enough hotel rooms etcetera, but what we fi nd is that there’s space you can’t fi ll,” he says.
He says the MICE industry needs to have a vision before it can have a strat-egy. “Where do you want to be 10 years from now? We need a research or au-dit team in place to adjust the strategy, should it need to change.”
“The government has plans to accelerate growth in the industry on multiple fronts, one of which being the hosting and co-organising of important conferences and exhibitions,” a spokeswoman for the Economic Services Bureau says
Meetings & Conventions
FEBRUARY 2012
101101
If you know of an event that you believe should be listed with Macau Business, please drop us an e-mail: [email protected]. In the subject bar, type in “List me as an event”.
TBA : To be advised | : A Macau Business partner event
Date: 24th - 26th
Event: Anti-Corruption China SummitVenue: Andaz ShanghaiOrganiser: Beacon EventsAddress: 20/F Siu On Ctr, 188 Lockhart Rd, Wanchai, Hong KongTel: (852) 2531 6107Fax: (852) 2586 1999Website: www.beaconevents.comE-mail: [email protected] Date: 24th - 26th Event: Global iGaming Summit and ExpoVenue: San Francisco, CA (TBA)Organiser: Clarion GamingAddress: Earls Court Exhibition Centre, London SW5 9TA, UK Tel: (44) 0 20 7370 8579Website: http://www.gigse.com/E-mail: [email protected]
May
Date: 1st - 3rd
Event: UAE Ministry of Foreign Trade Annual Investment MeetingVenue: Dubai International Convention & Exhibition Centre (UAE)Organiser: Annual Investment Meeting Organizing CommitteeAddress: P.O.Box 10161 Dubai, UAETel: (971) 4 39 23232Fax: (971) 4 39 23332Website: www.aimcongress.comE-mail: [email protected]
Date: 10th - 12th Event: GTI Asia Taipei ExpoVenue: Taipei World Trade Center, TaiwanOrganiser: Haw Ji Co., LtdAddress: 2F, No. 17, PaoChing St., SongShan Dist., Taipei City 10585, Taiwan Tel: (886) 2 27607407Fax: (886) 2 27 42 0522Website: www.gtiexpo.com.twE-mail: [email protected]
Date: 22nd - 24th
Event: G2E AsiaVenue: The Venetian Macao-Resort-Hotel Organiser: Reed ExpoAddress: 39/F Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong KongTel: (852) 2824 0330Website: www.g2easia.comE-mail: [email protected]
February
Date: 14th-17th
Event: 5th Anti-Corruption Asia CongressVenue: Renaissance Harbour View HotelOrganiser: Beacon EventsAddress: 20/F Siu On Ctr, 188 Lockhart Rd, Wanchai, Hong KongTel: (852) 2531 6107Fax: (852) 2586 1999Website: www.beaconevents.comE-mail: [email protected]
Date: 21st - 23rd Event: Gaming Executive Summit LatAmVenue: Panama City, PanamaOrganiser: TerrapinnAddress: 96 Spring Street, 4th Floor, New York, NY 10012Tel: (1) 212 379 6322Fax: (1) 212 379 6319Website: www.terrapinn.comE-mail: [email protected]
March
Date: 6th - 8th
Event: iGaming Asia Congress Venue: Grand Hyatt, City of Dreams, MacauOrganiser: Beacon EventsAddress: 20/F Siu On Ctr, 188 Lockhart Rd, Wanchai, Hong KongTel: (852) 2531 6107Fax: (852) 2586 1999Website: www.beaconevents.comE-mail: [email protected]
Date: 16th - 19th
Event: ENADA SpringVenue: Rimini Expo CentreOrganiser: Rimini FieraAddress: Via Emilia, 155, 47921 Rimini - ItalyTel: (39) 0541 744 214Fax: (39) 0541 744 454Website: en.enadaprimavera.itE-mail: g.zoni@riminifi era.it
Date: 29th - 31st Event: 2012 Macao International Environmental Co-operation Exhibition and Forum (MIECF)Venue: The Venetian Macao-Resort-HotelOrganiser: Macao Trade and Investment Promotion Institute (IPIM)Address: World Trade Centre Building, 1st & 4th Floors,918, Avenida da Amizade, MacaoTel: (853) 2871 0300Fax: (853) 2859 0309Website: www.ipim.gov.moE-mail: [email protected]
April
Date: 19th - 20th Event: Mobile Payments & NFC World Summit 2012Venue: Eaton Smart Hong KongOrganiser: Symphony Global Pte LtdAddress: 10 Anson Road, #26-04 International Plaza, Singapore 079903Tel: (65) 6474 1471Fax: (65) 6725 8438Website: www.symphonyglobal.comE-mail: [email protected]
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Over the past three years the gov-ernment has put protecting the environment at the top of its
agenda, throwing money at the problem. Experts think the results are mixed.
There is little indication that Macau’s environment has improved. The number of complaints about air and noise pollu-tion has soared since 2008, people are throwing away more rubbish and the amount of recycling is still negligible.
Hojae Shim, an academic teaching environmental engineering at the Uni-versity of Macau, says authorities have spent more on the environment since the establishment of the Environmental Protection Bureau in 2009. However, he notes there have been no great changes in the quality of the environment, in-
BY LUCIANA LEITÃO
Money isn’t
cluding the air and water. It may take time for Macau to catch up with more advanced jurisdictions, Mr Shim says.
Government spending on the envi-ronment looks hefty – on paper. It budg-eted MOP1.76 billion (US$220 million) for regional planning and the environ-ment for this year. That was MOP233 million more than in 2011.
However the numbers can be mis-leading. In 2009, the government budg-eted MOP1.45 billion for regional plan-ning and the environment but ended up spending less than half that amount. Even so, the government’s real spending in this fi eld in 2009 more than doubled from the previous year.
To make things more complicated, the environment is the responsibility of
several bureaus, and no single secretary oversees spending. Apart from the Envi-ronmental Protection Bureau, the Civic and Municipal Affairs Bureau, the Mar-itime Administration, the Offi ce for the Development of the Energy Sector and the Transport Bureau all spend money on the environment.
In the airMr Shim has a long list of environmental problems that need to be solved, ranging from air and water pollution to soil con-tamination. “For most local people, their biggest concern still would be about the quality of air and water,” he says. The number of air pollution complaints to the Environmental Protection Bureau rose by 119 percent to 357 in 2010.
everythingGovernment investment in protecting the environment has increased but offi cials lack a strategy and must be stricter in enforcing the law
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Mr Shim agrees that Macau peo-ple are in sore need of more education about the environment. “Several times I feel many local people, including some students taking my courses, are just very much indifferent to whatever is going on environmentally, even though they are the ones generating all kinds of en-vironmental problems by driving more cars and motorbikes, by generating more garbage and using more water, while not separating waste,” he says.
The government is trying to help businesses to go green. The newly creat-ed MOP200 million Environmental Pro-tection and Energy Conservation Fund subsidises the acquisition of green facil-ities, technology and products by com-panies and associations. Last December the fund approved its fi rst four grants to companies. Among other things, the fi rst grants will help pay for the installation of LED lighting and kitchen extractor hoods. The value of the grants was not made public.
Wang Zhishi, a member of the gov-ernment’s Environment Consultative Council, says the authorities have been investing heavily in environmental pro-tection – proportionally more than Zhu-hai or Hong Kong. He points to invest-ment in infrastructure to improve waste management and treatment.
