MB 91 | November 2011

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Economy & Finance 25 Survivor Macau There are still a few success stories in the city’s dying manufacturing industry

MB Report 34 2012 Policy Address What do lawmakers expect from the government for next year?

Politics 40 Chui times two Legislative Assembly vice-president Ho Iat Seng says chief executive Chui Sai On should be reappointed in 2014

Survey 44 A bare pass The Macau Business Quality of Life Report points out people are not so impressed by the government’s performance

Property 50 Market watch Real estate agents worried about impact of economic housing on the private real estate market

Transport 54 That sinking feeling More than 300 creditors claiming a total of HK$200 million from bankrupt Macao Dragon NOVEMBER 2011

CEO Interview 56 Sheldon Adelson Sands China Ltd. chairman wants amicable solution for dispute with government over Cotai parcels seven and eight

Gaming 66 Billions race Gross gaming revenue reaches a new all-time high 69 Trying to keep up Slots revenue increasing below market average 70 Stock watch Gaming stocks rebound after a bad September 74 The cap fits Gaming industry still has table capacity to spare under the 5,500 cap 76 Crystal clear Nasdaq-listed Asia Entertainment and Resources Ltd. says junket business is transparent

MICE 80 Powerhouse potential Industry players confident that Macau can become a leading events destination although numbers indicate otherwise 82 Crowds and cash International Trade and Investment Fair attracts more visitors and deals


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Technology 90 Apple flavoured Apple products are thick on the ground in Macau

Lifestyle 92 Liquid market The most expensive cognac in the world is available at MGM Macau

Arts & Culture 94 Modern masters Modern art from a pair of contemporary Asian painters on display at the Tap Seac Gallery

Corporate Social Responsibility 96 Charity hole-in-one The fifth Annual Macau Business Charity Golf Tournament is a great success

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Special 111 Grand Prix Your guide to Macau’s biggest sport event

Opinion 08 From the publisher’s desk Paulo A. Azevedo 11 Editorial Emanuel Graça 24 Dazzling obfuscation José I. Duarte 33 Good data, bad times Keith Morrison 37 Rumble to a roar Bill Kwok-ping Chou 78 What a surprise! David Green 87 A game everyone loses Gustavo Cavaliere 109 The water hegemon Brahma Chellaney


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Out of excuses ONLY SOMEONE COMPLETELY CLUELESS ABOUT public affairs would accept the lame excuses some officials provide for their actions, or the lack of them. Recently, the Commission of Audit scolded the Health Bureau for the absence of long-term human resources planning. It added that, throughout the entire audit process, the bureau showed an “absence of clear knowledge of the role it’s supposed to play”. The director of the Health Bureau, Lei Chin Ion, did what everyone else does in these circumstances: he used the inexcusable to excuse himself. He said that lack of experience was to blame because no one was expecting Macau to grow so much, so fast. These excuses are as predictable as they are irritating. They show the lack of respect with which officials treat us, to say nothing about how they flagrantly attempt to deceive us. It is true that Macau has grown tremendously. It has been said countless times. Along with many others, Macau Business has also warned that the “growth excuse” has not been valid since 2005.

Only someone blind, incompetent or hopelessly aloof could have missed the path Macau was following. This is not a recent phenomenon. Curiously, while the public hospital is sick, private hospitals reinforce their positions, largely due to the millions of patacas in grants provided by the public purse. Despite being lucrative institutions, they benefit from vast public support. Some advantages are truly unique. The latest episode involves the Macau University of Science and Technology, a private institution. The government, which gave land to the university free of charge for its campus – not to mention countless friendly grants and subsidies – inaugurated an emergency room located on the institution’s grounds, as part of the public health network. The location of the new emergency room is strange enough, since it is beside the university hospital. But the fact that the government has to pay almost MOP1 million (US$125,000) per month to rent a space that it gave to the university for free comes as a

The pressure on several areas in Macau is immense, as is demand. Our opinion is that the city is still unable to cope because there is no political courage and no ability to think outside the box

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surprise only to those not familiar with the intricacies of Macau logic – the logic of cronyism and lack of decorum.

Myopia, mismanagement Unfortunately, Mr Lei’s blatant lack of vision is not unusual among officials. We feel sorry if chief executive Fernando Chui Sai On wants to take the territory to a level of service excellence. For starters, the apparent disinterest from the police regarding the awful skills of drivers and the absence of civility on the road can only be compared to the laxness that guides the Traffic Affairs Bureau. Only now, when traffic is practically at a standstill due to an excessive number of vehicles is an annual growth limit for the number of cars being established. Don’t even get us started on the lack of vision when it comes to human resources. The apparent irresponsibility with which the importation of skilled manpower is being hampered is vulgar, to say the least. Maybe those professionals are unnecessary, since we don’t need good workers coming to Macau in order to find out how bad those we have are. A few days ago, a lighting expert told a local Portuguese language newspaper Macau that needs a lighting

plan. Now, here’s something to start our day with some humour. We are already lacking plenty of plans, so what’s the problem with one more? To be quite frank, this lack of vision is a karma that Macau has dealt with almost since its foundation. It is no wonder that, according to the Institute for Tourism Studies, the tourist satisfaction index is falling. It is beyond obvious. The pressure on several areas in Macau is immense, as is demand. Our opinion is that the city is still unable to cope because there is no political courage and no ability to think outside the box. Still, it is not all bad news. There is hope on the horizon. The long awaited bill on urban planning is going to be brought to public consultation. We do not need to tell you that we feel these public consultations are tainted from the get-go. We even dare to suggest that to a large extent they only exist to give a democratic appearance to public affairs management. In other words, we suspect the results are already cooked. But it’s fine, as long as the results to be imposed as those allegedly decided by the majority are the best for the common good. Well, you know what to expect, right?

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VOL.1 Nº91

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

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

Executive Director Business Development Luis Pereira pereiraluis@macaubusiness.com

Property Editor Alan Tso tsoalan@yahoo.com.hk

Senior Analyst José I. Duarte jid@macaubusiness.com

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Photography António Mil-Homens, Carmo Correia, Greg Mansfield, Gonçalo Lobo Pinheiro, John Si, MSP Agency, Agencies

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Letters to the editor

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

Illustration G. Fox, Rui Rasquinho

Exclusives Gambling Compliance, Hoje Macau, Project Syndicate Printed in Macau by Welfare Ltd Published every month in Macau. All Rights Reserved. Macau Business magazine is a media product of De Ficção - Multimedia Projects Disclaimer: In Macau Business magazine, the translation of MOP amounts into US$ amounts (and vice-versa) is made at the rate of MOP 8 to US$1 for the purposes of illustration only.

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 NOVEMBER 2011


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Emanuel Graça Editor-in-Chief

emanuel.graca@macaubusiness.com

Low expectations

The policy address has to be regarded as more than a handout, a Happy Halloween moment when the chief executive indiscriminately dishes out sweet treats in the form of cheques and subsidies

THERE ARE PLENTY OF REASONS WHY expectations could not be any lower ahead of the 2012 Policy Address, to be delivered by chief executive Fernando Chui Sai On later this month. Mr Chui and his cabinet have failed to break the status quo during the almost two years they have led the territory. To date, there have been no major breaks from the core policies laid out by Edmund Ho Hau Wah’s government. That should not surprise anyone greatly, since the top officials from Mr Ho’s leadership remain in place. Stagnant leadership has meant that Macau’s major headaches – inflation, rising housing prices, poor transportation and insufficient social welfare – remain unsolved or have become worse. From a broader perspective, these issues point towards a creeping inequality in Macau. Solving these problems is far from easy. They are intertwined, creating a much bigger, complex equation to resolve. The government’s response has so far been lacklustre because it fails to understand this. Officials continue to push the same tired formulas introduced years ago, not understanding that the city’s economic and social fabric has evolved at a breakneck speed. It is a realisation that contradicts Mr Chui’s pledge during his uncontested race to become the SAR’s leader in 2009. His platform was “continuity and innovation”. Almost two years into power, Mr Chui has promoted continuity a lot and innovated very little. While he pushed some adjustments to the political system, they were mostly cosmetic moves. In terms of content, nothing new has been put forward. With a government lacking imagination to innovate, the city is left in a strange situation: Macau has piles of money to dish out but does not know how to spend it. Worse still, we do not know how to properly invest our surpluses to reap handsome profits to use in the future.

Not good enough

Looking at the world around us, Macau residents can rightly feel fortunate. The territo-

ry’s former ruling power, Portugal, faces huge budget cuts that will see civil servants lose benefits and private sector employees working longer hours. In the United States, the scenario is also gloomy. The world’s biggest economy is still a far cry from recovery. Even in the mainland, the latest data is hinting at a slowdown in growth, although economic expansion is still high by any standard. Bearing this in mind, shouldn’t we in Macau be very thankful to the government? No. The gambling-led economic boom has run wild and is not benefitting the entire city. Some say they are worse off because inflation has outpaced their income or because they need to burn the midnight oil on a daily basis to make up for the mismanagement of human resources. As a wealthier society, we are entitled to demand more from the government. Political debate should no longer be silenced by throwing money at problems and by one-off measures, but should instead have a holistic approach to development. Very few people expect that this will happen in the 2012 Policy Address. Most discussion has been centred around the number and value of cash handouts to be announced, or the possibility of a wage increase for civil servants. While these issues are important, they must not prevent us from looking beyond the short term. The policy address has to be regarded as more than a handout, a Happy Halloween moment when the chief executive indiscriminately dishes out sweet treats in the form of cheques and subsidies. It should be a period of reflection about the SAR’s standing and about which path to follow for a better future. That has not been the case with Mr Chui’s two previous policy addresses, which were mostly dull and came with few forward-looking plans. While it is expected Mr Chui’s spin-doctors will draft at least some cunning surprises to include in the upcoming policy address, expect little to change. NOVEMBER 2011


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Litter marketing I don’t understand why the government has allowed “litter marketing” to invade our society. Can anyone explain? In far too many places, Macau pavements and passageways are littered with large quantities of leaflets, cards containing pictures of girls and other marketing detritus. Pretty girls in uniforms denoting their allegiance to one casino or another thrust most of these upon arriving visitors, who carry them no more than 20 metres before they discard them; on the ground, of course. This is not only a significant waste of money, but also has a significant adverse effect on the environment both in terms of production and disposal. Why does the government allow this? I am sure that the Tourist Office does not want to see Macau portrayed as not only a dirty city, but also as a place where certain types of ‘spas’ offer ‘questionable’ activities and freely advertise their wares. It would be nice to see special litter wardens, in clearly identifiable uniforms, standing a few metres behind the distribution points, with clearly identifiable containers to collect this detritus. So how could litter collection be financed? How could litter marketing be discouraged? It’s very simple. Impose a tax – say MOP1 – on every item of material distributed in this manner. Collect the tax at source, i.e. the printer, so as to ensure the collection and no avoidance. Based upon the level of litter we can see every day, the collection is sure to be selffinancing! With 9,000 people unemployed there will be no problem in finding the necessary staff. This would have a not inconsiderable side effect, as any reduction in unemployment will help those employers who are seeking qualified expatriate staff, the recruitment of whom is obstructed by the Human Resources Office citing the number of unemployed locals as an excuse. Can anyone explain? I don’t understand. Roy Goss

Write a letter to the editor To submit a letter to the editor e-mail editor@macaubusiness.com with the subject “Letters to the Editor”. Letters may also be sent by regular mail to this address: Letters to the Editor, Macau Business, Block C, Floor 9, Flat H, Edf. Ind. Nam Fong, No 679 Av Dr Francisco Vieira Machado, Macau. Please include your full name, address and a telephone number for confirmation purposes. Letters should be 200 words or fewer and all are subject to editing. NOVEMBER 2011


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CORRUPTION ALERT BY U.S. CONGRESS

NO SLOWING DOWN HERE Macau should post a strong growth rate for the third quarter of 2011, says Francis Tam

The secretary for economy and finance, Francis Tam Pak Yuen said Macau’s economic growth for the third quarter of 2011 should stay at the same levels recorded in the first half of the year. Official figures will be released at the end of this month. For the first six months of 2011, Macau’s GDP increased by 22.9 percent in real terms year-on-year. Mr Tam said the city should post a two-digit economic growth for the overall 2011. He added that although there has been a lot of instability in international markets, business levels during the National Day Golden Week were “better than expected” in terms of visitors, retail sales and the hospitality industry. Mr Tam stressed the government would continue to monitor the international financial instability and its potential impact on Macau.

MACAU NOT TRANSPARENT ENOUGH: INDEX Macau is ranked 23rd on the 2011 Financial Secrecy Index, released last month. The territory has been assessed with 83 “secrecy points” out of a potential 100, which places it towards the top end of the secrecy scale. Switzerland was ranked number one as the most opaque jurisdiction in the world, while Hong Kong is listed fourth. The 2011 Financial Secrecy Index focuses on 73 so-called “secrecy jurisdictions”. The ranking uses a combination of each jurisdiction’s secrecy score, which measures 15 key indicators, and a scale weighting based on its share of the global market for offshore financial services. In the previous report, issued in 2009, Macau was ranked 29th overall. London-based Tax Justice Network, an independent organisation launched in the British Houses of Parliament in March 2003, organizes the Financial Secrecy Index.

The latest report from the U.S. Congressional-Executive Commission on China says “corruption in Macau is a major and growing problem.” The document released last month notes that Macau’s ranking on the Transparency International Corruption Perception Index dropped from 43rd in 2009 to 46th in 2010. “The growth of gambling in Macau, fuelled by money from mainland Chinese gamblers and the growth of U.S.-owned casinos, has been accompanied by widespread corruption, organized crime and money laundering,” the report says. The document encourages members of the U.S. Congress and administration officials to arrange for regulatory experts from American states with gaming industries, such as Nevada, “to provide technical training and assistance to Macau authorities on how to control criminal activity and ensure that U.S. casino owners and operators in Macau are adhering to the highest standards for the gaming industry.”

HUMAN TRAFFICKING CASES DOWN The number of human trafficking cases logged in Macau is going down, local authorities say. The head of the Human Trafficking Deterrent Measures Concern Committee says there have been 42 cases detected since 2007 and until August, involving 58 victims. From January to August, Macau recorded nine cases of human trafficking, involving nine victims. In overall 2010, the number of cases busted reached 14, with 25 victims detected.

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BUSY PHONE LINES Macau leading in cell phone subscriptions per capita

Macau has become the place in the world with the most cell phone subscriptions per capita. According to data from the International Telecommunication Union, Macau had 206.43 cell phone subscriptions for every 100 people in 2010 – roughly two subscriptions per person. Hong Kong is ranked number two (190.21), followed by Saudi Arabia (187.86). The 2009 leader, Montenegro, is now fourth on the ranking, with 185.28 mobile subscribers. The high number of cell phone subscribers in Macau is easily explained by the thousands of tourists that flock to the city every day, many of whom buy prepaid cell phone cards to use during their holiday.

FLY FURTHER

ELECTRICITY PRICES STAY PUT Electricity utility CEM announced it would not raise its prices during the fourth quarter of 2011. The company said the move was “to alleviate the impact of Macau’s high rate of inflation on people’s livelihoods,” particularly for the residential and small and medium enterprises customers.

