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50 Economy & Finance 20 Copyright fight Royalties return from creative industries is still low 22 Fundamental flaws Lacklustre performance of mainland stocks in 2012
Politics 28 The Macau candidates Several sitting members of the Legislative Assembly are preparing to run for re-election
Greater China 36 Ailing health Private hospitals in Hong Kong are under scrutiny 40 In the leap of luxury Luxury brands still see plenty of potential in the mainland 42 The next Silicon Valley Chengdu wants to become a magnet for innovation
Property 46 The year of all changes Five bills with a wide impact on the real estate sector are set for vote in 2013
Gaming 50 Second coming Analysts say casino sector could grow up to 15 percent in the next 12 months 54 No butts, few ifs Partial ban on smoking inside casinos should not have a big impact on revenue 58 Non-stop expansion Galaxy Entertainment unveils plans for Galaxy Macau phases three and four 60 Heavy rotation Sands China launches accelerated version of baccarat 63 Chips with everything GPI is considering more customised products and services to boost Macau business 67 One step closer Madrid passes new rules catering f or Las Vegas Sands’ EuroVegas 68 Okada gets Philippines partner Japanese businessman has teamed up with John Gokongwei 69 Biggest and best ICE Totally Gaming 2013 will cover more than 31,000 square metres
bizintelligenceonline.com JANUARY 2013
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DECEMBER JANUARY 2013 2012
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70 MB Report 70 Spa wars Macau has put itself at the cutting edge of the global spa business
Hospitality 76 Room to spare Travellers to Macau are using the Internet to find private accommodation to stay in 78 Brave new world A growing interest in New World wines
Business 85 Lost in translation Translation services are still underdeveloped and vary in quality 88 At your serve-less Attentive service must adapt to the customer’s cultural background
Marketing 90 Funny money Cartoons can help boost sales to adults, researcher says
Education 92 Needs unmet City lacks expertise in handling children with special needs
JANUARY 2013
Arts & Culture 96 The red museums Businessman opens museums on the Cultural Revolution in the mainland
Opinion 10 From the publisher’s desk Paulo A. Azevedo 13 Editorial Emanuel Graça 19 The new shape of China’s economy Zhang Monan 23 Gold will shine on André Ribeiro 27 Care to explain? José I. Duarte 34 Year of the weasel Keith Morrison 45 Regime change in China? Minxin Pei 82 Low-hanging fruit Gustavo Cavaliere 89 Should we live to 1,000? Peter Singer 98 The optimist’s timeline Bill Gates
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DOMINO EFFECT
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The rules in the city’s civil service give more weight to following a superior, no matter if they are wrong or even violating their own obligations, than to defending the public interest
JANUARY 2013
acau is fighting a problem of gigantic proportions: a lack of accountability among its civil servants and their poor sense of service. It is a widespread problem, crossing all layers of the public administration. Often, it fuels a sense among civil servants that they are not liable for their own actions. That leads them to further disregard public affairs and their role in society. There are several cases here of civil servants who did not act as they were expected to in the face of serious events. That was either because they were too afraid of what their superiors would think and do, or – note the incongruence – because they blindly followed the rules. The problem is that the rules in the city’s civil service give more weight to following a superior, no matter if they are wrong or even violating their own obligations, than to defending the public interest. The most obvious expression of where the system fails comes from the corruption investigation that led to the arrest of former secretary for transport and public works Ao Man Long. In court, several civil servants – including the head of the Lands, Public Works and Transport Bureau – admitted
they had followed Mr Ao’s orders to change the outcome of many open tenders. They did so because “he was the boss” and were afraid of retaliation. Mr Ao is behind bars but only because the case was already too big for the city’s authorities to turn a blind eye. He was the only civil servant punished.
Top secrets Last month, the media reported – in what was an exceptionally rare event – that the Public Prosecutions Office had formally charged several high-ranking officials from the Civic and Municipal Affairs Bureau for taking too long to provide documents requested by the office. The documents related to the perpetual lease of 10 grave plots in 2001, one of which benefited the family of a close aid of the Secretary for Administration and Justice, Florinda Chan. The deal fell under the control of the Civic and Municipal Affairs Bureau, which is under Ms Chan’s supervision. There are similar cases of mismanagement by civil servants and, unfortunately, the majority have not been exposed to the public. It should be in the government’s best interests to change this state of affairs. I would say it is, taking into account the pledges made by Chief Executive
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Fernando Chui Sai On. But for that to happen, Mr Chui must first change the regulations governing the public administration. Civil servants have a duty to maintain confidentiality, which is understandable considering they may have access to classified information. But they are also prevented from disclosing facts or documents that are not considered confidential. An official note to all civil servants by the head of the Public Administration and Civil Service Bureau, José Chu, reminded them of that fact in October. Mr Chu’s bureau is also under Ms Chan’s leadership. The reminder from Mr Chu stressed that civil servants who take copies or pictures of documents, even if they are not considered confidential, and release them to the public are breaking their obligation to confidentiality. It shows how fearful the city’s officials are that any kind of information should reach the public domain. Mr Chu’s note hints that no leaks will be tolerated. Furthermore, the general
principles that have guided the civil service since November 2006 are strangely explicit in stressing the need to comply with orders that come from high-up. In short, when in doubt, always follow the boss’ orders. I am not in favour of chaos guiding the city’s public administration, but it is time to reduce the discretionary power of its bigwigs. It is only human nature that people in the highest echelons of an organisation make use of tools within their reach to protect themselves. It is usually those who are further down the food chain that end up feeling the heat. But this is wrong and should be corrected. The cases highlighted in this column are but a few examples. There are several rules that make Macau’s public administration more opaque and threaten its own staff from within. If Mr Chui really wants to create a more transparent and accountable public administration, it is mandatory that he revise the rules that govern it.
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Editorial Council Paulo A. Azevedo, Emanuel Graça, Tiago Azevedo, Duncan Davidson, José I. Duarte Founder and Publisher Paulo A. Azevedo VOL.1 Nº105
pazevedo@macaubusiness.com
Editor-in-Chief Emanuel Graça Cover photo: Luís Almoster
emanuel.graca@macaubusiness.com
Assistant Editor-in-Chief Alexandra Lages alexandra@macaubusiness.com
Executive Senior Analyst José I. Duarte jid@macaubusiness.com
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Xu Yu, Irene
Beijing Correspondent Maria João Belchior
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Photography António Mil-Homens, António Leong, Carmo Correia, Greg Mansfield, Gonçalo Lobo Pinheiro,John Si, Manuel Cardoso, MSP Agency, Agencies Illustration G. Fox, Rui Rasquinho
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Regular Contributors André Ribeiro, Branko Milanovic, David Cheung, David Green, Dominique Moisi, Eswar Prasad, Frank J. Fahrenkopf Jr., Gustavo Cavaliere, Hideaki Kaneda, José António Ocampo, José Sales Marques, Joseph Stiglitz, Leanda Lee, Keith Morrison, Kenneth Rogoff, Kenneth Tsang, Marvin Goodfriend, Pan Yue, Paulo J. Zak, Peter Singer, Richard Whitfield, Rodrigo de Rato, Robert J. Shiller, Sin-ming Shaw, Sudhir Kalé, Sun Shuyun, Vishakha N. Desai, Wenran Jiang
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Contributing Editors Christina Yang Ting Yan, Dennis Ferreira, Derek Proctor (Bangkok), Filipa Queiroz, Helder Beja, Joana Freitas, João Ferreira da Silva, João Francisco Pinto, José Carlos Matias, Kahon Chan, Kim Lyon, Lois Iwase, Luciana Leitão, Mandy Kuok, Michael Grimes, Sara Farr, Sara Silva Moreira, Sofia Jesus, Xi Chen, Yuci Tai
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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: editor@macaubusiness.com JANUARY 2013
emanuel.graca@macaubusiness.com EMANUEL GRAÇA EDITOR-IN-CHIEF
THE YEAR THAT WILL BE
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Several groups are already preparing for this year’s elections. It will be interesting to see how the political establishment fares
his year will be particularly interesting. It will be an atypical year for Macau, marked by change. No new casino will open this year. This is a novelty. The city has gained at least one casino each year since 2004 when Sands Macao opened and became the first property here not controlled by the gaming empire established by Stanley Ho Hung Sun. This year and next will allow the gaming industry to rethink its strategies, redesign what it offers the public and try to ease some of its growing pains, including the poor quality of its workforce. The consensus among forecasters is that this is set to happen against a backdrop of the more profitable mass-market gaming outgrowing VIP gaming, which is good news for the industry. In March, a new set of leaders will take the helm of the People’s Republic of China. At first, other news media reported that the central government intended to keep a closer eye on gambling junkets in Macau. But recent statements by senior officials indicate otherwise. The changing of the guard in Beijing is expected to make little difference to Macau. The incoming president, Xi Jinping, knows the city well. Macau and Hong Kong affairs are part of his portfolio as vice-president, and he visited Macau in 2009. This year will also be marked by elections to the Legislative Assembly. Last year’s reforms mean the number of directly elected members of the assembly will increase from 12 to 14, and the number of indirectly elected members will increase from 10 to 12. The number appointed by the chief executive will remain at seven. Several groups are already preparing for this year’s elections. It will be interesting to see how the political establishment fares. It is probable that its candidates will face
competition from candidates backed by gaming interests. Before the present assembly is dissolved for the elections, its members face a hard task: to pass several complex bills in record time. Any bill not passed by August must begin the whole legislative process from scratch when the new assembly convenes.
Game changer The problem is that the assembly has over 10 bills on its hands. Many of them are not only complex but also touch on sensitive areas. This is the case with the bill to amend the 32-year-old law on land grants. The bill was sent to the assembly only last month. The Portuguese-language version has 80 pages and more than 200 articles, so members will have to move at breakneck speed to pass it by August. Also last month, the government finished a bill on urban planning, which is bound to get mixed reactions from assembly members. Meanwhile, the bill on the rehabilitation of the city’s older districts has crawled through the legislative process for almost two years. The bill on the sale of unfinished homes was presented to the assembly last May and the bill on the on the protection of cultural heritage was presented last July. Neither has been passed. Given its lengthy agenda for the next eight months, will the assembly be able to deliver on time? Members seeking reelection will be concerned about what the voters think of their performance. Will this sway their stances on the various bills? Let us hope not. Gaming and politics will dominate public affairs this year. Will 2013 turn out to be a game changer in both fields, or will it be another lost opportunity?
JANUARY 2013
MACAU TO FACE “HIGHER RISKS” IN 2013 Fernando Chui Sai On pledges to ensure the stability of public finances and employment Chief Executive Fernando Chui Sai On said Macau would face new opportunities but also higher risks this year due to the “complexities in the global economy”. During his speech at the official ceremony on the 13th anniversary of Macau’s handover, Mr Chui pledged to further promote closer cooperation ties with the mainland in order to “provide a strong
SIMPLY THE BEST
backing and new opportunities for Macau’s sustainable development”. He said the government would ensure the stability of public finances and the employment of Macau residents. The government will also continue to strive to enrich the non-gaming elements within Macau casinos, Mr Chui said.
Macau was the top performer on the 2011-2012 economic performance index compiled by the Brookings Institution, a U.S.-based think tank. The ranking analysed the gross domestic product per capita and employment changes from 2011 to 2012 for the largest 300 metropolises worldwide. Perth, in Australia, and Riyadh, in Saudi Arabia, ranked second and third, respectively. According to the report, Macau registered growth rates of 5.1 percent in GDP per capita and 5.7 percent in employment, the latter topping all other metro areas in 2012.
JANUARY 2013
ECONOMY TO GROW BY 14.3 PERCENT
The Macau economy is forecast to record growth of 14.3 percent this year, says the Economist Intelligence Unit, of the Economist group. For full-2012, the estimate is that the city’s gross domestic product increased by 9.8 percent, a sharp drop from 2011’s 20.7 percent growth rate. The official data for full-2012 is only to be disclosed in March. Wei Qiang, head of asset and liability management at the Bank of China Ltd, Macau branch, says the city’s GDP will grow around 7 percent to 8 percent in 2013.
INFLATION TO STAY UNDER 6 PERCENT
The Secretary for Economy and Finance Francis Tam Pak Yuen expects inflation to be below 6 percent after Chinese New Year, which falls on February 10. Speaking to local media, he admitted that there will be some price fluctuations in the first two months of 2013 due to “seasonal factors”, but the inflation rate would ease after that. In October, the consumer price index, Macau’s main gauge for inflation, increased by 5.72 percent year-on-year. Mr Tam also predicted stable growth in Macau’s economy next year.
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TWO NEWCOMERS AMONG MACAU’S NPC DEPUTIES
Photo: Naty Torres
Ten of the incumbent Macau deputies to the National People’s Congress (NPC) were reelected last month. The 380-person electoral council also elected two new faces. The two newcomers are Ho Sut Heng, president of the Macau Federation of Trade Unions and a member of the Executive Council, and Iong Weng Ian, vice-director of the Women’s General Association. They will replace members of their associations who didn’t stand for re-election, namely Lau Cheok Va and Candice Chio Ngan Ieng, respectively.
DAVID CHOW TO BUILD MALL ON HENGQIN
The local businessman will develop a Portuguese-themed shopping centre on Hengqin Island Local businessman David Chow Kam Fai has won the bid for the land parcel reserved for Macau enterprises on Hengqin Island, paying RMB250 million (MOP320 million) for the piece of land. His company – Sino Perfect Investment Ltd – will develop the parcel into a Portuguese-themed commercial centre with retail, restaurants and a 1,200-space car park. The businessman will invest RMB1.6 billion in the project that is set to take four years to build. The 30,000-square-metre plot is located right next to the Hengqin Port and will be connected to the Guangzhou-Zhuhai Intercity Railway. Mr Chow was the only bidder. Mr Chow, the chief executive of Sino Perfect, is also the boss of Macau Fisherman’s Wharf and the Landmark hotel casino, both in Macau. Last month, the new Chinese Communist Party head Xi Jinping vowed Hengqin Island would continue serving as a platform for Macau’s economic diversification.
MACAU 16TH MOST COSTLY ASIAN CITY FOR EXPATS
Macau is the 16th most expensive city in Asia for foreign workers, according to a survey by human resource firm ECA International, released last month. Macau is in 83rd place on the world ranking and eighth amongst Greater China cities. The survey measures a basket of common items purchased by expats in more than 400 locations globally, such as dairy produce, clothing and meals out. It does not include housing, utilities and school expenses as these items are often compensated for in foreign workers packages. JANUARY 2013
MORE SUPPORT FOR MICE EVENTS
The government has extended the scope of the subsidies for the meetings, incentives, conferences and exhibitions industry (MICE). Starting this month, the subsidies also help fund the promotions, translations and logistics of MICE events. Up to October last year, the government had spent more than MOP30 million (US$3.8 million) on the Conventions and Exhibitions Stimulus Programme, supporting professional buyers’ accommodation costs and event opening ceremonies. For 2013, the government has allocated a budget of MOP40 million (US$5 million) for the programme.
CABLE TV TO LOSE EXCLUSIVE CABLE RIGHTS
The government will not extend Macau Cable TV Ltd’s exclusive concession contract after it expires in 2014. “We are now discussing the renewal issues but we will not include exclusive rights in the renewal contract,” Telecommunications Regulation Bureau director Lawrence Tou Veng Keong said last month. Mr Tou said the government wants to open up the cable TV market. Cable TV is willing to see the opening-up of the market “under fair, reasonable principles,” Cable TV chief executive Angela Lam Ion Fun said.
CTM’S MOBILE SERVICE CRASHES AGAIN
Telecom provider CTM reported that its 3G voice service crashed for about 30 minutes last month. It was the third major mobile network failure of the company in 2012. According to CTM, a software malfunction caused the voice service system to restart, which resulted in an unstable performance of the 3G voice service. Other mobile services including SMS, mobile broadband and 2G mobile services remained unaffected, according to CTM. The company has already reported the incident to the telecommunications regulator.
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PENINSULA FERRY TERMINAL RENOVATION TO START IN APRIL
HUMAN RIGHTS ONE STEP BACK
Grassroots New Macau Association is concerned about press freedoms
An annual report presented last month by grassroots New Macau Association says that human rights in Macau have gone one step back in 2012. In the report, the pro-democracy group mentions concerns over press freedom, alleging there are several cases of media self-censorship in Macau. It says that some local media firms are dependent on government grants and therefore lack editorial independence. It also slams Macau’s latest political
reform, for still not allowing all citizens to vote directly for the chief executive, and for maintaining the status quo at the Legislative Assembly, with directly elected legislators still being in the minority. The report criticises the government for barring several Hong Kong reporters, scholars and pan-democrat activists from entering Macau without providing details as to why they were considered a threat to the city’s public security.
The expansion works on the Outer Harbour Ferry Terminal will start in April, the Maritime Administration says. The government is now preparing the public tender, which will open this month. The works will mainly be carried out on the terminal’s first and second floors, and are scheduled to be complete within a year. The renovation project was originally scheduled to begin last September. In addition, the Taipa Ferry Terminal will be fully operational in the first half of 2014.
JANUARY 2013
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Gaming-centric economy
The government efforts to diversify the economy away from gaming are proving to be ineffective. Data for 2011 released last month, shows Macau’s gross domestic product at basic prices, which equals the sum of gross value added of all economic activities, is more dependent on the gaming sector than it has ever been
IMPORTED WORKERS SURPASS 110,000 MARK The number of imported workers has surpassed the 110,000 mark for the first time, official figures show. In November, the total number of non-resident workers in Macau stood at 110,139, up by 0.5 percent month-on-month. The hospitality sector was the number one employer of imported labour, accounting for over 30 percent of the total.
Direct relative importance of gaming to GDP at basic prices
50% 45% 40% 35% 30%
AIRPORT HANDLES MORE PASSENGERS
25% 20% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2011
Year
44.7%
The direct relative importance of gaming to the city’s GDP in 2011, up by 3.6 percentage points year-on-year
0.8 percentage points The year-on-year increase in the relative importance to GDP of the wholesale and retail sector in 2011, to 7.8 percent
4.8%
The hotel sector’s relative weight in the GDP in 2011. This represents a 0.2-percentage point increase over 2010
1.0 percentage point The year-on-year increase in the relative importance of the tertiary sector to GDP in 2011, rising to 93.6 percent
6.4%
The relative importance to Macau’s GDP in 2011 of the secondary sector, down by 1.0 percentage point year-on-year SOURCE: STATISTICS AND CENSUS SERVICE JANUARY 2013
The Macau International Airport received over 4 million passengers from January to November last year. This is a year-on-year increase of almost 400,000 passengers, according to media reports. These figures are close to CAM – Macau International Airport Company Ltd’s forecast of a 6 percent increase in the number of passengers to 4.2 million passengers for full 2012.
FEWER COMPANIES FINED OVER LABOUR DISPUTES The Labour Affairs Bureau fined 154 companies between January and November last year over labour disputes. According to Portugueselanguage newspaper Jornal Tribuna de Macau, there was a decrease in the number of fines compared with the same period of 2011, when 218 companies were fined. Most of the companies were penalised because of salary delays.
19 ZHANG MONAN FELLOW OF THE CHINA INFORMATION CENTRE
The new shape of China’s economy AFTER THREE DECADES OF UNPRECEDENTED GROWTH, CHINA’S NEW LEADERS ARE FACING A HISTORICAL TURNING POINT
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hina’s leadership transition attracted global attention in 2012, and deservedly so, given the country’s global significance. But, more important, strategic transformations now underway seem certain to influence its future pattern of growth. For three decades, the dividends from Deng Xiaoping’s initial decision to open China’s economy to market forces and to the world have fuelled rapid growth. Until recently, the key was China’s vast supply of low-cost labour, which provided the foundation for the country’s export-oriented model. Concentrated in coastal China, this model produced an uneven distribution of output and established a unique pattern of high savings and low consumption. Indeed, China’s savings rate rose steadily following the onset of market reforms, from 38 percent of gross domestic product in 1978 to 51 percent in 2007. Economic growth is determined not only by factors of production such as labour, capital and technology, but also by institutional arrangements. Through 30 years of reform, China has successfully completed the institutional transition from a highly centralised planned economy to a dynamic market-based system. Beginning from rural tiered management based on the household contract system, Chinese reformers supplemented public ownership with various other forms, with the market increasingly playing its fundamental role in allocating resources under the macro control of the state. Reform coincided with increasing globalisation, unleashing forces that restructured not only Chinese industry, but also production processes around the world as China challenged established manufacturers and became part of global supply chains. Developed economies’ massive outsourcing of traditional manufacturing, high-tech manufacturing and even some low-end services has brought exciting opportunities for emerging markets that, like China, have resource and cost advantages, strong market potential and industrial support capabilities.
Upgrading China Today, however, the catalytic power of Mr Deng’s initial changes has waned, with rising wages, weakening external demand and increasing competition from other emerging economies indicating the exhaustion of a growth model premised on exports and investment. In particular, the 2008 global financial crisis and the subsequent Eurozone debt crisis have forced Chinese officials to forge a new path for future growth. Most important, export-led growth must give way to domestic economic drivers. This implies the need to upgrade China’s industrial structure, accelerate the formation of human capital, facilitate technological progress and undertake further institutional reforms. If successfully implemented, this agenda is likely to reverse global savings and consumption patterns that have underpinned large imbalances in recent years. China is responsible for the savings side, while the U.S. disproportionately accounts for the consumption side,
Export-led growth must give way to domestic economic drivers ultimately turning the Chinese into America’s creditors. Of course, global savings and consumption patterns have undergone significant change since the financial crisis, with both the West and China trying to restore internal equilibrium. Doubling average household income by 2020 – the target set at the Chinese Communist Party’s 18th Congress in November – is likely to release 64 trillion renminbi (MOP82.1 trillion) in purchasing power, with China’s huge internal market gradually becoming a new long-term driver of domestic and international growth.
A new growth model This model presupposes that China will develop domestic capital, rather than simply relying on foreign investment. To be sure, the ability to attract and absorb external financing has been an important reason for China’s accelerated industrialisation, marketization and integration into the global economy. Thirty years ago, this was the most efficient and practical strategic choice for China, owing to its lack of capital and advanced technology. But a country’s economic development ultimately depends on its ability to accumulate capital and allocate it efficiently. With 90 trillion renminbi in banking assets and US$3.2 trillion (MOP25.6 trillion) in foreign-exchange reserves, China is now playing a significant role in global finance. And yet the high volume and inferior quality of these assets have also posed challenges to the country’s ability to complete the transition from trade power to financial power, and thus to exploit the competitive advantages of Chinese capital. After three decades of growth on a scale unprecedented in human history, China’s new leaders are facing a historical turning point. Whether China successfully changes its economic model ultimately will determine its prospects not only for further growth, but also for continued stability. JANUARY 2013
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Economy & Finance
Copyright fight More can be done to protect output from the creative industries and foster another pillar for the economy BY LUCIANA LEITÃO
he government has made its case for developing the creative industries and diversifying Macau’s economy. So far, the return on investment from creative industries has been poor, partly due to lax copyright enforcement here. The Macau Association of Composers, Authors and Publishers says that in 2011, royalties paid for the use of copyrighted material grew faster in Macau than anywhere else in Asia due to music licensing deals. That was a 60 percent increase over 2010 but still a relatively small amount at just MOP1.08 million (US$135,000). Macau-based artists represented by the association received around 15 percent of the royalties collected. Most of the money came from about 300 companies paying for licences that entitled them to legally play copyrighted
T
JANUARY 2013
music in their shops, restaurants, bars and other public venues. The head of the Macau Association of Composers, Authors and Publishers Ung Kuoc Iang says that amount is too low. International retailers and big corporations here comply with copyright but many other companies do not. The key users of music, such as the casinos, radio and television channels are still negotiating the payment of royalties. “We are now working hard to make sure that royalties are collected for music,” Mr Ung says.
Turn it up The association was set up in 2009 with the aim of protecting copyright and other intellectual property rights tied to music, literary or dramatic works or performances.
It has a partnership with the International Confederation of Authors and Composers Societies that administers a broad international repertory of musical works, including songs from the United States, Britain, Portugal, Taiwan, the mainland and further afield. The association says the partnership covers about 90 percent of all musical works played in Macau. Similarly, Macau copyrighted musical works are administered by the association’s partners outside Macau, which collects and distributes royalties to the copyright holders. The association has refrained from taking legal action over copyright infringements but that may change if talks fail with high-volume users of music, Mr Ung says. He says the group is “legally empowered to bring such legal actions”.
21 The association welcomed last year’s opening of an iTunes online music store for Macau that has led to an increase in the number of songs offered by regional artists. The association hopes that with more people buying songs through legitimate means, music piracy will fall. The association says the Macau iTunes Store is a positive for local artists, such as L.A.V.Y., that can now receive higher returns for their songs. The long-term goal for the association is to help copyright holders to protect their rights. “We hope to organise more educational activities in conjunction with Macau schools and universities so that the coming generations appreciate more deeply the need to respect copyright,� Mr Ung says. The association’s view is that creativity in Macau, and in turn the city’s culture, will be encouraged and promoted if copyright is adequately protected. In turn, that will bring increased economic benefits to several parties.
Television drama Last year, Macau revised its copyright law. It was a lengthy legislative process that took more than 15 months. Experts say that the major change was to clarify that copyright also applies
Last year, Macau revised its copyright law. It was a lengthy legislative process that took more than 15 months to the Internet. The revised law did not change the way royalties are negotiated. “These are to be negotiated by the person who has such a right and are to be paid by those who wish to use their music or movies,â€? says Gonçalo Cabral, a legal adviser to the government on intellectual property rights. Mr Cabral says it is exceptionally rare for copyright cases to reach the courts in Macau. He says that is probably because “there are no violations sufficiently severe for the interested party to careâ€?. The costs associated with bringing a complaint to the court also
deter rights holders from taking action. The revised law helped “partially� clarify the dispute between Macau’s public antenna companies and Macau Cable TV Ltd. The public antenna companies retransmit television channels broadcast into Macau, using unlicensed cable networks, charging a small rental fee to households for the service. These illegal services are popular. The majority of the population receive television broadcasts in this way and the services have been tacitly allowed by the government. Mr Cabral says the new rules “punish those who are able to unblock codified television emissions. Indirectly, this forces the antenna companies to stop retransmitting the codified channels�. Several antenna services no longer retransmit channels that are encrypted, particularly sports channels. Aside from the antenna service providers, Mr Cabral says he does not know of any other flagrant cases of copyright violation. He says he has only heard of a few cases regarding casinos and hotels reluctant to pay royalties for the music they pipe into public areas. “But I also know they are now discussing to find a solution,� he says.