Goal settingMr Wang, an environmental engineer-ing expert at the University of Macau, says size matters in environmental pro-tection and this is a problem for Macau. He says noise and air population are ag-gravated by the high density of the city’s population.
“We have a big population and a shortage of land, so this condition deter-mines any government actions,” he says.
Even so, Mr Wang says offi cials could do more. They lack “a clear stra-tegic target”. He wants to see short-term goals. For example, the government should set ceilings for carbon dioxide emissions. “Every year [those ceilings] could improve, based on Macau’s eco-nomic development,” he says.
Some targets have already been set. The water conservation plan envisages
The government will push ahead with water recycling. The fi rst water re-cycling system will be in Seac Pai Van’s public housing complex. Recycled water will be used to fl ush toilets and water gardens. The project entails the con-struction of a wastewater recycling plant in Coloane. The new campus of the Uni-versity of Macau, on Hengqin Island, is also set to use recycled water.
Mr Shim says protecting the envi-ronment requires more than just invest-ment in infrastructure. There is also a need to strictly enforce the law and pun-ish offenders more severely.
There are new bills being drafted to protect the environment, including leg-islation requiring environmental impact assessments for construction projects and legislation regulating noise, but no major change is scheduled to take place this year. A spokesperson for the Envi-ronmental Protection Bureau predicted that it would take three to fi ve years to establish an environmental impact as-sessment regime.
The bureau is also working on a blueprint for environment protection planning up to 2020. The blueprint will cover the management of air quality, wa-ter quality, waste, noise and energy.
Adding to this, the Environmental Protection Bureau is currently studying ways to limit the use of plastic bags and promoting the adoption of environment-friendly guidelines for construction projects.
The government seems less inter-ested in fl exing its muscles to protect the environment than in increasing aware-ness of the environment through educa-tion. This has been the Environmental Protection Bureau’s main task so far, which has led to it being criticised for lacking teeth.
Back to schoolIn 2010, the Environmental Protection Bureau and the Civic and Municipal Affairs Bureau organised more than 500 educational activities intended to increase environmental awareness, such as seminars and exhibitions, which at-tracted about 475,000 people. Those ac-tivities cost MOP6.6 million.
The government’s environmental protection measures for this year in-clude promoting the use of cleaner vehi-cles. It will try putting electric buses into service and buy electric cars for its own fl eet, among other things. But car deal-ers complain about the lack of licensing rules for electric vehicles, which scares away buyers.
Local authorities announced last month tighter standards on gas emis-sions for new vehicles.
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the reduction of Macau’s annual im-ports of water from the mainland by 22.7 million cubic metres by 2025 –30 percent of the volume imported in 2008. The amount of mainland water Macau used in 2010, 76.2 million cubic metres, was already 1.9 percent less than the year before.
The government’s Water Conserva-tion Working Group declined to say how much it has spent so far on saving water but did say it had installed more than 6,000 conservation devices in schools. The taskforce spent MOP400,000 to distribute 40,000 water-saving nozzles to 20,000 small and medium enterpris-es in 2010. There are also conservation programmes for hotels and water bill rebates for consumers that reduce the amount they use, aside from a progres-sive water tariff.
The Offi ce for the Development of the Energy Sector is in charge of the government’s energy conservation ef-forts. Its coordinator, Arnaldo Santos, says businesses have so far responded positively.
Yet electricity consumption in the fi rst nine months of last year was 4.7 percent higher than in the correspond-ing period of 2010. The business sector’s consumption increased by 4.1 percent, and the gaming sub-sector’s rose by 8 percent. Casinos use more than one-third of all electricity consumed in Macau.
Progressive thinkingMr Santos sees the glass half full. He says economic growth usually entails higher consumption of energy. But, he says, the amount of energy consumed per unit of gross domestic product has been decreasing, as has the amount of water consumed per unit of GDP.
“Casinos are very conscious. They know they spend a lot,” Mr Santos says. “Some of the casinos have reduced ener-gy consumption by around 10 percent.”
The Offi ce for the Development of the Energy Sector intends to introduce a progressive electricity tariff, like the progressive water tariff. “This will also help to make people more cautious in the usage of electricity: you use more, you pay more,” Mr Santos says.
He stresses his offi ce’s surveys in-dicate that people are more conscious about the importance of saving energy, but he admits that many are still not act-ing accordingly.
To promote awareness, his offi ce has come up with a technical manual
able energy in the private sector. “We are preparing draft legislation to set up and to defi ne the safety and technical standards for [solar panel] installation.”
He hopes the process of enacting this legislation can begin this year. “Af-ter this, we will have the conditions to promote solar energy on a bigger scale,” says Mr Santos.
Macau already has an incentive to adopt more environment-friendly prac-tices. The Environmental Protection Bureau projected in 2010 that if no con-servation measures were taken, water consumption would climb by 63 percent between 2008 and 2020, electricity con-sumption by 29 percent and greenhouse gas emissions by 32 percent.
for energy conservation in buildings. It has also encouraged several public-sec-tor bodies to make energy conservation plans, to use energy-saving technology in their premises and to follow manage-ment schemes to reduce energy con-sumption.
The Offi ce for the Development of the Energy Sector has been especially active in promoting the use of renew-able energy, principally by installing so-lar panels on some public facilities. “At this moment, the only renewable energy that we can make use of is solar. Wind in Macau is not enough and we don’t have land to spare,” Mr Santos says.
Mr Santos says the next step is to set standards to allow greater use of renew-
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In a report in this issue of Macau Business, the government reassures us that its concern for the environment remains as strong as ever and it is noticeably increasing the
amount of public money spent on it. It is pleasing to note that the environment is a major priority and that something is being done to improve it.
The main apprehension however is that it is diffi cult to fi nd any other policy area where the disconnection between the aims, actions and outcomes is wider.
We can start by gently reminding readers about the existence of environmental norms that are routinely ignored. Nobody seems to comply with them or feel responsible for punishing non-compliance.
A case in point is the environmental policy framework law, which celebrated – if that word can be used here – its 20th anniversary last year.
Offi cials rarely, if ever, invoke this law. Occasionally a reference is decoded by those close to the matter and an allusion is made to the lack of specifi c rules or the need to overhaul existing legislation. No one seems to take responsibility for the absence of regulations that the law explicitly requires, or for the obvious disregard of its provisions.
Sooner or later, we will likely hear someone saying the framework law is too old, the world and Macau have changed and that it needs to be adapted. And yet, the basis for any environmental policy worth its salt has always been in the framework law’s subsidiary legislation.
In Macau’s case, there has been a two-decade delay in drafting those subsidiary regulations. Any specifi c rules produced now will probably have come too late to be truly effective.
Downhill slideIt comes as a surprise to no one to say that the quality of the environment does not seem to have improved lately. To state the most obvious, the days of poor visibility due to air pollution seem to be increasing; the heaviness of the air we breathe is worse in some areas of the city; thick dust clouds associated with construction sites, including public works, are only too visible.
That is not all. The number of motor vehicles grows continuously and a lot of them are heavy vehicles on almost continuous duty. Traffi c jams are becoming a permanent feature at some major intersections, increasing the duration time of travel. All this means, simply, more air pollution emissions.