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The Macau International Airport has launched a new promotion to present medium/ long-haul routes. The goal is to offer passengers long-haul connection flights departing from Macau to countries such as the United States, Canada, Germany and Australia. Airlines joining this campaign include Air Macau/Air China, EVA Air, Air Asia and Philippine Airlines. Passengers can depart from Macau and transfer via Beijing, Taiwan, Kuala Lumpur and Manila with luggage checks through to destinations such as Los Angeles, San Francisco, Vancouver, Munich, Frankfurt, Melbourne, Perth, New Delhi and Guam.

CTM REVENUE UP ALMOST 50 PERCENT Telecommunications provider CTM recorded revenue of MOP1.95 billion in the first half of 2011, up by 47.2 percent. According to Portugal Telecom’s first half 2011 report, CTM’s earnings before interest, taxes, depreciation and amortisation (EBITDA) for the first six months of 2011 stood at MOP680.3 million, a year-on-year jump of 16.0 percent. EBITDA margin stood at 34.9 percent. Revenue growth was driven by an increase in equipment sales and telecom services to corporate customers. Portugal Telecom has a 28 percent stake in CTM.


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MONEY PROTECTED Government announces deposit protection scheme

The Macau government has introduced a deposit protection scheme bill. The bill proposes to compensate depositors up to a maximum of MOP500,000 (US$62,500) in the event of a bank failure. Macau already has a similar scheme in place, but it is only temporary. To finance the deposit protection scheme, a special fund would be set up. The government proposes to allocate MOP150 million to the fund, while local banks would also need to pay an annual contribution of 0.05 percent of the amount of protected deposits held. The bill is already under discussion by the Legislative Assembly.

MACAU AND JAPAN CLOSER RETAIL TRADE The Macau-Japan Chamber of REVENUE SOARS

Commerce was officially launched last month. The newly established chamber is pursuing to attract more investments from Japan. “Japanese companies will be very much interested in expanding business relations with Macau,” Yuji Kumamaru, consul-general of Japan in Hong Kong, told reporters. Mr Kumamaru also suggested the establishment of daily flights from Macau to Japan to boost investment and trade. Macau-Japan trade for the first eight months of 2011 stood at MOP2.5 billion, similar in comparison with one year ago.

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Macau’s retail industry saw its revenue surge by 29 percent year-on-year in 2010, to MOP29.75 billion (US$3.7 billion), according to the Statistics and Census Service. The retail trade excludes motor vehicles, fuel and repair of personal and household goods. At the same time, expenditure reached MOP25.96 billion, up by 26 percent. In 2010, there were almost 5,800 establishments operating in retail in Macau, more 410 than in the previous year. During the same period, those working in this sector increased by 7 percent, to around 22,800 people.

THE GOOD AMERICAN FRIEND U.S. consul general Stephen Young last month stressed the contribution of American companies and investment to Macau’s current economic boom. “The United States is playing an important and helpful role in contributing to Macau’s development – both through the investment of capital, but more importantly, through the investment of expertise and experience,” Mr Young said. He stressed this contribution is present not just in gaming, but also in other sectors of the economy, especially the leisure, tourism, and travel markets, as well as in the educational sector.


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MORE PEOPLE USING THE AIRPORT The Macau International Airport’s passenger traffic volume continued to grow in September. Passenger traffic increased 5.2 percent compared to same period last year to 325,000, the airport said. Traffic growth was mainly driven by passengers from the mainland and Southeast Asia, which recorded an increase of 21 percent and 8 percent respectively compared year-to-year.

DEPOSITS OUTPACE LOANS Total deposits with the banking sector grew 1.5 percent in August from a month earlier to MOP389.4 billion (US$48.7 billion), the monetary authority said. Concurrently, domestic loans to the private sector grew 1.2 percent on a monthly basis to MOP161.0 billion. On the other hand, external loans dropped 2.7 percent to MOP153.6 billion. As deposits grew faster than loans, the loan-to-deposit ratio fell 1.8 percentage points from the previous month to 80.8 percent.

GOVT SURPLUS WIDENS The Macau government surplus continues to expand, according to the Financial Services Bureau. A fiscal surplus of MOP56.09 billion (US$7 billion) was recorded in the first nine months of 2011, up by 77.4 percent year-on-year. Up to September, total public revenue rose by 45.9 percent, to a total of MOP81.43 billion. By the end of August, the Macau government had already achieved its budgeted revenue goal for the full year MOP70.2 billion.

FOREX RESERVES RISE

Macau’s foreign exchange reserves amounted to MOP246.8 billion (US$30.8 billion) at the end of September, according to preliminary estimates from the monetary authority. The reserves rose by 3.3 percent from the revised value of MOP238.9 billion for the previous month. When compared with a year earlier, the reserves increased by MOP77.2 billion or 45.5 percent.

MACAU INVESTS LESS IN THE MAINLAND

REAL ESTATE MANAGEMENT EXPENSES SOAR The real estate management sector expenses increased at a much faster pace than revenue in 2010, according to data from the Statistics and Census Service. Last year, the sector’s total expenditure amounted to MOP710 million (US$88.75 million), up year-on-year by 13.6 percent. Revenue increased by 4.1 percent, to MOP830 million. In 2010, there were 177 real estate management establishments in Macau, an increase of six over 2009. The number of persons engaged in the sector increased by 11.6 percent to 4,900.

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Macau’s investment in the mainland fell 11.4 percent yearon-year during the first eight months of the year, to US$430 million (MOP3.44 billion). Mainland authorities approved 189 Macau-related investment projects during the period, a year-on-year increase of 16.7 percent, according to the National Development and Reform Commission. From January to August, Macau’s exports to the mainland totalled US$110 million, a rise of 63.3 percent from one year earlier.


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SHINY GOLDEN DAYS Macau logged a strong National Day Golden Week holiday (October 1-7), with gaming revenue, tourists and occupied hotel rooms all up

SOURCES: MACAU GOVERNMENT TOURIST OFFICE, MACAU INTERNATIONAL AIRPORT, LUSA NEWS AGENCY

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

Dazzling obfuscation IT IS TIME FOR THE GOVERNMENT TO MATCH WHAT IT SAYS TO ACTION, AT LEAST ON ENVIRONMENTAL ISSUES f we browse the media and pay attention to the statements produced by government officials, we may easily conclude that environmental issues are at the forefront of public concerns. But, as pointed out in this column previously, Macau still has an agenda for a wide-ranging legislative effort, set out in its environmental policy framework law. The law had its 20th anniversary this year. That so little has been achieved in terms of the subsidiary legislation that the environmental policy framework law calls for, while declarations of concern and commitment have been continually forthcoming, does little to increase the standing of the government on these matters. One must acknowledge, however, that the bureau responsible for these matters has been trying to bring forth discussion of new legislation and policies. Even if one has reservations about the way some things are done – or the contents of some of the published documents – those efforts should be noted and supported. In that spirit, I suggest more vigorous action could be taken and stricter standards adopted on two matters of direct and immediate relevance without too much delay. Should this happen, the government’s assertion of its commitment on these matters would become more credible and the political and technical kudos of the departments concerned would be enhanced.

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Let there be dark The two topics are environmental impact assessments, as they apply to big projects, and light pollution. Both are addressed in the environmental policy framework law. The environmental policy framework law requires environmental impact assessments to be made whenever any action is expected to have significant effects on the environment or the quality of life of residents, and no project likely to have such effects can be approved without one. As far as most of us are aware, no big private development or public works initiated in recent years – and there have been many – underwent an environmental impact assessment. If they did, the results were neither made public nor had any practical influence on the granting of approval. By the way, does the

As far as most of us are aware, no big private development or public works initiated in recent years – and there have been many – underwent an environmental impact assessment

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government make environmental impact assessments on its own projects? As for light, the existing law covers two aspects: the shape and size of buildings and the shadows that they cast on their surroundings and the effect of artificial light coming from a building on neighbouring residential areas. I will focus only on this second aspect. One would have to have one’s eyes shut tightly not to notice the effects of artificial light. The Environmental Protection Bureau has some technical recommendations about environmental impact assessments and issues of light on its website. So these topics are deemed of sufficient relevance to warrant the publication of recommendations on how to carry out environmental impact assessments and about the effects of artificial light. The lack of formal regulation does not arise from lack of awareness of the importance of these topics. But even the recommendations raise some questions. First, what legal weight do they carry? Little, it seems, if any.

Over the limit A refusal by any developer to conduct an environmental impact assessment would put the government in a difficult position. Probably, most developers, if required to produce some kind of document, would deliver something vaguely similar to an environmental impact assessment, just for the sake of saving face all round, one presumes. But would the government be in a position to impose specific technical requirements or to force the adoption of preventative or mitigating measures? As for light pollution, has the government made any study of the situation, and does it monitor it? For the record, the technical recommendations issued by the Environmental Protection Bureau state that light entering windows from neighbouring residences should not exceed four lumens. Is the government willing to take any action in the many cases where the light exceeds the limit? So we have a law that is not enforced, coupled with recommendations that may not be followed. This situation is not good for the credibility of the government and does nothing to increase its authority. However, I think it is relatively easy to improve the situation. While it is developing more comprehensive legislation, nothing prevents the government from adopting technical regulations that conform to internationally adopted standards on these matters. These standards can be obtained easily and will, in all likelihood, be a point of reference for any future laws. This would allow official bodies to carry out their obligations properly and give them the ability to enforce norms consistently. And it would reduce the risk that, when new legislation finally appears, it is already mostly irrelevant – owing to most of the projects to which it is supposed to apply either being in progress or completed, or to the cost of enforcing it retrospectively being prohibitive.


Economy & Finance

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Photos: António Mil-Homens

SURVIVOR MACAU Hundreds of local factories have shut down since the heyday of Macau’s manufacturing industry, but there are still a few success stories


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Economy & Finance

fficial statistics over the past two decades have pointed to the continuing decline of Macau’s manufacturing industry, which was once the main pillar of the economy in its most glamorous era, the 1980s. In 1992 there were about 1,900 manufacturing establishments in the city, but the latest data available from the government shows the number had shrunk to 905 in 2010. And it is generally believed that the trend is unlikely to be reversed, unless somebody steps in. However, there are some exceptions to the trend, and factories have shown they can survive in a not-so-favourable business environment – the result of high operating costs and a lack of manpower – and still label their goods “Made in Macau”.

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The Lee Fu garment factory was founded in 1987 in one of the industrial buildings in Areia Preta. About eight years ago the owners opened a factory in Doumen in Zhuhai, on a 24-hectare site, and this has become the company’s primary production base, with close to 1,000 employees. Meanwhile, the twostorey establishment in Macau has shifted its function to that of a back office and a secondary production base, where processing is done. In 2005 the international garment trade quota system, which had benefited Macau’s manufacturing industry for about 40 years, was abolished. Since then local factories have been obliged to compete with those in developing countries that can offer lower export prices.

PESSIMISM PREVAILS I

n the second quarter of this year only 37.0 percent of Macau’s manufacturers were optimistic about the region’s exports in the subsequent six months, an official survey released by the Economic Services Bureau indicates. The second-quarter figure is 9.8 percentage points below the preceding quarter’s. Fewer than 1 percent of exporters expected exports to increase strongly in the subsequent six months, while 26.9 percent of manufacturers thought exports would slow. The survey indicates that 75.2 percent of manufacturers felt challenged by increases in the cost of materials in the second quarter, that 66.8 percent felt impacted by stiffer international competition and that 69.1 percent were troubled by a shortage of labour. NOVEMBER 2011

Lee Hon Seng, who took charge of the family business this year, says the shortage of labour and rising costs in Macau were other reasons for his parents moving Lee Fu’s main production line to the mainland. Lee Fu is not the only garment factory to have adopted this strategy to stay in business, Mr Lee says. “Macau is no longer suitable for the manufacturing industry, which has to be in places where salaries are low, manpower is easy to get and operating costs are low, such as in developing countries,” he says. “If the factories hadn’t moved to the mainland at that time, I believe many of them would have already closed down by now.”

Low-hanging fruit In the 1970s and 1980s, garment-making was a leading industry in Macau, Mr Lee recalls. “Many people established factories at that time because basically they could already break even if they could receive one order, so the profit was very high.” Wealthy customers in developed economies got to know about the factories in Macau and began to place orders with them. “In the beginning we could make a gross profit of MOP80 [US$10] for each ... garment we exported, but


27 some time later the companies realised that our production cost was actually very low, so they started to bargain with us and at last they didn’t even want to let us earn a gross profit of MOP10,” says Mr Lee. Export sales remain Lee Fu’s main source of revenue and most of its customers are in the United States. So business is inevitably swayed by the economic environment abroad. Mr Lee says that at the beginning of the 2008 international financial crisis his factory received fewer orders and had one customer that went bankrupt and was unable to pay a bill of several million patacas. But he says that in spite of the recent problems in the U.S. and European economies, Lee Fu’s export volume has grown at an annual rate of 10 to 20 percent, owing to “the stable source of customers and long-term cooperation with them, and also the assurance of quality and accurate shipment schedules”.

“Macau is no longer suitable for the manufacturing industry, which has to be in places where salaries are low, manpower is easy to get and operating costs are low, such as in developing countries,” says the boss of Lee Fu garment factory

far from bright. But he does not think Macau brands will appeal to mid-market or high-end buyers.

Does anybody care? “If two tops both sell for MOP3,000, would you buy Armani or the Macau brand?,” he asks. “Our production technologies and quality, reputation, cutting and fabrics can’t be compared to those in Western countries.” Nevertheless, Mr Lee is optimistic about his family business, believing that its business model, with Zhuhai as the primary production base and Macau as the secondary base – can be sustained for “a period of time”. Lee Fu produces

Feel the quality Mr Lee launched the company’s own Joueur brand this year in an effort to adapt to the highly competitive business environment. “One of the survival strategies for operating a garment factory nowadays is to launch your own brand,” he says. The summer collection was sold in some shops in Macau and the mainland, and the in-house designer is now working on the winter collection. “For each polo shirt we produce, based on an order, we can probably make MOP3, and the gross profit is limited. Yet if we develop our own brand we can control how much we can earn,” Mr Lee says. A showroom of Joueur clothing will open in Lee Fu’s Areia Preta factory this month, and each item will have its retail, wholesale and group-buying price. “Clothes are a necessity but people don’t need to buy them frequently, so how can we make our products keep selling? We need to have an excellent selling point and make our customers believe that buying our clothes in the showroom is a catch,” he says. Some local businesspeople say the only chance for survival is the creation of successful quality brands, and the Industrial Association has been pressing for the promotion of Macau products in the mainland. Mr Lee agrees that this could be the way forward for manufacturing, the future of which is otherwise NOVEMBER 2011


28

Economy & Finance

over one million garments annually. The orders it has on hand will keep it working into 2012. Mr Lee says it is too soon to say whether he will shut down the Macau operation some day, but he is sure that it will not be expanded. Asked if he would like manufacturing to get further support from the government, he replies: “It will depend if the government still needs and cares about this industry, besides gaming.” He has no comment about the Zhuhai-Macau cross-border zone, created by the government in 2003 to support local manufacturing. And Mr Lee has little faith in the industrial park being built on Hengqin. He suggests that the lack of residents and labour on the island will hamper the park. In the first nine months of this year Macau’s merchandise trade deficit was MOP39.57 billion, 49.5 percent more than in the corresponding period of last year. The chairman of the Macau Importers and Exporters Association, Tsui Wai Kwan, told the press last month that with local manufacturing continuing to go downhill and demand veering toward the high end of the market, with consumers craving Swiss watches, Italian or French fashion and German cars, the value of Macau’s exports would eventually shrink to one-ninth of the value of its imports. That day is nigh. In the first nine months of this year the value of exports was already only 11.3 percent of the value of imports.