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22
Economy & Finance
Fundamental flaws Mainland stock slump highlights market problems
ainland stocks are one of the top investment options here, surpassed only by Hong Kong equities. But mainland stocks in 2012 fell to levels unseen since the global financial crisis, as investors ignored a rebound in the world’s second largest economy and focused on fundamental problems with the market. The mainland’s economic growth hit a more than three-year low of 7.4 percent in the third quarter of last year, but recent manufacturing and other data have fuelled optimism that it has begun to recover. However, an improving macro-economic picture cannot make up for weak company earnings, poor governance, oversupply of shares and a lack of liquidity, analysts say. On December 4, the benchmark Shanghai Composite Index plumbed a four-year low of 1,949.46 points, its worst level since January 16, 2009. But it recovered fast and, on the last trading day of the year, it closed at a sevenmonth high, up 3.17 percent from the beginning of 2012. In contrast Hong Kong’s Hang Seng Index powered ahead almost 23 percent in the year. The disconnect is stark – the mainland is still by far the fastest-growing major world economy – but there are
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JANUARY 2013
fundamental reasons for the Shanghai market’s poor showing. “Just know this – the performance of the mainland equity market is not so tightly correlated with the overall economy,” says Wang Tao, a Hong Kong-based economist for UBS. “Structural and governance issues remain and continue to plague the mainland’s equity market,” she wrote in a report that described the country’s stock market as one of the worst performing in the world. In 2011, Chinese securities listed in the mainland and on overseas exchanges accounted for 21 percent of the market value of all investments by Macau residents in securities issued outside the territory, official data shows. The total invested in mainland securities reached MOP35.5 billion (US$4.4 billion) by the end of 2011, a 34.2 percent increase over the previous year. Around 64 percent was invested in equities.
Pessimistic analysts Many listed mainland companies are still majority state-owned, and so are largely indifferent to the demands of holders of their publicly-listed shares. The mainland also has a massive share glut, with the total value of flotations over the past two years estimated at US$1.3 trillion (MOP10.4 trillion) and
hundreds more companies waiting to list as the government – not the market – decides which firms are allowed to do so. Shanghai-based Woo, a small luxury scarf retailer, would like to seek funding from the market but expects it will take three years to make it through the listing pipeline, starving the firm of the capital it needs for expansion. “So far, there are 800 companies queuing,” says its chief executive officer Stephen Sun. Hopes that an annual government economic meeting would unveil steps to boost growth, drove the Shanghai index rebound last month, including a rise of more than four percent the day before the gathering began. But the event yielded no new policies to reform capital markets, and some analysts remain pessimistic. “The change shouldn’t be so fast; the recovery should be gradual,” says Shenyin Wanguo Securities analyst Qian Qimin. He forecasts the Shanghai market could once again fall through the key support level of 2,000 points. “The market had been expecting new policies, but in fact there weren’t any,” says BOC International analyst Shen Jun. “Some policies were just like ‘old wine in new bottles’ – nothing AFP NEWS AGENCY new there.”
23 ANDRÉ RIBEIRO CONSULTANT AND EXECUTIVE COACH - andre@taoinvestor.com
Gold will shine on MANY INVESTORS ARE PUTTING THEIR MONEY INTO GOLD TO HEDGE AGAINST INFLATION, BUT GOLD-RELATED STOCKS MAY PROVE TO BE A BETTER DEAL
C
Just ask George In the third quarter of last year India and Greater China continued to be the biggest source of consumer demand for gold, according to the World Gold Council. Together they accounted for 55 percent of demand for gold jewellery, bars and coins. My expectation is that not only Chinese private investors, but also the People’s Bank of China will continue to accumulate gold at increasing rates. Many analysts believe that Beijing holds a far higher volume of gold reserves than the 1,054 tonnes that the World Gold Council thinks it holds. The mainland imported 629.3 tonnes of gold from Hong Kong in the first 10 months of last year, more than double the amount it imported a year earlier, according to data from the Census and Statistics Department of the Hong Kong government. Some of the world’s leading fund managers have been building up their gold positions in recent months. Soros Fund Management LLC increased its holding in SPDR Gold Trust, the biggest gold-backed exchange-traded product, by 49 percent in the third quarter of last year, according to U.S. Securities and Exchange Commission filings. John Paulson has a considerable portion of his hedge funds tied to gold bullion, including a sizeable stake in SPDR Gold Trust, in which his Paulson & Co is the biggest shareholder. Naguib Sawiris, the second-richest man
GOLD SPOT PRICE 2,000 1,800 U.S. dollars per ounce
entral banks all over the world have been debasing their currencies for some time by lowering interest rates. Some, such as the U.S. Federal Reserve, have resorted to quantitative easing. It is a fancy term which basically means printing money. In the United States, the adjusted monetary base has more than tripled since 2008, as tracked by the Federal Reserve Bank of St Louis. This refers to the sum of currency, including coins, in circulation. The debasing of the currency, however, fuels inflation, since it pushes down the value of money. It is little wonder that in such an environment, many people have resorted to gold as a hedge against inflation and economic uncertainty due to central banks printing money. While gold has been a great investment over the past decade, its price rising by around 500 percent since the end of 2000, the returns on select shares with exposure to gold are expected to perform even better in the next 10 years. These expectations are backed by forecasts of gold hitting US$2,000 (MOP16,000) an ounce in the next few months and reaching a new record of US$3,000 an ounce within the next 24 months. The monetary expansion around the world should continue to ensure a positive environment for gold investments. Select gold-related shares will benefit the most, owing to leverage on the price of the metal. The U.S. Federal Reserve took an unprecedented step last month, committing itself to near-zero interest rates as long as unemployment remains high. Analysts said this was bullish for gold because it suggested that the U.S. central bank would keep creating new money to stimulate the economy.
1,600 1,400 1,200 1,000 800 600 400 200 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
2010
2011
2012
in Egypt, bought a Canadian gold producer for almost US$500 million in July. Ray Dalio, one of the world’s most respected fund managers, told CNBC in September that gold should be in everyone’s portfolio. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co, said last February that gold is a store of value when there is little value left in paper.
Price parabola I personally regard gold as a form of saving, whereas select goldrelated shares can be a very attractive investment, providing higher returns, especially these days. Buying precious-metal-related stocks is certainly not free of risk. But there is risk in buying any stock. Here, the risk can be minimised and higher returns achieved by choosing stocks of companies that have proven management practices and sound assets, work in less politically risky parts of the world and are on track toward big growth. I believe the parabolic trend phase for gold prices is still ahead of us, and that a medium-term price of US$5,000 an ounce could be a conservative estimate. History indicates that prices between US$5,000 and US$10,000 may be realised in the longer term. Increases of 200 percent to 500 percent or more in prices of select gold-related shares will not be uncommon in the next three to five years. The views expressed here are those of the author and are not investment calls by Macau Business JANUARY 2013
24
Economic Trends by José I. Duarte Population projections
GRAPH 1 - Population projections 2008 projection
2012 projection
Actual population growth
Expected growth (2008 projection)
900,000
800,000
Population
700,000
GRAPH 1
600,000
500,000
400,000 2006
2007
2008
2009
2010
2011
2016
2021
2026
2031
2036
GRAPH 2 - Population projections, by sex Male population, 2008 projection Male population, 2012 projection
Female population, 2008 projection Female population, 2012 projection
450,000
In Graph 1, the blue line shows actual population growth from 2006 to 2011 and the green line shows the expected trend, as estimated in the 2008 projection. Their divergence represents an error of about 13.4 percent in 2011, when Macau had 86,600 fewer residents than forecast in 2008. Changes in the way population is projected and more moderate assumptions about growth, mean the latest estimate of the population in 2036 is comparable to the estimate of the population in 2021 that was made in 2008. Marked changes in the economic environment, especially the international financial crisis of 2008 and 2009, and even more marked changes in labour policy are the main reasons for the differences between the 2008 projection and the 2012 projection. GRAPH 2
400,000
Number of people
Projecting population changes is tricky. In a small, open economy such as Macau’s, it is made more difficult by influxes of labour, which are highly sensitive to political considerations and economic oscillations. The latest population projection, made last year in the light of the 2011 census, corrects estimates in the previous projection, made in 2008.
The 2008 and 2012 projections both envisage a rise in the proportion of females in the population, especially the 2012 projection. The latest projection forecasts that there will be 1.16 females for every male in 2036, an increase from 1.08 females for every male in 2011.
350,000
300,000
GRAPH 3
250,000
200,000 2006
2011
2016
2021
2026
2031
2036
GRAPH 3 - 2012 population projection, dependency ratios Young-age-dependency ratio
Old-age-dependency ratio
Total age-dependency ratio
60% 50% 40% 30% 20% 10% 0% 2011
2016
JANUARY 2013
2021
2026
2031
2036
Of the worrying trends that the projections forecast, none is stronger than the ageing of the population and the rapid increases in dependency ratios. The 2012 projection envisages rapid growth in the number of people aged over 64 years, so that the proportion of the population they make up is expected to triple, roughly, in the next 20 years. The result of this growth would be that the old-age-dependency ratio will exceed the young-age-dependency ratio in the early 2020s. The old-agedependency ratio, expressed here as a percentage, is the ratio of the number of people over 64 to the number of people of working age. The youngage-dependency ratio is the ratio of the number of people under 15 to the number of people of working age. The total age-dependency ratio is the ratio of the number of dependents – people younger than 15 or older than 64 – to the number of working-age people. The 2012 projection forecasts that the total age-dependency ratio will surpass 50 percent in about 20 years from now, putting a heavy burden on the working population.
25
Gross national income
GRAPH 4 - GDP, GNI and net external factor income at current prices GNI
GDP
Net external factor income
300,000 250,000
MOP million
200,000
Gross national income (GNI) rose by 25.9 percent in monetary terms in 2011 or by 17.4 percent in real terms. This was expected, given that gross domestic product rose by over 30 percent in monetary terms from 2010 to 2011. GRAPH 4
150,000 100,000 50,000 0 -50,000 2004
2005
2006
2007
2008
2009
2010
2011
The difference between GDP and GNI is net external factor income. Net external factor income is income from Macau investment abroad minus income from outside investment in Macau. Macau’s net external factor income is negative because outsiders are getting more income from their investments here than Macau investors get from their investments elsewhere. From 2004 to 2011, the annual deficit in net external factor income increased ninefold. It grew by 66 percent in 2011. GRAPH 5
GRAPH 5 - External factor income at current prices Total outflow
Total inflow
30,000 20,000 10,000
MOP million
0 -10,000
The season for outside investors to reap the harvest of the investments they have made here since 2004 has clearly arrived, as Graph 5 shows. Income from Macau investment abroad began to grow again last year after the pause caused by the international financial crisis. But income from outside investment in Macau began recovering earlier, in 2010, and the recovery has been faster. The outflow of external factor income increased by 62 percent in 2011, and the inflow grew by 52 percent. The outflow was four times the size of the inflow, well above the average for 2004 to 2010.
-20,000 GRAPH 6
-30,000 -40,000 -50,000 -60,000 2004
2005
2006
2007
2008
2009
2010
2011
GRAPH 6 - GNI and GDP per head at current prices and annual median wages GNI per head
GDP per head
Median wage
600,000
The picture painted by GDP per head and GNI per head is extraordinary. GDP per head almost tripled from 2004 to 2011, while GNI per head rose by 172 percent. However, a decreasing proportion of income is being earned through labour. The parallel is inexact but this decrease in the importance of labour in generating income is borne out by the increase in the median annual wage from 2004 to 2011, which was less than 100 percent. The increase in the median annual wage, while remarkable, was clearly slower than growth in GDP per head. GDP per head is now 3.9 times the median wage, having been only 2.5 times the median wage in 2006.
500,000
MOP
400,000 300,000 200,000 100,000 0 2004
2005
2006
2007
2008
2009
2010
2011
JANUARY 2013
Statistical Digest
Economic output
Year-on-year change (%)
2011 GDP at current prices
MOP 292.1 billion
GDP in chained prices
MOP 273.1 billion
GDP per capita at current prices
MOP 531,723
GDP per capita in chained prices
MOP 497,219
Employment Oct - Dec 2011
29.1 20.7 26.2 18.0
2.1%
Median monthly employment earnings
MOP 10,000
Employed population
339,800 72.9%
11.1 5.5 percentage 1.5 points
Unemployment rate
Labour force participation Non-resident workers (end-balance)
94,028
2011-end Domestic loans to private sector
MOP 161.9 billion
Resident deposits
MOP 291.6 billion
Foreign exchange reserves*
MOP 272.4 billion
Inflation rate (full year)
5.8%
External merchandise trade 2011 Exports
MOP 7.0 billion
Imports Trade balance
2011 Electricity Gasoline Liquefied Petroleum Gas Natural Gas
109,541
18.7
Year-on-year change (%)
27.7 22.7 43.2 percentage 2.5 points Year-on-year change (%)
Latest
41.5 44.9 29.7 -Year-on-year change (%)
70.5 million m3 5.1 3,857 million kWh 5.5 81.7 million L 9.3 42,908 tons 5.3 73.6 million m3 -52.4
Sep-Nov 2012 Sep-Nov 2012 Nov 2012
Year-on-year change (%)
Notes
5.7%
14.0 23.2 -percentage -1.0 point
Latest
Year-on-year change (%)
MOP 181.8 billion MOP 352.7 billion MOP 133.9 billion
Year-on-year change (%)
Utility consumption Water
Jul-Sep 2012
346,600 72.3%
17.0 4.9 percentage -0.3 points
Latest
MOP 63.7 billion
Notes
MOP 11,700
Year-on-year change (%)
Balance
--
Sep-Nov 2012
2011
MOP 49.0 billion
--
1.9%
MOP 64.5 billion - MOP 57.0 billion
MOP 99.7 billion
Q3 2012
-0.6 percentage points
MOP 62.3 billion - MOP 55.3 billion
Total expenditure
Q3 2012
Year-on-year change (%)
Latest
19.9 15.4 --
MOP 112.7 billion
- Direct tax revenue from gaming
---
0.2 41.2 --
Public accounts Total revenue
MOP 75.0 billion
24.0
Money and prices
Notes
11.8 5.1 ---
MOP 86.1 billion
Year-on-year change (%)
-0.6 percentage points
Year-on-year change (%)
Latest
MOP 7.5 billion
MOP 76.0 billion
15.3 14.6 16.7 14.5
Latest
Year-on-year change (%)
MOP 118.5 billion MOP 104.0 billion MOP 42.5 billion
68.7 million m3 6.5 3,585 million kWh 9.4 72.7 million L 6.9 35,641 tons 1.1 --100
Oct 2012 Nov 2012 Nov 2012 Nov 2012
Notes Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012
Notes Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012
Notes Jan-Nov 2012 Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012
Transport and communications 2011-end Licensed vehicles - Automobiles - Motorcycles Mobile telephone users Internet services subscribers
206,349 95,151 111,198 1,353,194 209,223
Year-on-year change (%)
4.9 5.5 4.5 20.6 22.7
Latest
214,993 100,334 114,659 1,537,075 227,682
Year-on-year change (%)
5.2 6.7 3.9 18.1 10.4
* A new fiscal reserve system was introduced in January 2012, impacting the way foreign exchange reserves are accounted for JANUARY 2013
Notes Nov 2012 Nov 2012 Nov 2012 Nov 2012 Nov 2012
Source: Statistics and Census Service and Financial Services Bureau
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27 JOSÉ I. DUARTE ECONOMIST, MACAU BUSINESS SENIOR ANALYST - jid@macaubusiness.com
Care to explain? THE THINKING BEHIND THE LATEST OFFICIAL POPULATION PROJECTIONS IS UNEXPLAINED, UNDERMINING THEIR UTILITY FOR BUSINESS LEADERS AND POLICYMAKERS he Statistics and Census Service published in April 2008 its projections for the long-term growth of the population of Macau. These projections were based on the results of the 2006 by-census. They forecast population changes until 2031. Recently the Statistics and Census Service updated its projections so they forecast population changes until 2036. This update is welcome. The speed with which it was produced and published after the 2011 census should be underlined. Regrettably, such projections do not receive, as a rule, the attention they deserve – far from it. Yet they provide essential information for decision makers, information without which no major investment decision, private or public, should be taken. The size and structure of the population affect all kinds of social endeavours. For the government, these projections provide the most crucial basis for anticipating and planning for future needs and demand for public services and goods. This is especially true of the development of infrastructure and transport, and the provision of socially relevant services such as health and education. The reliability and plausibility of the projections are therefore of critical importance. What do the updated projections tells us about the changes that took place after 2006? The most striking feature of the original projections proved to be how fast reality showed them to be inaccurate. Hardly one year after the publication of the projections, the actual figures were already diverging significantly from them. This raised uncomfortable questions about the soundness of the underlying assumptions. The divergence, it seems to me, can be ascribed neither to lack of ability on the part of the Statistics and Census Service nor to neglect of major factors affecting population growth. It is inevitably assumed that the divergence stemmed mainly from important changes in labour policy: the tightening of restrictions on labour imports and the imposition of quotas.
T
Why, oh why? This underlines the sensitivity of population trends to government policy. The sensitivity can only increase in the near future, given that labour force growth will depend mostly on imported workers, owing to lower rates of natural growth in the population and the ageing of the population. Therefore it would be desirable if the update more explicitly set out the assumptions made and their rationale. Unfortunately, the reference to the assumptions is mostly descriptive, without any detailed explanation of why a specific assumption was made and the factors that determined the choice of it, or any evaluation of its sensitivity to changes in other factors. For instance, the update says that in 2011 the net number of specialised workers that were granted residence permits reached fewer than 1,000 workers. Then, it projects growth in their numbers of “between 3,800 and 4,600, every five years”, but does not say why.
The size and structure of the population affect all kinds of social endeavours The basis for the projection of such a critical factor as the number of non-resident workers is also not explained. The estimate of the future need for such workers is based on the projection for the labour force minus the estimated number of resident workers. Some of the non-resident workers required will live nearby, crossing the border every day, while others will live in Macau.
Intent to conceal? Three-quarters of non-resident workers lived here in 2011. The update assumes that the proportion living here will drop to 60 percent between 2011 and 2016, to 50 percent in the following five years and to 40 percent after that, but does not say why. Given the clear inaccuracy of the 2008 original projections, a more detailed presentation of the rationale for the options taken in updating them would have been welcome. I do not see any practical reason why the Statistics and Census Service should not supply a rationale for its assumptions. I believe those that did the technical work would be prepared and willing to do it. This kind of task is always a work in progress. Future projections would benefit from a wider and more open debate today. The absence of explanations may lead us to infer, however unfairly, an intent to conceal the policy options behind the choices made. One result is that objective analysis and evaluation of the likelihood of the projections is constrained. So we have less confidence in the value of the projections, and this reduces their utility in the making of policy and investment decisions. JANUARY 2013
28
Politics
Photo: Luís Almoster
THE MACAU CANDIDATES JANUARY 2013
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SITTING MEMBERS OF THE LEGISLATIVE ASSEMBLY ARE JOCKEYING FOR SELECTION AND RUNNING MATES AHEAD OF ELECTIONS THAT HAVE YET TO BE CALLED BY ALEXANDRA LAGES AND MANDY KUOK
his is a Legislative Assembly election year. Although there is no schedule for the elections – they will probably be in September – plenty of assembly members are preparing to run for reelection. And several political groups are looking for new blood for their tickets. Voter registration finished last month and candidates are starting to find their voices. Last year’s political reforms added two directly elected seats to the assembly and two indirectly elected seats. The chief executive will appoint seven members, as was the case previously. How the indirectly elected seats will be filled is still unclear (see sidebar) but the contest for the directly elected seats is underway. The voters will directly elect 14 members of the assembly. Observers say the mainstream political groups – the General Union of Neighbourhood Associations, commonly known as the Kai Fong, and the Macau Federation of Trade Unions – are likely to gain from the increase in the number of directly elected seats. Of the 12 sitting members that are directly elected, only businessman Ung Choi Kun has announced that he will not seek another term. There are also doubts about whether Lee Chong Cheng will run for re-election.
T
JANUARY 2013
30
Politics
Mr Lee, a conspicuous leader in the Federation of Trade Unions, was recently embroiled in a public controversy about the use of government grants to an association he heads. Observers say he may run for an indirectly elected seat. Mr Lee declined to speak to Macau Business about his plans. The political leading light of the Federation of Trade Unions is a veteran member of the assembly, Kwan Tsui Hang. The ticket Ms Kwan headed in the last elections, in 2009, won the most votes: 14.9 percent of the total. Ms Kwan would not comment on her plans for the elections. Sources spoken to by Macau Business say she will probably run again. They say the Federation of Trade Unions has a short-list of four candidates for direct election but has not announced the names.
Four’s the ticket Ho Ion Sang of the Kai Fong wants a second term. “I’m willing to run again,” he says. “In the past four years, I’ve served the Macau community but only four years are not enough and more time would be better,” he says. The Women’s General Association JANUARY 2013
Observers say the mainstream political groups are likely to gain from the increase in the number of directly elected seats to 14 vice-president Wong Kit Cheng will probably be the second candidate on Mr Ho’s ticket. Their aim is to outperform the joint ticket of the Kai Fong and the Women’s General Association in 2009, when only Mr Ho was elected. Ms Wong was not available for comment. Mr Ho says the Kai Fong will hold a general meeting this month to refine its strategy for the elections and decide whether he should seek another term. The New Macau Association put forward two separate tickets in 2009 and the voters elected three of its members to the assembly: Ng Kuok Cheong, Au Kam San and Paul Chan Wai Chi. All three are expected to run again this year. Mr Ng says he wants to seek another term but will make a decision after the association’s internal elections, which will probably be held after the end of June. The New Macau Association’s goal
is to win a fourth seat in the assembly. It will again put forward two separate tickets. Macau’s fragmented politics and its election system make it hard for more than two candidates on any one ticket to win seats. The association’s obvious choice for the candidate to fill a fourth seat is its head, Jason Chao Teng Hei. The 26-year-old has been cutting a figure as a grassroots political activist over the past four years. He says he is available to be a candidate.
Fujian muscle But Mr Chao is considering whether to join Bill Chou Kwok Ping, a professor of political science at the University of Macau. Mr Chou has been politically active in recent months and has said he is considering running for a Legislative Assembly seat. Mr Chao says he has yet to decide
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Ung Choi Kun has announced that he will not seek another term
Lee Chong Cheng may not run for re-election
All three New Macau Association legislators, including Au Kam San, are expected to run
Mak Soi Kun is willing to make a bid for a second term
Scholar Bill Chou is considering running for a Legislative Assembly seat
Chan Meng Kam will have to find a new partner for his ticket
Scholar Agnes Lam has yet to decide whether she will run
Sources say Kwan Tsui Hang will probably run again
JosĂŠ Pereira Coutinho, who heads the biggest civil service trade union, will run again
Angela Leong has announced that she will run
Paul Pun, from Caritas Macau, ran and lost in 2009
Ho Ion Sang of the Kai Fong wants a second term
Melinda Chan has said that she will seek a second term
Casimiro Pinto is available to be candidate again JANUARY 2013
32
Politics
whether to join Mr Chou. “I do not reject any possibility,” Mr Chao says. He says that if he joins Mr Chou, he would relinquish the leadership of the New Macau Association. “It will be difficult to get the fourth assembly member for the association but I’m highly confident we will maintain the three assembly members,” Mr Chao says. José Pereira Coutinho, who heads the biggest civil service trade union, will run. The question is who the second candidate on his ticket will be. His supporters are eager for the ticket to win two seats. Sources that Macau Business spoke to said property developer Mak Soi Kun was willing to make a bid for a second term. Mr Mak is trying to garner support among people from the southern mainland city of Jiangmen living in Macau. He did not respond to requests for an interview. Businessman Chan Meng Kam will have to find a new second candidate for his ticket, now that Mr Ung is vacating his seat. One possibility is Si Ka Lun, who is in the logistics business and – just as Mr Chan and Mr Ung – belongs to the city’s Fujianese community. Si Lei A, another Macau resident with Fujian roots, may also run but he has not decided yet. Mr Si owns an investment company and heads the Chinese-language newspaper Si Si. He claims 14,000 supporters here, most of them Fujianese. Macau Business understands that he could either run on his own ticket or join Mr Chan.
Political gambles SJM Holdings Ltd executive director Angela Leong On Kei has announced that she will run. The second candidate on the ticket is likely to again be Kent Wong Seng Hong, a senior consultant to Melco Crown Entertainment Ltd, according to political observers. They suggest Mr Wong’s chances of being elected are good. Ms Leong’s ticket had the fourth-biggest tally of votes in 2009. The three tickets with the biggest tallies of votes each won two seats. The election was contested by 16 tickets but just nine won one or more seats. There are other candidates with connections to gaming who are weighing up their chances. One is Leong Kin Ian from Suncity Group, one of the city’s biggest operators of gambling junkets, sources say. One person with connections to JANUARY 2013
IN SMOKY ROOMS F
ew changes are expected in the way the indirectly elected seats in the Legislative Assembly will be filled in this year’s elections. The assembly will have 12 indirectly elected seats, two more than previously. Most of the horse-trading about who will get a seat will probably take place behind closed doors before the elections. This usually favours supporters of the government in Beijing and here. In the last elections, in 2009, 10 candidates ran for 10 seats, and no seat for any functional constituency was contested. Only members of associations are entitled to vote in indirect elections to the Legislative Assembly. Most of the indirectly elected members of the assembly are expected to run for re-election. The professional services functional constituency will fill three seats in this year’s elections instead of two. Macau Business’s sources say the elder brother of Chief Executive Fernando Chui Sai On, businessman Chui Sai Cheong, is likely to run again. Macau Business tried to contact the other sitting representative in this constituency, lawyer Leonel Alves, but had not received a response by the time we went to press. The welfare, culture, education and sport functional constituency, which now includes two seats, will be split in two. The new welfare and education constituency will have one seat, and the new sport and culture constituency will have two.
Mind your business Francisco Manhão, who heads the Football Veterans Association, has announced he will run for one of the sports and culture seats. He is confident he will be successful. Mr Manhão has close ties with directly elected member Melinda Chan Mei Yi and her husband, David Chow Kam Fai. The sitting representatives of the welfare, culture, education and sport constituency, businessmen Vitor Cheung Lup Kwan and Chan Chak Mo, are likely to run for re-election, although Mr Chan said it was not yet the right time to announce whether he will seek another term. The Macau Federation of Trade Unions is discussing who should fill the labour functional constituency’s two seats. The two sitting representatives of the constituency, Lam Heong Sang and assembly president Lau Cheok Va, come from the federation’s rank and file. Just who might fill the business functional constituency’s four seats is unclear. Sources say that sitting member Fong Chi Keong is building support for a bid for another term. Little information is available about the intentions of other sitting representatives of the constituency – Ho Iat Seng, Kou Hoi In and Cheang Chi Keong – although the indications are that Mr Ho is likely to run for re-election.