On top of that, many vehicles travel with their own cloud of visible black fumes. Among them are a signifi cant number of vehicles in the public service.
This is one of the few sectors in the economy which is subject to emission standards but not even the public service seems to be able to comply with them. The government last month announced those standards would be further tightened.
To make matters worse, the absence of real urban planning may be leading to the multiplication of buildings
that block air fl ow, trapping in pollution and heat.Even so, no policy address is complete without a renewed
commitment to improving the environment. No offi cial fails to declare how much of a priority are both the protection of the environment and the improvement of the quality of life of residents. And, so we are told, a lot of activities are carried out and a lot of money is budgeted for environmental protection, although this isn’t necessarily refl ected in the amounts actually spent or, much less, well spent!
Adding hot airBesides promises of new regulations and action, much government-funded environmental activity falls into the category of promoting awareness. I have nothing against those types of activities but it seems a limited approach.
Taking the offi cial data at face value, an average of 10 awareness actions were carried out for every week of 2010 and involved almost 90 percent of the Macau population. Impressive, but was there any evaluation of their impact? How many hours of work did those actions involve? Did anyone consider an alternative use of those resources that might be less visible but more effective? Did anything change?
What is the point of, say, spending money and time in promoting domestic garbage separation and getting households to participate if the resources and facilities for recycling are sub-standard, leading to most of the rubbish being dumped in landfi ll or burnt in an incinerator?
There are other pertinent questions. Can the government’s agencies identify with a reasonable level of confi dence the leading sources of environmental degradation and measure them accurately? Is there an accurate estimate of the social and economic costs of these pollutants? Has a “hit list” been established that includes a hierarchy of important and urgent actions? Is there a calendar, a clear list of priorities, for policy development and implementation?
To be straightforward about these matters, will we have a coherent environmental policy any time soon?
Promises are occasionally made about this or that issue. This is the case with mandatory environmental impact assessments. But to be told that the legislation being developed may take three to fi ve years until it is ready does seem too timid as a policy aim. They are mandatory in the 20-year-old environmental policy framework law, a legal pre-condition for the licensing of major works, public or private.
This situation suggests a parallel with the idea that an urban planning regime will be developed once a use has been determined for the 361.65 hectares of land the current land reclamation scheme will create.
In urban planning, as in environmental protection, it may well happen that we will have sophisticated legislation only after all or most of the decisions for which those regulations mattered have been made. Should that happen, the laws would be ornaments to display, not actual foundations for our wellbeing.
In some jurisdictions, that type of outcome might be deemed a dereliction of duty.
Green credibility gapJOSÉ I. DUARTE ECONOMIST, MACAU BUSINESS SENIOR ANALYST - [email protected]
OFFICIALS OFFER SWEET WORDS, SAYING THEY HAVE A SOFT SPOT FOR THE ENVIRONMENT, BUT ARE YET TO PROPERLY DELIVER ON POLICY OR ITS PROTECTION
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Italian fashion house Dolce & Gab-bana was last month embroiled in a marketing crisis as hundreds of
people gathered outside the company’s Tsim Sha Tsui shop in Hong Kong for a string of demonstrations. The protests arose after reports that a security guard at the store had told Hongkongers that only foreigners and mainlanders were
BY LUCIANA LEITÃO
Brand morality taleFacing a marketing crisis, a brand owner must publicly acknowledge its mistakes, and be open and honest – unlike Dolce & Gabbana
allowed to take pictures of the window displays.
Did Dolce & Gabbana manage this marketing crisis properly? Experts tell Macau Business it did not.
The crisis erupted on January 5, when the Apple Daily newspaper broke the story. A public outcry followed and the shop became the target of a series
of protests organised on Facebook. On January 8, more than 1,000 protesters gathered in front of the store to dem-onstrate their anger by taking photos of it. The shop had to be closed for some days because of the protests.
Dolce & Gabbana issued its fi rst statement on the issue three days after the Apple Daily report. It was evasive.
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brand owner – in this case, Johnson & Johnson – can manage a crisis well.
Johnson & Johnson offered a US$100,000 (MOP800,000) reward for the capture and conviction of the killer. The company sent out warnings to the public not to take Tylenol, to doctors not to prescribe it and to distributors to hold their stocks. It halted Tylenol pro-duction and advertising and recalled all Tylenol products in the United States. When it emerged that only capsules had been poisoned, the company offered to replace capsules already sold with tab-lets.
The result of taking these steps was that in a few years Tylenol had more than regained the share of the market it held before the killings.
An associate professor of market-ing at the University of Macau, Des-mond Lam Chee Shiong, agrees that Johnson & Johnson’s handling of the Chicago Tylenol murders is a good ex-ample of how a company should act in a crisis. “The brand was maintained and even boosted because of the company’s handling of the crisis,” Mr Lam says.
In contrast, a classic example of poor management of a marketing crisis is the Perrier water affair of 1990, says Mr Sy-Changco. Excessive quantities of benzene, a chemical that can cause cancer, were found in Perrier water sold in the United States.
Perrier initially said it was an iso-lated incident and that its underground spring was not contaminated. A few days later it admitted that water con-tamination had occurred after employ-ees failed to replace charcoal fi lters that fi lter out benzene. And, worse, it kept on changing its story after that. The re-sult was that Perrier was forced to halt production and recall all its bottled wa-ter worldwide. One year later, its sales were less than half what they had been before. Eventually, the company was taken over by Nestlé SA.
Failure to understandMr Lam says Dolce & Gabbana used a “weak” strategy in response to the photo ban affair. “Companies which successfully overcome a crisis do so by ‘telling it fast and telling it all’,” he says. This precludes the news media from trying to guess what happened, as they did in the Dolce & Gabbana affair because the company’s response was “not timely and not open,” he says.
When a crisis is poorly managed,
“We wish to underline that our com-pany has not taken part in any action aiming at offending the Hong Kong public,” it said.
As the protests showed no signs of dying down, the fashion house issued another statement 10 days after the fi rst, acknowledging it had offended the Hong Kong people and apologising.
“We understand that the events which unfolded in front of the Dolce & Gabbana Boutique on Canton Road have offended the citizens of Hong Kong, and for this we are truly sorry and we apologise,” the company said. “The Dolce & Gabbana policy is to welcome the Hong Kong people and that of the whole world, respecting the rights of each individual and of the lo-cal laws.”
Many details of how this contro-versy arose remain unclear. The photo ban – if there was one – also stirred a debate in Hong Kong over the bal-ance between the right to take pictures in public places and protection of the trademark of goods displayed in shop windows.
No casualtiesJoseph Sy-Changco, an assistant pro-fessor of marketing at the University of Macau, says if it is true that there was policy of not allowing locals to take photos of the window displays, the pol-icy was clearly discriminatory. If it is not true, Dolce & Gabbana should have explained clearly to the public what its policy was, Mr Sy-Changco says.
“What is important is that they should be able to clear up things with the public,” he says.
Mr Sy-Changco says the mistakes most commonly made by companies in such situations include not responding to the crisis in time or denying outright any wrongdoing. The consequences may be onerous and customers may lose their confi dence in the brand, he says. “They will no longer trust the brand. They could easily migrate to other brands.”
Looking at the Dolce & Gabbana affair, Mr Sy-Changco believes people will quickly forget about it. “The main-land and foreign tourists will continue to buy and even Hong Kong people will. The negative effect will be mini-mal and short-term.”