Scoop of success Mr Tsui argued that a kind of equilibrium in the balance of trade is maintained by service exports – that is, what visitors spend here. Nevertheless, Mr Tsui’s association is planning to get Macau into the re-export business, in view of the size of the mainland market, he disclosed. The businessman-cum-legislator

said turning the city into a “trading platform” would become government policy. While Macau’s other merchandise exports are shrinking, the Kai Kong ice cream factory would very much like to begin selling its Macao Dairy-brand products abroad. Yet the high cost of food safety tests prevents it from doing so. The general manager of the 30-yearold company, Chamson Cheong Hon Kei, says he has met a lot of businesspeople, most from Hong Kong and the mainland, who were amazed by the fact

SLOW DEATH M

acau’s manufacturing sector has been collapsing for many years. Last year, the city lost 10 percent of its manufacturers and the number dropped to 905 – falling below 1,000 for the first time in decades, according to official data. Worse still, the sector lost almost one quarter of its labour force, which dropped to 13,600. In 1992, the figure was well above 50,000. The value of industrial production fell by 25 percent to MOP5.8 billion (US$725 million). That is only about one-quarter of what local casinos raked in in gross gaming revenue in September alone. Most manufacturers in Macau are small companies – eight out of nine had fewer than 30 employees in 2010. Only 29 had 100 workers or more. NOVEMBER 2011

that ice cream is made in Macau and were interested in importing it. But the factory cannot afford the various tests on dairy products that are required to obtain a certificate declaring they are safe enough to export. “Each product has to pass at least four to five different bacteria tests and each of these tests costs about MOP1,000,” he says. The government started this year to subsidise 60 to 70 percent of the cost of safety tests on products made by local food processors. But Mr Cheong says that since ice cream is a high-risk product, it must undergo more testing than other products, which increases the cost.

Sense of history “Usually, when a customer orders our ice pops, they won’t only order one of the flavours but all five of them. Then they will also order ice cream cups, which have nine flavours, the ice cream sandwiches and also the ice cream cones, with six flavours each. That means – even after sponsorship – the testing alone will still cost several tens of thousands, excluding


29

the transportation fees,” he says. “If we didn’t have this problem, exports would certainly be a great help to our business.” Kai Kong has about 12 full-time and part-time employees. Some have worked in the company for over 10 years. With more than 100 customers – grocers, restaurants, hotels and schools – the factory could do with more manpower, Mr Cheong says. But finding it is another big challenge. “We used to have young people who came to work for us, but soon after we had taught them the skills and knowledge, they quit and changed to another job,” he says. “Small and medium-size enterprises are actually helping big companies to train people.” The founders of the Macao Dairy brand, a husband-and-wife partnership, used to make and sell ice cream in a shop in the São Lázaro parish. But stricter regulations meant they had to move production to a proper factory in Areia Preta. The company almost had to close in 2008 as the couple’s children, who had

just returned to Macau after finishing their studies abroad, showed no interest in the family business. Local businessman Ip Sio Man eventually bought the business as he wanted to preserve Macao Dairy as one of the few Macau brands with over three decades of history, Mr Cheong says. “Macau isn’t an industrial city and therefore any domestically made products are very special and valuable,” he says.

Falling like ninepins In the face of stiff competition, the company thought of improving the factory and buying a large production line, Mr Cheong says. But this would have entailed expanding the factory or moving to a bigger one. And that would have meant having to apply for a new factory licence. “It’s impossible to know how long we will have to wait and also to suspend production before the license can be acquired,” he says. Mr Cheong says Kai Kong is observing the development of the Hengqin industrial park but is also concerned

about how much investment would be required to move there. If the company can, it will. “I think we will move to Hengqin because of the bigger space, improved business development potential and reduced operating costs.” He says the company thought of moving to the Zhuhai-Macau cross-border zone but that labour and factory licence obstacles prevented it from doing so. Mr Cheong agrees, up to a point, that Macau’s manufacturing industry is in decline, but he is not particularly worried about his ice cream factory’s future. “We have to have confidence in ourselves, and as long as we are willing to put in effort then it should be okay.” Lee Fu and Kai Kong are just two of the factories that have managed to stay in business in Macau, where the fate of manufacturing is no longer a big concern among politicians. Yet, several factories Macau Business tried to contact based on the Industrial Association’s website list were unable to be reached. That is because they have already shut down, or are about to. NOVEMBER 2011


30

Economic Trends by José I. Duarte Jobs and the jobless

GRAPH 1 - Number of unemployed by age group Age 45 and above

Age between 25 and 44

Age below 25

16,000 14,000 12,000

The scarcity of qualified workers in Macau is often mentioned as an obstacle to economic growth. Even the most casual analysis of the jobs data shows Macau is experiencing a period of full employment. GRAPH 1

10,000 8,000 6,000 4,000 2,000 0 2002

2003

2004

2005

2006

2007

2008

2009

2010

GRAPH 2 - Unemployment rate by gender Unemployment rage - global

Unemployment rage - male

Unemployment rage - female

(%)

9 8

The first graph shows the number of unemployed has run at a very low level for most of the period between 2002 and last year. By looking at the data by age categories, there are three clear trends. First, the number of unemployed aged between 25 and 44 – and who presumably have some work experience – has shrunk and this age group is close to full employment. It is also clear that the stock and share of those in the youngest category, which includes people who are new to the labour force, is mostly stable. Finally, the biggest proportion of Macau’s unemployed is among those in the final years of their working lives, which might hint at structural unemployment issues. This sector of society has a unique set of needs, including extended social support, and retraining for a new job may not be a viable option. GRAPH 2

When analysed by gender, unemployment rates have kept falling, even as the size of the labour force has grown. There has been a significant decline in unemployment to a level that is low by any international standards.

7 6 5 4

GRAPH 3

3 2 1 0 2002

2003

2004

2005

2006

2007

2008

2009

2010

GRAPH 3 - Net annual changes in the number of unemployed and of non-resident workers Net annual change in non-resident workers Net annual change in unemployed

30,000 25,000 20,000 15,000 10,000 5,000 0 -5,000 -10,000 -15,000 -20,000 2003

2004

2005

NOVEMBER 2011

2006

2007

2008

2009

2010

The third analysis deals with a contentious subject: the relationship between the number of employed residents and the volume of imported workers. It plots the annual net change in the number of unemployed residents and the net change in the number of non-resident workers. There appears to be little significant correlation, let alone causality, discernable from these figures.


31

GRAPH 4 - Job vacancies (aggregated by semester)

Vacancies Gaming

Hotel and restaurants

Manufacturing Finance

Wholesale and retail trade

Transport, storage and communications

Other

18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1H2011

2H2010

If the supply of labour seems hampered by existing laws, demand for labour apparently goes on unabated. Looking into Macau’s job vacancies, the data suggests that labour shortages could become a significant obstacle to business growth, if they are not already. The manpower surveys used in this analysis are published at different times according to sector by the Statistics and Census Service. In sectors like hospitality, data is made available for the first and third quarters. For others, such as gaming, data is available only for the second and fourth quarters. For convenience, the numbers have been aggregated into half yearly composite figures. This treatment may skew the analysis but seems an acceptable approximation to reveal bigger picture trends. GRAPH 4

GRAPH 5 - Vacancies in major sectors of the economy (average share for the period 2H2010-1H2011)

Gaming Hotel and restaurants Wholesale and retail trade Manufacturing Transport, storage and communications Finance Other

In times of stellar economic growth, the number of job vacancies has been relatively high. Graph four shows total vacancies fell by 15 percent between the second half of last year and the first six months of this year. Among the biggest employers – gambling, hospitality and commerce – only the casinos have reduced the number of vacancies by a significant amount, namely more than 40 percent. Other pillars of the economy seem to be unable to fill their vacancies, which must be limiting prospects for growth. The graph also highlights the “pulling power” of the gaming sector. In an environment where labour is already scarce, other industries are struggling to find talent. GRAPH 5

GRAPH 6 - Total vacancies and changes in the number of non-resident workers and of unemployed Non resident workers

18,000

Unemployed

Vacancies

Of all the available jobs, the gambling, hospitality and commerce sectors represent slightly more than threequarters of all vacancies. The hospitality sector alone, which includes hotels and restaurants, represents one-third of all job openings. The manufacturing sector is still hiring in comparatively high numbers, despite the steady flow of businesses to the mainland and other lower cost centres. GRAPH 6

16,000

The final graph compares total job vacancies against the average net changes in the number of non-resident workers and in the overall number of jobless residents. The number of non-resident workers has increased substantially, without any apparent detriment to the resident workforce.

14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 -2,000 2H2010

1H2011

NOVEMBER 2011


Economic Trends by JosĂŠ I. Duarte

32

Output and expenditure 2010 GDP current (in MOP)

217,324

million

Consumption (in MOP)

17,496 27,727 17,496 - 42,676 164,086 207,194

million

Investment (in MOP)

Economic Activity

Government (in MOP) Trade balance: goods (in MOP) Trade balance: services (in MOP) GDP constant (2009) (in MOP)

million million million million million

% var

31.4 9.8 - 13.6 9.3 21.5 54.2 26.2

Latest

Notes

% var

69,782 14,360 8,639 4,461

million

-14,295 56,617 63,688

million

million million million

million million

31.5 18.2 37.2 14.2 44.4 39.4 24.0

Q2 Q2 Q2 Q2 Q2 Q2 Q2

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

2010

% var

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

13.4 14.6 29.2 14.6 2.81 --

Latest

Notes

% var

37,510 million 274,344 million 159,292 million 268,148 million 110.8 base - 2008 0.50 %

8.7 20.2 38 20.1 5.37 --

Latest

% var

July July July July August August

Population/Labour force

Labour force Median wage rate (in MOP) Unemployment

522,300 330,900 9,000

% var

3.0 %

-1.9 0.5 4.7 -0.1

2010

% var

558,100 338,200 9,600 2.6 %

Notes

2.5 3.6 12.9 -0.3

July, var

% var

Notes

-2.5 -65.8 17.1 142.8 -7.6

August

% var

Notes

Q2 Q2 Q2

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

Major sectors

Started

m2 m2 tons million million

- 19.8 - 9.6 - 22.6 117.0 113.0

Latest

14,873 16,656 20,581 1,225 1,744

m2 m2 tons million million

August August August August

Gaming 2010 Gross revenue (in MOP) Casinos Tables Machines

189,588 33 4,791 14,050

million

% var

Latest

57.0 2 0.4 2.2

24,869 34 5,379 15,900

million

56.5 1 12.3 13.2

August Q3, var, ytd

Q3, ytd

Tourism 2010

24,965,000 Average expenditure (in MOP) 1,812 Average stay 0.90 Hotel rooms 20,091 Occupation rate 79.8 % Average hotel stay 1.54 nights Visitors

% var

15.0 0.3 - 0.2 4.3 8.43 0.04

Latest

2,698,000 1,482 0.90 days 21,804 82.91 % 1.41 nights

% var

Important note: The inflation base period has changed ( New base: April 2008 to March 2009 = 100) NOVEMBER2011 OCTOBER SEPTEMBER 2011 2011

Notes

August 6.2 Q2 3.2 Q2, var -- days July 10.5 July, var 8.18 July, var -0.07

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

Q3, ytd

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

2010 Population


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

Good data, bad times THE CITY’S BALLOONING GDP IS IN STARK CONTRAST TO THE WIDESPREAD REDUCTION IN THE QUALITY OF LIFE ITS POPULATION ENDURES

I

Middle squeezed After a slowdown in 2009, Macau’s GDP growth has skyrocketed. In the first two quarters of this year, year-onyear growth in real GDP increased by 21.6 percent and 24.0 percent respectively. The graph indicates the year-on-year rise in quarterly GDP in real terms since 2009. Clearly the increase is staggering. No double-dip recession there. Lest we become too exuberant, consider the rest of the data in the graph. Based on the composite consumer price index, inflation is on the rise, from - 0.15 percent in the third quarter of 2009 to 5.24 percent in the second quarter of this year. Household final consumption expenditure, which is a costof-living index, is also expanding at an increasing rate in real terms. From year-on-year growth of 0.8 percent in the third quarter of 2009, it jumped to 7.6 percent in the second quarter of this year. This year, household expenditure for food, beverages and tobacco rose by 5.2 percent in real terms in the first quarter and by 6.7 percent in the second quarter. The composite consumer price index for food and nonalcoholic beverages rose by 6.34 percent and 6.95 percent year-on-year for the first two quarters of the year. At the same time, median monthly earnings increased from MOP8,500 in the third quarter of 2009 to MOP9,600 in the second quarter this year. This is a small increase that hardly seems able to match the recent rises in the cost of living and inflation. Put simply, while GDP has soared – it has the steepest gradient of any of the lines on the graph – there seems to be little or no benefit for residents, who see inflation rising and

real household expenditure increasing even more dramatically. It costs more to live and your money buys less each month.

Nowhere, fast While the government cannot spend its enormous income fast enough, Macau’s citizens are seeing their purchasing power decline and must spend more to keep pace with inflation. It is a perfect example of the Red Queen Effect, an idea adopted from Lewis Carroll’s “Through the Looking Glass” by scientists to explain evolution. More specifically, it is the concept that you need to run faster just to keep pace or slow down and lag behind. It is a concept that is not new to Macau; residents here have lived with this understanding for quite some time. Maybe I’ve got it wrong, but I thought governments were here to help their people and ensure a uniformly decent standard of living. Macau has a constipated government that hoards money, too readily tolerates unchecked price increases, offers only a few subsidies here and there when matters get too hot, and makes promises without any reference to time. Too little, too late. While Macau is currently far more fortunate than many countries in the West, it strikes me that structural, redistributive justice seems to have gone missing. That may lead to a problem of even more social unrest boiling up. In the same “you’ve never had it so good” speech, Mr Macmillan also said “what we need is restraint and commonsense – restraint in the demands we make and commonsense on how we spend our income”. That seems like good advice. When might the Macau government act on it?