33
RESULTS OF THE 2009 DIRECT ELECTIONS TO THE LEGISLATIVE ASSEMBLY RANK
TICKET LEADER
SHARE OF VOTE 14.9 pct
CANDIDATES ELECTED
1
Kwan Tsui Hang
Kwan Tsui Hang, Lee Chong Cheng
2
Chan Meng Kam
12 pct
3
Ng Kuok Cheong
11.6 pct
4
Angela Leong On Kei
9.9 pct
Angela Leong On Kei
5
Ho Ion Sang
9.9 pct
Ho Ion Sang
6
José Pereira Coutinho
9.1 pct
José Pereira Coutinho
7
Au Kam San
7.8 pct
Au Kam San
8
Mak Soi Kun
7.3 pct
Mak Soi Kun
9
Melinda Chan Mei Yi
5.5 pct
Melinda Chan Mei Yi
10
Lai Cho Wai
3.8 pct
(none)
European style outdoor Open grill
Chan Meng Kam , Ung Choi Kun Ng Kuok Cheong, Paul Chan Wai Chi
11
Agnes Lam Iok Fong
3.8 pct
(none)
12
Paul Pun Chi Meng
1.7 pct
(none)
13
In Kam Seng
1.2 pct
(none)
14
Ng Sek Io
0.8 pct
(none)
15
Casimiro Pinto
0.6 pct
(none)
16
Lei Man Chao
0.2 pct
(none)
gaming who is definitely running is Melinda Chan Mei Yi, who has announced that she will seek a second term. Mrs Chan says the second candidate on her ticket will be academic Wu Kam Hon and the third, Macau Travel Industry Council chief Andy Wu Keng Kuong. The trio are unchanged from her ticket in 2009. Agnes Lam Iok Fong, the chairwoman of Macau Civic Power, a middle-class pressure group, and Paul Pun Chi Meng, the secretary-general of the charity Caritas Macau, have yet to decide whether they will run. They ran and lost in 2009. Ms Lam’s ticket only gained 3.8
percent of the vote in 2009 and Mr Pun’s only 1.65 percent. Macau’s distinct Eurasian community, the Macanese are thinking about drawing up a list of preferred candidates for voters to follow, repeating a similar effort in 2009. The candidates on that list won fewer than 1,000 votes altogether, despite the list having been endorsed by several leading members of the Macanese community. Casimiro Pinto, who headed the list in 2009, says the Macanese community have yet to decide whether to draw up a list for this year’s election. But Mr Pinto says he is available to be a candidate again.
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34 KEITH MORRISON AUTHOR AND EDUCATIONIST - kmorrison.iium@gmail.com
Year of the weasel
EMPTY WORDS FROM THE CITY’S LEADERS HERALD LITTLE IMPROVEMENT IN THE WAY MACAU IS MANAGED
easel words sound as though they mean something but they can mean almost anything you like: words like “many”, “rapid”, “increase”, “progress”, “better”, “improve” and so on. Lacking precise reference points, weasel words sound credible but they are capable of endless interpretations and twisting to mean whatever the speaker wants them to mean. They are a politician’s dream, enabling leaders to sound clear, decisive and informed, and to talk up a situation, while actually being completely unclear on every front and escaping accountability or any meaningful assessment of achievement. Weasel words are commonplace in Macau. I weary of hearing empty, laughable nonsense that the city will increase its prosperity in as many areas as you can think of, or that its economic salvation will come from Hengqin Island, the light rail transit system or the Hong Kong-Zhuhai-Macau Bridge. Gibberish such as pledges that the health services will continue to be outstanding or that the government will do more for the poor and needy, show the city has the gift for tergiversation. And what are we to make of statements that the meetings and conventions industry, the creative industries and the Chinese traditional medicine industry, along with the broadening of the business portfolios of casinos, will drive economic diversification, or that the University of Macau will become a world-class institution of tertiary education in just a handful of years? It is hollow hype, all of it – weasel words. One of the clearest examples of weasel words – indeed one of the most dispiriting, tired moments of last year – came in November, when Secretary for Economy and Finance Francis Tam Pak Yuen made his contribution to the Policy Address for 2013.
W
This verbal evasion creates a government that reacts to a drastic shortage of housing by building shoeboxes in places once designated as green areas, and gives us a society that celebrates greed, consumerism and materialism as though nothing else matters.
Silence of the rich
We are served by a government that seems to care more about visitors than its own people, by officials that lavish attention on gaming and yet are slower than a snail in raising old-age pensions to subsistence levels and in instituting a general minimum wage. Weasel words like “stability” and “stable growth” are widely heard. All in the name of stability, dissent or challenges are suppressed or ignored, the real situation of citizens is neglected, cash is handed out to quell the masses, the news media remain largely anodyne and some individuals are denied entry to Macau for no clear reason. Underneath it all, there is the relative silence of the rich because as long as ordinary people go on yapping about stability and stable growth, the rich can enjoy their riches. Weasel words are vacuous and distortable. “Tort” means both “twisted” and a “civil wrong”. In spouting them, Macau’s leaders make us feel that the outlook for this year is not so much a matter of stability and growth but of continued disregard for the welfare of many of its people, continued government unaccountability and continued inactivity on the part of senior officials. Happy New Year? I’m not convinced.
NUMBER OF NEW INCORPORATIONS BY INDUSTRY
Dual speed
JANUARY 2013
1,400 1,200 1,000 800 600 400 200 0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012* *Estimated
NEW INCORPORATIONS BY INDUSTRY AS PERCENTAGE OF TOTAL 45% 40% 35% 30% 25% 20% 15% 10% 5% 0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012* *Estimated
Manufacturing Wholesaling and retailing Transport, storage and communications Financial and business services
Construction Hospitality Real estate Education, health and social welfare
SOURCE: STATISTICS AND CENSUS SERVICE
Mr Tam said the economy would go from “rapid growth” to “stable growth”. He said the diversification of the economy must “increase” and that further legislation to address these matters “will appear”. Just when the public were looking for clear leadership and accountability in economic development, what did they get? They were given a dull, ill-defined picture of the future, with no vision, a plethora of weasel words devoid of any real substance or meaning. What exactly are “rapid growth” and “stable growth”? Why are they mutually exclusive? Why not have both? What do words like “increase” or “will appear” actually mean? Terms like “stability”, “stable growth” and “rapid growth”, used by Mr Tam, are gravely misleading. For example, the two graphs here show the picture is complex for new companies incorporated in the past 10 years. The figures for last year are extrapolated from the data for the first three quarters. Some industries have grown spectacularly in the past decade. Others have declined, and others have changed little. Expressions such as “stable growth” and “rapid growth” are not impressive, describing elaborate trends poorly. Under the mantle of the weasel words “stability” and “stable growth”, what we have is a city geared to the rich, and run by the rich for the rich. They are willing to trample anyone in their insatiable lust for shareholder profit.
Number of new incorporations
1,600
ON
SA
LE
35
JANUARY 2013
36
Greater China
AILING HEALTH The death of a customer at a beauty salon places regulation of private healthcare in Hong Kong under scrutiny BY MARY ANN BENITEZ* IN HONG KONG
37 rivate hospitals in Hong Kong are beset on all sides. The death of a woman after a beauty treatment involving blood transfusions has provoked a review by the government of the regulation of private healthcare facilities. The dead woman was one of four customers of the privately-owned DR chain of beauty salons taken ill in October. The women suffered septic shock after being sent for blood transfusions treatments normally meant for cancer patients. An investigation by the Department of Health found that another 40 customers at DR salons had received the same treatment. The investigation is ongoing. Separately, the Audit Commission issued in November a report criticising the Department of Health for its poor monitoring of private hospitals. This may set back the government’s plan to have four new private hospitals built. The commission looked into grants of land for the development of private
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hospitals and into regulatory control of private hospitals. The government is currently considering bids for two plots of land meant for private hospitals. Secretary for Food and Health Ko Wing-man has said the bidding closed in July and that the government will disclose the winning bids soon. But there has been little interest in the two plots, according to some news media. Sources say Dr Ko is more interested in again building up the Hospital Authority, which oversees Hong Kong’s public hospitals and where he was once a bigwig. He has admitted that the Department of Health “has not fully exercised its power” to regulate private hospitals.
Time’s up The Hospital Authority manages 41 hospitals and other similar institutions, 49 specialist outpatient clinics and 74 general outpatient clinics, which together have 27,000 beds and a workforce of about 61,000 people. In contrast, the 11
private hospitals in Hong Kong have about 4,000 beds. The private Hong Kong Central Hospital closed in September after 46 years, when its lease ran out. The landlord, the Anglican Church, evicted the hospital and intends to build an HK$800 million (US$103 million) museum and gallery on the site. The Central Hospital had about 80 beds. It mainly did minor surgery and was well known for doing abortions cheaply and safely. It did about 6,000 abortions a year, 60 percent of Hong Kong’s annual total, most for patients referred by the Family Planning Association of Hong Kong. The government turned down a proposal to move the hospital, saying it was unfeasible. Dr Ko has said he wants new private hospitals that will treat the middle class, not “luxury” hospitals. The bids for the two plots of land offered last year for the development of private hospitals already had to comply with more rigid criteria.
38
Greater China
Dr Ko has said he is open-minded about changing the “strict” land grant conditions in the future, depending on how the process goes with these two first projects. The criteria cover the number of beds – including the number of maternity beds –, hospital accreditation and price transparency.
Prior planning Business for private hospitals, once in the doldrums, grew tremendously as pregnant mainland Chinese took to giving birth in Hong Kong, so giving their offspring the right of abode in the city. But this year no mainlander will be allowed to give birth in a Hong Kong hospital unless her husband is a Hongkonger. The restriction follows public outrage that outsiders were taking up maternity beds, undeterred by stiff charges and obstructive red tape.
Until recently public hospitals were facing a shortage of doctors as their medical staff moved to the private sector. There is a growing feeling that under Dr Ko, with his public-sector background, the government will concentrate once again on public hospitals, especially as it is taking its time to decide on reform of healthcare financing. Universal health insurance for Hong Kong’s seven million people has been discussed for years, before and after the city returned to Chinese rule in 1997, but the discussions have been fruitless. Hong Kong relies heavily on public hospitals for its healthcare. They provide more than 90 percent of inpatient services, of which about 95 percent are heavily subsidised by the government. There is a public consensus that an ageing population and shrinking workforce cannot sustain the imbalance in
Sources say the Secretary for Food and Health Ko Wing-man is more interested in again building up the Hospital Authority, which oversees Hong Kong’s public hospitals JANUARY 2013
the numbers of public and private beds. But the Audit Commission’s report says that in helping to develop the private sector, the government has been too generous in its policy of granting “scarce and precious land” for private hospitals. A glaring example, seized on by Hong Kong’s newspapers, was the government’s grant of 1.92 hectares of land for the private Union Hospital in 1982. The hospital ended up occupying only 54 percent of the land. The remaining 0.88 hectare lay undeveloped for 20 years, until upmarket housing was built on it. Union Hospital said in response to the Audit Commission’s report that it had received up to HK$300 million from the developer of the housing, which went toward operating the hospital.
Wrists slapped The commission says the land was zoned for hospital use because of a shortage of hospital beds in the area. But it says the Union Hospital applied for permission for housing on the land as early as 1986. The commission estimates that there was still a shortfall of some 800 hospital beds in the Sha Tin-Tai Wai district when the government gave permission in 2004 for private housing to be built on some of the land. The district
39
Hong Kong relies heavily on public hospitals for its healthcare. They provide more than 90 percent of inpatient services
still had only 4.3 beds per 1,000 people in 2011, less than the 5.1 beds per 1,000 people the city as a whole had. “Government sites in the past were directly granted at nil or nominal premium to religious or charitable groups to encourage private hospital development. Today, private hospitals generally make profits, some of which are financially strong,” the commission’s report says. Nine of Hong Kong’s 11 private hospitals in September last year were charitable institutions exempt from several taxes. The head of the Department of Health, Director of Health Constance Chan Hon-yee, has said her department will monitor more closely the compliance of private hospitals with land grant conditions. The Audit Commission also looked into regulatory control of private hospitals. It found that the Department of Health had issued six advisory or warning letters to six private hospitals last year. But the commission’s report says the department gave only summary reports of some inspections which discovered “serious irregularities”. In one case a specialist centre began operating before it had registered its premises with
the department. The commission found that private hospitals delayed reporting medical blunders, called sentinel events. The Department of Health’s voluntary system calls for the reporting of sentinel events within 24 hours of their occurring. The department issued only three letters in respect of 55 cases of late reporting from 2008 to 2011.
Long-term review The commission’s report quotes the Independent Commission Against Corruption as having said in 2010 that the Department of Health preferred to treat private hospitals as partners in the enforcement of regulations, and that no sentinel event that impugned the professionalism of doctors or nurses had ever been referred to the Medical Council of Hong Kong or the Nursing Council of Hong Kong. Dr Ko admits there is room for improvement in the transparency of prices charged by private hospitals, in clinical standards, and in the management and reporting of untoward incidents. He has set up four working groups. One group will look into the threat to health posed by beauty salons improperly performing medical procedures of-
fered as “medical beauty services”. Two others will focus on defining which medical procedures performed on walk-in patients are highly risky, and on the regulation of premises where products for advanced therapies are processed. The fourth group will review the regulation of private medical facilities. The law on private hospitals has not been changed to any great extent since 1966. The review will take at least one year, and amendment of the law is no certainty. Dr Ko has said the Department of Health has taken “proactive measures’’ to monitor private hospitals more closely. “The director of Health has been trying to make improvements,” he said last month. “I don’t agree that we have too relaxed an attitude when it comes to law enforcement.” A member of the Legislative Council, Alan Leong Kah-kit of the Civic Party, is not convinced that the director of the Department of Health can hold sway over private hospitals in the absence of a formal mechanism for doing so. “You don’t really mean to exercise your power,” Mr Leong told Dr Ko last month during a Legislative Council committee meeting. “That’s why you have not put up a system or a set of targets.” * COPY EDITOR OF THE STANDARD NEWSPAPER IN HONG KONG JANUARY 2013
40
Greater China
In the lap of luxury
Big name labels pin hopes on the mainland’s rising middle class BY FRAN WANG*
lad in a black and orange Prada winter coat with a diamondshaped pattern she snapped up during a trip to Milan, Jennifer Ren embodies the mainland’s nouveau riche. For the 27-year-old exhibition planner, accessories such as Dior handbags, Chanel perfume and necklaces by French jewellery house Van Cleef & Arpels are daily fashion essentials. “Luxury goods have become a necessary part of my life,” says Ms Ren, who
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earns about RMB6,000 (MOP7,664) a month in salary but gets virtually unlimited financial backup from her wealthy mother, a successful businesswoman. “Once you start buying them, it would be hard to step down to lower-end products,” she says. Free-spending Chinese consumers such as Ms Ren have so far proven a blessing to big name labels trying to buck global woes. Sales of personal luxury goods in the mainland surged a
spectacular 56 percent in 2011 to US$19 billion (MOP152 billion), after a 35 percent climb in 2010, data from CLSA Asia-Pacific Markets shows. In comparison, the world economy grew just 2.7 percent in 2011. The investment group expects the mainland’s luxury market growth to slow in the rest of this decade, but still predicts it to average an impressive 20 percent a year over the period. Mainland Chinese consumers are
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41 now the world’s biggest buyers of luxury merchandise, according to a report last month by management consultancy McKinsey, while another consulting firm, Bain and Company, found they account for a quarter of all such purchases globally.
Plenty of potential This year, growth has been restricted by slowing expansion in the mainland economy and repressed gift-giving among and between officials and businessmen – a key element of building relationships, even at middle and lower levels. The habit remains widespread, but has been affected by mounting scrutiny of corruption and stepped-up government crackdowns, along with political uncertainties linked to the country’s once-a-decade leadership transition. But global luxury brands still see plenty of long-term potential in the world’s second-largest economy, pinning their hopes on the mainland’s rising middle class as Europe slogs through its debt crisis, U.S. growth remains weak and Japan’s economy fails to gain traction. French luxury icon Louis Vuitton launched its first mainland Maison in July, a four-storey megastore selling jewellery, leather goods, clothing and other products in the commercial hub of Shanghai – its biggest anywhere. In November, New York-based Coach unveiled a Chinese-language version of its official Internet store to ride the country’s online shopping wave. PPR, the French owner of brands including Gucci and Yves Saint Laurent, announced last month that it had acquired a majority stake in rising Chinese luxury jewellery brand Qeelin for an undisclosed amount. Easing domestic luxury sales last year has prompted warnings that the lightning growth rates of previous years are unlikely to be sustainable given the mainland’s economic slowdown and as the market matures.
Fundamentals in place Over the past three and a half decades, the mainland has grown nearly 10 per-
Mainland households with annual post-tax income of US$16,000 to US$34,000 are expected to grow 12-fold in just a decade, from fewer than 14 million in 2010 to 167 million by 2020, according to a previous report by McKinsey cent a year, but Beijing has cut its target to 7.0 percent annually for the five years through 2015 as it tries to reduce reliance on exports and have domestic consumers play a bigger role. Mainland households with annual post-tax income of US$16,000 to US$34,000 are expected to grow 12fold in just a decade, from fewer than 14 million in 2010 to 167 million by 2020, according to a previous report by McKinsey. “There is a lot of room for optimism because the fundamentals of rising affluence remain in place,” Claudia D’Arpizio, a partner with Bain & Company, told AFP. “Luxury consumers do not see the future of their economy as ‘cloudless’ as
it was a few years ago,” says Elan Shou, China managing director of Ruder Finn Public Relations. As visa restrictions ease, more mainland Chinese consumers are also making their luxury acquisitions overseas to take advantage of cheaper prices, lower purchase taxes and the mainland’s strengthening renminbi currency. And as mainland Chinese consumers’ tastes diversify, the market is likely to become more nuanced. Kevin Liu, a 25-year-old marketing executive in Beijing, says he only buys less pricey niche products for himself. But when it comes to friends’ weddings, goods like Gucci purses are de rigeur. “I think that is a rational spending pattern,” he says. * AFP NEWS AGENCY
* AFP NEWS AGENCY JANUARY 2013
42
Greater China
The next Silicon Valley Chengdu aims to become a magnet for software development and innovation BY SEBASTIEN BLANC*
ntrepreneurs in China’s southwest are dreaming of turning the city of Chengdu into the world’s next Silicon Valley as the government encourages more investment outside the booming coastal regions. Small start-ups as well as big-name Western companies have flocked to the metropolis of 14 million people, attracted by cheap labour costs and favourable government investment policies, and hoping to tap into the mainland’s rapidly expanding consumer market. And the Silicon Valley dream is becoming reality as the city, already a hi-tech manufacturing hub, seeks increasingly to become a magnet for software development and innovation.
E
JANUARY 2013
Between one-third to one-half of the iPads sold worldwide are assembled in Chengdu, while computer giant Intel makes up to half of its chips in the city. Far from the booming coastal regions, Chengdu can offer perks through the government’s “Go West” development programme, with incentives for start-ups such as one-year interest-free loans. So far it has attracted about 29,000 companies to its 130-square-kilometre “hi-tech development zone”, including about 1,000 foreign enterprises. Chengdu is also developing a nearby “Software Park” as the city aims to go beyond manufacturing and become a centre of innovation. At Chinese start-up GoodTeam, a
software engineer shows off his latest creation: a game in which players try to place a bottle into the mouth of a baby. The application is being developed for pre-schoolers between one and three years old, the age at which children in Chengdu begin to toy with computer technology. Founded in 2009, the start-up employs 32 people and has seen strong growth in the gaming market, with most of its applications used on mobile telephones. “In July 2009 we had about five downloads a day, today we have more than 100,000 a day for each game. We are confident in the market,” Liu Jia, a GoodTeam manager, told AFP.
43 and now we have 50,” says Mr Xiong. The company plans to add at least 30 more workers in 2013 and all will likely be aged under 30, he says.
Sound growth
Sales revenue for Chengdu’s information technology sector neared US$47.6 billion in 2011, with 20 million computers produced and production capacity four times that
“Since we started we have survived three crises but it has been the hi-tech zone that has sustained us by allowing us to borrow money.” With five nearby universities focusing on science and technology, cafes and restaurants around the development zone have become networking hotspots for software programmers. “The best reason [to come to Chengdu] is the education environment. The region has great universities,” Xiong Jie, the director of Thoughtworks, which runs an Internet site for a group of Australian insurance companies, told AFP. “Only China and India have this talent pool. We have grown very fast, we started with zero people in April
The zone boasts Chinese technology companies like Lenovo, Huawei, ZTE and the Taiwan electronics giant Foxconn, as well as Internet portals Tencent and Alibaba. Foreign companies include Texas Instruments, Intel, Fujitsu, IBM, Hewlett Packard, Microsoft, Sun, SAP, Ubisoft, Siemens, Motorola, Nokia, Ericsson, Alcatel and Dell. Chengdu highlights the changing nature of the technology scene in the mainland, where Beijing, Shanghai and the metropolis of Shenzhen near Hong Kong have long been the centre for the country’s IT industry. Multinationals have traditionally set up in those areas, initially making products for export but increasingly tapping into the mainland’s lucrative domestic markets. Sales revenue for Chengdu’s information technology sector neared US$47.6 billion (MOP381 billion) in 2011, with 20 million computers produced and production capacity four times that. In 2012, production capacity was set to surpass 100 million, with more than 50 million computers delivered, while by 2015 capacity is expected to reach 150 million tablets and 80 million laptop computers. “Although the speed of growth has slowed everywhere, for us the loss has been minimal,” says Tang Jiqiang, the Chengdu hi-tech’s zone’s director of strategy. “We have seen growth slip from 25 percent to 23 percent.” Overall, Chengdu expects economic growth of 13 percent in 2012, down from around 15 percent in recent years, but still well above the expected national average of about 8 percent. Gao Wenshu, an expert on labour economics at the Chinese Academy of Social Sciences in Beijing, says Chengdu’s skilled labour force could help it emulate Silicon Valley. But the city offers relatively low wages compared to Beijing, Shanghai and Guangzhou, and the challenge will be attracting and keeping an innovative workforce. “I don’t think the local salary level can meet the high-salary demands technology specialists seek,” Mr Gao says. * AFP NEWS AGENCY JANUARY 2013
44
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45 MINXIN PEI PROFESSOR OF GOVERNMENT, CLAREMONT MCKENNA COLLEGE
Regime change in China? WHILE THE FUTURE OF CHINA IS UNPREDICTABLE, THE DURABILITY OF ITS POST-TOTALITARIAN REGIME CAN BE ESTIMATED WITH SOME CONFIDENCE
O
ne question that should have been asked about the Chinese Communist Party’s recently-completed leadership transition is whether the entire elaborately choreographed exercise was akin to rearranging the deck chairs on the Titanic. The installation of a new leadership may matter little, if the end of the Chinese Communist Party rule is both foreseeable and highly probable. Many observers would find this assertion shocking. The Chinese Communist Party, they insist, has proved its resilience since the Tiananmen crisis in 1989 and the collapse of Soviet communism in 1991. Why should predictions of the collapse of the Chinese Communist Party rule be taken seriously now? While the future of China is unpredictable, the durability of its post-totalitarian regime can be estimated with some confidence. China may be unique in many ways, but its oneparty rule is hardly exceptional. Indeed, its political order suffers from the same self-destructive dynamics that have sent countless autocratic regimes to their graves. Among many of the systemic flaws of autocracy, degeneration at the top, epitomised by ever-weaker leaders, is progressive and incurable. The exclusive and closed nature of autocracy bars many talented individuals from rising to senior government positions, owing to a pattern of succession that rewards political loyalty over capabilities. In fact, savvy autocratic rulers favour less talented successors, because they are easier to groom and control on their way to power. Leadership degeneration accelerates as the autocratic regime ages and grows more bureaucratic. As individuals in such regimes ascend the hierarchy, patronage and risk-aversion become the most critical factors in determining their chances for promotion. Consequently, such regimes grow increasingly sclerotic as they select leaders with stellar resumes but mediocre records.
Escalating predation The most lethal strain of leadership degeneration is escalating predation among the ruling elites. The most visible symptom is corruption, but the cause is intrinsic to autocratic rule. Typically, first-generation revolutionaries have a strong emotional and ideological attachment to certain ideals, however misguided they may be. But the post-revolutionary elites are ideologically cynical and opportunistic. They view their work for the regime
Those who believe that the Chinese Communist Party can defy both the internal degenerative dynamics of autocracy and the historical record of failed one-party regimes might benefit from reading Leon Trotsky
merely as a form of investment. And, like investors, they seek ever-higher returns. As each preceding generation of rulers cashes in its illicit gains from holding power, the successors are motivated by both the desire to loot even more and the fear that there may not be much left by the time they get their turn at the trough. This is the underlying dynamic driving corruption in China today. In fact, the consequences of leadership degeneration are easy to see: faltering economic dynamism and growth, rising social tensions and loss of government credibility. The puzzle is why neither the compelling self-destructive logic of autocratic rule nor the mounting evidence of deteriorating regime performance in China has persuaded even some of the most knowledgeable observers that the end of Chinese Communist Party rule is now a distinct possibility. An obvious explanation is the power of conventional thinking. Long-ruling regimes – think of the Soviet Communist Party, Indonesia’s Suharto, and Egypt’s Hosni Mubarak – are typically considered invulnerable, even just before they collapse. But those who believe that the Chinese Communist Party can defy both the internal degenerative dynamics of autocracy and the historical record of failed one-party regimes might benefit from reading Leon Trotsky, who knew something about revolutions. Dictatorships are regarded as indestructible before they fall, Mr Trotsky reminds us, but their demise is viewed as inevitable once they are toppled.
Fear of the unknown Another explanation is fear of contemplating the unknown. Chinese Communist Party rule may not last but the alternative – state failure and civil chaos – could be far worse than the status quo. But the record of democratic transitions since 1974 suggests that regime change in China is unlikely to be calamitous. The decisive factor will be whether it is initiated and managed by the ruling elites, as in Taiwan, Mexico, Brazil and Spain. Managed transitions produce more stable democracies. Should such a process occur in China, the Chinese Communist Party could transform itself into a major political party competing with others for power, as formerly autocratic parties have done in Mexico and Taiwan. Even a disorderly regime transition, however traumatic and chaotic in the short term, could yield a system that, on balance, is an improvement over a stagnant, repressive and corrupt autocracy. Indonesia’s new democracy may be imperfect, but has thrived despite its initial poor prospects. Likewise, Vladimir Putin’s Russia, a deeply flawed hybrid autocracy, is nonetheless a far better place to live than the Soviet Union was. If there is one lesson to be learned from the remarkable history of the democratic transitions of the past 38 years, it is that when elites and the public reject authoritarian rule, they do their best to make the new system work. Should such a transition occur in China, there is no reason to think that the process and the outcome will be fundamentally different. JANUARY 2013
46
Property
The year of all changes This could be a landmark year for real estate, with two seminal bills finally before the Legislative Assembly he year of 2013 is forecast to bring many changes to the real estate market. The Legislative Assembly is set to vote on a group of five bills with a wide impact on the sector. Last month, the government announced that the long-awaited bill on urban planning was ready. The document has yet to be made public. In November, the bill amending the
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JANUARY 2013
32-year-old law on land grants was also finished. The Legislative Assembly is to start discussing it this month. Experts in this field say that without one bill, the other won’t work. Three other pieces of legislation that will have a major effect on real estate are also waiting for approval from the Legislative Assembly. The bill on the rehabilitation of the
city’s older districts has crawled through the legislative process for almost two years. The bill on the sale of unfinished homes was presented to the assembly last May, and the bill on the protection of cultural heritage was presented last July. Neither has been passed. These five bills need to be passed by August, before the present assembly is dissolved, ahead of new elections. Any
47 bill not passed by August must begin the whole legislative process from scratch when the new assembly convenes. Some Legislative Assembly members have already complained that there is not enough time to discuss so many complex bills. Members from the New Macau Association have expressed dissatisfaction with the reforms, saying they are not bold enough. Ever since the former secretary for public works and transport Ao Man Long was arrested in 2006, all eyes have been on Macau and the lack of transparency surrounding urban planning here. This has triggered authorities to look into coming up with a maiden urban planning law.