Hard to swallowThere have been marketing crises that have been much more damaging. Mr Sy-Changco recalls the Chicago Tyle-nol murders in 1982. Seven people died in the United States after taking Tyle-nol pain-relief medicine capsules that somebody had laced with poison. No suspects were ever charged and the case remains unsolved. But Mr Sy-Changco says this is a good example of how a
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it can harm a brand’s reputation and create a negative impression. “Sales and shares can drop sharply in the short term. Over time, negative word-of-mouth among customers makes it hard for the brand to recover,” says Mr Lam.
Although he thinks Dolce & Gab-bana reacted poorly, he does not think the affair will badly damage its repu-tation among most of its customers in the long run. “I think a silent boycott by its Hong Kong buyers is highly pos-sible in the short term, hence leading to reduced sales for the brand within this period. This may be due in part to neg-ative media coverage of its inadequate actions.”
Another assistant professor of marketing at the University of Macau, Lancy Mac, agrees that Dolce & Gab-bana mishandled the affair. “Dolce & Gabbana defi nitely was not prepared whatsoever for any crisis like this and reacted very slowly,” says Ms Mac. She says it took the fashion house more than a week to respond properly.
Ms Mac believes this reveals a poor public relations strategy and misman-agement in particular of relations with the Hong Kong public. It also shows that the company did not have a sound marketing strategy, in that it failed to understand different kinds of customers and how to best serve them, she adds.
Knowing your beansIf there was a photo ban, it may have been due to demands by some VIP cus-tomers for privacy while shopping, Ms Mac says. “If the company is able to understand that these customers need special treatment, things should be organised much better, perhaps with a VIP corner, or in terms of design of the shop windows, in order to offer more privacy.”
Ms Mac says another problem re-vealed by the affair is that many brands face internal marketing challenges – that is, failing to get employees to un-derstand and serve customers properly. She says the crisis was probably due to decisions taken by untrained front-line staff.
Comparing brand owners, Ms Mac says Starbucks Corp. is one of those successful companies that know what its customers want and generally trains its employees accordingly. “It is quite puzzling to fi nd that even a coffee shop can do this, but luxurious brands sell-ing expensive merchandise can’t.”
mistake, this was not really a well-thought policy – if, indeed, it was a policy,” she says.
She believes Dolce & Gabbana’s actions were insensitive and arrogant.
“There is a sensitivity among Hong Kong people at the moment that the mainlanders are coming here with all their money, buying all the luxury goods. It’s a ‘them-and-us’ scenario,” she says. Dolce & Gabbana should have been aware of this, she says.
Even so, Ms Grebstad does not be-lieve the company’s mismanagement of the crisis will do great or endur-ing harm. “Maybe Hong Kong people might be a bit more sensitive, but I don’t think they are their major market, which is the mainland, which will not be too bothered by this.”
Macau Business sought comment from Dolce & Gabbana for this arti-cle but the company said it had noth-ing to add to the two statements it had already issued.
When a marketing crisis occurs, brand owners must act quickly and honestly, she says. “The Dolce & Gab-bana case is probably a wake-up call for many of these brands that they have to be more sensitive to different custom-ers’ needs as well as the local publics where they are operating.”
Lynn Grebstad, a partner in Hong Kong public relations company Grebs-tad Hicks Communications, calls Dolce & Gabbana’s behaviour insensitive. “They’ve allowed the whole situation to blow out of control. They didn’t issue a statement at the beginning,” says Ms Grebstad.
She says a marketing crisis occurs when “anything damages the public perception of your brand”. That was ex-actly the case in the Dolce & Gabbana affair.
Ms Grebstad says Dolce & Gab-bana failed to be open and honest throughout. “They should have come out, they should have said this was a
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Global fi nance’s supply-chain revolution
In March 2011, the catastrophic earthquake, tsunami and nuclear disaster that hit Japan halted production of key components on which many global supply chains depend.
The sudden disruption of these essential materials from the production process forced a reassessment of how these supply chains function. But such vulnerabilities are not confi ned to the manufacturing sector. The fi nance industry, too, has suffered its own near “supply chain” meltdown in recent times.
The failure of Lehman Brothers in 2008 not only roiled global fi nancial markets, but also brought global trade practically to a standstill as wholesale banks refused to fund each other for fear of counterparty failure. The simple banking system of the past, one based on retail savings being concentrated in order to fund the credit needs of borrowers, had evolved into a highly complex – and global – supply chain with knock-on risks of disruption comparable to those seen in Japan last spring.
Financial supply chains and those in the manufacturing sector share three key features – architecture, feedback mechanisms, and processes – and their robustness and effi ciency depend upon how these components interact.
In today’s fi nancial architecture, as with other supply chains, interdependent networks tend to concentrate in powerful hubs. For example, just two fi nancial centres, London and New York, dominate international fi nance, and only 22 players conduct 90 percent of all global foreign-exchange trading. Such concentration is very effi cient, but it also contributes to greater systemic risks, because, if the leading hubs fail, the whole system can collapse.
Open feedback mechanisms ensure a supply chain’s ability to respond to a changing environment, but, in the case of fi nancial supply chains, feedback mechanisms can amplify shocks until the whole system blows up. The Lehman Brothers collapse triggered just such an explosion, with the fi nancial system saved only by government bailouts.
Finally, the processes within supply chains, and the feedback interactions between them, can make the system greater or smaller than the sum of its parts. Since a complex network comprises linkages between many sub-networks, individual ineffi ciencies or weaknesses can have an impact on the viability of the whole.
Pressures to readaptLike manufacturing supply chains in the wake of the Japanese disruption, fi nancial supply chains face formidable pressures to re-engineer and adapt as the global economic balance shifts towards emerging markets. As that happens, billions of consumers will enter these countries’ middle classes, new social networks will evolve and climate change will become a growing factor in global commerce.
In addition, major regulatory reforms will impose new and higher costs on the financial sector. Banks and
other institutions are also under pressure to devise new financial products that can help the real sector to manage more complex risks and enable investment in areas such as green technology and infrastructure for developing economies.
Moreover, global fi nancial stability now depends upon greater cooperation at the international level, with tighter enforcement of rules at the national level. It is also clear that emerging markets are searching for alternative growth models that are green and sustainable. Their fi nancial sectors will have to operate very differently from the current model, which is driven by consumption.
In a world in which both consumption and fi nance must grow more slowly to cope with global resource and environmental constraints, what role can fi nance play in reducing addictive consumption, funded by unsustainable leverage? And, given that fi nancial institutions will have to monitor and manage risk in a radically different manner, both for themselves and their customers, what is the role of distribution in a world where consumption, savings and investment will accelerate in volatility?
The “killer app”Financial “production” is currently a top-down process. Instruments are designed in such a way that their sales generate more profi ts for fi nancial engineers than for end users. But the rise of interactive social networking has made fi nancial innovation more bottom-up. Millions of bank customers using mobile phones can provide immediate feedback on which products and services they like or dislike. In the future, client-service and transaction-management systems will receive more input from customers more frequently, so that product design is shaped interactively.
The current strategy in the fi nancial sector drives excessive competition by increasing market share at rivals’ expense, often breaking trust with customers for the sake of short-term gains. Yet the fi nancial sector has, in previous eras, proven that it can operate as a public good by providing trustworthy, effi cient services. The winning fi nancial supply chains of the future will instil confi dence that they offer safe, stable and effi cient services to the most clients.