VARIATIONS IN GDP, HOUSEHOLD EXPENDITURE AND INFLATION SINCE 2009

Year-on-year percentage increase

n 1957, British Prime Minister Harold Macmillan told his supporters “let us be frank about it: most of our people have never had it so good”. More than 50 years later, his message would ring hollow for some and enjoy a resounding reaffirmation by others. While the West languishes in the throes of a double-dip recession, multiple financial bailouts, economic blamedumping, widespread unemployment, street riots and demonstrations, credit squeezes, and the tightest austerity measures for decades, Macau is experiencing a boom without interruption or hindrance. It was announced that in 2009 the Macau government had a surplus of MOP23.8 billion (US$2.98 billion) or about 41.3 percent of total public revenue that year, rising to MOP41.88 billion last year. It seems the Macau government cannot spend money fast enough to keep up with its income. Earlier this year it was reported that Macau’s per capita gross domestic product was the second highest in Asia last year, just behind Qatar, and that it was also in the world’s top ten. Last year, the city’s GDP increased by 26.4 percent yearon-year in real terms.

35 30 25

GDP (real terms)

20

Household final consumption expenditure (real terms)

15 10

Inflation

5 0 -5 Q3 Q4 2009 2009

Q1 2010

Q2 2010

Q3 2010

Q4 2010

Q1 2011

Q2 2011

Source: Statistics and Census Service

NOVEMBER 2011


mbreport 2012 POLICY ADDRESS 34

POLICY WISHES Legislators expect chief executive Fernando Chui Sai On to use this month’s policy address to announce more effective measures to tackle inflation n November 15 and 16, Chief executive Fernando Chui Sai On will deliver his 2012 Policy Address. Legislators are mainly expecting new measures to curb inflation. Housing policies and economic diversification are also on the agenda. Inflation is the major issue in Macau. Inflation hit a three-year peak in September when the consumer price index increased by 6.5 percent over the same time last year. For the 12 months ended September, inflation stood at 5.1 percent. Although Macau has a booming economy and full employment, the rise in food and housing prices is seriously eroding the newly acquired wealth of families. Last month, Mr Chui disclosed the government was preparing a package of measures to curb inflation that would be ready next year. Among the measures will be arranging additional sources of food and expanding existing grants to protect the livelihood of grassroots communities. Legislator Lee Chong Cheng says there must be more effort to stabilise food prices. Public housing and public transport services should also be revised. A representative of the influential Macau Federation of Trade Unions, Mr Lee says the government has to act fast to close the widening wealth gap between the rich and poor. He wants increased upward mobility for low-level employees, who should see salary increases so they share the fruits of economic development. “The working class is the main generator of a sustainable, sound gross domestic product. Without it, businesses are hardly able to promote long-term, sustainable economic development. Enterprisers have to show a social con-

O

NOVEMBER 2011

science,” Mr Lee says. He admits that human resources need to be enhanced in order to boost the city’s competitiveness. “Macau should improve education quality by continuously investing in educational hardware and software resources,” he says. With gaming being the main engine of the economy, Mr Lee warns that Macau lacks measures to tackle the industry’s negative side-effects. Widespread responsible gaming programmes and civic

awareness initiatives are required. Outspoken legislator José Pereira Coutinho wants a pay rise for public servants. Mr Coutinho, who is the president of Macau’s biggest civil servants’ association, says it will help them cope with inflation.

Repair healthcare He also wants more resources poured into the healthcare system. “We need another public hospital as soon as pos-


35

Lee Chong Cheng

“Macau should improve education quality by continuously investing in educational hardware and software resources”

Pereira Coutinho

“There is a wide consensus among the society that there is a deficit of directlyelected lawmakers and that the number of the members on the chief executive’s election committee should increase”

sible and to hire quality doctors,” he says. The government has announced it will construct a new hospital in Cotai but it will not be completed within the next five years. A temporary public emergency unit was opened this month at the Macau University of Science and Technology. Although the government is one of the main sponsors of the privately owned university and granted it the land where its campus stands for free, it

will pay a monthly rent of MOP910,000 (US$113,750) for the facility. Mr Coutinho also wants a mandatory welfare system for all workers. “We need this system in order for people to be not so dependent on government grants when they retire,” he says. The legislator is critical of the current ombudsman system under the Commission Against Corruption. Mr Coutinho is asking for a new model to better protect residents’ rights.

Ng Kuok Cheong

The legislator wants to see the government to come up with policies to reduce the widening wealth gap. Furthermore, he urges a new plan for public housing NOVEMBER 2011


mbreport 2012 POLICY ADDRESS 36

In addition, he is urging the chief executive to push forward economic diversification. “We are depending too much on gaming. Despite the efforts to diversify our economy, results are not visible yet.” Mr Coutinho also wants more diversity in Macau politics, that is to say more directly-elected legislators and enlarging the number of members on the committee that chooses the territory’s chief executive. “There is a wide consensus among the society that there is a deficit of directly-elected lawmakers and that the number of the members of the chief executive’s election committee should increase. This is a way to address the Basic Law when it states that Macau should be governed by its people,” Mr Coutinho says.

Traffic jammed Pro-democracy legislator Ng Kuok Cheong agrees. He says “2012 is the last year” to raise any changes to the current status quo ahead of the next elections – the next Legislative Assembly elections will be held in 2013 and the next chief executive will be selected the following year. Just like Mr Lee, Mr Ng also wants to see the government come up with policies to reduce the widening wealth gap. Furthermore, he urges a new plan for public housing in addition to the 19,000 units announced in 2007 and due to be completed next year. Easing traffic congestion should be the government’s number one worry next year, says chief executive-appointed legNOVEMBER 2011

islator Gabriel Tong Io Cheng. “The new law on government-subsidised housing for sale has been approved and houses are starting to be granted to residents. The problem we have to solve now is traffic,” he says. “Macau is a small city and a lot of road construction works are to be expected with the light rail transit system’s development. The government has to ensure people’s daily lives are not affected. So, we need to enhance our road system.” Also a chief executive-appointed legislator, Dominic Sio Chi Wai says Macau needs to review its laws to keep up with globalisation. Mr Sio, an economist and businessman, is urging the government to focus more on cooperation with the mainland. “We have to cooperate with Guangdong because that will be good for our future, so young people that have studied abroad can have a job opportunity in Macau,” he says. Lawyer Leonel Alves, an indirectly elected legislator who represents the professional services sector, wants to see policies for economic diversification. “We have to look at the big projects on Hengqin Island and at the creative and cultural industries,” he says. Mr Alves is also calling for specific guidelines to curb inflation. The lawyer is expecting to hear Mr Chui announce changes in the judicial system, namely on how the courts are organised. “With the increase of cases, there is a need to revise the structure of local courts,” he says.

Dominic Sio Chi Wai

“We have to cooperate with Guangdong because that will be good for our future, so young people that have studied abroad can have a job opportunity in Macau”

Leonel Alves

“With the increase of cases, there is a need to revise the structure of local courts”


37 BILL KWOK-PING CHOU ASSOCIATE PROFESSOR OF POLITICAL SCIENCE AT THE UNIVERSITY OF MACAU

Rumble to a roar SOCIAL CONFLICT CANNOT BE CONSTRAINED BY THE GOVERNMENT’S ADMINISTRATIVE REFORMS he corruption case involving former secretary for transport and public works Ao Man Long can be considered a watershed moment in Macau’s governance. Before, Macau’s population would tolerate the incompetence and shortcomings of the government, viewing it as a by-product of the Portuguese colonial rule. Prior to the handover, the process of civil service localisation went on slowly and officials had next to no chance to try their hand at top-level jobs. The lack of experience in the SAR’s first cabinet and among other top officials meant mistakes were likely. After the Ao case erupted late in 2006, tolerance towards the government fell away, with complaints and critical remarks popping up almost every day. At the same time, the number of residents who considered street protests taboo also fell away. The government’s reputation hit rock bottom. Officials tried to restore public favour with two policy initiatives. They implemented social measures benefiting residents, such as an annual cash handout and living allowances for the disadvantaged. Administrative reforms were also introduced. In 2007, the government published a public roadmap for administrative reform, putting forward 34 proposed changes to governance and policy-making. The changes were aimed at increasing administrative efficiency, cutting waste, preventing corruption and improving policy-making.

T

Listen up As part of the reform package and in order to formulate policies better tuned to public opinion, the government expanded the scope of its consultations. Adopted measures included establishing community-level consultative committees. Those committees would include stakeholders from all walks of society and solicit opinions on community issues. Also, before launching new policies and legislation, the government began entrusting experts and scholars to draft advisory reports first, to work as support for public consultations. Furthermore, while community leaders were usually invited to consultation meetings, the government now hosts public consultation meetings, which offer the general public an opportunity to express their views. Other administrative reforms included expanding the terms of office of the Commission Against Corruption, establishing a system of government spokespersons and introducing a civil servant central recruitment mechanism. The measures are similar to the administration model adopted in Hong Kong in the 1970s. Those changes had the net effect of drawing influential elites into advisory bodies led by officialdom. It encouraged society’s elite class to express their opinions on public policies and thus effectively ensured they were less likely to engage with other organisations to wage attacks on the government’s reputation.

Living in the past At the time, there were few leaders capable of mobilising

citizens to challenge the government. Compared to today, the masses were so poorly educated that they did not have an effective means to address the shortcomings of the system and voice strong opinions on public affairs. Not to mention the quality of life was poor, with most citizens busy making a living, without the time to care about politics. In these circumstances, tinkering with the administration in lieu of decisive and bold political reform had a positive effect and improved Hong Kong’s governance. Macau’s situation is very different from Hong Kong’s in the 1970s. The Macau of today is much better off than Hong Kong was at that time. There are few Macau residents who are too busy making a living to care about social affairs. With the development of the Internet, it has become much easier to mobilise the public. Issues such as preventing the Guia Lighthouse from being blocked by high-rise buildings or halting the demolition of the historic Social Welfare Bureau headquarters building – the socalled “Blue House” – have shown that it is impossible for the government to avoid the emergence of social activities which might hold it back and undermine its authority. With better education, the public are able to better grasp the government’s policies. The dissemination of information ensures the public is aware of other views, differing from the official interpretation. The same process ensures residents have a better understanding of the advantages of other systems and, by comparison, can realise the government’s deficiencies, which generates disappointment and anger. To prevent social outbursts, the government has to use political reform to co-opt increasingly more public representatives to all echelons of decision-making and advisory bodies. Then they can turn negative emotions of disappointment and anger into input for policies, rather than igniting the powder of social conflict. NOVEMBER 2011


mbreport 2012 POLICY ADDRESS 38

MET AND MISSED Tackling inflation, traffic and real estate speculation were the government’s main challenges this year BY ALEXANDRA LAGES

n his 2011 Policy Address, chief executive Fernando Chui Sai On targeted improving residents’ livelihood. However, as prices continued climbing, the government spent all year trying to alleviate the impact of inflation on the population. Overall, the targets set in the last policy address have been largely accomplished, even though some measures have not yet been launched and the impact of other measures was not as expected. For instance, the food safety centre is still a work in progress and the project to develop a night market at the underground mall at Sai Van Lake Square has stalled. The promise by Mr Chui to solve the long-existing conflict between Macau Cable TV and the public antenna companies in the first half of the year was not kept. In gaming, the government plan to create a database to record data of junket operators and their associates has not been fulfilled. The bill to impose age restrictions on people entering casinos is currently being evaluated by the Legislative Assembly. Work on a minimum wage has started, with discussions between employers and representatives of employees on-going. Even so, any breakthrough seems far away.

Photo: Luís Almoster | mspagency.org

I

NOVEMBER 2011

A year ago, Mr Chui pledged the government would spend more than MOP13 billion (US$1.6 billion) on education, healthcare and other social measures in 2011. The so-called wealth distribution scheme was one of such measures. In its third year, it continued to be one of the government’s major policies to help residents face the burden of inflation. The government handed out MOP4,000 per permanent resident and MOP2,400 for every non-permanent resident in the first half of the year. As prices continued to soar, Mr Chui pushed ahead with an unprecedented second cash handout, although the amount given was 25 percent less.

Housing headache Before the second cash handout was announced, officials released a MOP311.7 million package of social measures in April. Included was a hike in subsidies for the elderly, disabled and people living on low incomes. The responsibility for running a food bank was passed on to charity association Caritas. At least 6,000 people are expected to benefit from the programme. To curb rising food prices, the


39 over its limited ability to upgrade the overall quality of human resources in Macau. Most of the policies planned for the tertiary education system this year are yet to be realised, including the creation of a higher education assessment system. Some private local universities have been criticised for the poor quality of their graduates, with employers failing to recognise qualifications issued by the schools. Mr Chui also promised to introduce professional registration and certification systems but has again failed to deliver.

Health, welfare priorities

government has sought to open new sources in the mainland. Following through on the 2007 pledge of former chief executive Edmund Ho Hau Wah, the government has continued working to make sure 19,000 units of public housing will be ready next year. This has included taking back a number of illegally occupied pieces of land for governmentsponsored residential blocks. A new law governing the sale of government-subsidised housing was enacted and income ceilings for eligible buyers were raised. Over 3,000 subsidised home-ownership flats are to be granted until the end of this year. Even so, rising housing prices in the private market have continued to be a headache for the government. After a first set of ineffective measures announced late last year, the government was forced to introduce a special stamp duty of up to 20 percent on each transaction to curb real estate speculation. This measure seems to be working. In the education portfolio, the MOP500-million Continuing Education Development Fund has been set up. Offering a maximum scholarship of MOP5,000 to each resident aged 15 or older, the programme has been criticised

Improving the quality of elderly care was also a priority in Mr Chui’s programme. The Social Welfare Bureau has started work on setting up eight new rehabilitation facilities over the next five years. In the health sector, a temporary emergency unit has opened in Taipa, at the University of Science and Technology. It will operate until the new public hospital in Cotai opens. Health authorities, after admitting they failed to accurately forecast the need for new doctors after the liberalisation of the gaming industry, are now trying to catch up. The 2011 Policy Address included a vow to improve traffic, mainly by introducing a new public bus service system in August. Aside from several accidents and delays, the massive introduction of hundreds of new buses onto the city’s roads has only made traffic congestion worse. This is only expected to magnify when the construction works for the light rail train system breaks ground, sometime next year. Still on transport, plans to expand the airport have not yet been formally announced. The government has also invested MOP700 million in Air Macau to help the troubled airline get back on track. The government fund subsiding green equipment for businesses was launched in September. It should start allocating its first grants later this year. Taxes for the importation of environmentally friendly vehicles were waved — not a big help since electric cars are still waiting for further regulation in Macau and there are currently just a handful being tested on the road. For the first time, a legislative schedule was announced but the government has not fully complied. Three pieces of legislation that the government was supposed to introduce by the end of September have yet to appear. These include bills amending the law on the declaration of assets by public officials; regulating the new central savings system; and amending the cultural heritage protection law. Communication with the Legislative Assembly has improved, however lawmakers say there is still room for improvement. Within the government bureaucracy, there have been several changes, with some bodies merging, while others have changed the makeup of their portfolio. The government has also kept its promise of raising civil servants’ wages by 5 percent and boosting other benefits. This year was a breakthrough for cooperation between Macau and Guangdong, culminating in the inking of a framework agreement in March. Macau also improve its relations with Taiwan. Almost two years after being announced, the territory will finally have an official representation in Taipei, and vice-versa. Economic diversification, another key focus of Mr Chui’s 2011 Policy Address, is getting going but small and medium enterprises say they are facing increasing hardships. NOVEMBER 2011


Photos: Carmo Correia

40

Politics

NOVEMBER 2011


41

Chui times two

Legislative Assembly vice-president Ho Iat Seng says chief executive Fernando Chui Sai On should be reappointed for a second term BY CRIS JIANG

hief executive Fernando Chui Sai On has won his first public supporter for a second term. The call came from a seemingly unlikely source, a man who has been linked with the job himself, Legislative Assembly vice-president Ho Iat Seng. “In order to put into practice his concepts, a chief executive has to work at least two terms,” Mr Ho told Macau Business. That is why he “absolutely” thinks Mr Chui should be reappointed in 2014. Seen previously as one of the frontrunners to succeed Edmund Ho Hau Wah in 2009, Mr Ho was the first one to announce he was not considering running for the job. He says he has not changed his mind, adding that the work at the Legislative Assembly suits him better. Born in 1957, Mr Ho is currently Macau’s sole representative on the Standing Committee of the National People’s Congress. Before him, only iconic figures such as Ho Yin, Ma Man Kei and Edmund Ho had successfully held down such a pivotal post. It provides Mr Ho with a front row seat to observe Beijing politics. A reshuffle in the top hierarchy is scheduled next year, so what might that mean for Macau? “Change in the Chinese leadership will not impact Macau in any way,” says Mr Ho, adding “one country, two systems” will stay put. Vice-president Xi Jinping is widely expected to take the post of president from Hu Jintao. Some analysts say that is positive for Macau, as the territory affairs are currently part of Mr Xi’s portfolio. “With the continuous emergence of talents in the mainland, in the future we will see many people who are familiar with Hong Kong and Macau stepping forward” to assume top jobs, says Mr Ho. Mr Ho ran for the Legislative Assembly in 2009 to become one of the four indirectly elected legislators representing the business sector. Still in his first term, he has surpassed several more ex-

C

perienced legislators to be selected as the Legislative Assembly’s vice-president. “I did need time to get accustomed. While other members had taken their seat for several terms, as a newcomer I took up the vice-president post and I certainly felt pressure. But still I could manage it,” he says.