Master planning The bill on urban planning was first announced in 2008, however it took the government four years to have it ready. The bill says the Lands, Public Works
The bill on urban planning is closely related to the bill amending the law on land grants. The latter, five years in the making, spells out more clearly when the government would have to call for tenders for plots of land. Experts in this field say that without one bill, the other won’t work and Transport Bureau will draft Macau’s urban plans. The bureau will require approval from the chief executive but not from the Legislative Assembly. “There will be a master plan, providing strategic guidelines like mapping infrastructures and other public facilities,” says Leong Heng Teng, the spokesperson for the Executive Council, an advisory body to the chief executive. “Meanwhile there will be detailed plans that lay down the land use regulations, such as the plot ratio [ratio of floor area to plot size] and heights.” The master plan will be reviewed every five years. Mr Leong estimates that the first master plan will take around two years to be ready. The bill on urban planning, containing more than 50 articles, entitles the government to go ahead with land expropriation. The bill proposes the creation of an advisory urban planning council, which would have a say on where to locate relevant public facilities, as well as reviewing urban plans. The council would include members from various fields, including architecture, transport and infrastructure. “The council will consist of around 40 members, over half of which are professionals and other representatives from social groups,” says Mr Leong. “The rest would be government representatives.” The members of the advisory body will be required to stay out of any dis-
cussion about projects in which they are an interested party, Mr Leong says. Urban planning violations will incur fines of between MOP25,000 (US$3,125) to MOP2 million. The bill on urban planning is closely related to the bill amending the law on land grants. The latter, five years in the making, spells out more clearly when the government would have to call for tenders for plots of land. It would change the way land premiums are calculated and heavily punish squatting on public land.
Master worries The United Nations Educational, Scientific and Cultural Organisation (UNESCO) has been worried about new buildings obscuring the view of Macau’s heritage since 2008. It has asked the government several times to make an urban plan that would stop such developments. In 2011, UNESCO’s World Heritage Committee expressed concern about “the continuing inadequacy of the current management system, the buffer zone and legal provisions to protect effectively the very important visual and functional linkages” between Macau’s historical centre and the wider urban landscape and seascape. Carlos Marreiros, a Macau architect with a background in urban planning, agrees that the city is in urgent need of an urban plan. He told Radio Macau he welcomes the bill on urban planning. However, Mr Marreiros is doubtful the government will be able to have Macau’s maiden master plan ready in just two years. The urban plan will have to comply with both the bill on heritage protection and the bill on the renovation of city’s old neighbourhoods. The bill on heritage protection spells out specific rules for construction in buffer zones around the city’s heritage sites. Any new project or building renovation in those areas needs to be approved by the Cultural Affairs Bureau. The master plan will also guide the government on the development of the 3.5 square km of reclaimed land it is adding to the roughly 29 square km that the city now occupies. The five new tracts of land are expected to accommodate up to 120,000 people. The reclamation programme was announced in 2008. Of the five areas of sea off the peninsula and Taipa that are meant to be reclaimed, only one is now dry land. JANUARY 2013
48
Property | Market Watch
Notable residential property transactions - 01/12 to 13/12, 2012 District
Property
Unit
Macau Macau Macau Macau Macau Macau Taipa Coloane Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Taipa Macau Coloane Macau Macau Macau Macau Taipa Macau Taipa Macau Macau Taipa Taipa Macau
One Central One Central One Central The Paragon One Central The Residencia The Buckingham One Oasis Cotai South Pearl Horizon Pearl Horizon Pearl Horizon Pearl Horizon One Central Villa de Mer La Baie du Noble Villa de Mer Pearl Horizon Pearl Horizon Jardins do Oceano Pearl Horizon One Oasis Cotai South Villa de Mer Pearl Horizon Villa de Mer The Praia Hung Fat Garden The Riviera Happy Valley Pearl Horizon The Riviera Nova Taipa Kinglight Garden Edf. U Wa
Block 4, M/F, unit B Block 5, L/F, unit B Block 2, H/F, unit A M/F, unit B Block 2, H/F, unit B Block 2, H/F, unit A (with car park) M/F, unit B (with car park) Block 8, H/F, unit G Block 8, H/F, unit A Block 15, H/F, unit D Block 8, H/F, unit A Block 8, H/F, unit C Block 1, M/F, unit A Block 4, H/F, unit B Block 3, H/F, unit N Block 4, H/F, unit B Block 5, H/F, unit C Block 15, H/F, unit G Edf. Elm, H/F, unit C (with car park) Block 7, M/F, unit C Block 8, L/F, unit B Block 2, H/F, unit C Block 6, L/F, unit C Block 3, H/F, unit F Block 2, M/F, unit J Block 1, L/F, unit V Block 1, M/F, unit C Block 2, L/F, unit V Block 15, H/F, unit H Block 1, M/F, unit D Block 20, L/F, unit B Block 3, L/F, unit X Block 13, L/F, unit B
Source: Centaline (Macau) Property Agency Ltd
Floor area (sq. ft) 2,585 2,312 2,299 1,980 2,267 2,448 1,873 1,838 1,248 1,302 1,248 1,147 1,273 1,479 1,570 1,479 1,103 1,183 1,610 1,193 1,255 832 1,103 824 1,099 1,270 880 1,350 767 866 849 1,238 859
Sale price (HK$) 24,428,250 21,964,000 20,900,000 20,790,000 20,600,000 17,051,000 10,800,000 10,568,500 9,444,000 9,307,000 9,294,000 9,185,000 9,170,000 8,730,000 8,550,000 8,400,000 8,122,000 7,954,000 7,000,000 6,380,000 6,100,000 5,750,000 5,738,000 5,400,000 5,400,000 5,250,000 5,200,000 5,000,000 4,900,000 4,680,000 4,400,000 4,200,000 3,380,000
Price per sq.ft. (HK$) 9,450 9,500 9,090 10,500 9,086 6,965 5,766 5,750 7,567 7,148 7,447 8,007 7,203 5,902 5,445 5,679 7,363 6,723 4,347 5,347 4,860 6,911 5,202 6,553 4,913 4,133 5,909 3,703 6,388 5,404 5,182 3,392 3,934
Note: L/F - Low floor; M/F - Middle floor; H/F - High floor
Notable residential property rentals - 01/12 to 13/12, 2012 Type
Property
Unit
Macau Taipa Macau Taipa Macau Taipa Macau Macau Taipa Taipa Taipa Macau Taipa Macau Macau Macau Macau Macau Macau Macau Macau Taipa Taipa Taipa Macau
One Central One Grantai One Central Manhattan The Residencia Nova City The Residencia The Residencia Nova City Nova City Nova City Villa de Mer Nova City Villa de Mer Villa de Mer The Praia La CitĂŠ La CitĂŠ Villa de Mer Villa de Mer Villa de Mer Chong Fok Garden Jardins de Lisboa Jardins de Lisboa Jardins Sun Yick
Block 6, M/F, unit B Block 4, L/F, unit O Block 1, M/F, unit F South Tower, M/F, unit C Block 2, H/F, unit A Block 13, M/F, unit B Block 5, L/F, unit B (with car park) Block 1, M/F, unit B Block 10, M/F, unit C Block 6, L/F, unit F Block 6, L/F, unit F Block 1, L/F, unit A Block 6, M/F, unit E Block 5, L/F, unit B Block 5, L/F, unit A Block 3, M/F, unit S Block 3, H/F, unit C Block 3, H/F, unit E Block 3, M/F, unit D Block 5, M/F, unit G Block 3, H/F, unit F Edf. Liking Court, L/F, unit A Edf. Vista Linda, L/F, unit B Edf. Majestade, L/F, unit B Block 4, M/F, unit E
Source: Centaline (Macau) Property Agency Ltd
Floor area (sq. ft) 2,528 3,025 1,815 2,082 2,448 1,518 1,696 1,693 1,314 1,340 1,340 1,703 1,314 1,475 1,475 1,558 1,699 1,849 798 829 824 1,500 1,833 1,608 1,000
Rent price (HK$) 48,000 38,000 31,000 24,000 23,800 18,000 17,500 16,500 16,000 15,000 15,000 15,000 12,500 12,000 12,000 12,000 12,000 12,000 11,000 11,000 10,000 10,000 8,800 8,000 7,800
Price per sq.ft. (HK$) 18.99 12.56 17.08 11.53 9.72 11.86 10.32 9.75 12.18 11.19 11.19 8.81 9.51 8.14 8.14 7.70 7.06 6.49 13.78 13.27 12.14 6.67 4.80 4.98 7.80
Note: L/F - Low floor; M/F - Middle floor; H/F - High floor
JANUARY 2013
Property Statistics Year-on-year change (%)
2011
1,387 1,099 231 57 2,159 2,053 86 20
Building units completed - Residential - Commercial and offices - Industrial and others Building units started - Residential - Commercial and offices - Industrial and others
-69.4 -73.0 -45.9 67.6 148.2 162.9 8.9 100
Transactions (1)
- Residential - New building - Old building Resident buyers (as percentage of total buyers) - Commercial and offices Resident buyers (as percentage of total buyers) - Industrial and others Total value of total units transacted (2)
percentage
MOP76.3 billion MOP58.9 billion
- Residential - New building
MOP41.4 billion
- Old building
MOP17.5 billion MOP12.7 billion
- Commercial and offices
MOP4.7 billion
- Industrial and others
34.4 28.1 41.0 5.4 93.0 10.9
Under MOP1 million
MOP61.4 billion MOP39.9 billion MOP21.5 billion MOP17.1 billion MOP6.7 billion
MOP1 million to MOP1.9 million MOP2 million to MOP2.9 million MOP3 million to MOP3.9 million MOP4 million or above
1,258 2,968 2,590 1,830 5,660
Year-on-year change (%)
MOP45,027 /m
2
- Macau Peninsula
MOP43,569 /m
2
- Taipa
MOP41,501 /m
2
- Coloane
MOP68,208 /m2
Macau
21.6 32.9 1.4 6.4
Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012
Notes Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012
24.0 13.1 3.2 37.8 65.7 61.7
-48.5 -29.2 -9.1 11.8 26.2
Average transaction price of residential units (3) 2011
Jan-Oct 2012
Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012
Year-on-year change (%)
Latest
-46.8 -13.4 4.7 15.6 62.5
2,690 4,628 3,162 1,818 4,878
Jan-Oct 2012
7.8 percentage points -29.1
MOP85.2 billion
Year-on-year change (%)
Jan-Oct 2012
percentage Jan-Oct 2012
Transaction price of residential units (1) 2011
Jan-Oct 2012
3.7 points -8.3
90.2 2,521
-12.6 percentage 91.8 points -17.5 4,726
81.5 7,320
Jan-Oct 2012
-13.9 -8.3 -16.9 -1.0
21,553 14,306 5,973 8,333
-1.8 points 13.7
87.1 3,128
Notes
Year-on-year change (%)
Latest
-6.7 -4.5 26.8 -20.7
27,624 17,176 7,783 9,393
Total units transacted
92.0 134.0 -62.4 -73.1 -44.3 -44.5 -46.7 -6.3
2,521 2,422 85 14 1,114 1,059 40 15
Year-on-year change (%)
2011
Year-on-year change (%)
Latest
Notes Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012
Month-on-month change (%)
Latest MOP65,949 /m
2
MOP65,641 /m
2
MOP64,443 /m
2
MOP83,210 /m2
-9.4 -7.5 -14.5 -4.6
Notes Nov 2012 Nov 2012 Nov 2012 Nov 2012
(1) The data covers transactions with stamp duty paid during the reporting period, including transactions exempted from stamp duty (2) Figures are rounded, therefore they may not add up exactly (3) The data covers transactions with stamp duty bill issued during the reporting period, including transactions exempted from stamp duty JANUARY 2013
Source: Statistics and Census Service and Financial Services Bureau
Construction - private sector
49
50
Gaming
SECOND COMING
Two records to round out last year have shattered some gloomy estimates and have analysts excited about the year ahead BY LUCIANA LEITﾃグ
eports last year of the death of Macau’s gaming industry were greatly exaggerated. Casino gross gaming revenue was higher in December than in any month before it and higher last year than ever before, stirring excitement among analysts about this year. Their estimates for growth in casino gross gaming revenue for the next 12 months range between 8 percent and 15 percent, with a consensus around 11 percent. They expect mass-market gaming revenue to continue to grow faster than revenue from VIP gaming. It will be a time of change, without the opening of a new casino – the first time since 2003. The casinos said goodbye to last year on a high note. Data from the Gaming Inspection and Coordination Bureau shows casinos recorded MOP28.2 billion (US$3.5 billion) in gross gaming revenue last month, 19.6 percent more than a year before and the most in any month ever. The previous record was MOP27.7 billion, set in October.
R
The December figure increased total casino gross gaming revenue for 2012 to MOP304.1 billion, 13.5 percent more than in 2011 and the most in any year ever. The previous record was set in 2011. The new record was set despite the city having roughly the same number of visitors last year as in 2011. Even so, last year’s growth in casino gross gaming revenue was the slowest since 2009, when the growth rate was 9.7 percent. Gaming revenue grew by 58 percent in 2010 and 42 percent in 2011. Some analysts say last year’s slowdown stemmed from the advent of the leadership change in Beijing and the slowing of economic growth in the mainland. Both factors held back VIP gambling, which accounts for 70 percent of casino gross gaming revenue.
Closers connections The government does not make public forecasts of the performance of the gaming industry, despite it being the
engine of the economy. The budget shows that the government expects to get less tax revenue from the gaming industry this year than it received in 2012, implying that it expects gross gaming revenue to fall. But government estimates of tax revenue from the gaming industry are typically cautious, and time and actual tax revenues have shown they are excessively so. The office of the Secretary for Economy and Finance told Macau Business that the government expected the VIP gaming business to remain stable this year and the mass-market gaming business to grow. It did not release figures. The co-chairman and chief executive of Melco Crown Entertainment Ltd, Lawrence Ho Yau Lung, is optimistic that the gaming market will grow this year. Mr Ho told Macau Business that he expects both the VIP and mass markets to expand as the mainland economy improved, but said the mass market would expand fastest.
Photo: Luís Almoster
51
52
Gaming
Looking further ahead, he said the permanent ferry terminal on Taipa and other new transport infrastructure projects would “facilitate convenient cross-border access” for mainland tourists and improved arrival numbers. The opening of new casinos in Cotai, scheduled to take place in 2015-2016, including Melco Crown’s Studio City project, should fuel the growth of mass-market gaming revenue in the medium term, he said. Melco Crown also expects to start construction of a new hotel tower at its City of Dreams casino resort in Cotai this year. The city’s five other casino operators were contacted for this report but none was prepared to comment on its prospects for this year.
from flaunting their wealth during the political transition. Economic weakness in the mainland, not just in exporting provinces such as Guangdong but also in resourcerich western provinces that produce VIP gamblers, slowed growth in the gaming business last year. Casinos and junket operators were more careful about lending to gamblers, and gamblers were more reluctant to borrow, reducing the amount of VIP gaming business. Recent data shows the mainland economy is picking up steam again, and the prospects for the United States economy are improving, boosting consumer confidence. “It is good for the mainland in terms of exports,” Mr Monaghan says.
Among the analysts, Japanese brokerage Nomura says that sources among casino managers forecast that VIP gaming revenue will grow at a “mid-single-digit” to “low-double-digit” rate this year. The casino managers forecast that massmarket gaming revenue will grow by 20 percent to 25 percent. Nomura itself forecasts growth of 14 percent for the
gaming business this year. HSBC’s senior gaming analyst for Southeast Asia, Sean Monaghan, says he expects casino gross gaming revenue to grow by 13 percent this year, propelled by an increase of 25 percent in massmarket gaming revenue and an increase of 7 percent in VIP gaming revenue. “Macau casino business models are changing, shedding their historical dependence on the high-risk and low-margin VIP segment, and shifting to highgrowth, high-margin and low-risk mass gaming,” said an HSBC forecast on the Asian gaming industry’s performance this year. Mr Monaghan says most of the factors that tended to disrupt Macau’s casino industry last year have passed. One such factor was the conviction that the euro zone would break up. “That scared a lot of people.” He says political uncertainty due to the advent of new leadership in Beijing has also ended. Xi Jinping became head of the Chinese Communist Party in November and will become president in March. Mr Monaghan says that before the new leaders took over, VIP gamblers made themselves scarce, abstaining
The chief executive of Melco Crown, Lawrence Ho, is optimistic that the gaming market will grow this year
HSBC’s analyst Sean Monaghan says he expects casino gross gaming revenue to go up 13 percent in 2013
Jonathan Galaviz, from consultancy Galaviz & Co, forecasts casino gross gaming revenue to grow by about 8 percent this year
Numbers game
CASINO GROSS GAMING REVENUE
The HSBC report says analysts may re-rate stocks associated with Macau’s gaming industry this year. “We believe 2013 will be the period when global investors ascribe value for new casino developments, and this will likely be a major factor behind the sector re-rating,” the report says. “We believe the lack of visible construction activity has been a key reason
CASINO GROSS GAMING REVENUE GROWTH 70% 60%
Year-on-year growth (percent)
350,000 300,000 250,000 MOP million
Stock picks
200,000 150,000 100,000 50,000
50% 40% 30% 20% 10%
0
0 2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
SOURCE: STATISTICS AND CENSUS SERVICE, GAMING INSPECTION AND COORDINATION BUREAU
JANUARY 2013
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
SOURCE: STATISTICS AND CENSUS SERVICE, GAMING INSPECTION AND COORDINATION BUREAU
Photo: Luís Almoster
53
why investors have been reluctant to ascribe value for these projects. We believe 2013 will be characterised by wallto-wall cranes on Cotai, clearly developing the next wave of resorts targeting the mass mainland customer.” Mr Monaghan’s top stock picks for this year are Galaxy Entertainment Group Ltd and Melco Crown. But he says MGM China Holdings Ltd’s shares offer the greatest potential return. Most Macau casino operators will pay dividends this year, according to the HSBC report. The forecasts of David Bain, senior research analyst for U.S.-based brokerage firm Sterne Agee, are on the bullish side. He expects the casino market to expand by 15 percent this year because of jumps of 12 percent in VIP gaming revenue and of 23 percent in mass-market gaming revenue. Mr Bain says his forecast is bullish because his expectations for the VIP gaming business are above the average. His expectations are based on forecasts that the mainland economy will improve. Other news media reported in November that Beijing would crack down on corruption, but Mr Bain expects no change in the policy toward Macau. It is widely assumed that some of the money gambled at the VIP tables in Macau’s casinos is ill-gotten, much of it through corruption.
Mr Bain says the strength of the growth in mass-market gaming last year was mainly due to gambling becoming more accessible and attractive for that segment. The increasing number of nongaming attractions and hotel room capacity has also helped, he says.
Premium players Mr Bain also highlights the completion of the railway link between Guangzhou and Gongbei late last month. He says that can help boost mass market play this year. Recent changes to travel permits will also help. Migrant workers in several mainland metropolises can now apply for a permit from the city where they work instead of having to travel to their hometown to make an application. In an investors note released last month, Mr Bain had one warning: “While China continues its march toward a domestic consumer economy (good for Macau), external demand could slow its pace. Recall that Guangdong, the largest mainland feeder to Macau, has many export driven industries.” Jonathan Galaviz, managing director of Las Vegas consulting firm Galaviz & Co, is more bearish. He says he forecasts casino gross gaming revenue in Macau to grow by about 8 percent this year. The VIP sector will remain “generally flat”, while the mass segment will
be the main driver of growth over the next decade, Mr Galaviz says. Fitch Ratings says continued transport infrastructure development will propel revenue growth of roughly 8 percent this year. That implies low-singledigit VIP revenue growth and roughly 20 percent mass-market revenue growth. “The mass market should continue to grow faster than the VIP segment over the next few years, supported by numerous infrastructure projects, as well as the potential for further development of Hengqin,” the ratings agency wrote in a December report. Ben Lee, managing partner at gaming consultancy IGamiX Management & Consulting Ltd, says the Macau casino market fundamentals are recovering. He says the market should see a recovery in VIP growth and continued expansion in mass gaming. He says there has been a deliberate transition by several VIP players to the premium mass segment, in order to stay below the radar of local and mainland authorities. The trend can partially explain the VIP segment’s recent lacklustre performance. Overall, Mr Lee is optimistic, even though he says there are some clouds on the horizon. He is still unsure about a rebound in Western economies and, unlike HSBC’s Mr Monaghan, he says there is still risk that the euro may fall apart. JANUARY 2013
54
Gaming
JANUARY 2013
55
Casinos must now have non-smoking areas; few analysts say it will make much difference to revenue BY ALEXANDRA LAGES
rom this month, smokers should check before lighting up in a casino. Smoking is now banned in casinos and slot machine parlours, except in designated smoking areas. Analysts expect the restrictions on smoking to cause a slight drop in gaming revenue but say they expect gamblers to adapt fast. Only a complete ban
F
on smoking in casinos, like the ban on smoking indoors in most other public places, would be a cause of concern. David Green, principal of gaming consulting firm Newpage Consultadoria Ltda, says he does not expect gaming revenue here to “fall off a cliff” because of the smoking restrictions. “The experience in jurisdictions I know that have introduced smoking bans in recent years has been a significant, immediate negative impact on gaming revenue. However, in those places smoking has either been totally banned or limited to small defined areas within casinos,” says Mr Green, whose firm the government consults about gaming matters. “In most cases, revenues have recovered to, or in excess of, pre-ban levels. The situation in
JANUARY 2013
Illustrations: Rui Rasquinho
NO BUTTS, FEW IFS
56
Gaming
Macau is somewhat different, given the restriction will apply only to half an entire casino gaming area.” Union Gaming Group analyst Grant Govertsen forecasts that the smoking restrictions will reduce the rate of growth in gaming revenue by more than two percentage points. He says the actual impact is hard to quantify. “It will be impossible to measure, given that the market is still growing quite strongly. In other words, we expect to see strong year-over-year growth in 2013 despite the implementation of the 50 percent smoking ban,” Mr Govertsen says. He says a complete ban on smoking in casinos would reduce revenue measurably. “Smokers, which constitute a large percentage of visitors to Macau, would spend less time on the casino floors, as they likely would take frequent breaks to go smoke.”
Clearing the air Casino operators have so far avoided making public forecasts about how the smoking restrictions will affect their business. Macau Business asked all six gaming concessionaires what the effect would be. Only Wynn Macau Ltd and Sands China Ltd replied and neither offered an estimate. Spokespersons for Wynn Macau and Sands China said only that their companies supported the smoking restrictions, and were in close contact with the Health Bureau and the Gaming Inspection and Coordination Bureau to ensure their casinos complied with the new rules. One executive director of SJM Holdings Ltd, Rui Cunha, has publicly expressed concerns. Mr Cunha said in October that smoking restrictions could act as a brake on the growth of the gaming industry. Another SJM Holdings executive director, Angela Leong On Kei, said in November that she was in favour of a complete ban on smoking in casinos. The government has said it will consider the idea. Ms Leong is a directly elected member of the Legislative Assembly and is seeking re-election this year. Casino workers are her main constituency and most are in favour of a complete ban because they are worried about their health. SJM Holdings chief executive Ambrose So Shu Fai has expressed equaJANUARY 2013
nimity about a complete ban. “Eventually, after two or three years, a smoking ban will be enacted altogether in any case,” Mr So said in November. “So why not do it now?” He doubts that nonsmoking areas will work.
Exceptional industry
Consultant David Green says he does not expect gaming revenue here to “fall off a cliff” because of the smoking restrictions
Union Gaming analyst Grant Govertsen says the actual impact of the ban on smoking is hard to quantify
Scholar Ricardo Siu says some potential patrons that object to smoke-filled rooms may now be tempted to gamble
“I don’t think the city will lose its competitiveness,” says Desmond Lam, an expert on Chinese gambling psychology
Casinos must reserve at least half their gaming area as non-smoking areas. They must separate smoking and non-smoking areas with either four-metre-wide buffer zones, air curtains or two-metrehigh walls, or use special air-circulation systems. If casinos have more than one floor, the smoking areas must be on the upper floors. New casinos must divide their gaming floors physically and have separate ventilation systems for smoking and no-smoking areas. The government banned smoking in most other public places last year. Smoking is prohibited indoors in places of work, hotels (except the rooms), restaurants, commercial areas, banks and government buildings. Casinos are permitted to have smoking areas because the government felt that a complete ban would be bad for the gaming business in particular and the economy in general. However, the government only announced its specifications for smoking areas in late October. This provoked complaints by casino operators that it would be a rush job to have everything ready by the end of last month. Parts of the smoking areas in seven casinos were not yet ready by the time the smoking ban was enacted. Investment bank Morgan Stanley forecasts that the annual rate of growth in casino gross gaming revenue will be two to three percentage points “lower than normal” this year because of the smoking restrictions. It says the growth rate could be less than 10 percent, in contrast to the consensus among analysts of 11 percent. Morgan Stanley analysts led by Praveen Choudhary say in a note to investors released last month that gaming revenue in United States and Australian casinos fell on average by 12 percent in the first 12 months after the imposition of smoking bans there.
Captive market Morgan Stanley quotes casino managers as saying that in Macau 80 percent to 90 percent of gamblers are smokers. “In the United States and Australia, the percentage of smokers is less than 50 percent. Thus, the smoking ban should
57 affect Macau more than other jurisdictions,” it says. But the note says casinos in Macau are more fortunate than those in the U.S. and Australia in two respects. “Macau does not have any competing casino destinations nearby and thus smokers do not have the option to drive to other counties or tribal casinos to gamble. And the smoking ban in Australia has had its biggest impact on electronic gaming machines and not on mass tables,” the report says. Here, mass-market table games account for a much bigger proportion of gaming revenue. Analysts in Macau do not believe the smoking restrictions will harm business substantially. They say the restrictions present an opportunity for casinos to bring in different kinds of gamblers. Ricardo Siu Chi Sen, a gaming and tourism specialist at the University of Macau, says some potential patrons that object to smoke-filled rooms may now be tempted to come in and try their luck. “For those who must smoke, they will still find a place to do so,” Mr Siu says. Desmond Lam Chee Shiong, an expert on Chinese gambling psychology at the University of Macau, says most players from the mainland, Macau’s main source of gamblers, are smokers, but that the smoking restrictions will not put them off coming. They will learn to live with finding a smoking area to gamble in, or taking a break for a smoke, Mr Lam says. “It will just make their visits less than ideal,” he says. “The positive thing to take from the Australian example is that a smoking ban will attract a different breed of gamblers, who do not smoke (hence, previously, they avoided casinos because of the bad air), or who do not mind gambling without being able to smoke. These are more likely to be leisure, younger gamblers,” Mr Lam says. “In the long run, I think it is all good news for Macau. I don’t think the city will lose its competitiveness.”