Innovation in the last century focused on processes, products and services. Today, the fi nancial sector needs innovation of a higher order, involving business models, strategy and management approaches that restore trust in fi nance. Just as Steve Jobs of Apple transformed the computer industry through lifestyle products and highly reliable, user-friendly and “cool” services, fi nancial institutions will have to introduce new value chains that create confi dence by adapting to the growing needs of new markets.
Given such profound changes, fi nancial leaders should think about how to orchestrate a new fi nancial supply chain – the “killer app” for our still new century.
ANDREW SHENG FORMER CHAIRMAN OF THE SECURITIES AND FUTURES COMMISSION OF HONG KONG
THE WINNING FINANCIAL SUPPLY CHAINS OF THE FUTURE WILL INSTIL CONFIDENCE THAT THEY OFFER SAFE, STABLE AND EFFICIENT SERVICES TO THE MOST CLIENTS
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Burning midnight oilThe world is working longer hours; in Macau, the hours are already long enoughBY SARA SILVA MOREIRA
Human Resources
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The French ideal of a 35-hour working week has been down-graded from rule to exception in
France. It is a trend being echoed around the world, but in Macau the working week is already long.
The latest offi cial data available, from the third quarter of last year, shows the median number of hours worked per worker per week in Macau was 46.6. That was 30 minutes less than fi ve years before, despite the economic boom in between.
The data show 48 percent of the em-ployed population work between 45 and 49 hours a week, about 11 percent work between 50 and 59 hours and about 11 percent work 60 or more hours. Civil servants work 39.4 hours.
The International Labour Organi-sation recommends a working week of no more than 40 hours, with occasional paid overtime of up to 12 hours a week.
In the European Union, the average working week was 39.7 hours in 2010, claims a report by the European Foun-dation for the Improvement of Living and Working Conditions. In Asia, data from the Organisation for Economic Co-operation and Development shows that the average working week was 45.9 hours in South Korea, more than in Ja-pan, and a survey by non-profi t organi-sation Community Business found that among full-time employees in Hong Kong it was 48.7 hours.
Recent research by facilities man-agement and business support services company Regus Plc says 48 percent of white-collar workers worldwide work more than nine hours a day. Over one-third work an average of 50 hours a week and 10 percent work 60 hours a week.
Regus also found that 43 percent of white-collar workers take work home more than three times a week. No recent equivalent data are available for Macau.
The reasons for long working hours in Macau are numerous. They range from the idea that the more time an em-ployee spends at work, the better an em-ployee he or she is, to the shortage of la-bour, which means employees must burn the midnight oil to get everything done.
Age no handicapKim Kuok Oi Mei, a lecturer in manage-ment at the University of Macau, says inef-fi ciency may also account for long work-ing hours. The ineffi ciency may be due to employees doing a poor job, or to insuf-fi cient or unsuitable tools or training.
Another phenomenon in Macau is that it is not just young people striving to prove themselves at the start of their ca-reers that work long hours, but also the middle-aged and elderly. Offi cial data shows 71 percent of workers between the ages of 25 and 34 work more than 44 hours a week. So do 71 percent of work-ers aged between 55 and 64. Three out of four of workers over 65 put in over 44 hours a week.
Ms Kuok says this may be related to the economic changes Macau has under-gone. “High infl ation, soaring real estate prices and the lack of government sup-port makes these senior people feel in-secure about their retirement,” she says.
Also, the thriving tourism, hos-pitality and gaming industries tend to hire younger people, says José Pereira Coutinho, a directly elected member of the Legislative Assembly, so senior em-ployees feel they need to work longer to avoid being replaced.
in this category. They are the ones work-ing the longest in Macau: 48.6 hours per week is the median.
There have been many reports of housemaids meeting with resistance from their employers even when trying to take their weekly day off, and of them not being properly compensated for working on statutory holidays. A sur-vey of domestic workers by the Peduli Indonesian Migrant Workers Concern Group, which is run by and for Indo-nesian migrant workers, found that up to 75 percent worked excessive hours. Some housemaids reported working close to 12 hours a day.
Macau’s labour law sets the usual working limit at eight hours per day. Al-though it allows employers and employ-ees to agree on a longer day, it mandates a maximum of 48 hours per week in nor-mal circumstances, with at least one day off a week. In other words, Macau has yet to adopt a fi ve-day working week. And the law says employees in certain jobs, including domestic workers, can be exempt from the usual limits.
As for leave, the law requires em-ployers to observe the 10 statutory holi-days each year and give employees six days of paid leave per year after one year of service. Usually, the manufacturing, construction, security, transport, whole-sale, retail, catering, hotel and other cus-tomer service industries observe only the statutory holidays. Public bodies, banks and education institutions usually observe the statutory holidays and 10 other customary holidays each year.
The last resortA spokesperson for the Labour Affairs Bureau says employees can complain to the bureau if their employer is overbur-dening them with long working hours and failing to comply with the law, but the University of Macau’s Ms Kuok says that in many cases, especially those of domestic workers, evidence is hard to produce.
Mr Coutinho, the legislator, calls for special rules for domestic workers, in-cluding rules to protect them from abuse by their employers. He says the present safeguards are insuffi cient and the pen-alties for ignoring them too lenient.
Cecilia Ho Wing Yin, a lecturer in social work at the Polytechnic Institute of Macau, accuses the Labour Affairs Bureau of inaction. She says it does not have enough staff to police employment practices. Ms Ho also says the language
The latest offi cial data available, from the third quarter of last year, shows the median number of hours worked a week per worker in Macau was 46.6. That was 30 minutes less than fi ve years before, despite the economic boom in between
Education also plays an important role in how long one works. Although 71 percent of those that completed sec-ondary education work over 44 hours a week, only 48 percent of university graduates do so.
People that work longer hours usu-ally get less pay. A total of 15,400 Macau workers working over 44 hours a week earn less than MOP3,500 (US$437.50) per month, while only one-third of the 2,800 people paid MOP80,000 or more work over 44 hours a week.
Domestic drudgeryLow-wage employees often refrain from complaining about long hours for fear of losing their jobs. Domestic workers are
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Human Resources
barrier deters foreign domestic workers from complaining.
The Labour Affairs Bureau should educate employers and employees about their legal rights and responsibilities, she says. The University of Macau’s Ms Kuok would like to see a hotline for em-ployees to use to voice their complaints.
The Peduli group has been lobbying for changes in the law but has met with resistance from the government and em-ployers. A spokesperson for the group says the authorities have been slack in enforcing the law.
Cutting working hours should be a joint effort by the government and the private sector, says Jennifer Liao, found-er and managing director of recruitment agency EvolutionHR. Ms Liao says more labour should be imported, especially for the hospitality industry, and that the government should give private business more fl exibility to import qualifi ed per-sonnel.
Business, in return, must be aware of the importance of protecting the well-being and work-life balance of employ-ees, she says. Apart from safeguarding the right of workers to rest, companies “must also invest in training and devel-oping their employees, so that they can perform their job effectively and effi -ciently”.
The University of Macau’s Ms Kuok
of a 25-year old white-collar worker added weight to a report in 2010 by the Chinese Medical Doctor Association and Chinese Hospital Association, indicating that over 60 percent of white-collar work-ers in large mainland cities risk develop-ing illnesses caused by overwork.