Greater representation Mr Ho is not a political freshman. He has been a member of the National People’s Congress Standing Committee since 2000 and sat as a member of Edmund Ho’s Executive Council from 2004 to 2009. “I have formulated national laws. In comparison, Macau is simpler, as it has mainly a mono-industrial structure,” he says. Mr Ho says he agrees with a greater representation for voters in Macau but he does not elaborate much. “In line with Hong Kong’s politic reform direction, Macau should increase directly elected seats [in the Legislative Assembly] and must pursue a path towards democratic reform.” A common criticism of the Legislative Assembly is that it is ruled by the business sector, with most legislators

“In order to put into practice his concepts, a chief executive has to work at least two terms,” says Ho Iat Seng. That is why he “absolutely” thinks Chui Sai On should be reappointed in 2014

involved in commerce. Mr Ho is the general manager of Ho Tin Industrial, a large company which manufactures solar panels and electrical lighting. He admits he has faced mistrust from some, but as an elected representative from the business sector he represents his constituents. “The assembly is composed of members from various sectors. Only if all members coordinate and exchange ideas can good laws be born, that in the end benefit Macau as a whole. No law is only to protect one party’s interests.” There are areas in which the assembly’s work has yet to bear fruit. While the right to strike and form trade unions is already safeguarded by the Basic Law, Macau lacks a proper trade union law. It has been blocked by the assembly. Mr Ho says he does not oppose a trade union law but its goals must first be spelled out clearly. There are several possible systems, from the mainland’s government-controlled All-China Federation of Trade Unions, which acts like an umbrella organisation, to Hong Kong’s model where unions have mushroomed and there is no centralisation. Mr Ho argues that it is already possible in Macau to freely establish labour associations that act to protect workers’ interests. Local workers are already fully exercising their labour rights, even without the existence of a trade union law, he says.

Souvenir solution Connected with the debate about the trade union law is the discussion regarding minimum wage. The establishment of a minimum wage will eventually go ahead, especially now that Hong Kong has one, says Mr Ho, but he warns that there will be side effects. “A minimum wage is a new factor that will affect the whole society. While income at the lowest class will be lifted, other residents will have to pay the costs,” he says. NOVEMBER 2011


42

Politics

Expect to see inflation increase, as low skilled labour is expected to become more expensive, Mr Ho says. “It’s likely that a bunch of local small and medium enterprises would not survive.” With or without a minimum wage, many companies are struggling to survive. That is clear in the manufacturing sector, whose industrial association is led by Mr Ho. He says the sector faces increasing competition and higher labour costs, aggravated by the economic crisis in traditional export markets like Europe and the United States. “It’s hard to reverse the trend of Macau’s fading export-oriented manufacturing industry,” Mr Ho says. “What the government can do, like offering privileges for importing workers, tax breaks

and government-guaranteed bank loans, cannot help much.” For Mr Ho, transformation is the only way to go. One of the potential untapped avenues of success is the souvenir industry, he says. “Today, locally produced souvenirs are comparatively traditional and monotonic, while Japan, for instance, offers quite more diversified choices. Considering we have 25 million visitors a year, if the industry plays fully their creativity, there’s a huge market in Macau.” The government could help SMEs import international designers, with the design concepts being developed and produced on Hengqin Island, Mr Ho says.

“A minimum wage is a new factor that will affect the whole society. While income at the lowest class will be lifted, other residents will have to pay the costs,” says Ho Iat Seng NOVEMBER 2011

GREEN NEEDS T

he vice-president of the Legislative Assembly Ho Iat Seng wants more government action on environmental protection, starting with pushing ahead rules for impact assessments. “The government policies are still very insufficient in regards to environmental impact assessments. There are no quantitative indices; relevant laws and regulations are far from being sound,” Mr Ho says. The legislator says a firm hand is needed and points out that these issues are far better regulated in the mainland. “If a project fails the standards, the authorities won’t approve construction.” Stressing money is not an issue for Macau, Mr Ho urges the government to lead by example and install more solar panels and use energy saving LED lights. “The government should seriously consider how to support environmental protection with proper funding, as Macau is still a very wasteful society in terms of energy utilization,” he says. Among the products Mr Ho’s company manufactures are low-energy LED lights and solar panels.


43

NOVEMBER 2011


44

Survey

A bare pass The Macau Business Quality of Life Report is back. The first survey of its third series points out people are not so impressed by the government’s performance

acau people believe there is significant room for improvement regarding the government’s performance. That is the main conclusion of the latest Macau Business Quality of Life Report, back after a two-year hiatus. The survey was commissioned to a team of experts from the University of Saint Joseph for Macau Business magazine and its sister Chinese language publication, Business Intelligence (see box). The interviews were conducted in September. In the first running of this new series, Macau people were asked about their priorities for developing and improving the quality of life in Macau. When people were asked how they rated the current administration of Macau in regards to improving their quality of life, on average respondents gave the government a bare passing grade of 53.3 points out of a possible 100. Clearly, they believe there is significant scope for improvement, the experts from the University of Saint Joseph point out. Furthermore, when asked for their views on the most important areas for improvement, Macau people believe that

Photo: Luís Almoster | mspagency.org

M

housing (27 percent of respondents), inflation (19 percent) and public transport (19 percent) are causing the most headaches at present. Health comes fourth, but by a large distance, only being chosen by 6 percent of respondents. With regards to housing problems, Macau people mostly recommend that the government should increase the availability of affordable housing, while establishing policies to control the real estate market and speculation. Respondents also call for a reduction in the amount of land being given to casinos and luxury residential developments. It seems that housing affordability is a real concern, and the average person is being priced out of the market and is not being catered to, the report’s authors say. Turning to inflation, Macau people mostly recommend increasing social benefits and subsidies to low-income families. They also suggest raising the salaries for the less well-off brackets in order to reduce the wealth gap. Very interestingly, a number of people recommended pegging the pataca to the renminbi, instead of the current indirect


45

pegging of the local currency to the U.S. dollar through the Hong Kong dollar. That goes against both the government and the monetary authority’s views. In the same vein, many Macau people also recommend reducing the number of monopolies and increasing the number of channels for importing goods, especially from the mainland. When considering transportation problems, the survey respondents mostly recommend minimizing the amount of road construction work and increasing the number of parking spaces. There are calls for more and better public transport (buses and especially taxis) and for a reduction in the number of private cars on the roads. Finally, when looking at problems in the healthcare system, respondents mostly recommend increasing the number of hospitals and clinics and improving their facilities. They also see the need for more (and better) doctors and more health support for the elderly. Generally, the issue seems to be more about quality of service than cost, the University of Saint Joseph experts say.

30%

What should the government priorities for development be?

25% 20% 15% 10% 5% 0%

Housing

53.3

Inflation

Public transportation

Health services

Education

Environment

How people rate the current administration of Macau in regards to improving their quality of life out of a possible 100 points


46

Survey

Macau’s current National Wellbeing Index has come down since 2009, with significant drops in people’s satisfaction with the environment and the government

Not better off acau people are less satisfied today with their wellbeing than they were two years ago. The stellar economic growth and change in government haven’t helped to fuel a happier population, the latest Macau Business Quality of Life Report shows. As can be seen from the National Wellbeing Index graph, the second series of the Macau Business Quality of Life Report ended on a high note at the third quarter of 2009. That was just before Fernando Chui Sai On took over as chief executive. The newest data for the fourth quarter of 2011 (59.1 percent), reverses such positive trend and puts the National Wellbeing Index at the same level Macau was experiencing in 2007,

M

NOVEMBER 2011

which is much lower than the value just before the chief executive change (63.7 percent). Looking at the data for the components of the National Wellbeing Index in more detail, it is clear that the most significant drops have been with people’s satisfaction with the environment and the government. The experts from the University of Saint Joseph suggest that, as the city gets more crowded and noisier, aside from the several ongoing road work and repair projects, it is little wonder people are becoming less satisfied with the local environment. There is also a significant fall in people’s perceptions of current social conditions and the business situation. This may come as a bit of a surprise,

as Macau is doing quite well in a business and economic sense, especially compared to the situations in Europe and the United States. However, people do not perceive it this way - they feel things are getting worse.

Little achievement Turning to the Personal Wellbeing Index, we can also see a significant drop in the current quarter in comparison with the last previous data available, reversing the positive momentum noted in 2009. In fact, the Personal Wellbeing Index is down to 63.8 percent and near the bottom levels recorded in Macau people are not currently very satisfied with their own lives. It is important to stress that, although still positive and within the “golden


47

THE RULES OF THE SURVEY A

fter a two-year hiatus, this new survey marks the third series of the Macau Business Quality of Life Report, a project that started in 2007 to monitor the city’s progress. As in the two previous series, the Macau Business Quality of Life Report is a project by De Ficção - Projectos Multimedia, the publisher of both Macau Business and Chineselanguage Business Intelligence magazines, commissioned to the University of Saint Joseph to carry out quarterly telephone surveys on quality of life indicators in Macau. Each time, the University of Saint Joseph collects at least 1,000 valid responses. The scholars are also in-charge of providing their unbiased analysis of the results. Because extensive information exists regarding objective indicators like the city’s gross domestic product per capita, education levels and life expectancy, this series focuses solely on subjective indicators, or how people perceive their lives and general living conditions in Macau. The Macau Business Quality of Life Report uses the internationally respected and widely adopted International Wellbeing Index. It will be supplemented in each survey with data on a different special topic - for the current survey, we approached the topic of priorities for Macau’s development. The International Wellbeing Index measures people’s subjective perceptions of different aspects of their own lives and different aspects of living in their country or region. University of Saint Joseph scholars explain that quality of life partly depends on the “real” local situation – gross domestic product, cost of living, housing affordability, and so on – and partly on people’s internal feelings about the local situation. Operationally, the International Wellbeing Index is divided into two sub-scales. The National Wellbeing Index asks people about their satisfaction with different aspects of their life in the local region – security, the economic and business situations, social conditions and government performance, and the state of the environment. The Personal Wellbeing Index asks about satisfaction with a person’s own life – personal relationships, health, standard of living, personal safety and future security, community connectedness and personal achievements. Both for the National Wellbeing Index and the Personal Wellbeing Index, values are presented in percentages reflecting the strength of satisfaction with the specific domain asked. Values below 50 percent indicate dissatisfaction.

National Wellbeing Index

Personal Wellbeing Index

66.0%

67.0%

63.7%

64.0%

66.7%

66.0%

65.5% 62.0%

59.6%

60.0%

58.0%

65.0%

61.0% 60.2%

57.6%

64.4%

59.9% 59.1%

64.0%

63.4%

63.8%

63.8% 63.8% 63.0%

57.9%

63.0%

57.4%

56.0%

54.0%

63.9%

62.0%

1Q2007 2Q2007 3Q2007 4Q2007 4Q2008 1Q2009 2Q2009 3Q2009 4Q2011

standard” for non-Western societies (60 to 70 percent), the Personal Wellbeing Index for the fourth quarter of 2011 was below the average of data collected for

61.0%

1Q2007 2Q2007 3Q2007 4Q2007 4Q2008 1Q2009 2Q2009 3Q2009 4Q2011

the two previous series (64.3 percent). Looking at the data for the components of the Personal Wellbeing Index in more detail, the largest falls are for

people’s satisfaction with their achievements in life, standard of living and community connectedness. The report’s authors note it seems NOVEMBER 2011


48

Survey

that people’s perceptions of the worsening business and economic situation is also showing up in their personal lives as a reduced sense of personal achievement and community connectedness. Perhaps respondents are feeling they need to work harder than they would like to, they add. Macau people are also concerned with falling standards of living. There is a rising concern about inflation in Macau. This hip-pocket issue is also something that the government is not visibly doing anything about, which may partly explain the current dissatisfaction with the government, the University of Saint Joseph team says. The data collected is representative of the whole population of Macau. As to be expected, better-educated people with higher-level jobs are not feeling the inflation pinch so much, but they are more critical of the current living conditions. By contrast, people on the lower rungs of local society are more concerned with their economic situation.

NOVEMBER 2011

VARIATION

NATIONAL WELLBEING INDEX

4Q2011

3Q2009

(percentage points)

Territorial security

66.5%

67.1%

-0.6

Economic situation

63.7%

65.2%

-1.5

Business

58.9%

63.8%

-4.9

Social conditions

57.9%

63.2%

-5.3

State of the environment

53.9%

62.2%

-8.3

Government

53.5%

60.6%

-7.1

OVERALL

59.1%

63.7%

-4.6

PERSONAL WELLBEING INDEX

4Q2011

3Q2009

(percentage points)

Personal relationships

70.4%

69.2%

1.2

Safety

66.8%

66.5%

0.3

Health

66.0%

68.1%

-2.1

Standard of living

62.8%

67.9%

-5.1

Community connectedness

61.6%

66.1%

-4.5

Future security

61.3%

65.0%

-3.7

Achievements in life

57.6%

64.1%

-6.5

OVERALL

63.8%

66.7%

-2.9

VARIATION



50

Property | Market Watch

Scary cheap Real estate agents are worried that subsidised flats hitting the market under the home ownership scheme will hurt the private market BY CRIS JIANG

he first units under Macau’s revamped home ownership scheme came onto the market this month at the Weng Neng housing complex. It is a development watched with interest by developers, agents and agencies in the private sector. Insiders are most worried about the speed at which the remaining thousands of units currently under construction will be put up for grabs. The government’s public housing policy includes social housing for rent, and economic housing for sale, at subsidised prices under the home ownership scheme. The waiting list for the latter includes more than 11,000 households. Weng Neng’s apartments, at Bairro do Hipódromo on the peninsula, are the first home ownership scheme flats put up for sale in several years. They are part of the 19,000 public housing units the government has pledged to build from 2007 until the end of next year.