HARM-REDUCED HOT AIR T
he restrictions on smoking in casinos may be a headache for the gaming operators but they present a business opportunity for other companies. VaporBrands International Inc of the United States makes electronic cigarettes and cigars. The company announced last month that it planned to sell them in Asia, beginning in Macau. It is hoping to cash in on the restrictions on smoking in casinos. “We feel that now is the time to penetrate the Asian market, with Macau as the logical entry point, in part due to its dominant casino industry and upscale clientele,” VaporBrands says. “Macau has implemented anti-smoking laws and it will also apply to the casinos beginning in 2013, where only half of the casino space can be designated as smoking.” The company says it believes electronic cigarettes will be an “attractive” option for smokers and regulators alike. It hopes that a foothold here will help to promote its products among visitors from the mainland and elsewhere in Asia. Electronic cigarettes differ because they do not burn any organic matter. Instead, they use a battery-powered element to heat a non-toxic liquid containing nicotine, which creates a vapour rather than smoke. Since there are no toxins in them, electronic cigarettes have no known health risks. These products also have the option of being used without nicotine, which can help people who are looking to quit smoking but still feel the need to physically smoke.
Analysts in Macau do not believe the smoking restrictions will harm business substantially. They say the restrictions present an opportunity for casinos to bring in different kinds of gamblers
Morgan Stanley forecasts that the annual rate of growth in casino revenue will be two to three percentage points “lower than normal” this year because of the smoking restrictions JANUARY 2013
58
Gaming
Non-stop expansion Galaxy Entertainment announces plans for Galaxy Macau phases three and four BY MARTIN JOHN WILLIAMS*
alaxy Entertainment Group Ltd has unveiled details of its plans for phases three and four of its giant land bank in Cotai, placing fresh pressure on the government’s gaming table cap. With its phase two project barely started, Galaxy Entertainment said last month it will submit plans for Galaxy Macau phases three and four to the government early this year. The plan is to start construction at the end of 2013, Galaxy Entertainment vice chairman Francis Lui Yiu Tung told reporters last month. In addition to offering a maximum 600 gaming tables and 2,000 slot machines, “we hope to utilise this [phase three] to promote Macau’s creative industries,” Mr Lui said. Phase three’s “culture” theme would aim to attract “big-spending middle class families,” he added. Phase three will open as early as late 2016, with 4,200 hotel rooms and occupying almost one million square metres, or most of the remaining space on Galaxy Entertainment’s land parcel in Cotai. This phase will equal the physical size of phases one and two combined, Mr Lui said, and will cost some HK$40 billion (US$5.2 billion) to HK$50 billion to build. Phase four, dominated by 50,000 square metres of meeting and convention facilities, will take up the remaining 280,000 square metres of Galaxy Entertainment’s land bank and be completed by 2018, Galaxy Entertainment investor relations spokesperson Yoko Ku told GamblingCompliance. Ms Ku said financing of phase three would follow the model for phase two. “We will use our existing cash plus cash from operations and also debt facilities if needed,” she said.
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Who gets what? Hong Kong-based Sun Hung Kai Financial analyst Stephen Yang said Mr Lui’s announcement was “pretty positive” for JANUARY 2013
The plan is to start construction at the end of 2013, Galaxy Entertainment vice chairman Francis Lui says the company. But “to me it was a little bit of a surprise that they would announce it so early considering that their phase two project hasn’t really gotten too much under way”. Still, “they’ve got a ton of cash, they’re probably going to generate a significant amount of cash over the next couple of years, and I guess the best way to put that to good use is to put it back into their expansion plans”. However, Mr Yang said the Macau government’s gaming table cap – now exhausted and allowing only 3 percent
annual increases in supply over the next decade – increasingly appears to be a serious problem for gaming operators. “If the Macau government sticks to their guns in terms of allocating the tables, they’re not all going to be able to fill their capacity,” he said. As with other operators, Galaxy Entertainment’s “ability to receive their allocation is at risk. It’s not transparent how the allocation process works and how the government grants tables to whom. There might be a fight over who gets what,” Mr Yang said. It is expected that a further 400 tables and 1,000 slot machines will be added in Galaxy Macau’s phase four. Galaxy Entertainment’s Ms Ku said the government’s allocation of gaming tables according to the proportion of non-gaming facilities will give the gaming operator a very good chance of securing most or all of its desired allocation. “We are confident that the government will allow us sufficient tables to operate. We are trying to get more tables by offering 95 percent non-gaming [facilities] in phase three,” she said. Non-gaming facilities in phase three include arts, entertainment and performance infrastructure, with a main arena seating 10,000, a multi-use performance facility seating 1,000 and a smaller theatre seating 300 to 500. Galaxy Macau’s phase three would be the seventh integrated resort to open in Cotai in the next three to five years if the government elects not to stagger development. Despite government assurances to the contrary, last year saw officials effectively green-light the remaining Cotai land applications from Wynn Macau Ltd, MGM China Holdings Ltd and SJM Holdings Ltd. In April last year, Galaxy Entertainment announced the start of construction of the HK$16 billion phase two of its Cotai property, promising 500 table games, 1,000 slots, 1,300 hotel rooms and an expected opening in mid-2015. * GAMBLINGCOMPLIANCE
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Heavy rotation
Sands China launches Fast Action Baccarat, an accelerated version of the game that accommodates more players BY ALEXANDRA LAGES
accarat has been given a new twist at the Venetian Macao. The Sands China Ltd casino resort has opened four new tables for playing a quicker version of the city’s most popular casino game. The version is called Fast Action Baccarat. It allows more gamblers to play without the casino exceeding the government’s city-wide cap on the number of live gaming tables. Without the option of adding more traditional tables, casino operators are searching for other ways to accommodate more players. Slot machines are an option but they account for less than 5 percent of gross gaming revenue from the casinos. Chinese gamblers usually prefer games with a live dealer. Nine players are normally seated at a baccarat table. In contrast, a Fast Action Baccarat table has 28 betting positions, allowing up to 60 gamblers to play, albeit while standing. The gaming table is elliptical, its longest dimension measuring 6.4 metres. It more closely resembles a bar, more than it does a traditional baccarat table. The new game has betting positions right around its circumference. A dealer in the central well deals the cards and the deal is displayed on monitors around the table.
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One round of betting typically takes about one minute. Gamblers place their chips just as they would do on a traditional table. They can make every kind of bet from their betting positions: player, banker, tie, player pair and banker pair. See-through screens pop up at the betting positions when the croupier calls “no more bets” to prevent late placing of bets.
Song and dance Trap doors built into the table swallow any wagered chips from lost bets. Two croupiers distribute winnings from chip trays that can be moved around the central well. Because croupiers only pay out winnings and there is no need to collect bets, rounds are quicker than in traditional games. The minimum bet is MOP100 (US$12.50), a nod to mass-market players. Staff create more atmosphere by singing and dancing around the table. Sands China “is continuously looking for ways to innovate the gaming experience for our large amount of customers”, says Cetin Tanisman, senior vice-president of table game operations at Venetian Macau Ltd, a Sands China subsidiary that runs the Venetian Macao casino. Mr Tanisman says Sands China
hopes to offer players something new. He says Fast Action Baccarat tables can accommodate larger groups of players at one time but he declined to say if Sands China developed the game specifically to increase player numbers while staying inside the government’s cap on the number of live gaming tables. Sands China says it intends to introduce Fast Action Baccarat at its other casinos. The Gaming Inspection and Coordination Bureau told Macau Business it had given the Venetian permission to operate four tables of the game, each with 28 betting stations. Each Fast Action Baccarat table counts as one live gaming table under the government’s cap. Casinos have tried other ways to increase the number of baccarat players they can accommodate while maintaining the limit on tables. Some allow players at gaming terminals to bet electronically on live games. Some use normal baccarat tables with two boards, known as Siamese tables. These tables can seat up to double the number of players accommodated at a typical baccarat table. The official regulations on baccarat in Macau say one baccarat table can have “one or two boards, with seven or more seats”.
Gaming Statistics
Casino gaming 2011 MOP 304.1 billion
Gross gaming revenue (2012)
5,302 16,056 34 casinos
Gaming tables Slot machines Number of casinos
Market share per casino operator* 2012 SJM Holdings Ltd Galaxy Entertainment Group Ltd Sands China Ltd Wynn Macau Ltd Melco Crown Entertainment Ltd MGM China Holdings Ltd
27% 19% 19% 12% 14% 10%
Year-on-year change (%)
MOP 28.2 billion
13.5 10.7 14.3 1 casino
5,497 17,029 35 casinos
Year-on-year change (%)
-2 3 3 -1 -1 --
Year-on-year change (%)
Latest
Latest
percentage points percentage points percentage points percentage point percentage point
19.6 2.2 7.1 1 casino
Month-on-month change (%)
26% 18% 21% 10% 14% 11%
-2 2 --2 -1
percentage point percentage points
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Notes Dec 2012 Sep 2012 Sep 2012 Sep 2012
Notes Dec 2012 Dec 2012 Dec 2012
percentage points
Dec 2012 Dec 2012
percentage point
Dec 2012
Gross revenue from casino games Roulette Blackjack VIP Baccarat Baccarat
MOP783 million MOP2,712 million MOP196,126 million MOP48,669 million
Fantan
MOP211 million
Cussec
MOP4,774 million
Paikao
MOP114 million
Mahjong Slot machines 3-Card Poker Fish-Prawn-Crab
MOP70 million MOP11,425 million MOP190 million MOP51 million
3-Card Baccarat Game
MOP281 million
Craps
MOP151 million
Texas Holdem Poker
MOP277 million
Lucky Wheel Live Multi Game
MOP35 million MOP311 million
Stud Poker
MOP1,309 million
Casino War
MOP225 million
Fortune 3 Card Poker
MOP141 million
Year-on-year change (%)
16.5 18.4 44.6 39.4 15.3 34.3 32.6 105.9 32.6 45.0 -45.2 28.3 -7.4 28.2 9.4 103.3 23.5 43.3 29.4
Latest MOP193 million MOP746 million MOP51,166 million MOP16,805 million MOP56 million MOP1,398 million MOP20 million MOP52 million MOP3,149 billion MOP50 million MOP6 million MOP90 million MOP35 million MOP69 million MOP10 million MOP259 million MOP368 million MOP57 million MOP51 million
Year-on-year change (%)
2.1 13.5 -1.1 32.8 1.8 10.3 -28.6 205.9 11.2 4.2 -45.5 28.6 -2.8 3.0 -191.0 7.0 -1.7 37.8
Notes Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012
Gross revenue from other gaming activities 2011 Greyhound Racing
MOP297 million
Horse Racing
MOP440 million
Chinese Lottery
MOP6 million
Instant Lottery
MOP0.0036 million
Sports Betting - Football Sports Betting - Basketball
MOP362 million MOP86 million
Year-on-year change (%)
-12.6 0.2 -56.5 -4.7 8.9
Latest MOP50 million MOP90 million MOP2 million MOP0.0002 million MOP115 million MOP15 million
Year-on-year change (%)
-39.0 -20.4 --71.4 36.9 -11.8
* Figures are rounded to the nearest unit, therefore they may not add exactly to 100 percent
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Notes Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012
Source: Gaming Inspection and Coordination Bureau and industry sources
2011
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Gaming
NEPTUNE BOSS SAYS JUNKETS NOT INVOLVED IN CRIME
Nicholas Niglio highlights the VIP business is undergoing a consolidation period Nicholas Niglio, the chief executive of junket investor Neptune Group Ltd last month dismissed rumours that junket operators in Macau are involved in illegitimate businesses. “It’s ridiculous. That only happens in Hollywood movies,” Mr Niglio told Hong Kong-based newspaper The Standard. “They [the promoters] will not give up their credibility for such a small return from illegal activities,” he
added, noting that the junket activity in Macau is regulated and governed by the Gaming Inspection and Coordination Bureau. Hong Kong-listed Neptune is one of the biggest junket investors in Macau. Mr Niglio also said that the VIP sector in Macau is now facing a consolidation period. “It is time for industry consolidation as small junket promoters are gradually absorbed by mid-sized ones.”
UNION DEMANDS PAID TRAINING
The Macau Gaming Industry Workers Association is urging gaming operators to provide paid professional training to workers. The vice-director of the association, Leong Sun Iok, said this would allow workers to enhance their skills and improve their chances of promotion. Mr Leong also accused casinos of not allocating shifts properly. He said some casinos devise work schedules for workers based on the flow of visitors and gamblers in the pits. Because of this, rest hours are not evenly distributed.
NEWPAGE GETS CONTRACT RENEWED
AERL TO LIST IN HONG KONG
Nasdaq-listed VIP room gaming operator Asia Entertainment & Resources Ltd (AERL) announced last month that it intends to file a formal listing application with the Hong Kong Stock Exchange in the first half of 2013. The company further announced that it has entered into engagement letters with professional advisors in order to complete the listing. AERL promotes four VIP gaming rooms, all in Macau. They are located in StarWorld, Galaxy Macau, Venetian Macao and City of Dreams, respectively.
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Gaming consultant company Newpage Consultadoria Ltda will continue to provide consultancy services to the government in 2013, it was announced last month. The amount to be paid to Newpage was not made public. The company was formed in June 2010 and is headed by David Green. It was fi rst awarded a contract for gaming consultancy services in August 2010. Mr Green has provided consultancy services to the Macau government in the gaming area since 2000.
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Chips with everything GPI is counting on customised products and RFID technology to increase its business
Photos: António Mil-Homens
BY EMANUEL GRAÇA
aming Partners International Corp wants to boost its revenue in Macau. The Nasdaq-listed supplier of gaming equipment is keen to climb up the value ladder. The Las Vegas company opened an office here two years ago. It has long been the city’s leading supplier of casino chips, supplying most gaming companies in Macau. Now it is considering more customised products and service, says its senior vice-president and chief operating officer for Asia, Kirsten Clark. Before, the company served its Macau clients from France. It now has seven employees here and is taking on three more. “When we made the decision to open up the office, it was with a very specific intent: to grow our support and our product reach into this area,” Ms Clark says. “Other than replacement of chips or top-up orders, we hadn’t been really focused on things like recurring revenue. We are changing that, expanding core products like radio-frequency identification device (RFID) technology into broader functionalities. “These involve ongoing support, maintenance and licensing agreements for using the technology, not just a onetime sale of the chip.” GPI has had several peaks in revenue in Macau in recent years, due to large orders for chips for new casinos. Ms Clark says casino openings are outliers. “They are somewhat misleading. Because of the massive size of the casinos, they do give us a very big jump in revenues,” she says. No new casino is scheduled to open here until 2015, so GPI expects growth to come from a greater presence in the market, says Scott McCarthy, GPI’s vice-president of sales for Asia. Since GPI opened its Macau office, its revenue here has been “more stable, more consistent and definitely growing”, Mr McCarthy says. “We have gone from being order-takers to being true partners.”
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Collaborative relationships GPI does not release financial results for its operations in Macau. Worldwide, the company made revenue of US$16.9 million (MOP135 million) in the third quarter of last year, 22.5 percent more than a year before, and made a net profit of US$1.3 million. JANUARY 2013
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Gaming
The company announced last April that it had received orders for casino tokens together worth nearly US$4.7 million from Sands China Ltd and SJM Holdings Ltd. It also supplies casino currency to the Galaxy Macau casino resort, which opened in 2011. “We have a very collaborative relationship with our core customers in this market,” says Ms Clark. “We have several ongoing projects here, which are not public yet, where we have been partnering with key customers to develop functionalities in which they see value.” Ms Clark highlights GPI’s European-style Bourgogne et Grasset J2 jetons, developed in partnership with SJM Holdings. They combine the aesthetic and security features of conventional jetons with the ease of handling of U.S.style chips, making them easier to stack and more convenient for table games that require a lot of chips. They were introduced in 2011. The company is also eager to put RFID technology to new uses. It began by buying International Game Technology Inc’s chip inventory system in 2010.
Easy assumption GPI is looking beyond using RFID technology simply to detect counterfeit chips. “There are so many manual processes in place to account for the casino money that if you can tie that into RFID and do it automatically you are saving time, increasing rounds per hour and eliminating manual errors,” Ms Clark says. GPI has also developed a portable RFID chip reader at Galaxy Entertainment Group Ltd’s request. New casino token sets for junket operators are another important source of revenue for GPI here. The highest-value casino token in Macau made by GPI is a HK$10 million (US$1.29 million) plaque. Plaques are rectangular casino tokens, bigger than chips and representing higher amounts than chips. GPI is known here mainly for its casino tokens, but it also supplies other products. “We are a more diverse company, although our focus in Macau up until now has always been just the casino money,” says Ms Clark. GPI supplies playing cards, dice, table game sets, casino furniture and other gaming accessories. Ms Clark says part of the purpose of the company’s JANUARY 2013
Last year in Macau, GPI introduced chips with a four-colour ultraviolet security feature. This allows casinos to hide full-colour images in chips. Croupiers can use standard ultraviolet detectors to detect these chips and check that they are genuine
office here is to promote its full range of products. “There is interest but current contracts are in place for things like table game layouts. Furniture is already in place and it is very easy for casinos to get it built right across the border. It is going to take a little while to build the interest and build the business,” she says. “If we are able to penetrate the market with layouts or cards, it will be great growth for us. But I still think our core chips, and RFID more so, is where we will see more ongoing, significant growth.” If business picks up, GPI may consider using Macau as a manufacturing base. “We have already somewhat looked at that,” Ms Clark says. “Assuming that we continue to grow
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Scott McCarthy and Kirsten Clark
the business, we are already expanding our services capabilities here, we expanded our sales and we continue to do so, having a manufacturing capability here on the ground is an easy assumption to make in the next few years.”
Brand manifestation The company may manufacture casino furniture and table game sets here but not casino tokens. “Due to the different levels of security that are involved in chip manufacturing – we are producing money – it is a little trickier to try to establish something like that,” Ms Clark says. The casino tokens GPI sells here are made in its facilities in France and Mexico. GPI’s story began in 1923, when its precursor, Bourgogne et Grasset, was established in France to make chips that were counterfeit-resistant for casinos in Monaco. GPI began supplying casino tokens to casinos in Macau four decades ago. “These days, the operators are much more brand-sensitive, but they also obviously want to protect their currency,” says Mr McCarthy. He says GPI comes up with new security features at least every six months.
PART OF THE THRILL G
aming is increasingly going digital but Gaming Partners International Corp does not expect tangible casino tokens to go out of fashion anytime soon. The company’s senior vice-president and chief operating officer for Asia, Kirsten Clark, argues that chips are more than just a commodity. “Although our products aren’t a game, they are used in the gaming experience,” she says. “I believe there is certainly a place for electronic gaming. But I believe personally [that] your core, true table game player wants to have physical cards, chips. It is a tangible part of the experience.”
Last year in Macau, the company introduced chips with a four-colour ultraviolet security feature. This allows casinos to hide full-colour photographs or other images in chips. Croupiers can use standard ultraviolet detectors to detect these chips and check that they are genuine. “With shifting to more customised and more intricate designs, not only do you significantly raise the bar for potential counterfeiters, but casinos also look at this as a tangible manifestation of their brand,” says Mr McCarthy. Ms Clark says about 90 percent of the products GPI supplies are made to the customer’s specifications. “That is something very unique about us. It requires a very high level of customer service and customer support.”
The company has a considerable presence elsewhere in Asia. Ms Clark says it has supplied chips to the stateowned Philippine Amusement and Gaming Corp for several years. GPI is now working closely with the operators of new casino resorts due to open in Manila. GPI has footholds in the markets in Singapore, Cambodia and South Korea. It will supply chips to the MGM Grand Ho Tram Beach casino resort, which is due to open soon in Vietnam. It has a long-standing relationship with Genting Malaysia Bhd. “We have been doing quite well in Asia for a very long time,” says Ms Clark. “And now, as we are changing our focus, and having more direct support of the market, we see that increasing.” JANUARY 2013
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Gaming
ANTI-GRAFT MEASURES NO THREAT TO CASINOS
“Measures against corruption and casinos are not the same matter,” says Beijing’s man in Macau Bai Zhijian, director of the central government’s liaison office in Macau, said last month that anti-corruption measures in the mainland should not be regarded as measures to control the casino industry in Macau. “Measures against corruption and casinos are not the same matter,” Mr Bai Zhijian said. “Every place across the globe is talking about anticorruption and there are casinos everywhere. These are two different matters.”
Mr Bai added he is not expecting new restrictions to be implemented for people in the mainland wanting to visit Macau. Meanwhile, Mr Bai, 64, hinted he could be leaving his post soon. He has headed the central government’s liaison office in Macau since 2002. Last month, the State Council appointed Li Gang as deputy director of the liaison office here. Prior to that, he was deputy head of the central government’s liaison office in Hong Kong.
SANDS CHINA STARTS ACCEPTING ALIPAY
The Venetian Macao and Sands Macao now accept payments via Alipay, China’s most widely used third-party online payment solution, according to a press release from Sands China Ltd. The service provider had more than 700 million registered accounts as of June. Alipay is an affiliate of Alibaba Group. “Offering Alipay as an additional payment option when booking our hotels online represents a fabulous convenience for our guests who book online from the mainland,” said David Sisk, chief operating officer of Sands China.
GREEK MYTHOLOGY REVENUES PLUNGE
WYNN CHANGES DIVIDEND’S TIMING
Wynn Macau Ltd has announced a change of timing for the board to consider recommending or declaring a dividend. From now on, the company’s board expects to consider recommending a final dividend in or around March of the succeeding fiscal year, and declaring an interim dividend in or around August of the then-current fiscal year. The company’s board previously declared special dividends of HK$0.76 (US$9.5 cents) per share in November 2010 and HK$1.20 per share in November 2011.
JANUARY 2013
Greek Mythology’s gross gaming revenues have plunged by over 80 percent year-on-year since July. Figures cited by Portuguese-language newspaper Jornal Tribuna de Macau indicated that revenue at the casino, operated by Greek Mythology (Macau) Entertainment Group Corp Ltd, reached MOP65.9 million (US$8.2 million) in November, down by 84.75 percent month-on-month. Last summer, the Greek Mythology, one of SJM Holdings Ltd’s third-party promoted casinos, was involved in a shareholder battle over the control of the property.
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One step closer Madrid passes casino resort law for Las Vegas Sands’ EuroVegas BY DANIEL MACADAM*
adrid lawmakers have passed new regulations that will allow Las Vegas Sands Corp to pursue its 15-billion euro (MOP156 billion) EuroVegas resort in the Spanish capital, despite accusations from opposition parties that it is a bill full of “rage and shame”. The centre-right government’s majority was enough to push the bill through Madrid’s regional parliament to authorise mega-gambling resorts and lower the region’s casino tax to an attractive 10 percent. That was not before opposition parties railed against a law they said was “tailor-made” for Las Vegas Sands chief to go ahead and build his planned Las Vegas-style casino complex, dubbed EuroVegas. Las Vegas Sands is the parent company of Macau-based gaming operator Sands China Ltd. In particular, opposition parties blasted Madrid’s government for wrapping the regulation of so-called integrated development centres inside a broader budget law that also dealt with healthcare reforms and must-pass taxes. Antonio Miguel Carmona, Socialist Party economic spokesman in the Madrid Congress, said the omnibus bill acted as a “safe passage for corruption”, and accused the region’s premier Ignacio González of putting EuroVegas regulations “in a coffin in search of a graveyard”. Another lawmaker, Libertad Martínez from the United Left, called it the “Voldemort law” after the villain in Harry Potter who shall not be named. “It is the law of rage and shame,” he said, adding it will see thousands of people moved out of their homes.
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Lower taxes than Macau The bill, which El Pais reported was passed on December 28 without any of the amendments proposed by opposition parties, establishes criteria for the authorisation and development of integrated development centres, and sets casino taxes at 10 percent of gross income. In November, less than four weeks before the government first published
Sheldon Adelson
the integrated development centre regulations, Las Vegas Sands boss Mr Adelson said he was confident Madrid would offer a casino tax rate lower than Singapore’s 15 percent. “We get below that, which I’m confident we will, significantly, ... then we don’t need anywhere near as much money by any measure,” the 79 year-old told analysts, who asked if the Spanish resort could be as lucrative as Las Vegas Sands’ Asian properties. EuroVegas could make the same as Las Vegas Sands does in Singapore or Macau and have only 70 percent of the amount of business, he said. “You can’t compare apples to apples. They are two different calculations.” The concessions that Madrid lawmakers have handed to integrated development centres relax many of the gambling laws in place for other Spanish gambling operators, including 24-hour opening and the ability to offer players credit. Cristina Romero, a partner at Madrid law firm Loyra Abogados, said that extending credit to players has long been prohibited in Spain and still is for existing online and land-based gambling firms outside Madrid. Ms Romero said the Madrid resort is also in line for un-
precedented flexibility about which casino games it can offer and its real estate licences. Elsewhere, the Madrid law creates a new gaming control commission for all casinos and other gambling businesses in the region. Any integrated development centre project would be subject to public tender. Las Vegas Sands spokesman Ron Reese said: “The company is actively reviewing the recently passed legislation and looks forward to participating in the next step of the process as laid out by the Madrid government.” Las Vegas Sands representatives said in October that they planned to break ground in 2013 once the Madrid government pass integrated resort legislation. Still, U.S. analysts have questioned whether the multi-billion dollar project will survive if the Spanish economy and the euro zone deteriorate further. Las Vegas Sands president Michael Leven said on a November conference call with analysts: “We feel good about looking at the investment at the present time and looking at the future. But if something dramatic happens in the economic environment that causes real concern we would very much hesitate to go * GAMBLINGCOMPLIANCE forward.” JANUARY 2013
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Gaming
Okada gets Philippines partner John Gokongwei joins Japanese businessman for a billion-dollar casino resort project in Manila apanese gambling tycoon Kazuo Okada has teamed up with the family of Philippine billionaire John Gokongwei for a billion-dollar casino project in Manila, both sides said last month. Robinsons Land Corp, a Gokongwei-controlled developer, said it would take a minority stake in a Mr Okada firm that owns a gaming franchise in the Philippine government’s giant Entertainment City complex along Manila Bay. Under the deal with Mr Okada’s Universal Entertainment Group, Robinsons Land would also purchase a majority stake in a company that owns the land where the casino, called Manila Bay Resorts, would be built. “Robinsons Land Corporation shall be responsible for developing the commercial facilities, a budget hotel and residential facilities in the project,” Universal Entertainment said in a statement on its website. Neither side disclosed the total value of the deal.