Excessive time spent at work also takes its toll on the family life of em-ployees, being one of the causes of the increase in Macau’s divorce rate, says Mr Coutinho. The number of divorces has risen by more than 150 percent over the past 10 years.
Several experts say that a way around long hours and shift work is to offer employees fl exible working hours. The labour law is silent on this but the Labour Affairs Bureau’s spokesperson says the bureau encourages businesses to draw up work schedules that are more favourable to workers.
Although Mr Coutinho says estab-lishing fl exible working hours in a city that never sleeps would be diffi cult, both the University of Macau’s Ms Kuok and EvolutionHR’s Ms Liao say employers are more and more willing to adjust working hours to the needs of their employees, es-pecially when trying to attract and retain qualifi ed personnel. Ms Liao says she has already managed to negotiate such ar-rangements for highly skilled profession-als who specially asked for them.
says the government could give training and counselling to private businesses, and lower the legal limits on working hours only as the last resort.
Worked to deathA 2007 study by the International La-bour Organisation concluded that laws and policies on working hours have a limited infl uence on actual working hours, since many employees have no option but to work long hours just to make ends meet. And employers often demand unpaid overtime so they can hit business targets. Mr Coutinho, the leg-islator, says the legal limits on working hours are unlikely to be lowered.
Long working hours can help a company’s bottom line, but badly im-pair the health of employees. A recent British study found that 67 percent of people that work 11 hours or more a day are likely to have a heart attack. Long working hours are also linked to alcohol abuse.
In Japan, the phenomenon of death by overwork, called ‘karoshi’, became such a problem that in 1987 the Japanese Ministry of Labour began publishing statistics. The main cause of ‘karoshi’ is heart attacks brought on by extreme stress.
In the mainland, overwork came un-der the spotlight last year after the death
In Japan, the phenomenon of death by overwork, called ‘karoshi’, became such a problem that in 1987 the Japanese Ministry of Labour began publishing statistics. The main cause of ‘karoshi’ is heart attacks brought on by extreme stress
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FEBRUARY 2012
IT IS SURVIVAL, NOT WORKERS’ GREED THAT FORCES THE MOST LOW PAID TO CHANGE JOBS
It is old news that job-hopping is a problem in Macau. What is more problematic is why it persists unabated. It is a problem more complex than simply demand for workers outstripping
supply.Employees come and go at a week’s notice, a day’s notice
or no notice at all – or they demand extra money to stay, holding their employers to ransom.
The most recent full survey of the job market, in 2008, indicated that 12.1 percent of the workforce changed jobs that year, of who 57 percent had taken a new job for better pay and 22 percent due to “incompatibility with working hours/dissatisfaction with the work environment”. The most recent data suggests the rate of job-hopping varies according to occupation and industry, from 1.9 percent to 11.4 percent.
Managers are aware that job-hopping may indicate a lack of commitment, a fl aky attitude to work, irresponsible behaviour or a greedy outlook. Instead of a fl aw in the employees, the problem may also lie with the nature of the work. Work may be boring and unfulfi lling, the employer’s behaviour inappropriate or the pay poor and working conditions unsatisfactory.
Although Frederick Herzberg’s research on job satisfaction in the 1950s attracted both praise and serious criticism, his thinking about “hygiene factors” such as job security, pay, benefi ts and working conditions, may still have contemporary potency in explaining some cases of job-hopping in Macau.
He suggested that while “hygiene factors” may not improve employee motivation, their absence or poor quality may give rise to dissatisfaction. Pay is an important part of the modern work experience and many employees in Macau are poorly paid.
Patacas matterThe table on this page provides the latest staff turnover percentages and average monthly earnings for different groups of workers. The relationship is illustrated on the graph. The data do not all refer to the same period in time, since the Statistics and Census Service publishes them at different quarters according to sector.
The table and the graph show, unsurprisingly, that low pay and high turnover are strongly associated. The line of best fi t on the graph shows that the lower the average monthly income, the higher the turnover rate, and suggests that 40.9 percent of staff turnover in this collection of surveys is explained by income. For statistics purists, there is a strong negative correlation coeffi cient (-0.670) between pay and turnover (ρ=0.005); regressing income onto turnover rate yields an adjusted R square of 0.409.
If you work in a clothing factory or at a restaurant or as a security guard, it is little wonder that you may be considering a change of job, even for a few patacas more. An extra, say, MOP300 (US$37.5) a month for a worker in a clothing factory is on average a 6.5-percent increase. For the average restaurant worker, an extra MOP400 a month is a 5.5-percent increase.
Neither increase is enough to match infl ation. Last November saw prices rise 6.65 percent year-on-year.
Let us put aside accusations of greed or an “easy-come-
easy-go” attitude among the poorly paid job-hoppers. It is survival, not greed.
If you are one of the 57,100 unskilled workers whose median monthly income in the third quarter of last year was MOP4,600, or one of the 79,300 employees in the service and sales sector whose median monthly income was MOP8,000 – these two groups constituted 39.7 percent of the workforce and earned less than the city’s median monthly income of MOP10,000 – it is little wonder you want a job where you can earn a few more patacas.
You do not need a Nobel Prize to know that paying people more might help to retain them. Why doesn’t it happen in Macau? There are promises of pay rises in the gaming sector but what about the rest of the workforce? A minimum wage is only the fi rst step, and even that is not yet a statutory requirement.
No wonder workers jump ship to earn a few dollars more.
For a few dollars moreKEITH MORRISON AUTHOR AND EDUCATIONIST - [email protected]
Apparel (Qtr. 3)Manufacturing (Qtr. 3)Restaurants (Qtr. 3)Security activities (Qtr. 2)Wholesale trades (Qtr. 2)Retail trade (Qtr. 2)Sewage and refuse disposal (Qtr. 2)Hotels (Qtr. 3)Land transport (Qtr. 2)Financial intermediation activities (Qtr. 3)Casino croupiers (Qtr. 2)Transport, storage and communications (Qtr. 2)Postal and telecommunications (Qtr. 2)Insurance (Qtr. 3)Banking (Qtr. 3)Electricity, gas and water supply (Qtr. 3)
Industry, second or third quarter of last year
Staff turnover rate
(%)
Average monthly earnings
(patacas)
10.37.98.3
11.46.48.23.36.78.66.73.96.49.44.75.51.9
4,6506,9407,3307,6409,8709,940
11,13012,32012,35012,99014,56015,53016,79019,30019,90023,430
Source: Statistics and Census Service
Source: Statistics and Census Service
Staff turnover rates for selected industries ranked from lowest to highest average monthly earnings
The strong correlation between being poorly paid and high turnover
12.0
10.0
8.0
6.0
4.0
2.0
0
Average monthly income (MOP)
Turn
over
rate
(%)
10,0000 5,000 15,000 20,000 25,000
114
FEBRUARY 2012
hen the fi nal word is published on the most outlandish, sumptuous eye-candy ever created, it would not surprise anyone if fi lmmaker Peter Greenaway made the list.
The British direc-tor has a pedigree for meshing his art school
background with his take on art-house cinema to create cel-luloid masterpieces such as “The Cook, The Thief, His Wife and Her Lover”, “Prospero’s Books” and “The Pillow Book”. In his latest project, this time for the stage, Mr Greenaway brings his cinematic vision to “The Blue Planet”.