T

NOVEMBER 2011

The prices at the complex range from MOP565,100 (US$70,638) to MOP863,300 for a T1 unit. A T4 unit’s price can vary from MOP1.11 million to MOP1.68 million. Overall, the average price is around MOP1,256 per square foot. After selling Weng Neng’s 880 units, the government will launch the pre-sale of some 2,703 other subsidised flats currently under construction in Taipa. There are at least some 800-plus in the works elsewhere in the territory. Real estate professionals so far are playing defense. They mostly expect the impact of the home ownership scheme flats to be felt in the number of transactions and consequently in the liquidity of the private real estate market rather than in prices. Ronald Cheung Yat Fai, chief executive officer of real estate agency Midland Realty (Macau) Ltd., says the announced 19,000 public housing units are enough to cover the needs of Macau for

a decade. If they were to be handed out all in a year, private real estate market demand would suffer, he warns.

Price decline Ricacorp executive director Jane Liu has similar concerns. She says Macau’s small population may not need such a huge quantity of public housing units over a short period of time. Ms Liu notes the government also loosened the eligibility criteria for the home ownership scheme, meaning more people can now apply. As thousands of units are currently in the pipeline, this has affected investors’ willingness to enter the private market, she says. Ricacorp’s executive director estimates the new public housing units will mostly impact the prices of secondhand property. She predicts a price decline of 10 to 15 percent, but only in older buildings. Currently, the private property market is still recovering from the introduc-


51

2010

2011

Month

Number of Transactions January 1,297 February 1,084 March 1,503 April 2,202 May 1,627 June 1,543 July 1,204 August 940 September 1,505 October 1,312 November 1,818 December 1,954 January 1,541 February 788 March 2,225 April 3,485 May 2,402 June 2,368 July 878 August 645

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

Month

2010

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

2011

January February

5,000 4,000 3,000 2,000 1,000 0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 2010 2011

* Notes: 1. The data includes transactions of residential units exempted from stamp duty. 2. The data covers residential units with stamp duty paid during the reporting month.

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

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2010 2011

* Notes: 1. The data includes transactions of residential units exempted from stamp duty. 2. The data covers residential units with stamp duty bill issued during the reporting month. 3. Some residential units may not be included in the data made available by the Financial Services Bureau for privacy reasons.

EMPEROR GROUP PLANS DOWNTOWN MALL E

* Notes: 1. The data includes transactions of residential units exempted from stamp duty. 2. The data covers residential units with stamp duty paid during the reporting month.

mperor Group subsidiary Fai Iek Ltd. plans to build a 2,749-square metre, five-storey high mall near the BNU headquarters in Avenida Almeida Ribeiro, popularly known by its Cantonese name ‘Sa Man Lou’. The company will pay a premium of MOP20.2 million (US$2.5 million) to the government for the land contract revision, approved last month. Fai Iek will have to demolish the three buildings currently standing on the plot. According to Emperor Group’s website, the new building will house a shopping complex aimed at tourists. David Chow Kam Fai’s Landmark owned the plot before. Emperor Group paid HK$430 million for it in 2007.

tion of a new special stamp duty of up to 20 percent on transactions earlier this year. Home prices stayed almost put in September at MOP39,217, with a marginal drop month-on-month. That was still 11.7 percent higher than a year before, according to the Financial Services Bureau.

Meanwhile, the number of transactions has plunged by two digits since the stamp duty was enacted. Legislator-cum-developer Ung Choi Kun believes the public housing policy will have little effect on the private property market. “From a macro perspective, only by solving the housing problem can

March April Source: DSEC

Value (MOP million) 3,140 1,995 2,806 6,180 4,281 3,319 2,642 1,889 3,687 3,421 7,569 5,010 3,790 1,918 7,704 19,244 7,902 6,114 2,359 1,744

Value (MOP thousand) 6,000

May June July August

Source: DSEC

Year

Average transaction value of residential properties as per record of stamp duty

people live and work, and eventually further pursue entering the private housing market,” says Mr Ung, who is the president of the Association of Property Agents and Realty Developers. Warren Leung Cheuk Hang, director of Shun Tak Holdings’ property sales arm, is also not concerned by the impact NOVEMBER 2011

Source: Financial Services Bureau

Residential units sold as per record of stamp duty*


52

Property | Market Watch

of public housing. He told reporters last month that he still expects prices in the private real estate market to rise by 15 percent next year. The government has stressed prices of the economic housing units at Weng Neng complex are not linked to the private market, but rather based on the purchasing power of the awaiting eligible families. The prices were calculated so that mortgage expenses would not represent more than around one third of a household’s income, the Housing Bureau told Macau Business.

Legislator-cumdeveloper Ung Choi Kun admits the prices at Weng Neng are “not high” in comparison with the private real estate market. “But the fundamental role of public housing is to be a social welfare policy. From this perspective, the pricing is high for lower to middle classes”

Profiteering charge Mr Ung admits the prices at Weng Neng are “not high” in comparison with the private real estate market. “But the fundamental role of public housing is to be a social welfare policy, solving the housing needs of low-income families. From this perspective, the pricing is high for lower to middle classes.” He suggests future economic housing units be put up for sale at a fraction of the Weng Neng prices, even below constructions costs. Mr Ung suggests a reference price tag of around MOP300,000 per unit. The Weng Neng complex was first announced in 2005. To allow for the construction of Windsor Arch, a luxury residential development in Taipa, the government requested the developer, among other things, to build the 880unit public housing complex. The government got 755 units for free, while the developer was authorised to sell the remaining 125 at government-set prices, as stipulated in the 2005 contract. This year, the administration decided to buy all the developer’s units, at the 2005 prices, adjusted for inflation. The twist is that the government is now selling them at triple or more, says outspoken legislator Au Kam San, accusing local authorities of using public housing to make a profit. The secretary for transport and public works, Lau Si Io, has already dismissed such claims. He said any surplus made is to go to the public purse and thus serve the population.

NOVEMBER 2011

Weng Neng complex

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

19,224 13% 87% Residents

COSTLY RECLAMATION

T

50.78 billion Proportion of buyers

Proportion of buyers

Non-Residents

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

he construction cost of the new reclaimed areas planned by the government will hit MOP7 billion (US$875 million). This only includes the land reclamation itself and may even rise further. The 361.6-hectare reclamation project will be divided into five different areas, two located on the Macau Peninsula and three in Taipa. The reclamation should be completed by 2017. The government has opened a new round of public consultation focusing on the development of the new urban areas. It runs until December 23.

26% 74%

Non-Residents

Residents

LAND PREMIUM INCREASES T

he government has a new formula for calculating land premiums, starting this month. According to a press release from the Land, Public Works and Transportation Bureau, land concessions for the construction of high-rise buildings for residential purposes will see their land premium increase by 93 percent. For other purposes, land premiums will increase by up to 53 percent according to the new calculation formula. The new formula will only be used for new projects. The last land premium update took place in 2007.


Property | Market Watch Notable residential property transactions - 16/09 to 15/10, 2011 District

Property

Unit

Macau Macau Macau Macau Macau Macau Coloane Macau Taipa Taipa Macau Macau Macau Coloane Taipa Taipa Taipa Taipa Taipa Taipa Macau Taipa Macau Macau Taipa Macau Macau Taipa Macau Macau Macau Taipa Taipa Macau Macau Macau Macau Macau Macau Macau

L’Arc Macau One Central One Central L’Arc Macau Lake View Mansion Lake View Tower One Oasis Cotai South L’Arc Macau Supreme Flower City Supreme Flower City The Residencia Macau Villa de Mer One Central One Oasis Cotai South Nova City Kings Ville Nova City Nova City Nova Taipa Nova City One Central Prince Flower City One Central The Bayview Prince Flower City The Praia The Praia Nova City The Praia The Bayview The Praia Nova City Prince Flower City The Riviera The Bayview The Residencia Macau The Bayview Villa de Mer The Bayview The Residencia Macau

H/F, unit H Block 5, L/F, unit A Block 2, H/F, unit A M/F, unit G Block 1, L/F, unit I M/F, unit P Block 1, M/F, unit C H/F, unit K M/F, unit C M/F, unit D Block 1, M/F, unit C Block 1, M/F, unit A M/F, unit C Block 9, M/F, unit A Block 9, H/F, unit C Block 3, H/F, unit G Block 15, H/F, unit D Block 9, L/F, unit B Block 25, M/F, unit A Block 9, M/F, unit C Block 1, H/F, unit C Block 2, M/F, unit H Block 1, H/F, unit C Block 4, M/F, unit C Block 2, M/F, unit F Block 3, M/F, unit N Block 3, M/F, unit N Block 15, H/F, unit D Block 1, H/F, unit A Block 2, H/F, unit C Block 1, H/F, unit A Block 13, M/F, unit D Block 1, H/F, unit C Block 2, H/F, unit K Block 2, M/F, unit F Block 5, M/F, unit C Block 2, M/F, unit B Block 4, M/F, unit C Block 2, M/F, unit B Block 2, H/F, unit N

53

Source: Ricacorp and Midland

Floor area (sq. ft)

Sale price (HK$)

Price per sq.ft. (HK$)

3,547 2,262 2,241 2,411 3,485 2,110 2,369 2,261 2,060 2,060 1,570 1,703 1,176 1,325 1,974 1,599 1,959 1,981 2,167 1,974 918 1,522 918 1,582 1,685 1,558 1,558 1,559 1,571 1,582 1,571 1,559 1,665 1,187 1,582 1,209 1,603 1,371 1,603 1,188

18,090,000 18,000,000 17,000,000 15,400,000 15,000,000 13,715,000 11,370,000 10,000,000 8,380,000 8,100,000 7,900,000 7,680,000 7,000,000 7,000,000 6,880,000 6,800,000 6,800,000 6,800,000 6,800,000 6,780,000 6,680,000 6,500,000 6,430,000 6,380,000 6,300,000 6,100,000 6,100,000 6,080,000 5,880,000 5,808,060 5,800,000 5,600,000 5,500,000 5,480,000 5,310,000 5,280,000 5,140,000 5,100,000 5,070,417 4,800,000

5,100 7,958 7,586 6,387 4,304 6,500 4,799 4,423 4,068 3,932 5,032 4,510 5,952 5,283 3,485 4,253 3,471 3,433 3,138 3,435 7,277 4,271 7,004 4,033 3,739 3,915 3,915 3,900 3,743 3,671 3,692 3,592 3,303 4,617 3,357 4,367 3,206 3,720 3,163 4,040

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

Notable residential property rentals - 16/09 to 15/10, 2011 District

Property

Unit

Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Macau Taipa Taipa Taipa Macau Taipa Taipa Macau Taipa Macau Macau Taipa Taipa Taipa Taipa Taipa Taipa Taipa Taipa Macau

One Central L’Arc Macau L’Arc Macau L’Arc Macau L’Arc Macau L’Arc Macau L’Arc Macau L’Arc Macau One Central Lake View Tower One Central Supreme Flower City Treasure Garden Supreme Flower City Lake View Tower Kings Ville Kings Ville One Central Kings Ville One Central One Central Nova City Nova Taipa Nova City Kings Ville Nova City Nova Taipa Nova City Nova City La Cité

Block 6, M/F, unit A H/F, unit B H/F, unit J H/F, unit A H/F, unit A H/F, unit J H/F, unit A H/F, unit K Block 7, H/F, unit A M/F, unit D Block 1, M/F, unit A H/F, unit K H/F, unit A H/F. unit L M/F, unit F Block 2, M/F, unit F Block 1, M/F, unit A Block 1, H/F, unit D Block 3, L/F, unit H Block 1, H/F, unit D Block 1, H/F, unit D Block 10, L/F, unit F Block 23, L/F, unit G Block 4, M/F, unit F Block 2, M/F, unit D Block 13, H/F, unit D Block 21, M/F, unit A Block 10, L/F, unit B Block 10, M/F, unit C Block 4, H/F, unit E

Source: Ricacorp and Midland

Floor area (sq. ft) 2,300 2,803 2,803 2,261 2,261 2,803 2,261 2,261 1,269 1,597 1,273 2,060 2,087 2,060 1,428 1,422 1,496 654 2,100 645 654 1,340 2,167 1,340 1,422 1,559 2,105 1,318 1,318 1,634

Rent price (HK$) 45,818 42,000 40,000 37,000 36,000 36,000 28,000 28,000 24,500 20,000 19,000 18,000 18,000 16,000 15,000 14,000 14,000 13,800 13,500 13,000 13,000 13,000 13,000 12,500 12,000 12,000 12,000 11,000 10,000 10,000

Price per sq.ft. (HK$) 19.92 14.98 14.27 16.36 15.92 12.84 12.38 12.38 19.31 12.52 14.93 8.74 8.62 7.77 10.50 9.85 9.36 21.10 6.43 20.16 19.88 9.70 6.00 9.33 8.44 7.70 5.70 8.35 7.59 6.12

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

NOVEMBER 2011


54

Transport

That sinking feeling More than 300 creditors are claiming a total of HK$200 million from bankrupt Macao Dragon, but only a few will get any money at all BY LUCIANA LEITÃO

he list is long: more than 300 creditors of failed low-cost ferry operator Macao Dragon Co Ltd were confirmed at a meeting in Hong Kong last month. Together, they are claiming HK$200 million (US$25.7 million). The two biggest creditors are a local holding company that is the sole owner of Macao Dragon and group buying website Groupon Hong Kong. In April, in a partnership with Groupon, Macao Dragon sold more than 60,000 tickets for trips between Macau and Hong Kong in five days. This hauled in revenue of more than HK$4 million, according to a press release. The tickets cost 70 percent less than usual. The meeting of creditors confirmed the provisional liquidators, from Deloitte Touche Tohmatsu, and appointed a committee of inspection. One of the liquidators, Derek Lai Kar Yan, declined to tell to Macau Business how much each creditor was claiming but confirmed HK$200 million was at stake. Macao Dragon filed for bankruptcy

T

in September after 14 months of operations. It blamed the Macau government for its failure, saying the government had broken promises made to the company by restricting the number of passengers its ferries could carry. The authorities say the cap took into consideration the handling capacity of the Taipa Temporary Ferry Terminal, from which Macao Dragon vessels sailed. Macao Dragon made four regular return trips a day between Hong Kong and Taipa. Its vessels could carry 1,152 passengers a trip. The government restricted the number to less than twothirds of capacity. Even so, the average numbers of passengers on each trip was well below the caps, according to the authorities.