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Strong partners The Japanese partner said the agreement would be concluded this month, while Robinsons Land said in a separate statement that a final agreement in the near JANUARY 2013
future was “subject to comprehensive due diligence”. Universal Entertainment holds one of four licences handed out by the Philippine gaming regulator Philippine Amusement and Gaming Corp (Pagcor) to build a casino worth at least US$1 billion (MOP8 billion) each at Entertainment City. Of the other franchises, one involves Macau-based gaming operator Melco Crown Entertainment Ltd and a firm held by the family of shopping mall magnate Henry Sy, the Philippines’ richest man. The first of the franchise holders, a firm controlled by Philippine shipping
“Robinsons Land Corp shall be responsible for developing the commercial facilities, a budget hotel and residential facilities in the project,” Universal Entertainment said
billionaire Enrique Razon, is scheduled to open its casino, called Solaire, in March. Forbes magazine lists the Gokongwei family, which is also into aviation, banking, and food manufacturing, as the fourth-richest in the Philippines with a net worth of US$3.2 billion. Mr Razon, with US$3.6 billion, is the country’s third-richest, it added. The Mr Okada project was roiled in controversy last year when the Japanese businessman was sued in the United States by American partner Steve Wynn in a case involving their casino businesses in Las Vegas and Macau, controlled by Wynn Resorts Ltd. Philippine President Benigno Aquino in February ordered an enquiry into Wynn Resorts’ allegations that Mr Okada’s representatives gave illegal gifts to top Pagcor officials amid the Japanese man’s pursuit of a Manila casino licence. Pagcor chief Cristino Naguiat has admitted getting free accommodations for himself and his family at Wynn Macau casino hotel, but insisted it was an industry-wide practice that violated no law. The Philippine government has yet to announce the result of the inves* AFP NEWS AGENCY tigation.
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Biggest and best This year’s ICE Totally Gaming trade show aims to be the biggest ever ondon will borrow Macau’s title as the world’s gaming capital next month when it welcomes ICE Totally Gaming 2013. The trade show, between February 5 and 7, will be the biggest and most comprehensive yet, covering sports betting, bingo, casinos, lotteries, mobile gaming, online gaming and social gaming, says the organiser, Clarion Events. The event will take place at the ExCeL London exhibition and convention centre, an Olympic Games venue last year. The exhibition will cover more than 31,000 square metres, making it bigger than G2E 2012, which took place in Las Vegas in October. More than 400 exhibitors are expected. Clarion figures show that just 1.2 percent of exhibition space remained unsold at the beginning of last month. “Our marketing theme for 2013 has been ‘think big’, and I’m delighted to say that the creative we have been running throughout the international media channels has lived up to the reality of what visitors will see at ExCeL London when the doors open,” says Kate Chambers, Clarion’s director for gaming events, who is responsible for moving the event to ExCeL London. “ICE is an event which
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provides a shop window on absolutely everything that’s taking place in gaming and, most importantly, gaming from every geographical perspective.” Attendance is expected to grow, although the organiser has given no estimates. “There’s absolutely no way that any buyer of gaming equipment would be able to see so many leading companies without spending at least nine months of the year on a plane,” Ms Chambers says. She says ICE 2013 is not meant just to be the biggest. “There’s simply no value in attending events just because of their size. Events have to deliver value,” Ms Chambers says. “My team knows that people have a choice. They know that each year we have to earn their support and earn their attendance.” ICE includes eight conferences, covering all aspects of the industry, including online gaming and mobile gaming. The programme this year will focus particularly on social gaming, with more than 20 social game developers and industry leaders involved.
Embracing innovation A conference on monetising social gaming is meant to analyse in depth the convergence of casual gaming and social
gambling. It will discuss issues such as how to convert players from social to real-money gaming, and look into the approaches being taken to regulate social gaming in various jurisdictions. Social gaming will also be debated in sessions of some of the other seven conferences. A conference on integrating conventional and online gaming will include a panel discussion on using social networks for promotion, increasing brand awareness and finding players. “The evolving convergence of casual gaming and social gambling, and its ultimate effect on the wider world of gambling, is currently leaving us with more questions than answers,” says Ewa Bakun, Clarion’s head of content for gaming events. “The i-gaming industry has more to gain by embracing these changes, and the aim of the ICE conferences programme is to help the industry avoid the mistakes made by other sectors, such as music and publishing, which resisted the drive of innovation until it was almost too late.” Visitors to ICE 2013 will have access to the first ICE Sports Betting Village. This is part of the exhibition and comprises almost 30 sports-book suppliers and operators.
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mbreport SPA BUSINESS 70
SPA WARS
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THE PROLIFERATION OF FIVE-STAR HOTELS MEANS MACAU HAS BECOME A LEADER IN LUXURY SPAS, PERHAPS THE MOST SUCCESSFUL EXAMPLE YET OF TOURISM INDUSTRY DIVERSIFICATION BY MUHAMMAD COHEN
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o some people, Macau is the world’s leading gambling centre. To others, it is a crucible of EastWest fusion that lives on in its historic buildings and Macanese cuisine. And, in recent years, for those in the know, it has become the place to go for luxury spas. Tropical Phuket or Bali may seem more likely places but Macau has put itself at the cutting edge of the global spa
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business, industry observers say. The city’s advance is due largely to its unprecedented concentration of new fivestar spa facilities. “A premium spa facility has become a must-have for high-end luxury hotels,” says Ravi Chandran, senior vice-president and managing director of spa operations for the Banyan Tree Spa chain, which runs the spa at the Galaxy Macau
casino resort’s Banyan Tree Hotel. “Visiting spas has become a popular activity for many guests in their quest for a healthy and balanced lifestyle,” he says. A Melco Crown Entertainment Ltd spokesperson says: “While City of Dreams and Altira Macau are gaming-centric, non-gaming offerings, including our spa segment, create a compelling journey of world-class hospitality for our guests.”
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mbreport SPA BUSINESS 72
Others are equally fulsome. “If you were to add the total number of luxury spas in Macau, they are really in a league of their own,” says a former manager of award-winning spas here, who asked not to be identified. The executive, now managing a property in Southeast Asia, says that the city helps define the stateof-the-art in spa facilities and is also at the forefront of industry-wide trends such as holistic approaches incorporating wellness and customisation, owing to its experience in catering to casino high-rollers. Spa customers are spoilt for choice, the city having an array of facilities, each of which can cost up to US$10 million (MOP80 million) to set up. The Westin Resort Macau, inaugurated in 1993, and casino hotel Ponte 16, opened in 2008, recently undertook makeovers of their spas to keep pace with the fastmoving market.
“Macau is moving forward as a destination where people come for reasons other than gaming,” says the manager of the Six Senses Spa in the MGM Macau casino hotel, Carolina Moquist
Maturing market
Profit centres Spas are key places for gamblers to unwind. “When they’re at the gaming table, they have a lot of tension, they’re so focused,” says Johnson Chan, general manager of the Grand Lisboa casino hotel. “They’ll have a massage to help them relax so they can go to sleep.” He regards the spa as a hotel resource, not a separate attraction. “We don’t intend to compete with other spas. Outside customers are welcome but our facility is for our clients. It’s not about making a profit.” However, several casino resort and casino hotel operators say most spas deliver welcome non-gaming profits, even though the market is highly competitive. Spas may be the most successful examJANUARY 2013
ple of casino properties using a nongaming attraction to expand Macau’s appeal as a tourism and leisure destination, in line with official policy. They make their profits from booming demand for treatments, prices of which begin at MOP400 and run into thousands of patacas. The treatments are given by spa therapists who typically earn less than MOP10,000 per month. At weekends, treatment rooms may accommodate eight separate sets of customers per day – more than many restaurant tables. “The spa is a key profit-making centre to the hotel’s overall success,” says the director of the Grand Lapa hotel’s resort and spa, Brett Burton. “It is very much a business that assists in driving average occupancy rate, length of stay and guest satisfaction.”
“The key is how the spa fits into the integrated resort as a whole,” says the general manager of the Conrad Macao hotel, Troy Hickox
“Macau is moving forward as a destination where people come for reasons other than gaming,” says the manager of the Six Senses Spa in the MGM Macau casino hotel, Carolina Moquist. “Spas will be a key leisure element that guests will seek out, along with dining,” she adds. Casino resorts and hotels use spas to distinguish themselves from their rivals. Innovations in decor and treatments make spas here stand out. Several luxury spas offer exclusive products, from massage oils to moisturisers, which they use in treatments and sell for use at home. “The key is how the spa fits into the integrated resort as a whole,” says the general manager of the Conrad Macao hotel, Troy Hickox. “Now it’s becoming even more important as a way to differentiate your offerings.” Special offers from the spa are
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T THE DIFFERENCE IS MACAU THE LINKS BETWEEN SPAS AND CASINOS CREATE A SPA MARKET THAT STANDS APART FROM OTHER DESTINATIONS
he Macau spa market does not fit a typical pattern because the city is also a gaming centre. “Customisation is something that everyone is talking about in the spa industry these days, but it has been happening in Macau for years because it’s part of the gaming world,” a former manager of award-winning Macau spas tells Macau Business. In other words, spas here must meet the demands of high-rollers, and have been doing so already for some years. There are several other important differences between the spa market here and more typical markets. The opening hours are the most obvious difference. Here, gamblers often want treatments at all hours of the night after their sessions in the casino. The Conrad Macao hotel is considering pushing back the closing time of its spa from 11pm to 3am. The MGM Macau casino hotel’s Six Senses spa closes at 4am. The Malo Clinic at the Venetian Macao casino resort is open 22 hours a day, closing only from 8am to 10am. Opening hours hardly matter for VIP gamblers. Casino operators usually have rooms and therapists reserved for them. Some VIP gaming areas have their own massage rooms, and some spas have sections with private facilities reserved for VIPs. Treatments can be given anywhere. “A slot machine high-roller was lying down while playing and requested a massage,” the former Macau spa manager recalls. “We delivered it right there at the machine.”
Make it quick Another peculiarity of the Macau market is the predominance of male customers. Typically, 60 percent of a spa’s customers are women. But most customers are men here. The proportion of men depresses a spa’s bottom line. “A male customer will tend to choose a basic massage and stretch its duration,” says the managing director of consultancy Spa Innovations, Dianna Chia. “A female customer tends to choose a wider variety of services: facials, body scrubs and wraps, water therapies. Hence, revenues from female customers are definitely higher than from male customers.” At the Grand Lisboa, 70 percent of spa customers are men. “Our customers come in tired and they want something fast,” says the casino hotel’s general manager, Johnson Chan. “Macau has more demand for shorter treatments,” notes the manager of the Six Senses Spa in the MGM Macau casino hotel, Carolina Moquist, who previously worked in Middle East and Caribbean resorts. However, spa managers in properties with less emphasis on gaming say the bookings they get for longer treatments are comparable to the bookings they would get in more conventional markets. “Overall, we see the demand for spa services in Macau becoming more sophisticated as the influx of high-end travellers brings new expectations,” a spokesperson for Wynn Macau Ltd says. JANUARY 2013
mbreport SPA BUSINESS 74 among privileges for Macau residents and frequent visitors who have what the Conrad Macao calls “lifestyle membership”. The hotel’s Bodhi Spa tries to stand out by offering a combination of traditional Hindu medical treatments from India, Aboriginal treatments from Australia and Chinese techniques. “If we’d brought in this concept five years ago, it wouldn’t have worked,” says the Conrad Macao’s director of wellness and leisure, Johan Potgieter. But it does work now. “Macau is already a spa destination for Hong Kong and mainland travellers,” Mr Potgieter says. Mr Hickox agrees. “The customers have definitely matured and are more experienced with spas,” he says. “They come in looking for a new experience.”
Holistic approaches
BANYAN TREE TAKES ROOT B
anyan Tree is perhaps Asia’s bestknown spa brand. It set the standard for the modern tropical spa when it opened its first resort in Phuket in 1994. The Banyan Tree group has since remained a trendsetter, establishing central training facilities for its therapists to ensure consistency. The brand came to Macau in May 2011, when the group opened a five-star hotel and spa in the Galaxy Macau casino resort. The 3,400-square metre spa has 21 treatment rooms. Observers of the spa industry are divided on whether Banyan Tree Spa has stirred up the market here. “The impact is vast,” says the managing director of consultancy Spa Innovations, Dianna Chia. “First, it gives customers confidence, knowing that a renowned brand like Banyan Tree puts its faith in Macau. This ultimately boosts the image of Macau as a spa destination, not just a gaming destination.” The director of the Grand Lapa’s resort and spa, Brett Burton, says Banyan Tree Spa “has been good in further de-
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veloping” the spa market here. “There is enough demand for everyone,” he says. “It’s a positive to get other high-end brands in here,” says the manager of the Six Senses Spa in the MGM Macau casino hotel, Carolina Moquist. However, she adds, “nothing is different with our operation since Banyan Tree arrived. We’re just constantly moving forward”. A former manager of several spas in casino properties here says there has been “no impact” from Banyan Tree. The former manager, who requested anonymity, says the Banyan Tree has its own style but its therapists could face difficulties in understanding the expectations of a gaming property. “Many new resorts are opening and introducing new spa brands,” a spokesperson for Wynn Macau Ltd says. “This is healthy competition for all spas in Macau and is welcome as it creates awareness of the spa industry in this region and will help to make Macau more of a diversified destination for both business and leisure travellers.”
The Grand Lapa, formerly the Mandarin Oriental Macau and still managed by the Mandarin Oriental chain, offers more familiar spa experiences. The hotel has a small casino but it is not gaming-oriented. Since it opened in 1984, the hotel has carved out a niche in the market, offering Macau residents membership that entitles them to use its resort wing facilities, including the gym and pool, adjacent to the spa. The spa menu features home-grown treatments such as its signature Macanese Sangria Ritual. The Six Senses Spa at MGM Macau belongs to one of the world’s top specialist spa chains, and the Banyan Tree Spa at Galaxy Macau belongs to another. “The specialist takes on the stress of hiring, training and maintaining service standards ... freeing management to focus on the main revenue-generating outlets,” says the managing director of consultancy Spa Innovations, Dianna Chia. Ms Moquist of the Six Senses Spa says her company “takes a holistic approach that includes wellness.” She says the treatments that a Six Senses Spa offers depend on where it is. “The spa menu is customised to the area. In China, there are more Chinese therapies.” Galaxy Entertainment Group Ltd’s vice-president for public relations, Buddy Lam Chi Seng, says the Banyan Tree Spa fits Galaxy Macau’s “World Class, Asia Heart” theme. “In Galaxy Macau phase one, there were no Western brands. We were building an Asian destination, creating a mixture of Asian brands and products,” Mr Lam says.
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Several casino resort and casino hotel operators say most spas deliver welcome non-gaming profits, even though the market is highly competitive “Banyan Tree is well-known and makes the whole destination more appealing.” The Venetian Macao casino resort opened in 2007 with its own V Spa. “This facility was only ever intended to be an interim solution, as we looked for a world-class operator that could provide a more comprehensive and diverse offering,” says Venetian Macao’s senior vicepresident Mark McWhinnie. “We chose Malo Clinic, considering their comprehensive spa and medical facilities, which are able to offer a more holistic approach through a complete range of spa, health and beauty treatments.”
Maintaining standards The Grand Lisboa spa struck up a partnership with French beauty company Clarins for its products, not for its brand power or association with Europe, says the hotel casino’s general manager Mr Chan. “Clarins in Asia is not the most well-known,” he says. “But we know the quality of the products and how good they are.” The Grand Lisboa and Clarins share the running of the spa. The casino hotel oversees day-to-day operations and Clarins trainers come monthly to instruct the staff. The therapists are jointly hired by the companies. “We work handin-hand to ensure the quality is there in every phase of the spa,” Mr Chan says. Other hotels and resorts prefer to go solo. “We want to create a brand image and manage that,” Conrad Macao’s Mr Potgieter says. “That’s harder to manage with an outsider. There’s also a profit that the hotel can capture.”
“The goal is a total premium world class experience,” the Melco Crown spokesperson says. “Our spa facilities, together with other different components, all share the same premium products and service standards and together they create something larger than the sum of their parts.” The Wynn Macau casino hotel also manages its spas in-house. “The reason we chose to manage our own spa is to ensure that we can maintain our standards,”
says a Wynn Macau Ltd spokesperson. The company has a second spa in its Encore hotel. The two spas will soon have an advanced music system that matches sound to the therapist’s movements. Macau’s luxury spa business is in the midst of an incredible journey. It seems that the only characters in this tale not moving at the speed of a credit card transaction are the customers lying on the therapist’s tables, soaking up the treatments.
MEANWHILE, DOWNMARKET... A
long with its luxury spas, Macau has about 50 businesses at the lower end of the market, commonly called saunas or massage parlours. Sex is often available. Prostitution is not illegal in Macau but several related activities are. The law says prostitution is allowed as long as an individual prostitute engages in it in a private place. Organised prostitution is illegal. The principal market for saunas and massage parlours is mainland tourists, according to party organiser EvenTour Macau’s Stephen Anderson.
Sex workers are also predominantly from the mainland, with a sprinkling from other East Asian countries. Some human rights groups and foreign governments say the saunas are linked to human trafficking networks. Saunas and luxury spas seem to have carved out their own separate slices of the market. “Sexual favour requests are certainly something you cannot avoid in this industry. However it’s not all that frequent in Macau,” a former manager of awardwinning spas here says. “Tourists seem to know where to go for these extra services.”
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Hospitality
Room to spare Travellers on a shoestring are on the hunt for private accommodation – some of which is let illegally
BY ALEXANDRA LAGES
elvin Limonte lives in South Korea and is planning a holiday in Macau this month. It will be his first visit to the city. Unlike most tourists, 23-year-old Mr Limonte is looking for someone to put him up for nothing, so he does not have to pay for a hotel room for the five days of his stay. He is looking for a host at Couchsurfing.org, a website that connects more than five million travellers who are prepared to offer free accommodation in 97,000 cities around the world. There are some 1,000 registered couchsurfers here. As the city becomes better-known internationally, more and more visiting couchsurfers are contacting them in search of a sofa or spare bed to sleep on. Video maker Fernando Eloy, 46, puts up couchsurfers. He joined the website in August. Mr Eloy says that on average he gets two to three requests a week from guests from all over the world that want a bed. University student Andrea Medina, 20, was familiar with couchsurfing long before she became a host here. Since August, Ms Medina has put up two couchsurfers. But she says she has re-
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ceived more requests, from as far away as Europe and the United States but also from as near at hand as the Philippines and the mainland. Couchsurfing.org was founded in 2003. Members are not obliged to be hosts but 46 percent are. They can reject requests. Observers of the tourism market say the number of people using Couchsurfing. org and similar websites to find accommodation here is small. The director of the Tourism Research Centre at the Institute for Tourism Studies, Leonardo Dioko, says they do little harm to the hotel business. Still, for backpackers and other travellers on tight budgets, arranging accommodation in this way is more attractive than the alternative. A room in a three-star hotel here can cost more than MOP1,000 (US$125) a night.
Poor choice It is not that easy to find a couchsurfing host to put you up here. Johan Hysing, 35, and Chen Xianglian, 25, visited at Christmas. Each looked for a place to stay through Couchsurfing.org but had no luck because most hosts were away for the holiday season.
Mr Hysing instead took a hotel room for one night. Ms Chen opted for a day-trip from Hong Kong before returning home to Xiamen. Among the Macau hosts, Ms Medina says: “What most couchsurfers say is that even though the living cost in Macau is not too expensive – food, transportation and others – finding a nice place to stay with a low or rather tight budget is really hard.” Mr Eloy says most couchsurfers he has met here do not scrimp just for the sake of it. He says they want to see the city through the eyes of people that live here. Even so, time and again people that contact him complain about the high room rates. “Unlike other tourist cities, there is a very limited choice of budget hotels. Also, the rates of budget hotels are unreasonable if you consider their quality,” Ms Chen says. Mr Hysing is a Swedish couchsurfer living in Shanghai. Having taken a hotel room here for one night, he said: “I didn’t think the hotels were that expensive. Perhaps most were a bit over my usual budget, but for a shorter visit, [they were] quite okay.”
77 No money changes hands when visitors find a place to stay through Couchsurfing.org. Other websites allow visitors to arrange accommodation in a similar way but they must pay. The hosts usually have spare rooms to let for short stays. University of Macau law scholar and Legislative Assembly member Gabriel Tong Io Cheng says they are breaking the law. “The activity of providing accommodation to the public without a licence for exploitation of hotel establishments is illegal,” he says, pointing to legislation enacted in 2010 to stamp out unlicensed inns, which had mushroomed. Macau Business approached the Macau Government Tourist Office for comment but had not received a reply by the time we went to press. Airbnb.com is one of the most popular websites that visitors use to find private lodgings. Last month it had at least listings for four rooms in Macau, with rates from US$23 a night to US$92 a night, and two entire flats. One of the rooms most in demand was in Taipa. Someone that has stayed there, identified only as Dominik from Beijing, said in a review on the website: “Great accommodation and great host.” He applauded the apartment for being clean, spacious and conveniently situated. “I had a great experience in Macau and will come back for sure,” he said. Hosts on Airbnb.com undertake to provide basic accommodation, including a bed, clean sheets and towels. The terms allow guests full use of the premises. Airbnb.com co-founder and chief executive Brian Chesky has played down recent cases of hosts getting into trouble by letting accommodation. “We’re in 30,000 cities, hundreds of thousands of neighbourhoods. They all have different rules. At the end of the day, we want to empower people to be able to rent out their space,” Mr Chesky told U.S. broadcaster CBS last month. “We ask them to learn about their local rules and regulations, and we want to cooperate with cities.” Macau Business contacted a host offering lodgings through Airbnb.com but the host refused to be interviewed, and the room is no longer listed on the website.
The website said the flat, on Coloane, could accommodate up to six people, the price per night starting at MOP1,290 for two people. Mr Dioko of the Institute for Tourism Studies says the lack of low-cost accommodation here causes tourists to look for cheaper options. He says it is not just a Macau problem. “These vacation rentals have grown tremendously over the years in all major cities,” he says. Mr Dioko says too many high-end hotels have been built here in the past few years, and that less well-off visitors have been forgotten. This has led to a boom in unlicensed accommodation. The government admits that despite the new law, it has difficulty in stamping out unlicensed accommodation. “The key question is: why would
people develop these activities illegally, when it is perfectly reasonable economically for legitimate entrepreneurs to address this unmet market need?” Mr Dioko says. He argues that is due to lack of official support and too much red tape. The government acknowledged last year that Macau lacks low-cost accommodation for visitors. It now has plans to double the amount on offer. The city has 13 two-star hotels and 33 guesthouses, together containing almost 1,500 rooms. By November, the government had nearly 20 proposals on hand to build low-cost hotels. The Hoteliers and Innkeepers Association launched a website in November that visitors can use to book rooms in some of the city’s two-star hotels and guesthouses.
Key question Homeaway.com, another website that visitors can use to find private lodgings, had one flat in Macau listed last month. JANUARY 2013
Hospitality
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Brave new world
French and Portuguese wines are favourites here but there is a growing interest in New World wines BY ALEXANDRA LAGES
IMPORTS OF NEW WORLD BOTTLED WINE BY VOLUME
Litres of bottled red or white wine
800,000 700,000 600,000 500,000 400,000 Chile Australia United States New Zealand South Africa Argentina
300,000 200,000 100,000 0
2006
2007
2008
2009
2010
2011
2012 (Jan-Oct)
SOURCE: STATISTICS AND CENSUS SERVICE
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79 he rule of thumb when dining out is that you can never go wrong with a bottle of fancy French wine. But that is changing as wine lovers and tourists become keener on trying wines produced outside the traditional winemaking areas of Europe. Although wines from France and Portugal continue to rule the market by volume sold, the popularity of the wines produced in the New World – in countries such as Argentina, Australia, Chile, New Zealand, South Africa and the United States – is growing fast. New World producers are aware of this. They have been increasing the number of promotional events they hold here. Last October, film director Francis Ford Coppola, who owns the Inglenook winery in California’s Napa Valley, held a private dinner at the Venetian Macao to introduce his wines to select figures in the hotel and food-and-drink industries. A month later, the Institute for Tourism Studies held an event to promote wines from South Africa. About the same time, Nigel Greening, owner of New Zealand’s Felton Road vineyard, held a seminar at the Venetian on the basics of biodynamic wines. It was Mr Greening’s second visit to Macau. He first came here in 2009. “Macau was obviously a place where people were already enjoying fine wine from Europe,” he says of his first visit here. “As the market and the curiosity for wine grew, almost by definition, the top wineries from the New World would gradually start finding a place here.” Three years later, Mr Greening believes the market has evolved a lot. “Right now, there is definitely an opportunity for us to become more deeply involved and spend more time here.”
mainland, so it’s pretty simple for us to come in to Macau,” Mr Greening says. Wine traders here say New World wine sales have been increasing steadily, by around 10 percent per year. Sandy Leong, general manager of Great Time Ltd, one of the largest distributors of drinks in Macau, says New World wines are selling well as the casino industry develops. “Previously, Portuguese wines dominated over 60 percent of the market. Over the last 13 years, that has been changing, especially because casino hotels are including more New World wines in their wine lists to cater for international tourists,” she says. “French wines are mostly preferred by very wealthy visitors and casino gamblers. It’s a luxury wine. For New World wines, I believe there is a lot of potential because they can be drunk every day.” That is because they are cheaper. The average import price of a bottle of French red wine stands at MOP398. A bottle of Australian red wine costs, on average, MOP107 and a bottle of Chilean red wine MOP43. In the first 10 months of last year, Macau imported more than 4.2 million litres of bottled red or white wine, together worth MOP1.25 billion (US$156 million), official data shows. Of the volume imported, nearly 1.96 million litres came from France and about one-fifth from Portugal. Of the wines imported from New World countries, Chilean wines had 12.0 percent of the market by volume, Australian wines had 10.4 percent and U.S. wines 1.6 percent. But Australian wines had 4.9 percent of the market by value, second only to French wines, which had 83.1 percent of the market by value.
Drunk every day
Low taxation helps wine imports. Like Hong Kong, Macau scrapped its duty of 15 percent on wine in 2008. Of the volume of wine Macau imports, 10 to 15 percent is re-exported. Seapower Trading Co Ltd is a big wine trader in Macau. Its chief operating officer, Patrick Ting, says retailers and casino hotels are the main buyers of New World wine. “We are happy with customers looking for more selections of wines from all over the world,” says Mr Ting. A big importer and distributor of wine in Greater China is Summergate Ltd. Timothy Feather is a director of the
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IMPORTS OF NEW WORLD BOTTLED WINE BY VALUE JANUARY TO OCTOBER 2012
Felton Road is now approaching sommeliers here to promote its products. “We are increasingly going around the
70 60 MOP million
50 40 30 20 10 0
Chile
Australia United States
New Zealand
South Africa
Argentina
SOURCE: STATISTICS AND CENSUS SERVICE
The average import price of a bottle of French red wine stands at MOP398. A bottle of Australian red wine costs, on average, MOP107
Wider worldview
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Hospitality
company in its Macau office. Mr Feather forecasts that New World wines will take more and more of the market here. David Wong Yuk Shan, a specialist in the food and drink industry at the Institute for Tourism Studies, also expects the market for New World wines to grow. “Wine lovers and drinkers will get better educated and learn there is another world outside of Bordeaux and France,” he says. Mr Wong adds New World winemakers are promoting their products strongly in Asia, while improving the quality of their wines. “Argentina will overcome Chile and become the powerhouse in South America, and the United States will be even more value-focused,” Mr Wong says. But he forecasts Australia will remain the leader in the Asian market for New World wines. The fortunes of New World wines vary in Macau. Demand for wines from
New Zealand and South Africa is not great, but this may soon change. “South Africa is producing much better wines these days and making a huge marketing push. New Zealand has the boutique market and will go from strength to strength in terms of quality wine,” Mr Wong says.