In common with his previous work, which could argu-ably have been labelled cinema masquerading as theatre, this performance bends the boundaries between the two formats and adds dance, opera and a live accompaniment.
The audience at April’s performance of The Blue Planet at the Macau Cultural Centre will be immersed by a familiar tale of a coming fl ood, the side-effect of mankind destroying the planet. The recurring theme is “God makes, man breaks”.
The work is based on the premise of Noah’s Ark. As in the tale relayed in the Christian Bible, the Koran and taught by Jewish Rabbis, Noah is instructed to build an Ark to save the world’s creatures. He himself refuses to board, such is his loathing and disgust for humankind. His wife, a Joan of Arc character, resists too, until she feels compelled by love for her children. Her redemption reminds us that there is always a chance to reform our hurtful ways.
Media messageWhile The Blue Planet has a familiar theme, reminding us of the risks we pose to mother nature, the staging is a novel, technical marvel.
WAT E R WORLD
THEATRE AND DANCE, BACKED BY A STUNNING MULTIMEDIA
SHOW FROM ONE OF THE WORLD’S GREATEST FILM
DIRECTORS TELL AN ALLURING AND ALARMING TALE OF
ENVIRONMENTAL DESTRUCTION
Arts & Culture114
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FEBRUARY 2012
multimedia. In “The Tulse Luper Suitcases”, Mr Greenaway incorporated cinema and multimedia to tell a personal his-tory of the discovery and eventual misuse of uranium in 2003 and 2004.
The project was epic, involving three feature length pieces of “cinema”, online content, books and television shows. Even for Mr Greenaway, it was considered a diffi cult piece to understand.
It is a style that has run in parallel with his deepening forays into new media. He has experimented as a VJ.
The Blue Planet continues his dislike of a straight-for-ward narrative style. He delights in showing the audience an
outlandish array of visual possibilities that are pure art, not restrained by boundaries.
This is not an easy or happy piece to follow. It is not a work for young children, either. As a review in the Italian newspaper “Il Messaggero” noted in 2009, “what you mostly remember are the images, projected on the screens. The terrible images which tell
the ruin of the environment and the poetic im-ages that shoe a pure nature which needs to be
protected”.
Co-collaborator, Dutch opera director Saskia Boddeke and Mr Greenaway’s stunning high quality images of Earth’s biodiversity mingle delight the senses. The digital images are splashed on the screen in what is being called an Oratorio of dance, music and imagery.
Six enormous screens relay the images to the audience, adopting Mr Greenaway’s signature device of splitting the action across multiple canvases. Beneath them, dancers move around a water pool on the stage. A live musical accompani-ment drives the narrative.
The work was conceived for Expo 2008 in Zaragoza, Spain. It has since been seen only in rare circumstances, making this performance in Macau a unique experi-ence. This time the work is produced by Change Performing Arts based in Milan.
They produce a work of that relies heavily on tales from the Bible’s Old Testament, weav-ing in man’s desire to break God’s great works.
It is a recurring theme, according to the liner notes that accompany The Blue Planet. Adam and Eve caused man’s fi rst punishment, being cast out from earthly paradise in Eden. The lesson went unheeded and the kingdoms of Sodom and Gomorrah paid the price, levelled with fi re. And then the Great Flood.
Earth, fi re and water are required to cleanse the Earth of man’s muddle-headed wrong-doing. The fourth element, air, is the current focus of man’s inhumanity. Greenhouse gases, pollution. Of course, this time it is the water that again is coming to claim us as the seas rise.
Master classWith The Blue Planet, Mr Greenaway deviates into modern civilisation and the ecology. It is a rarity for a man who has previously immersed himself in age old tales.
Known largely for his work with fi lm, he has steadily moved away from the medium, instead expressing himself in
115
THE BLUE PLANETVENUE: Grand Auditorium, Macau Cultural CentreTIME: 8PMDATE: APRIL 4TICKETS: Tickets are available at the Macau Cultural Centre and Kong Seng outletsCREDIT CARD TICKETING HOTLINE: (853) 2840 0555INTERNET TICKETING: WWW.MACAUTICKET.COMMORE INFORMATION: Call (853) 2870 0699 EMAIL: [email protected] WEBSITE: www.ccm.gov.moNOTE: Best for aged 13 or above; show contains nudity
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FEBRUARY 2012
MACAU USHERS IN YEAR OF THE DRAGONA string of festivities welcomed in the Year of the Dragon last month, viewed by many as an auspicious and powerful year. The Lunar New Year, or Spring Festival, began on January 23 and was warmly greeted with roars of fi recrackers and a series of celebratory activities.
Aside from the government-sponsored celebrations, all gaming operators held special events to herald the Year of the Dragon with wishes of good fortune, health, happiness and prosperity. Those events included performances by dragon and lion dance troupes, as well as other traditional activities and the handing out of thousands of lucky red packets.
A 238-metre long golden dragon parades the city’s major tourist spots
A fi reworks display on the fi rst day of the Year of the Dragon lights up the skies
Worshippers in temple light the fi rst incense of the New Year
The chief executive sets off a set of fi reworksThe God of Fortune gives out red packets to the visitors at Galaxy Macau
Sands China Ltd.’s executive team welcomes the Year of the Dragon
The Mandarin Oriental Macau hosted a lion dance to bring good luck to guests, staff and the hotel
Holding to tradition, SJM Holdings Ltd. held its Lunar New Year’s Eve celebration dinner
Chinese New Year performance at MGM Macau
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FEBRUARY 2012
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118
FEBRUARY 2012
Islamic fi nance unboundWhile uncertainty continues to roil global markets, driving
many investors into full retreat, one part of the fi nancial sector is expanding exponentially: Islamic-law-compliant
fi nancial assets have grown from about US$5 billion (MOP40 billion) in the late 1980s to roughly $1.2 trillion in 2011.
This asset class, which is characterized by shared risk between institutions and clients, avoided many of the most severe consequences of the global fi nancial crisis that began in 2008. This resilience, along with several other key features, underpins the high performance and growing popularity of Islamic fi nance.
The global fi nancial crisis adversely affected a small number of Islamic fi nancial institutions as the real economy contracted and some issuers of Islamic bonds defaulted. But the risk-sharing inherent to Islamic fi nance made such instruments more resistant to the fi rst round of fi nancial contagion that hit in 2008. Leading economists, such as Harvard University’s Kenneth Rogoff, have suggested that Islamic fi nance demonstrates the advantages of more equity and risk-sharing over the conventional bias in favour of debt instruments.
Clients like business partnersSeveral distinctive features have made Islamic fi nancial institutions relatively stable throughout the crisis. One such feature is that Islamic fi nance emphasizes asset-backing, thereby ensuring a direct link between fi nancial transactions and real economic activities. Institutions’ savings and investment returns are closely linked, because they are determined by the real sector, not the fi nancial sector.
This creates a fl exible adjustment mechanism, should unanticipated shocks occur. It also ensures that real asset and liability values are always equal, while prohibiting excessive leverage and several forms of complicated securitisation. Moreover, Islamic fi nance is more equitable: lenders and borrowers share risks and rewards, which increases the focus on long-term goals and discourages excessive short-term risk-taking.