Queue here Macao Dragon’s liquidators are now trying to sell the company’s assets. “Only then can we see if there is any money available. I think the realisable assets will amount to less than HK$2 million,” Mr Lai said. “For sure, the

creditors will not be fully paid.” The preferential creditors will be paid first. Among these are Macao Dragon’s former employees. The preliminary estimate by their lawyers is that they are owed HK$8.5 million in unpaid wages. One as yet unanswered question is who owns the company’s two catamaran ferries. Initial reports in the news media said the company did not own its ferries but leased them from affiliates. But the South China Morning Post reported that a Hong Kong law firm, acting on behalf of the Macau branch of the Bank of China, had seized the vessels in September as security for two outstanding term loan facilities of HK$160 million. The lawyers representing the former employees asked the courts to ensure that the employees are kept informed of developments arising from the seizure of the ships, and that they be allowed to step in if Bank of China drops out. Macao Dragon has lost its licence to operate to and from Macau and the MOP2 million (US$250,000) deposit it gave the Macau government.

Macao Dragon’s liquidators are now trying to sell the company’s assets. “Only then can we see if there is any money available. I think the realisable assets will amount to less than HK$2 million,” says one of the liquidators, Derek Lai Kar Yan. “For sure, the creditors will not be fully paid” NOVEMBER 2011


55

NOVEMBER 2011


56

EXCLUSIVE CEO INTERVIEW

“I DON’T WANT TO FIGHT THE GOVERNMENT” Las Vegas Sands Corp. and Sands China Ltd. chairman Sheldon Adelson wants to cooperate with the government to solve the dispute over Cotai parcels seven and eight. In an exclusive interview with Macau Business, he criticises the cap on gaming tables, arguing the best way to control the growth of the gaming industry is by targeting gaming facilities run by third parties. He also unveils his next investment targets and what he would have done differently in Singapore and Macau

I

BY PAULO A. AZEVEDO IN LAS VEGAS s the Cotai Strip becoming what you thought it could be, now that Lawrence Ho has opened City of Dreams, Francis Lui has inaugurated Galaxy Macau and with Sands Cotai Central opening next year?

Sheldon Adelson - My original plan called for 20 lots on a U-shaped strip, coming down the strip to the roundabout and then going right at the road that takes you to the power plant, then coming back up by the Macau Dome. My idea was to rebuild half or more of the Las Vegas strip, to create the critical mass. I do not mind that other people are coming. I want other people to come because it validates the critical mass nature of the development. Look, nobody wanted the land before. It was sitting there for a long time. NOVEMBER 2011


57

NOVEMBER 2011


58

EXCLUSIVE CEO INTERVIEW

You can take that as a compliment.

There is another compliment. Secretary [for economy and finance Francis] Tam is now saying that in order for developers to get their new casinos approved - presumably that means whatever the amount of casinos they can build, including the number of tables they can get - they need to bring directly proportional non-gaming amenities. This has been the matrix for me since I came to Macau. Are you surprised with the 3-percent cap on gaming tables announced by the government for the next 10 years starting in 2013?

I am surprised because it is not the cap on tables that really makes the difference. What makes the difference is the number of places that are competing for the customer. When a customer comes to Macau, different operators approach him. What counts is how many approaches he gets and how much marketing and promotion each property does to bring people to Macau. No customer knows how many tables are in each property and none of the customers care. Putting a cap on the tables may have the desired effect of limiting the number of places to bet but all the government really has to do is to limit the number of sublicenses [operations run by third-parties under the gaming license of one of the city’s six concessionaires, which in return is entitled to a fixed cut]. That is the problem. They don’t limit the number of sublicenses. Stanley [Ho Hung Sun] has 60 VIP rooms and close to 20 sublicensed casinos. A casino by any other name is still a casino. I am very glad to see that the government has finally said there is a matrix of non-gaming amenities that you have to provide in order to get the “golden ring”. And you are bringing more non-gaming facilities?

More than anybody, by far.

ENOUGH TABLES With parcels five and six, (now re-branded as Sands Cotai Central, a better name, by the way) opening next year, you need more gaming tables. How does the 3-percent cap impact Cotai Central?

We have the tables. We grandfathered in because we started the project several years ago before they came up with this limitation. I believe the government has already allowed you 400 tables for Cotai Central?

I believe so. Was it less than an operator with this size of investment would expect?

This is going to be the largest building ever built in the world, almost 1.3 million square metres. I respect the fact they want to limit development. We just disagree [on the method]. There is more than one way to do it, rather than putting a limit on the number of tables. If they are trying to discourage people from developing new properties, they could simply say “You cannot develop new properties”. That is all there is to do. NOVEMBER 2011

We are correct in following the integrated resort model with all the non-gaming amenities connected. I am going to write a letter to the government suggesting there ought to be something like 30 percent of the space in hotel rooms, 15 percent of the space should be for MICE [meetings and conventions] and of that, 10 percent should be exhibitions space and 5 percent congress space. Maybe 15 percent for retail, spas and showrooms etc. I am going to prepare a matrix that will show what percentage of space should be devoted to each separate amenity. That comes to 60 percent. What about the other 40 percent?

For other things. But the casino should be no more than 5 or 10 percent of the total amount of space. Whatever number they come up and think is optimum. I do not think we need more than 5 percent. The developer that does not want to put up the [non-gaming] amenities, should be penalised by having the percentage of the casino in relation to the total amount of space reduced. Fortunately, the government announced the table cap after Sands China Ltd. secured a US$3.7 billion (MOP29.6 billion) loan agreement. Do you think operators that wish to develop in Cotai might face difficulties in getting bank financing due to the new rules?

Banks will not loan money without assurances from the government that there will be sufficient equipment, approvals and labour to both construct and operate the resorts so that they have the best chance of getting the money back. At the last minute, there was enough demand [for the Sands’ loan agreement] and we took another few million dollars [US$200 million] just to have extra cash and consider paying dividends. We did not absorb all the available cash in the market by far. There is plenty of cash in the market and it is up to the credit worthiness of the applicants. But I talked to many banks and they say that without assurances that the operator will have sufficient equipment and labour, they are not going to loan any money.

LET’S SIT AND TALK On parcels seven and eight, Sands China Ltd. took the case to court after the government did a U-turn and decided not to grant you the plots anymore. Do you really think you can get them back?

We have an obligation to our shareholders. We are a public company and we have to pursue all the available avenues of appeal. If, in the final accounting, all the appeals are rejected, then we will be rejected. We have an obligation to protect the interest of the company. We obviously disagree with the government. There is no reason to take it back but I understand what the government is trying to do. If we could sit down and have a discussion about how to resolve the matter, we would welcome that opportunity. If the government doesn’t grant you the sites, will you sue to try to get back the US$100 million-plus that Sands has already invested in them?


59 So the ball is in the government’s court?

“Putting a cap on the tables may have the desired effect of limiting the number of places to bet but all the government really has to do is to limit the number of sublicenses” “Banks will not loan money without assurances from the government that there will be sufficient equipment, approvals and labour to both construct and operate the resorts”

Yes. Could the government say it is going to take that site as well because you are not developing it?

We own the site. We paid for it. It is a lot different from seven and eight. [According to the land grant contract, Sands China Ltd. is required to complete the development of parcel three by April 2013].

PAYING A DIVIDEND You said recently that Las Vegas Sands Corp. might pay dividends to shareholders next year. Will Sands China Ltd. follow?

Yes. Stock market volatility has been huge and gaming stocks are no exception. Does it keep you up at night?

No. I do not worry about that because I know that over the long term this is like gaming. Over time, the live averages change in the house advantage. It all leverages itself. I know over so many years of doing business that everything is in cycles. It goes up and down. Everything is volatile. I don’t understand why rumours are enough to have such a strong impact on stock prices. Look at Macau, look at Singapore, and the numbers have been nothing but amazing every single month. Where are these panic attacks coming from?

I do not want to sue the government. I would much rather sit down and amicably negotiate out a solution. Have you already suggested that to the government?

Yes. I have given instructions for that to happen. I do not know exactly what happened. We are there together. I have changed the face of Macau for the positive. I do not want to fight with the government. This is their country but I think there are certain things that should occur. We call it grandfathering, meaning when you change a law, whoever is in the midst of taking certain steps, should be allowed to continue to complete whatever they are doing. Apparently not. To finish on the sites, there is one parcel left, number three. Any concrete plans?

We are ready to start it. There are some answers that we need from the government before we could start it.

It’s hedge funds and day-traders, which are opportunists, not long-term investors. If the bad news gets around, the stock will go down so let’s spread the bad news. When the good news comes, lets help spread the good news and the stock will go up. They could be in and out in an hour to make money. In a minute, sometimes. These issues do not affect the fundamentals of any commercial enterprise. People have not sufficiently studied in order to talk about the slowdown in China. Over 90 percent of the Chinese visitors to Macau come from Guangdong province. There is plenty more people from adjacent provinces like Fujian and other places where visitors could come from. They are saying it is going to affect the liquidity of the junket representatives. We have talked at length with them and they are saying there is plenty of money. It is not an issue. People are throwing money out at them. Macau is a success story. Singapore too is a success story, but surely even you must be surprised with the numbers. Did you expect the results would be like this?

No. I knew that there was an explosive opportunity and that if the market was correctly approached it would be big, but I never knew how big. Macau brought in US$24 billion last year in gross gaming income and this year it is bringing over US$30 billion. I never thought that we would get to that so fast. When we first came to Macau, there was only about US$2.5 billion of business. Within two years, without adding a table, without adding a chair for somebody to sit at, it doubled to US$5.5 billion. NOVEMBER 2011


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EXCLUSIVE CEO INTERVIEW

“We obviously disagree with the government [on parcels seven and eight]. There is no reason to take it back. If we could sit down and have a discussion about how to resolve the matter, we would welcome that opportunity” “Macau brought in US$24 billion last year in gross gaming income and this year it is bringing over US$30 billion. I never thought that we would get to that so fast”

NOVEMBER 2011


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NOVEMBER 2011


62

EXCLUSIVE CEO INTERVIEW

Everybody laughed at that and said that it was due to the excitement of the Sands Macao effect creating a lot more business. It was not that.

MORE AND MORE How happy are you to have a foot in both Singapore and Macau?

Very, very happy. I believe Asia has the potential for many more properties and we hope to be able to set up a network of properties that help to feed each other. For instance, if we are going to Korea, a lot of the very big Korean players are not going to play in their country because they want neither their social circles nor the government to see them. So, they will leave Korea and go somewhere else to play. Let’s say I am also going to Japan. The same thing with the Japanese. What will happen is the Japanese will go to Korea and the Koreans will go to Japan. The high rollers will come from other countries. Everybody is talking about your plans for Spain. Are they still on track?

Yes. What is the situation with the project?

We are in constant discussion with the government about the local legislation and what kind of grants and incentives they will give to us. Under the present legislation in Spain, it is not conducive to develop a strip of integrated resorts like the original plan we have proposed. We are talking about 12 hotels with 3,000 rooms each. For instance, the government requires everybody who comes in to show his or her passport but they do not know why. When you get down to some of the bureaucratic explanations, they say the European Union wants to prevent money laundering. We have to change the law. [It is understandable] that when you go to the cashiers’ cage and you put out your cash to buy the chips or the tokens, you have to show your passport, rather than show it when you come in. We cannot have 70,000 to 80,000 people a day coming to each property and showing their passport. It is ridiculous. You are telling them to bring whatever regulations they have, bring them now and not in the middle of an investment like happened in Macau?

Right. We are anticipating everything that can go wrong and we are discussing with the government. The government is very supportive. They want this development because it could be over US$30 billion. In Madrid?

Either on the city limits of Madrid or the suburbs of Barcelona. We probably have 1,000 pages of research provided by different consulting firms to each aspect of the gaming and non-gaming amenities to see how that will work out. Let me provoke you. Given the experiences you had in Macau and Singapore, what will you try to avoid in Spain? NOVEMBER 2011

You just put the finger on it. [We are trying] to anticipate all the issues that can arise during the course of the development and try to resolve them upfront so there are no surprises and no changes. For instance, everything to do with labour: the availability of labour, our ability to bring in if there is not enough Spanish labour – but our policy has always been local labour first –, the ability to deal with the unions, the ability to train the labour, things like that. Also, the moving around of tables. What difference does it make if I take this table that is sitting here and move it over there? Currently, the government needs to approve it. We are trying to convince the bureaucrats that there is no fundamental need or desire to wait two or three months to [get the approval to] move a table from this location to two metres away. Aside from Spain, do you see any other place that you would like to invest?

Yes. Japan, Korea, Taiwan, Vietnam, Thailand. I do not know about Thailand because the subject of legalisation goes off and on. There are rumours they will do it and there are rumours they won’t. I think it is much more serious in Korea, Japan, Vietnam. I do not know about Taiwan. Taiwan has been talking about the islands but nothing substantial regarding operators opening in Kinmen or Matsu. Japan and Korea: would you enter alone or would you like a local partner to go with?

We like to invest alone unless we are required to invest with local partners.

LEARNING CURVE One and a half years after the opening of Marina Bay Sands, what would you do differently if you could?

I would build more MICE space, more exhibition space, more hotel rooms and more casino space. Do you feel you are running out of space?

That is correct. We are running almost 99 percent occupancy [rates] in the hotel. More then seven years after the opening of Sands Macao, what would you do differently in Macau?

I would do exactly what I have done. There is not much I would do different. I mean, business wise. I might have built several places at once but we were doing other properties: we were building Singapore, we were building the Palazzo [Las Vegas]. We were building too much. Yes, I would have done several places simultaneously [in Macau]. I would have gone ahead and done [parcels] five and six, then I would have started seven and eight and have [site] three finished. [Originally] I was going to do them in sequence. For instance, I would finish the pilings in one property and then I would move the equipment and the crew to the next lot and so on. But with the recession, my crew could not handle it. It was too much for us to build.


63

“I am going to write a letter to the government suggesting there ought to be something like 30 percent of the space in hotel rooms, 15 percent of the space should be for MICE� NOVEMBER 2011


64

EXCLUSIVE CEO INTERVIEW

That would have been a way to secure the plots.

You are right.

JACOBS CAUSED ‘HURT’ The judicial saga with former Sands China Ltd. chief executive officer Steve Jacobs created a lot of noise around the company in Macau. Is it possible for you to measure the negative impact created by the case?

I am too trusting of people and I did not think somebody was that malicious to go out of his way to do criminal things. I cannot measure it but it caused us a lot of hurt. When the people went to make a settlement with him and to fire him, the first thing he did was to threaten us. Once threatened, we could not make any deal. These were very honest members, very outstanding members of the board. Once he threatened that he was going to make up stories and he had evidence, they could not capitulate to his demands. He made a bed for himself. The image I have of you is that you are always ready for a fight.