Easier to drink Thandi Wines (Pty) Ltd was the first South African company accredited as a fair trade winemaker, in 2003. It is one of a number of South African winemakers seeking to sell their products in Macau. Last month it held an event here to introduce its wines and to promote the concept of fair trade in New World wines, which guarantees that poor grape farmers are treated fairly by big wine producers. ASC Fine Wines Co Ltd is a big wine trader in China. The sales manager in its Macau office is João Farinha, a
BOTTLED WINE IMPORTS BY VOLUME New World
27%
trained winemaker who has worked in Portugal and Australia. Mr Farinha says half of his company’s product portfolio here is made of New World wines. He says New World wines are better value for money than Old World wines, and that the volume of New World wines his company sells is much higher. “Due to cheaper production costs influenced by a number of variables, cheaper manpower, location, weather, it’s possible to produce high-quality wines at lower prices” in New World countries, he says. Another important source of demand in Macau for New World wines is the growing number of expatriates here from the countries that make them. Mr Farinha says these consumers, along with Macau people that have lived abroad, are emotionally attached to wines from their parts of the world, and this helps business. He says curiosity about New World wines is growing as reviews of them get better and better and as their quality improves. “Besides, New World wines are normally easier to drink than Old World wines.”
Old World
Flag waving
73%
Mr Farinha says consumer ignorance is an obstacle to sellers of New World wines. Many consumers here believe European wines are better and are suspicious of New World products, he explains. Cut-throat competition is another obstacle wines have to overcome. “Macau’s market is being flooded with wine and there’s a lot to choose from, especially when we’re talking about New World wine, which makes it tougher to get more listings,” Mr Farinha notes. Summergate’s Mr Feather argues that it is up to the wine importers to “wave the flag and build the brands”. Felton Road’s Mr Greening says the personality of a wine makes the difference. His biodynamic wines are the result of a holistic approach to organic viticulture and a quest for sustainable production. “There are tens of thousands of wines in the world. Just being in the crowd doesn’t work. You have to have a unique history that people understand,” Mr Greening says. “Consumers buy things not just because they like it but also because they share the same values.”
SOURCE: STASTISTICS AND CENSUS SERVICE - JAN TO OCT 2012
JANUARY 2013
Chilean wines have 12.0 percent of the market by volume
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India
Russia
NEW MGTO BOSS TO ADD MORE TOURIST SPOTS
Helena de Senna Fernandes admits there are some poorly promoted areas The new director of the Macau Government Tourist Office, Helena de Senna Fernandes, wants to divert tourists to less-visited areas of the city. Ms Fernandes took up her post last month replacing veteran JoĂŁo Manuel Costa Antunes. The new director admitted there are some tourist spots that are poorly promoted and thus, less visited. This year, the tourist office will launch a
project jointly with the Cultural Affairs Bureau and the Civic and Municipal Affairs Bureau to draw visitors to these areas, many located in the northern district. Ms Fernandes also said the government would persist in 2013 with efforts to tap India as a source of tourists, and to attract more visitors from Russia.
NO REBOUND FOR VISITOR ARRIVALS
Visitor arrivals dropped for the seventh consecutive month in November, official data shows. In November, visitor arrivals dropped by 1.8 percent year-on-year, to below 2.4 million. The average length of stay stood at 1.0 day, up by 0.1 days year-on-year. Visitor arrivals to Macau have been dropping since May. In the first 11 months of 2012, visitor arrivals totalled 25.6 million, up by just 0.5 percent year-on-year.
MORE TOURISTS DURING CHRISTMAS
A total of 793,343 tourist arrivals were recorded during the Christmas holiday season, from December 20 to December 26, data from the Public Security Police shows. This represents an increase of 0.68 percent compared to the same period last year.
RESTAURANT SALES TO GROW BY 10 PERCENT The chairman of the United Association of Food and Beverage Merchants of Macau, Chan Chak Mo, expects the restaurant industry’s sales volume to grow by at least 10 percent in 2013. Mr Chan, who is also managing director of restaurant operator Future Bright Holdings Ltd, told reporters that business growth will be driven by a higher influx of visitors due to the completion of the railway link between Guangzhou and Gongbei late last month. JANUARY 2013
82 GUSTAVO CAVALIERE HOSPITALITY INDUSTRY EXPERT - gustavo.cavaliere@gmail.com
Low-hanging fruit HOTEL MANAGERS ARE DESPERATE FOR TALENTED PEOPLE BUT THEY OFTEN FORGET TO LOOK AFTER THEIR OWN EMPLOYEES
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inding, nurturing and developing talent should be a priority for any hotel in Macau. That has not always been the case. It is still not happening today and I doubt change will come any time soon. Hotel managers here have learned the hard way that talent is not a commodity and that it is not easily available in Macau – at least not in its ready-for-action form. It is a scarce resource, made more scarce by foolish labour laws that restrict the importing of staff. What is worse, globalisation has made the hunt for talent global. Talented people are time and again lured away by a wide array of tempting opportunities, spread across the globe. Why should they choose Macau rather than New York or Paris? Faced with these challenges, developing the potential of a hotel’s present employees should be any manager’s main focus. Not only it is a cheaper solution, but it also brings more benefits in the long term, including higher retention rates. Developing talent is a vertical task, going through all layers of a hotel organisation. At the top, it should be linked to a succession plan, something that most hotels here do not have. At lower levels, it should give staff the tools they need to excel at their tasks, while offering them opportunities to progress in their careers. Many hotel managers here raise their eyebrow when discussing talent development. They fear that employees, after receiving training, will put what they have learned to work at rival hotels. But the opposite is much more likely: managers who do not provide ways for their subordinates to develop their potential are likely to face higher employee turnover figures. Staff are likely to leave in search of employers that give them room to grow vocationally.
Chain reaction Often it also seems that hotel managers feel their turf threatened by the potential of their subordinates. Rather than helping their staff to develop their capabilities fully, some managers engage in power games to ensure high-potential employees are no threat to them and are kept at a safe distance below them on the corporate ladder. But the hotel industry is one of the main contributors to employment in Macau. There should be a continuous focus on developing skilled staff for the industry. Why not invest in in-house training programmes to spot and develop talent? This would be a great idea but first hotels would need to be equipped with true leaders, able to give this kind of training. Talented people follow those who lead by example, not executives who just play by the book. Such programmes should, in the first place, focus on managers. The executives nurtured should be able to demonstrate a particular set of skills, well beyond technical expertise. Chief among these skills should be a pragmatic approach to finding and developing new talent. This would start a chain reaction which would eventually raise the level of the JANUARY 2013
Developing the potential of a hotel’s present employees should be any manager’s main focus. Not only it is a cheaper solution, but it also brings more benefits in the long term, including higher retention rates industry’s performance. It is not uncommon to hear hotel managers whine about their teams. “If only I had better staff,” is a frequent lament.
Open your eyes It is a petty excuse, repeated too often, unfortunately. Although highly trained personnel are scarce in Macau, raw talent exists in considerable amounts. It is a matter of whether managers are able to tap into it, nurture it and convert it into added value. No important hotel here has ever done so. In most cases, hotels just send staff to across-the-board standard workshops that bear little return. Training is not customised, nor do managements have formal schemes to scan their workforces for talent. To find talent, managers need to look for it. But hotels here mainly follow human resource routines created in and for markets with few similarities to Macau. Nurturing talent is much more than just offering promotions. Hotel managers must start opening their eyes and looking after the development of their employees. Walk into any hotel here and take a look at the faces of the employees. Do you see motivated people, whose potential is being nurtured by their superiors? I certainly do not. It is time for change.
Tourism statistics
83
Visitor arrivals Year-on-year change (%)
2011 Total - Same-day visitors - Overnight visitors Average length of stay
28,002,279 15,077,119 12,925,160 0.9 days
Year-on-year change (%)
Latest
25,586,441 13,261,703 12,324,738 1.0 days
12.2 15.6 8.4 --
0.5 -3.4 5.0 0.1 days
Notes Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Nov 2012
Visitors by place of residence Year-on-year change (%)
2011 Asia - Mainland - Guangdong - Fujian - Zhejiang - Hunan - Beijing - Shanghai - Tianjin - Chongqing Individual visit scheme - Hong Kong - Taiwan - Japan - South Korea - Others America Europe Oceania Others
27,287,076 16,162,747 8,196,139 932,316 575,595 533,495 314,696 471,366 100,585 172,140 6,588,722 7,582,923 1,215,162 396,023 398,807 1,531,414 310,608 251,748 127,983 24,864
12.4 22.2 131.1 164.2 140.1 191.9 185.6 159.0 151.2 166.8 20.1 1.6
Year-on-year change (%)
Latest
24,924,831 15,407,183 7,316,276 743,844 562,071 536,261 292,775 452,534 115,796 176,246 6,528,000 6,469,327 983,238 369,048 400,623 1,295,412 280,451 239,864 116,729 24,566
-6.0 -4.2 20.2 -0.6 4.5 3.0 0.3 8.8
Notes
0.5 5.0
Jan-Nov 2012
-2.5 -11.5 7.1 12.1 4.3 7.4 34.7 14.2 8.5 -6.6 -12.9 3.8 11.2 -4.5 -0.8 4.2 1.5 10.7
Jan-Nov 2012
Jan-Nov 2012
Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012 Jan-Nov 2012
Hotels Hotel and guest-house rooms Hotel guests Hotel average occupancy rate Average length of stay
11.3 22,356 11.0 8,612,127 4.3 84.1 1.53 nights -0.01
percentage points nights
Latest
Year-on-year change (%)
26,050 16.8 7,803,299 11.3 percentage 82.3 -0.7 points 1.39 nights -0.14 nights
Notes Oct 2012 Jan-Oct 2012 Jan-Oct 2012 Jan-Oct 2012
Visitor expenditure 2011 Total spending (excluding gaming) MOP 45.3 billion - Non-shopping spending - Shopping spending Per-capita spending
MOP 22.9 billion
22.4 billion MOP 1,619 MOP
Year-on-year change (%)
20 23 16 7
Latest MOP 13.3 billion MOP 6.9 billion MOP 6.3 billion MOP 1,822
Year-on-year change (%)
10 13 5 12
JANUARY 2013
Notes Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012 Jul-Sep 2012
Source: Statistics and Census Service
Year-on-year change (%)
2011
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January Date: Event:
14th – 18
Venue: Organiser: Address: Tel: Fax: Website: E-mail:
Galaxy Macau, Macau Macau Tourist Guide Association No 20, Travessa dos Algibebes, Macau (853) 2878 3134 (853) 2836 7545 www.wftga2013.org register.wftga2013@xdchannel.com
Date: Event: Venue: Organiser: Address:
23rd – 24th
Tel: Fax: Website: E-mail:
15th World Federation of Tourist Guide Associations International Convention
iFXExpo Asia
Venetian Macao-Resort-Hotel, Macau iFXExpo Asia 155, Agias Fylaxeos Street, Ersi Court, Office 101, 3083, Limassol, Cyprus (357) 25 028718 (357) 25 028699 www.ifxexpo.com info@ifxexpo.com
Date: Event: Venue: Address:
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13th – 14th
Asia Retail Congress 2013 Taj Lands End, Mumbai, India 402, Savoy Chambers, Dattatraya Road, Santacruz Jn., Santacruz (W), Mumbai - 400 054, India (91) 22 2660 3124 (91) 22 2660 3124 www.asiaretailcongress.com tim@asiaretailcongress.com
March Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:
12th – 14th
iGaming Asia Congress 2013 Grand Hyatt, Macau Beacon Events 20/F, Siu On Centre, 188 Lockhart Road, Wanchai, Hong Kong (852) 2219 0111 (852) 2219 0112 www.igamingasiacongress.com info@beaconevents.com
Date: Event:
24th
Date: Event:
Venue: Organiser: Address:
Grand Hyatt Hotel, Macau Facility Media Ltd 12/F, Des Voeux Commercial Ctr, 212-214 Des Voeux Road, Central, Hong Kong (852) 2851 9923 (852) 2851 9477 www.buildingmacau.com nb@facilitymedia.com
Venue: Organiser: Address:
29 th
Compliance XChange Forum
Date: Event:
21st – 23rd
Hong Kong Convention & Exhibition Centre, Hong Kong Beacon Events 20/F, Siu On Centre, 188 Lockhart Road, Wanchai, Hong Kong (852) 2219 0111 (852) 2219 0112 www.ComplianceXChange-Forum.com info@beaconevents.com
Venue: Organiser: Tel: Fax: Website: E-mail:
Venetian Macao-Resort-Hotel, Macau Macau Government (853) 8798 9675 (853) 2872 3322 www.macaomiecf.com miecf@koelnmesse.com.hk
Date: Event:
29 th – 31st
Venue: Organiser: Tel: Fax: Website: E-mail:
Venetian Macao-Resort-Hotel, Macau Macau Decheng International Media Co Ltd (853) 6288 3333 (86) 756 511 3333 www.v-8.cn huashitv@163.com
Tel: Fax: Website: E-mail: Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:
Building & Infrastructure Macau Conference 2013
February Date: Event: Venue: Organiser: Tel: Website: E-mail:
Tel: Fax: Website: E-mail:
5th – 7th
ICE Totally Gaming 2013 ExCel Centre, London, United Kingdom Clarion Events (44) 020 7384 8121 www.icetotallygaming.com cassie.jauffret-lenzi@clarionevents.com
JANUARY 2013
12th – 14th
Annual Corruption & Compliance Asia Summit 2013 Andaz Shanghai, Shanghai, China Beacon Events 20/F, Siu On Centre, 188 Lockhart Road, Wanchai, Hong Kong (852) 2219 0111 (852) 2219 0112 www.corruptionandcompliance-asia.com info@beaconevents.com
2013 Macao International Environmental Co-operation Forum & Exhibition
4th Macau International Real Estate Fair
2012 :SEPTEMBER A Macau Business NOVEMBER 2012 partner event
Business
85
Lost in translation
Macau is an international city with scores of spoken languages, but translation services are underdeveloped and variable in quality BY LUCIANA LEITÃO
y listening to the noisy streets, Macau often sounds like a modern version of Babel. The city has two official languages, Chinese and Portuguese. English is also common. Other languages are heard too, ranging from Filipino to Russian. Despite these natural advantages, the city’s translation business is still in its infancy. Qualified translators complain of competition from untrained providers who, they say, do translations that are cheaper and inferior. This is possible because the market is unregulated. There are no official figures available for the number of translators and interpreters working in the private sector. Macau Translations Ltd was created in 2006 out of a number of enterprises, some of which had their origins in the
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1980s. Leo Stepanov, a Russian interpreter and translator fluent in several languages, owns the company. Mr Stepanov has six partners abroad, who work in their home countries, and gives work to about 20 freelancers. Altogether, Macau Translations has on its books about 300 translators and interpreters that it can turn to. The company does translations, including translations of documents on specialist subjects such as aviation, and certifies translations. It also provides interpreters, usually for visiting foreign dignitaries. Most Macau Translations customers here are in the gaming, banking or aviation industries. But the company also has customers abroad, mainly large corporations venturing into Macau to sell their products or services.
Mr Stepanov says foreign companies, especially businesses new to Macau, usually have their agents carry out translation. Often the work is outsourced to Macau Translations. “Obviously we have losses on pricing but, in many cases, it’s impossible to otherwise penetrate the curtain of corporate protectionism,” he says.
Unhealthy competition From time to time, government departments make contact with Macau Translations. Mr Stepanov says most of those contacts are for the purpose of inviting the company to be one of the three suppliers that a government department must canvass before it can award a contract without a public tender. In most cases the contacts are for show, the department having already JANUARY 2013
86
Business
made up its mind which supplier to award the contract to, Mr Stepanov says. The courts often resort to outsourcing interpretation, especially for languages other than Cantonese or Portuguese. But Mr Stepanov says it takes, on average, six months for his interpreters to get paid. He says there is “a noticeable absence” of good linguists on the payrolls of private companies and public bodies here because of restrictions on the import of labour. The Macao Polytechnic Institute offers bachelor’s degree programmes
Qualified translators complain of competition from untrained providers who, they say, do translations that are cheaper and inferior. This is possible because the market is unregulated
in translation between Chinese and Portuguese and between Chinese and English. The University of Macau offers bachelor’s degree programmes in Portuguese, English and Japanese studies, and master’s degree programmes in translation studies. Mr Stepanov says the economic boom has drawn many translators into gaming and entertainment, especially since 2008, and that they often have positions not directly related to their qualifications. Full-time translators and interpreters are “grossly underpaid” because of “unhealthy competition” from untrained providers of translation from English to Chinese.
Lack of capability Most of these untrained people are mainland students “who agree to work at virtually any price”, Mr Stepanov says, although their work is not much good. All this makes it hard to attract new blood into the translation business, he says. Luís Silva established Prompt Editorial Services Ltd in 2007. At first he worked alone, but he has since enlarged the enterprise. Prompt Editorial Services now has 10 associate translators and editors, who can translate several languages, mainly English, Chinese and Portuguese. “To win contracts, I had to become trilingual, covering Macau’s official languages and English,” Mr Silva says. “We have people in Portugal, Hong Kong and Macau.” The company’s customers include public bodies and hotels here, and corporations and other organisations abroad. Prompt Editorial Services specialises in the media, advertising and the law. Its biggest customers here are the Museum of Art and the Civic and Municipal Affairs Bureau. De Ficção – Multimedia Projects, the publisher of Macau Business, is a customer. “We offer what we call ‘print-ready work’, ready to be put on the page. It increases the price because it saves the client some money,” Mr Silva says. He says many customers turn to Prompt Editorial Services because they lack the capability to do translations in-house. Mr Silva says the business has room for growth because qualified translators are in short supply.
Legal lingo Bill Gao and his business partner set up JANUARY 2013
87 Boss Translation Co Ltd in February 2011, after seeing demand for translation work spike. Boss Translation gets round the shortage of qualified translators by using computers. Translation software helps its translators in their work. This is different from machine translation, like Google Translate, in which everything is automated but often with poor results. Boss Translation has had the support of the Macau New Technologies Incubator Centre, or Manetic. Manetic assists fledgling technology companies in turning ideas into full-blown commercial ventures. “We started from zero, and now we have more than 10 major clients from the government and media,” Mr Gao told Macau Business in August last year. C&C Translation Centre began life as a department of law firm C&C Macau Lawyers. It later became a business in its own right, to tap the market for specialist legal translations. Portuguese is the only language of many lawyers here, even though most criminal accused, civil litigants and witnesses read and write only Chinese and speak only Cantonese. Much of the law is in Portuguese only, while often
The government has the biggest pool of in-house translators, but it still lacks qualified translators evidence is given in Chinese. All this makes translation and interpretation a daily need for the legal system. C&C Translation Centre’s senior translator, Manuela Ribeiro, says the enterprise has four translators of its own, and freelancers on call whenever needed. Its full-timers include qualified translators trained in Beijing. It can translate English, Chinese, Portuguese,
French, Italian and Spanish. Most of C&C Translation Centre’s customers are lawyers, but its other customers include construction and engineering companies, some from Hong Kong. It translates documents to be used in evidence in court, other paperwork arising from litigation, and contracts. “A lot of people ask for birth certificate translations,” Ms Ribeiro says. The enterprise has also worked for public bodies, such as the Monetary Authority of Macau and Macau Post. “But usually public departments have their own set of translators,” she says. The government has the biggest pool of in-house translators, but it still lacks qualified translators. It is often criticised for its poor translations. The Macau Portuguese and English Press Association has several times pressed for improvements. Ms Ribeiro says a lot of the translation done here is poor. “There are a lot of amateurs that start doing translations. Usually they are Chinese with some knowledge of Portuguese. In terms of grammar and content, it is often badly done,” she says.
JANUARY 2013
88
Business
At your serve-less Service standards that please Westerners may not appeal to Chinese consumers BY ALEXANDRA LAGES
ow attentive should a shop assistant or a restaurant waiter be? How does their attentiveness influence the satisfaction of customers? The conventional marketing wisdom is that attentive service increases business, but the results of Australian research indicate that it all depends on culture. The research found that going that extra mile to provide top-notch service could lead to dissatisfaction, complaints and consumers taking their custom elsewhere. Researcher Keh Hean Tat, professor of marketing at the University of Queensland, says what pleases a Chinese customer may not have the same effect on other customers. “The baseline is we should treat our customers well but we shouldn’t go beyond a certain point,” he says. Where that point is depends on the customer’s cultural background. Mr Keh presented the preliminary results of his latest research during a marketing seminar at the University of Macau in November. His work on the responses of consumers from different cultures to highly attentive service shows that consumers from more individualistic Western cultures favour
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aspects of service different from those favoured by consumers from more collectivist cultures such as Macau’s or the mainland’s. Mr Keh’s research focused on Canadian and Chinese consumers in shops and restaurants. He didn’t disclose if the research focused on shoppers in luxury outlets or cheaper, bargain shopping. “We have to have good service. Consumers everywhere, regardless [of whether] they are in China or elsewhere, would like to have high-quality service,” Mr Keh told Macau Business. But the definition of good service varies, he says.
Say cheese Most important among Chinese consumers is whether they feel the employee rendering the service is genuine and sincere. They are less satisfied if they suspect that the employee is trying to foist merchandise on them or angling for a tip. “If the consumers perceive the employee to be genuine and sincere in wanting to help the customer, then the outcome should still be positive,” Mr Keh says.
Mr Keh’s research also looked into how Canadian and Chinese customers react to a shop assistant’s smile. Chinese consumers are most likely to buy if they perceive the smile to be genuine, while Canadians are most likely to buy if they perceive the smile as professional. “Chinese buyers value authenticity but Canadians value professionalism,” Mr Keh says. He says service staff in Chinese markets should be trained to be more genuine. In Western markets such as Canada, service staff should be trained to be more professional. Service quality is a hot topic in Macau, where shops, restaurants and hotels are often criticised for their poor standards. “To be fair, service quality is an issue that is of concern not only to Macau but to many other countries,” says Mr Keh. “Obviously, as the standard of living improves, the expectations of consumers will also increase. In a more competitive marketplace, service organisations, in order to continue to do well, have to make sure they can keep up with the consumer’s expectations.”
89 PETER SINGER PROFESSOR OF BIOETHICS, PRINCETON UNIVERSITY
Should we live to 1,000? IF OUR PLANET HAS A FINITE CAPACITY TO SUPPORT HUMAN LIFE, IS IT BETTER TO HAVE FEWER PEOPLE LIVING LONGER LIVES, OR MORE PEOPLE LIVING SHORTER LIVES?
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n which problems should we focus research in medicine and the biological sciences? There is a strong argument for tackling the diseases that kill the most people – diseases like malaria, measles and diarrhoea, which kill millions in developing countries but very few in the developed world. Developed countries, however, devote most of their research funds to the diseases from which their citizens suffer, and that seems likely to continue for the foreseeable future. Given that constraint, which medical breakthrough would do the most to improve our lives? If your first thought is “a cure for cancer” or “a cure for heart disease”, think again. Aubrey de Grey, chief science officer of SENS Foundation and the world’s most prominent advocate of anti-aging research, argues that it makes no sense to spend the vast majority of our medical resources on trying to combat the diseases of aging without tackling aging itself. If we cure one of these diseases, those who would have died from it can expect to succumb to another in a few years. The benefit is therefore modest. In developed countries, aging is the ultimate cause of 90 percent of all human deaths; thus, treating aging is a form of preventive medicine for all of the diseases of old age. Moreover, even before aging leads to our death, it reduces our capacity to enjoy our own lives and to contribute positively to the lives of others. So, instead of targeting specific diseases that are much more likely to occur when people have reached a certain age, wouldn’t a better strategy be to attempt to forestall or repair the damage done to our bodies by the aging process? Mr de Grey believes that even modest progress in this area over the coming decade could lead to a dramatic extension of the human lifespan. All we need to do is reach what he calls “longevity escape velocity” – that is, the point at which we can extend life sufficiently to allow time for further scientific progress to permit additional extensions and thus further progress and greater longevity. Speaking recently at Princeton University, Mr de Grey said: “We don’t know how old the first person who will live to 150 is today, but the first person to live to 1,000 is almost certainly less than 20 years younger.”
Slowing down ageing What most attracts Mr de Grey about this prospect is not living forever but rather the extension of healthy, youthful life that would come with a degree of control over the process of aging. In developed countries, enabling those who are young or middle-aged to remain youthful longer would attenuate the looming demographic problem of an historically unprecedented proportion of the population reaching advanced age – and often becoming dependent on younger people. On the other hand, we still need to pose the ethical question: Are we being selfish in seeking to extend our lives so
dramatically? And, if we succeed, will the outcome be good for some but unfair to others? People in rich countries already can expect to live about 30 years longer than people in the poorest countries. If we discover how to slow aging, we might have a world in which the poor majority must face death at a time when members of the rich minority are only one-tenth of the way through their expected lifespans. That disparity is one reason to believe that overcoming aging will increase the stock of injustice in the world. Another is that if people continue to be born, while others do not die, the planet’s population will increase at an even faster rate than it is now, which will likewise make life for some much worse than it would have been otherwise. Whether we can overcome these objections depends on our degree of optimism about future technological and economic advances. Mr de Grey’s response to the first objection is that, while anti-aging treatment may be expensive initially, the price is likely to drop, as it has for so many other innovations, from computers to the drugs that prevent the development of AIDS. If the world can continue to develop economically and technologically, people will become wealthier and, in the long run, anti-aging treatment will benefit everyone. So why not get started and make it a priority now?