In short, Islamic fi nancial institutions treat their clients like business partners. They therefore have strong incentives to evaluate fi nancing requests carefully and to assist borrowers in bad times, thus reducing the pressure to sell assets at “fi re-sale” prices and minimizing the likelihood of fi nancial contagion. Finally, the Islamic fi nancial framework protects deposit balances, and prevents excessive credit growth.
Islamic fi nancial instruments are currently available in at least 70 countries and today represent about 0.5 percent of global fi nancial assets. But the prospects for continued rapid growth are strong. In its November 2011 “Global Islamic Banking Report”, Deutsche Bank projects a 24 percent compounded annual growth rate in Islamic assets over the coming three years. There are fi ve main reasons for this forecast:- Islamic fi nance offers savers and investors practical alternatives to conventional instruments;- The quality of Islamic fi nancial services is improving and these services are not limited to particular clients;
- Conventional multinational fi nancial institutions are increasingly offering Islamic assets and there is growing interest in them in London, Luxembourg and other world fi nancial capitals;- The commodity boom in some Muslim countries has generated surpluses that need to be allocated through fi nancial intermediaries and sovereign wealth funds;- Islamic fi nancial instruments can comply with ‘sharia’ – Islam’s moral code and religious law – as well as send signals of change compatible with recent developments in several Muslim-majority countries.
Big potentialBut realizing the potential of Islamic fi nance requires strong supervisory oversight. Financial institutions need to enhance pre-lending screening and post-borrowing monitoring. It is also problematic that, in many countries, debt receives advantageous tax treatment, which favours leverage over equity and profi t/loss-sharing arrangements. This should change.
Moreover, mortgages, mutual insurance, leasing and microfi nance are underdeveloped in Islamic fi nance; insolvency and bankruptcy procedures must be improved; and mechanisms to deal with “Islamic bond” defaults must be established. Finally, Islamic fi nancial institutions must address concerns about liquidity-risk management, compliance with Basel III (the Basel Committee on Banking Supervision’s most recent global regulatory standard), international accounting standards and corporate governance.
While recent reports emphasize the size and growth of Islamic fi nancial assets and instruments, it is the quality of services, continued fi nancial innovation and sound risk-management practices that will ultimately defi ne their success. By addressing its shortcomings, Islamic fi nance could encourage inclusive growth in many developing countries.
If Islamic fi nance can resolve key regulatory and corporate-governance issues, it has the potential to meet more people’s banking and investment needs, expand its reach and contribute to greater fi nancial stability and inclusion in the developing world. That is something that everyone should welcome.
MAHMOUD MOHIELDIN MANAGING DIRECTOR OF THE WORLD BANK
ITS RESILIENCE, ALONG WITH SEVERAL OTHER KEY FEATURES, UNDERPINS THE HIGH PERFORMANCE AND GROWING POPULARITY OF ISLAMIC FINANCE
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FEBRUARY 2012
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TAKEN FOR A RIDEThe government is in talks with taxi drivers to increase fares. The authorities have signalled they are prepared to approve an increase in fl agfall of less than 10 percent.
Frozen Spy thinks this is already too much. Yes, the cost of running a taxi has soared since the last fare increase in 2008. But the service provided has also declined, with more complaints about poor driving, overcharging and the preferential picking of passengers.
The negotiation could be an ideal bargaining chip.We would like to see all taxis installed with closed-circuit cameras or webcams,
and have them linked to a tracking system operated by the Transport Bureau to better protect both customers and drivers. Or perhaps establish a plan to replace the current fl eet with low-emission electric cars.
Yes, this is pure daydreaming.Remember that in 2008 the city was promised that taxi services would improve
after fares were increased. Almost four years later, look at how much better off we are.
POLICE NUMBERS ARE CRIMINALCrime rates inside casinos increased by more than 20 percent last year, data from the Judiciary Police shows.
A crime was committed inside a casino every four hours on average last year. More signifi cantly, all four homicides that took place last year are suspected to be linked to gambling.
The director of the Judiciary Police, Wong Sio Chak, admits the fast growth of the gaming industry has had a negative impact on public security and that the city’s authorities lack the manpower to tackle the casino crimes.
Frozen Spy is no security expert but shouldn’t the city put more effort into protecting its cash cow? More security would surely be a better investment than the money spent on plain-clothes police offi cers to take snapshots of demonstrators every time there is a pro-democracy rally.
A NEW DEAL FROM THE BOSS-MANAn academic has suggested the government give casinos the option to hire dealers from overseas, ending a policy to hire Macau talent exclusively. Professor Zeng Zhonglu from the Macau Polytechnic Institute said the change would give gaming operators the option to promote domestic dealers to higher positions.
He has a point. With Macau’s unemployment rate at a historic low and several casino resorts in the pipeline, a scarcity of dealers is looming. Gambling concessionaires will increasingly face the risk of not being able to fi nd replacement staff if they promote a resident dealer, supervisor or pit manager – all positions for which they cannot currently import workers.
As things stand, the only choice is to continue increasing salaries to attract more ID-card holders to the tables. That would further distort the economy, hurting small and medium enterprises already struggling to compete for manpower.
Curiously enough, chief executive Fernando Chui Sai On does not seem to see the threat. He made the solemn pledge that he will never authorise imported workers to work as dealers.
So, Mr Chui, would you care to explain what your plan is?
HITTING WHERE IT HURTSMacau is moving towards becoming an environmentally-friendly society. One of the measures proposed is a progressive electricity tariff. Those who use more will pay more.
Since the government rebates households MOP180 (US$22.50) a month on their electricity bill, the new tariff will have a limited impact.
Truth be told, households represent just one-fi fth of all the electricity consumed in Macau but it is the sector where awareness campaigns are the most effective.
For low-income households, the subsidy is a much-needed welfare supplement. For others, it promotes waste.
The government clearly prefers to save itself the trouble of screening applicants and offers the rebate to
everybody. After all, Macau has money to spare, right?Meanwhile, as usual, the casinos will bear most of the cost when
the new system is in place. The tariff makes our offi cials appear profi cient but it underlines that their attitude has not changed.
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Advertisers IndexFEBRUARY 2012
Aristocrat Page 02 www.aristocratgaming.com
Bally Technologies Page 07 www.ballytech.com
BNU Page 19 www.bnu.com.mo
Galaxy Entertainment Group IFC and Page 17 www.galaxyentertainment.com
Goldfi sh Pages 30 and 57 www.goldfi shmacau.com
Hotel Okura Page 39 www.hotelokuramacau.com
Icon Communications Page 65 www.icon-communications.com
Macau Business Daily Page 41 www.macaubusinessdaily.com
Macau Cultural Centre Page IBC www.ccm.org.mo
Macau Post Offi ce Page 85 www.macaupost.gov.mo
Macau Daily Times Page 55 www.macaudailytimes.com.mo
Mandarin Oriental Page 23 www.mandarinoriental.com
MGM Macau Page 03 www.mgmmacau.com
MGTO Page 21 www.macautourism.gov.mo
Morton’s The Steakhouse Page 103 www.mortons.com
Our Dental Clinic Page 38 www.ooioc.com
PokerStars Macau Page 05 www.pokerstarsmacau.com
Project Asia Corporation Page 15
Sands China BC www.sandschinaltd.com
SJM Page 61 www.sjmholdings.com
Zung Fu Motors – Mercedes Page 01 www.zungfu.com.mo
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