Better off? As for the second objection, contrary to what most people assume, success in overcoming aging could itself give us breathing space to find solutions to the population problem, because it would also delay or eliminate menopause, enabling women to have their first children much later than they can now. If economic development continues, fertility rates in developing countries will fall, as they have in developed countries. In the end, technology, too, may help to overcome the population objection, by providing new sources of energy that do not increase our carbon footprint. The population objection raises a deeper philosophical question. If our planet has a finite capacity to support human life, is it better to have fewer people living longer lives, or more people living shorter lives? One reason for thinking it is better to have fewer people living longer lives is that only those who are born know what death deprives them of; those who do not exist cannot know what they are missing. Mr de Grey has set up SENS Foundation to promote research into anti-aging. By most standards, his fundraising efforts have been successful, for the foundation now has an annual budget of around US$4 million (MOP32 million). But that is still pitifully small by the standards of medical research foundations. Mr de Grey might be mistaken, but if there is only a small chance that he is right, the huge pay-offs make antiaging research a better bet than areas of medical research that are currently far better funded. JANUARY 2013
90
Marketing
Funny money Ignore the power of cartoons to boost sales at your businesses’ peril, a researcher says BY ALEXANDRA LAGES
arketers argue that consumers mature with age, and so should marketing campaigns – except in Asia, and particularly Macau, where the love of cartoon characters transcends age and social barriers. Here, animated characters are used to sell credit cards, jewellery and other goods for wealthy adults. University of Macau assistant professor of marketing Candy Fong Pun San has researched the interest adults from Greater China have for cartoon characters from the United States, Hong Kong and Japan. She argues that an adult’s attachment to animation is not a sign of immaturity but of their perception of self – an idea psychologists call self-concept. Ms Fong’s research is still at an early stage but she says companies can make use of these links to increase business. Cartoon characters can be associated with products and appeal to emotions. Adult consumers may be willing
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to pay more for products associated with their favourite cartoon characters, she says. It is also in the interest of the holders of the copyrights to cartoon characters to nurture associations through licensing. This allows copyright holders to increase the amount they receive in royalties. Molly, 43, started collecting merchandise from the My Melody franchise, a Japanese cartoon character, because her family could not afford toys when she was growing up. Ms Fong’s preliminary research report, entitled “I am a Hello Kitty: The incorporation of a cartoon character into self-concept”, quotes Molly as saying: “I told myself that when I had the money, I would buy as many as possible”. The researcher interprets Molly’s My Melody collection as an expression of her autonomy and confidence. Michael, 21, is a fan of Winnie the Pooh. Ms Fong’s research says Michael’s
mother gave him a Winnie the Pooh pillow when he was little and that, for Michael, Disney’s version of A.A. Milne’s teddy bear is as much an escape from reality now as it was then.
Of mice and women Becky’s favourite is Mickey Mouse, a cartoon character that has helped to shape her personality, Ms Fong’s report says. “For my parents, Mickey is very positive and energetic. As a young girl, I was very timid and did not dare to speak out. I did not dare to tell my parents that I was being bullied at kindergarten. My parents thought I should be more cheerful and gave me lots of Mickey products,” the report quotes Becky as saying. For her research, Ms Fong interviewed 20 adults from Macau, Hong Kong and the mainland with fixations on cartoon characters. She found that emotional attachments with cartoon characters, usually developed during childhood, affect self-concept by working as transitional objects, role models, symbols of autonomy and competence, and as facilitators of relationships and public identity. For many adults, “those implications tend to continue into adulthood,” Ms Fong tells Macau Business. “People have a misperception about the linkage association between consumption of cartoon character-themed
91
products and immaturity, but they do not understand the implications of it to self-concept development, and those self-concept implications are not going to cease over time. If you ask [adult consumers] to stop, you are depriving them of some advantages they can take from that consumption,” she says.
Money in the Kitty Ms Fong says social pressure may stop some adults from consuming cartoon merchandise for themselves, so they begin buying it for their children instead. She says businesses can also make money out of this trend. “In this case, companies can try to
facilitate this kind of extension by encouraging parents to buy products for their kids, saying it’s something they can consume together,” she says. Hello Kitty is a good example of a cartoon character that successfully appeals to the emotions. “It’s very successful because it not only appeals to children. It has developed different types of products for different markets. They successfully made people think that Hello Kitty is not only for the kids, but also for adults,” Ms Fong argues. The scholar says fixation on cartoon characters is most common in Asia. In Western countries, most people outgrow childhood cartoon characters and
plush toys during adolescence. Adults there tend to replace them with expensive goods, pets or pastimes, which play similar roles to cartoon characters in the adulthood of Asians. Asian adults are especially influenced by Japanese cartoons, according to Ms Fong. “Japanese are very good in developing a lot of products with cartoon-character associations.” Adult consumption of such merchandise is also more socially acceptable, she says. Ms Fong notes U.S. cartoons do not generate as much merchandise and do not easily sustain emotional attachments to the franchise as time goes by.
Asian adults are especially influenced by Japanese cartoons, says scholar Candy Fong
JANUARY 2013
92
Education any children in Macau with special needs go through school with their conditions undiagnosed, people in the business of special education say. Many pupils with special needs drop out of school, frustrated with their poor academic results. Educators say something must be done. They suggest greater coordination among those involved in diagnosing special needs, and greater assistance for children that have them. Paul Pun Chi Meng heads the São João de Brito School, run by the charity Caritas Macau, of which he is secretarygeneral. “We accept students with special problems that other schools reject,” Mr Pun says. For this academic year, the São João de Brito School enrolled three visually impaired pupils who had been turned away from other schools. At the beginning of the academic year, the school had eight pupils with special needs. Most had behavioural problems. “They have special needs, as referred by the government. Usually the government asks which schools will accept them,” Mr Pun says. These pupils take part in ordinary classes, usually not more than one student a class. The school’s policy is not to disclose their special needs to their classmates. “We try to make it confidential,” Mr Pun says. He says more schools are now accepting children with special needs but some still lack the capability to handle them. If a regular student at São João de Brito School appears to have special needs, Mr Pun tells the parents and informs them of the support available from the government.
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Needs unmet
Macau’s schools have long lacked expertise in handling students with special needs, and children continue to fall through the cracks BY LUCIANA LEITÃO
JANUARY 2013
93 “Parents usually don’t want their children to be classified as having special needs,” he says. Education and Youth Affairs Bureau data shows that in the 2011-2012 academic year, Macau had 1,047 pupils with special needs, a 7.2-percent increase from the previous academic year. About 46 percent took part in ordinary classes and 563 were in special education classes, of which 122 were in small classes specially suited to their needs.
The predominance of private schools does no favours for children with special needs. In the 2010-2011 academic year, the city had 93 private schools and 13 public schools. He says most private schools care mainly about “keeping their numbers up”. Children with special needs tend to detract from a school’s academic record because their results are often below average. “They are not popular, they cost a lot of money and private schools’ budgets are tight,” says Mr Morrison.
Rejection, acceptance
Front-line teachers
Macau has about 100 schools, ranging from preschools to secondary schools. Official data shows that just one in 10 offers special education classes. Of those that do, half are public schools. The data shows 35 schools offer to teach children with special needs in ordinary classes, including 27 private schools. Special education is designed for pupils with special needs, such as gifted children and children with physical, mental, sensory, communication or other problems. Academic Keith Morrison of the University of Science and Technology says the quality of special education here is far from uniform. “There’s a mixture, integrating students whenever it is possible. Some schools do this, providing in-class additional support for these students,” Mr Morrison says. “For students with severe learning difficulties that wouldn’t see their needs met in mainstream education, they do have government-funded special education schools.” He says the biggest problem is when children have special needs that are not obvious, such as behavioural problems, emotional problems or learning difficulties. Some schools find it hard to control such pupils and eventually kick them out. Other schools, however, will take them on. “The Colégio Mateus Ricci primary school does accept a lot of students excluded from other schools,” Mr Morrison says. In the 2011-2012 academic year, children with special needs made up fewer than 1.5 percent of all school pupils here. People in the business of special education consider this figure low.
Mr Morrison says the government should increase its subsidies to schools that provide special education. “Schools could then bring in external expertise to train their teachers, to give very practical in-house training and to train in-school support,” he says. He says all schools should have coordinators for children with special needs and that government money could help pay for them. He says schools should adapt curriculums to each pupil’s needs. Some schools are already doing these things. “The São Paulo School is increasing the extent of active teaching. It’s moving down the track to try to accommodate the different ways in which children learn at different speeds,” he says. Teacher Charlot Noruega says few schools accommodate children with special needs. But she says the government has been trying to change this. More schools now have counsellors but she says identifying each child’s exact problem is not easy. Sometimes children with special needs are often misdiagnosed and given medicine that “can worsen their condition”. Teachers can help improve things, she says. Ms Noruega says it is the responsibility of teachers to refer children to experts for further analysis when they notice that children have trouble reading or writing, learning in general or paying attention. She says few ordinary schools have inclusive programmes for handling children with special needs, so they are reluctant to accept them. “Also, because the class size in local schools
Reputations paramount Mr Morrison says that in some developed countries the proportion of pupils identified with special needs can be as high as 18 percent. “There’s a certain degree of denial about it in Macau.” Children with special needs often find it hard to progress to the next year. In special education classes, about one-third progress to the next year, official data shows. Mr Morrison says children are often under stress as there is social pressure on them to keep up with their classmates. “The evidence is very clear. Repeating a year, students typically don’t learn,” he says. He acknowledges that the government has been doing its bit but says there should be more help for children with special needs. Teacher training should be improved because teachers are often the first to notice that a child has special needs. Teachers should also be trained to help such children when they take part in ordinary classes. Mr Morrison says education of children with special needs is hampered by a lack of suitable personnel, a lack of expertise and a lack of understanding of what each child with special needs is capable of achieving.
Official data shows that in the 2011-2012 academic year, Macau had 1,047 pupils with special needs, a 7.2-percent increase from the previous academic year JANUARY 2013
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Education
is fairly large, the teachers may not be able to give them individual attention,” she says. A professional that deals with children with special needs, who declined to be identified, said ordinary schools lacked the necessary personnel and expertise to handle more severe cases. With students with milder problems, schools “do the best they can”, sometimes tutoring these children after school hours, the source said. Special education is something of a novelty in Macau, especially for less severe cases. The source said international schools were leading the way in handling children with special needs. The International School of Macao has teachers qualified in this field. In a multicultural city, it can be hard to identify children with special needs in time. For example, professionals say it is troublesome to diagnose correctly if a Chinese child attending an English-language school has learning difficulties. The child may simply not understand English rather than have some sort of special need. The source said courses leading to teaching degrees here should give more emphasis to special education. More specially trained support staff are needed in schools and more university courses related to special education are required.
Blinded by numbers Rick D’Amato, a school psychologist, heads the Centre for Teaching and Learning Enhancement at the University of
Macau. Mr D’Amato says Chinese families that have children with special needs tend not to acknowledge their children’s conditions publicly. Sometimes they fail to send children with severe conditions to school at all. So only children with mild conditions are spotted by the education system, he says. Mr D’Amato says this has to change. The Education and Youth Affairs Bureau says all children with special needs are entitled to special education. The bureau has been giving more money to private schools to spend on special education. It also regularly sends special education teachers to these schools to help teach pupils with special needs. All public schools have staff qualified to assist children with special needs, ranging from therapists to teachers, the bureau says. The bureau has 11 psychological counsellors supporting special education in public and private schools. Nine non-governmental organisations had more than 130 counsellors to give counselling in 69 private schools in the 2011-2012 academic year. The Education and Youth Affairs Bureau recently commissioned the Centre for Special Educational Needs and Inclusive Education in Hong Kong to do an assessment of Macau’s special education system. The centre suggested greater integration of children with special needs with ordinary school life and improvement in the amount and scope of support available in schools for children with special needs.
Help is at hand More parents of children with special needs are turning to specialist associations for help BY LUCIANA LEITÃO
ho do you turn to when your child has special needs? This is the question many parents face when their children are diagnosed with a disorder. Parents often head to support associations, such as the Macau Child Devel-
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opment Association. Parents often put their children in the hands of the association because the children are failing academically or cannot fit in in ordinary schools. The association welcomes children with developmental disorders, and chil-
dren with communication and learning difficulties. Most of the children it works with are English-speaking. The association has an educational psychologist, a counsellor, three occupational therapists and two speech therapists. It evaluates children and teenag-
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Children with special needs often find it hard to progress to the next year. In special education classes, about one-third progress to the next year
ers with special needs and gives them psycho-pedagogical support. The Child Development Association is hoping to form partnerships with the government and schools to broaden its scope, but so far has been unsuccessful. The association also has plans for a dedicated school for children with special needs. It intends to open the school, costing MOP80 million (US$10 million), four years from now. But the association is short of money. In November, it asked for financial support from the government and the private sector to allow it to meet the growing demand for its services. The association needs MOP17 million this year. Most of the children the association helps suffer from autism but it also helps with cases of hyperactivity and learning difficulties. “We have children who are already officially diagnosed but we also have children who are not diagnosed,” says educational psychologist Rita Inácio. If the association’s specialists identify certain symptoms, the children are referred to the competent authorities for further diagnosis, if the parents permit. Some of the children helped by the Child Development Association are not even in school. The law says all children are entitled to schooling but Ms Inácio
says some schools argue that they are incapable of handling more severe cases of students with special needs. She says schools lack awareness of special needs and knowledge of special education.
Long waiting lists Among the children the association helps, some have yet to be officially identified by the schools they attend as having a special need. Even when the schools have identified a problem, Ms Inácio says they “don’t plan the necessary measures to undertake, or the measures that are being undertaken often don’t match the needs of those children”. She says there are other cases where the necessary plans are made but not put
into action. Schools often resist making individual education plans for children with special needs. If they do create a strategy, often the plans can be generic and superficial. “There are even cases in which the student’s success in written examinations adjusted to their needs is used as justification to withdraw special support from them,” Ms Inácio says. She says some schools lack specialist staff, even staff to give nothing more than extra-curricular support. “Most of the time, such children do not need to be integrated into specific special education establishments,” she says. Most schools lack people qualified to detect and act on cases of children with special needs, says Ms Inácio, and the competent authorities have long waiting lists, which can take months to get to the top of. Another institution that helps children with special needs is the Kai Chi Early Learning and Development Centre. It assists children up to six years old that suffer from behavioural and emotional disorders, autism, hyperactivity and amblyopia. The centre’s representatives turned down opportunities to speak to Macau Business about their work. JANUARY 2013
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Arts & Culture
The red museums China’s painful past displayed under political shadow BY TOM HANCOCK*
group of museums commemorating China’s violent Cultural Revolution is opening up normally tightly controlled discussion of the chaotic era – but only up to a point. Businessman Fan Jianchuan has opened six museums about the ten-year period beginning in 1966 when China’s then-leader Mao Zedong called on ordinary citizens to struggle against entrenched interest groups – including government officials. The 55-year-old says he has filled six warehouses with artefacts from the period, when young people formed often violent “Red Guard” groups and those labelled as “capitalist
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roaders” were publicly tortured at mass rallies. “I see myself as an archaeologist of the Cultural Revolution,” Mr Fan, a former government official who made a fortune as a real estate developer, told AFP in his museum office in the southwestern city of Chengdu. But what he calls “political sensitivity” has meant that he keeps the vast majority of his collection hidden from view. “What I have on display is barely five percent of what I’ve collected,” says Mr Fan, who plans to open a seventh museum on the era this year. The ruling Communist Party keeps
detailed discussion of the Cultural Revolution out of mainstream Chinese media, worried that an open debate could be used to justify unrest and also undermine its official history of a period it refers to as a “serious setback” for the party.
“Airbrushing” history Mr Mao set the period of lawlessness in motion to boost his authority, previously undermined by the disastrous effort to modernise China known as the “Great Leap Forward,” which led to a famine that killed millions in the late 1950s. China has never stated estimates of how
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Fan Jianchuan
Businessman Fan Jianchuan has opened six museums commemorating China’s violent Cultural Revolution
many died in the decade of political campaigns, which saw citizens turning on their neighbours and caused half a million deaths in 1967 alone, according to U.S.-based British historian Roderick MacFarquhar. The downfall last year of Bo Xilai – former party boss of the southwestern megacity of Chongqing – has thrust the Cultural Revolution into the spotlight. Mr Bo’s revival of “Red culture,” which saw Maoist quotes sent to citizens’ mobile phones and massive “Red song” concerts, along with his charismatic leadership style, reminded many party insiders of Mr Mao’s excesses.
An increase in social discontent over the past 10 years, evidenced by rising numbers of protests, has made Chinese leaders more reluctant to mention the period, Guobin Yang, professor at U.S.-based Barnard College, told AFP. “I see a tightening of space for discussion of the Cultural Revolution over the last decade, including on the Internet,” he says. “There is a fear that the Cultural Revolution could be a resource for protesters to justify their activities.” Mr Fan’s museums have seemingly escaped censure by mostly avoiding the violence of the time and by not using the term “Cultural Revolution”. Due to government pressure the period is instead referred to as the more-neutral “Red Era”, said a museum assistant, who requested anonymity. Most government-funded museums in China avoid mentioning the period altogether. China’s National Museum, renovated in 2011, commemorates the era with a lone photograph and three lines of written text. “The government’s first concern is with keeping society stable, and they know that it would stir up too much criticism to open a museum about the period,” Mr Fan says. “I think it will take at least another 20 years before we can talk openly about the Cultural Revolution.”
Checks on power Mr Fan’s museums are part of a growing trend of private museums and galleries being opened in China over the past five
years. Of all museums in the country, 13 percent are private, according to the China Daily. Mr Fan opened his first museum in 2005 in Chengdu and has since expanded to put more of his collection – boasting more than 100 tonnes of documents including 20,000 diaries – on display. Each has a different theme, such as household objects or Mr Mao pin-badges and clocks. Though most of his exhibits avoid the dark side of the 1966-76 social experiment, some do address the violence. Letters on display in one of the museums tell the story of a Chinese actor who committed suicide in 1967 after prolonged beatings by Red Guards, one of thousands who died during the political campaigns. But Mr Fan says he is reluctant to exhibit items implicating his fellow citizens in violent crimes “out of respect for their privacy”, adding that the items he collected “touch on too many painful memories”. One group that hopes to break the silence are Chinese liberals, who see the chaos as an illustration of the need for democracy and independent checks on the power of the one-party state. Mr Fan dodges questions about whether the excesses of the period show the need for further political reforms. “I can’t talk too much about these issues, it could bring me all kinds of problems,” he says. “Above all, I need to preserve my collection.” * AFP NEWS AGENCY JANUARY 2013
98 BILL GATES CO-CHAIR OF THE BILL & MELINDA GATES FOUNDATION AND CO-FOUNDER OF MICROSOFT CORP
The optimist’s timeline A DECADE AGO, MANY PEOPLE BELIEVED THAT THE PROLIFERATION OF CELL PHONES IN POOR COUNTRIES WOULD MEAN A SHORT LEAP TO DIGITAL EMPOWERMENT
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sually, “optimism” and “realism” are used to describe two different outlooks on life. But I believe that a realistic appraisal of the human condition compels an optimistic worldview. I am particularly optimistic about the potential for technological innovation to improve the lives of the poorest people in the world. That is why I do the work that I do. Even so, there is one area of technology and global development where reality has tempered my optimism: the idea that cell phones would revolutionise life in developing countries. A decade ago, many people believed that the proliferation of mobile devices in Africa would mean a short leap to digital empowerment. It didn’t. Digital empowerment is a long and ongoing process, and the mere existence of cellular technology does not immediately change how poor people meet their basic needs. But now, after years of investments, digital empowerment is underway, owing to a confluence of factors, including growing network coverage, more capable devices and an expanding catalogue of applications. As more people obtain access to better and cheaper digital technology, an inflection point is eventually reached, at which the benefits of providing digitally services like banking and healthcare clearly outweigh the costs. Companies are then willing to make the investments required to build new systems, and customers are able to accept the transition costs of adopting new behaviours.
Changing the rules Consider the example of M-Pesa, Kenya’s mobile-banking service that allows people to send money via their cell phones. M-Pesa first needed to invest in many brick-and-mortar stores where subscribers could convert the cash they earn into digital money (and back into cash). This real-world infrastructure will be necessary until economies become completely cashless, which will take decades. Without omnipresent cash points, M-Pesa would be no more convenient than traditional ways of moving money around. At the same time, it was impossible to persuade retail stores to sign on as cash points unless there were enough M-Pesa subscribers to make it profitable for them. This kind of bootstrapping is exactly what we had to do at Microsoft in the early years of the personal computer. No one wanted a machine unless there was software, and no one would create software unless there were machines. Microsoft
Digital empowerment is a long and ongoing process, and the mere existence of cellular technology does not immediately change how poor people meet their basic needs JANUARY 2013
convinced both hardware and software companies to bet on future volume by showing how our platform would change the rules. There have been many successful small-scale pilot programmes using cell phones. But examples of large-scale, self-sustaining programmes powered by digital technology, like M-Pesa, are harder to find, because the key pieces have not been put into place to enable the required work to advance beyond the limits of controlled experiments. Digitally-enabled healthcare, or mHealth, is one area that has been slow to emerge, because it is difficult to build a great platform and then convince everybody in a health system that it is worth using. If some health workers use cell phones to send information to a central database, but others do not see the value, the digital system is incomplete – and thus just as flawed as the current paper system.
New solutions The most promising mHealth project that I have seen, called Motech, focuses on maternal and child health in Ghana. Community health workers with phones visit villages and submit digital forms with vital information about newly pregnant women. The system then sends health messages to the expectant mothers, such as weekly reminders about good prenatal care. The system also sends data to the health ministry, giving policymakers an accurate and detailed picture of health conditions in the country. Those working on AIDS, tuberculosis, malaria, family planning, nutrition and other global health issues can use the same platform, so that all parts of a country’s health system are sharing information and responding appropriately in realtime. This is the dream, but it works only if frontline workers are inputting data, health ministries are acting on it, and patients are using the information that they receive on their phones. I realised that things were taking off when our partners on Motech started talking about burdensome network costs and simplifying the user interface. The application was really being used in the field and the stickiest challenges were presenting themselves – which meant that the system had proved that it was valuable enough for people to put in the work to solve problems as they arose, instead of just reverting to the old system. This digital approach is now being extended to other regions, including Northern India. A decade ago, people said that this would happen quickly. It didn’t, because the pieces just were not there. Now they are starting to come into place. It will take a decade to get certain applications into a lot of places, but the momentum will build and we will learn as we go. In the long run, the results will be just as transformative as we hoped, if not more so. Ultimately, when people are truly empowered, they will begin to use digital technology to innovate on their own behalf, building solutions that the established software-development community never considered.
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HAPPY NEW YEAR!
Large crowds turned out for spectacular firework displays and countdown parties across Macau, as the New Year was welcomed in with a bang. From the peninsula to Cotai, the choice was nothing if not plentiful, with casino-organised celebrations, government-sponsored shows and bashes being held at several bars and nightspots. The goal was simple: to party the night away and celebrate the arrival of 2013.
Taipa Houses-Museum
Venetian Macao
Venetian Macao
MGM Macau
MGM Macau
Sai Van Square
Grand Lisboa JANUARY 2013
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Moments
FUN PACKED NIGHT The American Chamber of Commerce in Macau held its annual blacktie ball last month, gathering around 600 guests. The Venetian Macao’s ballroom was transformed into New York City’s famous Apollo Theatre, home of the greatest African-American music, for this gala event, which featured the Grammy Award-winning Commodores as the main attraction. A portion of the proceeds of the ball once again went to support the American Chamber of Commerce scholarship programme for students from Macau studying in U.S. universities.
A fun crowd
Winnie Ku, Gregory Ku, Jeff Wong, Edward Law, Martin Chow and Henry Han The Commodores in action
Thomas Wyatt, Kim H. Johnson, Mason Chan, Steffi Chan, Maygi Chan and Andy Chan
Carolyn Choy, Patrick Choy and Iun In Chan JANUARY 2013
Donna Cunha Santos, Filipe Cunha Santos and The Commodores
Garrick Choi and wife
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Grant Bowie, Robert McBain, Lynda Hidayati, Barbara Finamore and U.S. consul-general Stephen Young
Echo Chan, Ambrose So, Christine So, Diana Chui and José Chui Sai Peng
Anakin Wong, Sabrina Kuan, Maria Diana Wong, Helen Fong, Penny Lei and Alan Chan
Glenn Shive and Anne Carver
Paul Tse, Pauline Tse, Rita Santos and José Pereira Coutinho
Edward Tracy, Manuel Joaquim das Neves and Carla Coteriano JANUARY 2013
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THE OTHER SIDE OF LUXURY
The One Central shopping mall hosted the French exhibition “Lux Inside” last month, an insight into luxury consumer goods using 3D medical imaging technology. Journalist Laurence Picot, in partnership with artist Ricardo Escobar, cardiologist Jean-François Paul and 3D programmer Sylvain Ordureau, first conceived the digital art and photography project in 2010. Alongside the pictures, several of the luxury items portrayed were also on display. Macau was the first place in Asia to welcome the exhibition, the result of a three-way partnership between Alliance Française de Macao, the One Central complex and the Charity Association of Macau Business.
Some of the luxury items on display
Leica M8 digital camera
Officiating guests at the inauguration ceremony
Cadolle corset
French consul-general Arnaud Barthélémy
Paulo A. Azevedo Rémy Martin Louis XIII cognac
Laurence Picot explains the concept behind the exhibition to guests JANUARY 2013
Hermès Talaris saddle
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New Year’s resolutions A fresh year has begun but several hoary old issues remain unsolved in Macau. To welcome in 2013, Frozen Spy suggests the government to make five sweeping New Year’s resolutions, to change the city for the better
HOMES, SWEET HOMES To introduce a special levy on the purchase of second homes The imposition of such a levy was one of the first measures taken in the mainland to curb real estate prices. It has not been done here. The government could also sharply increase the property tax on unoccupied homes, prodding the owners either to let or sell them. The absence of restrictions on buying second and third homes seems to benefit only developers and speculators, not the public.
SIXTEEN SEASONS To make a final decision on the Four Seasons apartment hotel in Cotai The soap opera on whether Sands China Ltd will be allowed to sell the apartments has run on too long. What seems most unusual is why a five-star apartment hotel has lain empty for more than four years when the city needs both more hotel rooms and more homes.
PRICEY ROTTEN TOMATOES To push ahead with the liberalisation of imports of fresh food The government wants to open up the telecommunications and cable television markets to competition but has no similar plans for the market for imported fresh food. Is it because stateowned conglomerates have cornered the market? One thing is certain, the status quo does little to help ease inflation.
SHROUDED IN DARKNESS To come clean on the night market project The government is suddenly very keen on building a night market around the Sai Van Lake. It was quick to dismiss other sites, such as the Nam Van Lake or Fisherman’s Wharf, which many say are better-suited for the project. Since the night market is meant to give tourists some extra evening fun, Frozen Spy wonders why officials didn’t consider building it in Cotai, where many mass-market visitors stay. The government needs to come clean on who will profit from this project. For sure, not residents who like to take an evening stroll along the shore of Sai Van Lake.
DYSFUNCTIONAL CONSTITUENCIES To make public the criteria used by the chief executive in choosing his appointed legislators A new Legislative Assembly will convene sometime during the fourth quarter of this year. Unlike previous times, the criteria that the chief executive uses in choosing the seven members he appoints should be made public, in order to boost transparency. It would also be good to see some true competition for the seats for indirectly elected members. Let’s hope that the main associations won’t again cook up ‘consensus’ results behind closed doors. That would not be good for a city that is struggling to clean up its reputation.
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January 2013
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