I am not ready for a fight. I do not want to fight but we are ready to defend ourselves against improper and untruthful allegations. He did it very cleverly. He went to court. In the United States, anything that is said in court is protected from liable or slander or any claim against untruth. In Macau it is not. In the rest of the world it is not. So he brought in the press to watch what he filed. I am sure he gave them copies. When we win the case, we will go after him in a way that he won’t forget because none of what he says is true and he can’t prove it. You were one of the first people to think of a way to expand into Hengqin Island, next to Macau, to host some of your non-gaming projects. Years later, the island will be developed by the Macau and Zhuhai governments, and some private businesses. You are not there. What went wrong?

I do not think it went wrong. My former management was enthused about it and I was not that enthused because we were a simple real estate development. From my point of view, they needed my convention expertise to develop and operate a big convention centre. We were discouraged because we were told that the central government did not want any casino operators operating on Hengqin Island, even if it was non-gaming. As it turned out, that was not the case. But that was not what we understood at the time, so we passed. Still, it is just the beginning and the island is six times bigger than Macau. If the opportunity comes, would you think about it?

We are only in the business of doing integrated resorts. We are not going to get into any other business. Business aside, here you are now, among the wealthiest people in the world. I am sure many are asking themselves: “With all these billions, why doesn’t he NOVEMBER 2011

“Asia has the potential for many more properties and we hope to be able to set up a network of properties that help to feed each other” “We like to invest alone unless we are required to invest with local partners” “When we win the case, we will go after Steve Jacobs in a way that he won’t forget because none of what he says is true and he can’t prove it”

stop? How much is enough?” It is not just an issue of money, is it? What drives you?

Accomplishment. To accomplish things that other people cannot do and to change the way other people do things. Looking back, what makes your heart beat faster with pride and what saddens you?

This morning we were talking about the joblessness [in the U.S.] and the sad part of people who are out of work. One of my colleagues said he got 17 calls in one day from people looking for jobs. That really makes me feel sad because I remember my parents who were both uneducated and my father had a lot of difficulties in getting a good job. I remember the sad times when there was no money. They had to borrow money from moneylenders, from shylocks, to put food on the table. What makes me proud are all the accomplishments. The biggest accomplishment that I have and that makes me the proudest has to do with medical research. I have changed the status quo of medical research because of my new “business model”. It is not business. It is a research model of conducting collaborative medical research [through the Dr Miriam and Sheldon G. Adelson Medical Research Foundation]. Did you know that we opened a drug treatment centre in Macau? We have a clinic there. It is a labour of love from my wife. She is a doctor of internal medicine and she developed a subspecialty in treating drug addicts. We have one in Israel, in Tel Aviv, where my wife comes from, and we have one here in Las Vegas. My wife has sent, many times, doctors, nurses and medical people from both clinics over to Macau. Now they have a couple of hundred patients and they are doing an excellent job and sharing treatment research, which is published in medical publications.


65

NOVEMBER 2011


Gaming | Billions Race

66

Strong showing New monthly record for gaming revenue uelled by holidaymakers during the National Day Golden Week, Macau’s casinos set a new record for monthly gross gaming revenue last month. Gross revenue of MOP26.85 billion (US$3.4 billion) easily surpassed the MOP24.77 billion record set in August,

F

according to data from the Gaming Inspection and Coordination Bureau. Casino gross gaming revenue was up 42.3 percent year-on-year. Even though a new all-time high was expected, the result still surprised some analysts, including Macquarie Securities’ head of Asian consumer and

Gaming Results: Gross Revenue

gaming research Gary Pinge. He admitted the new record was slightly above expectations. A new record was seemingly obvious as soon as preliminary data for the Golden Week national holiday started to come out. The casinos recorded MOP10.8 billion in gross gaming

In Million MOP (1HKD:1.03MOP)

28,000 26,000

24,306

24,000 22,000 20,000

18,869

18,883

18,571

Dec 2010

Jan 2011

19,863

20,087

20,507

Feb 2011

Mar 2011

Apr 2011

24,212

26,851

24,769 21,244

20,792

17,354

18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0

Oct 2010

Nov 2010

NOVEMBER 2011

May 2011

Jun 2011

Jul 2011

Aug 2011

Sep 2011

Oct 2011


67

Gaming Results: Market Share Per Operator 2010

2011

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct *

SJM

32%

31%

30%

31%

31%

34%

30%

32%

29%

28%

27%

29%

26%

Sands China

19%

15%

17%

18%

18%

16%

17%

16%

16%

15%

14%

14%

14%

Galaxy

10%

10%

10%

11%

9%

11%

9%

13%

15%

19%

20%

20%

21%

Wynn

14%

17%

17%

14%

15%

14%

17%

13%

15%

15%

13%

12%

13%

MPEL

14%

15%

15%

15%

15%

14%

17%

14%

14%

16%

15%

16%

15%

MGM

11%

11%

12%

11%

12%

11%

11%

11%

11%

8%

11%

10%

11%

TOTAL

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

40

SJM

Sands China

Galaxy

Wynn

MPEL

MGM

30

20

10

0

Oct 2010

Nov 2010

Dec 2010

Jan 2011

Feb 2011

Mar 2011

Apr 2011

May 2011

Jun 2011

Jul 2011

Aug 2011

Sep 2011

* estimated

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

revenue from October 1 to 9, an increase of about 40 percent year-on-year. October’s return is the sixth time this year that a monthly record has been set. What is also certain is that this year will see a new annual record. Total casino gross gaming revenue for the first 10 months of the year was up 45.4 percent year-on-year to MOP221.2 billion. That figure exceeds by 17.4 percent the MOP188.34 billion the industry posted last year, even before the final two months’ results.

Union Gaming Research expects the momentum to keep going until December, with the year closing at around MOP270 billion. In terms of market share, sources told Macau Business that SJM Holdings Ltd. was ranked first in October but its market share fell to 26 percent from 29 percent in September. The last time the gaming operator’s market share stood so low was back in August 2009, a couple of months after the opening of City of Dreams. This time, it seems that SJM’s pains

Oct 2011 *

are also caused by a new property in Cotai – Galaxy Macau. Since the resort opened, parent company Galaxy Entertainment Group Ltd. has steadily increased its share of the pie. Last month, it generated 21 percent of the city’s gross gaming revenue. In October, Melco Crown Entertainment Ltd. had a market share of 15 percent, while Sands China Ltd. registered 14 percent. Wynn Macau Ltd. had 13 percent and MGM China Holdings Ltd. rounded the ranking with 11 percent.

Macau Business now comes to your inbox with free daily updates from our newsroom

Go now to macaubusiness.com and sign up for our e-newsletter NOVEMBER 2011


68

Gaming Gaming || Billions Stock Watch Race

Gross revenue from different gaming activities 3Q 2011

2Q 2011

1Q 2011

4Q 2010

70,521 70,224 51,750 12,656 2,832 1,268 657 344 189 70 67 55 58 48 11 28 36 10 n/a 17 0.3 89 113 82 84 17 2 0.0007

65,900 65,605 48,539 11,512 2,828 1,137 643 300 152 75 71 53 52 48 14 29 36 8 1.6 16 0.4 56 107 81 87 18 2 0.0012

58,835 58,521 42,570 10,558 2,723 1,067 663 303 188 65 67 46 45 46 18 30 25 8 2 10 0.3 52 116 76 89 33 1 0.0006

55,398 55,106 40,472 9,698 2,407 947 627 265 222 57 64 43 38 38 21 24 88 7 1 9 0.4 46 98 72 92 29 2 0.0005

3Q 2010

2Q 2010

1Q 2010

4Q 2009

3Q 2009

45,219 44,902 32,368 8,310 2,028 856 541 266 161 55 52 43 41 30 24 20 22 9 0.2 8 0.4 41 110 91 102 12 1 0.001

41,248 40,951 28,761 8,024 1,948 869 594 273 135 55 48 45 39 29 28 19 19 8 2 7 0.5 22 124 91 52 27 2 0.0002

36,476 36,161 24,976 7,259 1,820 779 509 262 257 45 42 42 37 27 28 13 26 7 1 6 0.5 n/a 102 110 80 21 1 0.001

32,036 31,781 21,742 6,536 1,616 723 473 253 161 53 39 49 45 22 36 12 23 6 2 7 0.4 n/a 70 111 60 12 1 0.000

9.6% 9.6% 12.5% 3.6% 4.1% -1.5% -8.9% -2.6% 19.3% 0.0% 8.3% -4.4% 5.1% 3.4% -14.3% 5.3% 15.8% 12.5% -90.0% 14.3% -20.0% 86.4% -11.3% 0.0% 96.2% -55.6% -50.0% 400.0%

13.1% 13.2% 15.2% 10.5% 7.0% 11.6% 16.7% 4.2% - 47.5% 22.2% 14.3% 7.1% 5.4% 7.4% 0.0% 46.2% - 26.9% 14.3% 100.0% 16.7% 0.0% n/a 21.6% - 17.3% - 35.0% 28.6% 100.0% - 80.0%

13.9% 13.8% 14.9% 11.1% 12.6% 7.7% 7.6% 3.6% 59.6% -15.1% 7.7% -14.3% -17.8% 22.7% -22.2% 8.3% 13.0% 16.7% -50.0% -14.3% 25.0% n/a 45.7% - 0.9% 33.3% 75.0% 0.0% 150.0%

25.0% 25.1% 33.5% 10.8% 5.4% 13.3% 9.5% 13.5% 28.8% 32.5% 21.9% 25.6% 8.4% - 4.3% - 2.7% 50.0% 15.0% 20.0% 0.0% n/a 0.0% n/a - 1.4% 85.0% - 11.8% 9.1% 0.0% - 60.0%

Macau Patacas (Million)

Total Games of Fortune (total) VIP Baccarat Baccarat Slot Machines Cussec Black Jack Stud Poker Roulette 3-Card Baccarat Texas Holdem Poker Fantan Casino War 3-Card Poker Fish-Prawn-Crab Paikao Craps Lucky Wheel Makccarat Mahjong Tombola Live Multi Game Horse Racing Greyhound Racing Sports Lottery - Football Sports Lottery - Basketball Chinese Lottery Instant Lottery

47,723 47,384 34,047 8,884 2,236 884 528 255 154 52 52 52 38 33 20 23 34 8 1 10 0.4 44 107 85 134 11 1 0.0006 QoQ%

Total Games of Fortune VIP Baccarat Baccarat Slot Machines Cussec Black Jack Stud Poker Roulette 3-Card Baccarat Texas Holdem Poker Fantan Casino War 3-Card Poker Fish-Prawn-Crab Paikao Craps Lucky Wheel Makccarat Mahjong Tombola Live Multi Game Horse Racing Greyhound Racing Sports Lottery - Football Sports Lottery - Basketball Chinese Lottery Instant Lottery

7.0% 7.0% 6.6% 9.9% 0.1% 11.5% 2.2% 14.7% 24.3% -6.7% -5.6% 3.8% 11.5% 0.0% -21.4% -3.4% 0.0% 25.0% n/a 6.3% -25.0% 58.9% 5.6% 1.2% -3.4% -5.6% 0.0% -41.7%

Source: Gaming Inspection and Coordination Bureau NOVEMBER 2011

12.0% 12.1% 14.0% 9.0% 3.9% 6.6% -3.0% -1.0% -19.1% 15.4% 6.0% 15.2% 15.6% 4.3% -22.2% -3.3% 44.0% 0.0% -20.0% 60% 0.3 7.7% -7.8% 6.6% -2.2% -45.5% 100.0% 66.7%

6.2% 6.2% 5.2% 8.9% 13.1% 12.7% 5.7% 14.3% -15.3% 14.0% 4.7% 7.0% 18.4% 21.1% -14.3% 25.0% -71.6% 14.3% 100.0% 11.1% -0.3 13.0% 18.4% 5.6% -3.3% 13.8% -50.0% 20.0%

16.1% 16.3% 18.9% 9.2% 7.6% 7.1% 18.8% 3.9% 44.2% 9.6% 23.1% -17.3% 0.0% 15.2% 5.0% 4.3% 158.8% -12.5% 0.0% -10.0% 0.0 4.5% - 8.4% -15.3% - 31.3% 163.6% 100.0% -16.7%

5.5% 5.5% 5.2% 6.9% 10.3% 3.3% -2.4% -4.1% -4.3% -5.5% 0.0% 20.9% -7.3% 10.0% -16.7% 15.0% 54.5% -11.1% 400.0% 25.0% 0.0% 7.3% -2.7% -6.6% 31.4% -8.3% 0.0% - 40.0%


69

Trying to keep up Slots revenue stalls in third quarter of 2011 as mass baccarat lifts share BY MARTIN JOHN WILLIAMS*

IP baccarat revenue in Macau rose dramatically in the third quarter of 2011, but market share for the territory’s leading cash engine retreated slightly after peaking in the second quarter. Meanwhile, slot machine market share slid again as revenue stalled despite the addition of 800 machines. Breakdown figures for the third quarter released by the government’s Gaming Inspection and Coordination Bureau last month showed that Macau’s booming gaming industry raked in MOP70.52 billion (US$8.8 billion) in gross revenue, a 7 percent increase on the second quarter and a 47.8 percent leap year-on-year. Revenue for games of fortune, a category that covers casinos and noncasino slot machines, rose to MOP70.22 billion, or 99.58 percent of the total, while pari-mutuel and lottery revenue was roughly even at MOP298 million. VIP baccarat revenue increased from the second quarter’s MOP48.54 billion to MOP51.75 billion, up 6.6 percent quarter-on-quarter and 52.0 percent year-on-year, but this represented a quarter-on-quarter fall in market share of games of fortune from 74.0 percent to 73.7 percent. Mass market baccarat earned MOP12.66 billion from July to September, a 9.9 percent increase on the second quarter and up 42.5 percent year-onyear, producing a quarter-on-quarter rise in market share of 0.5 percentage points to 18.0 percent. However, slot machines, the largest source of gaming revenue in Macau after VIP baccarat and mass market baccarat, seemingly struggled to take advantage of industry growth. Slots lodged a mere 0.14 percent quarter-on-quarter increase in revenue that delivered MOP2.83 billion for the quarter, or a 4.0 percent market share of games of fortune, down from 4.3 percent in the second quarter.

V

Complicated mathematics The Gaming Inspection and Coordination Bureau also reported that the total

number of licensed slot machines increased to 15,900 from 15,098, which pushed average quarterly revenue per unit down to MOP178,113, a fall of 9.8 percent in two quarters after peaking at MOP197,504 in the first quarter of 2011. It was the second consecutive quarterly fall in per-unit revenue after nonstop per-unit growth since the second quarter of 2009. David Punter, general manager of Aristocrat Technologies’ Asia-Pacific unit, a major supplier of machines to the Macau market, told GamblingCompliance that the slots data may reflect competition with VIP tables for space on the casino floor rather than per-unit performance. The Gaming Inspection and Coordination Bureau data does not indicate the number of slots in operation at a given time, which means machines that have been removed — for example, to make room for much more profitable VIP tables — or that have been licensed but are not installed are included in the total figure, which would distort the measure of per-unit revenue. The key metric, Mr Punter said,

is the full-year comparison: slots revenue of MOP8.38 billion for 2011 after three quarters is just short of the total MOP8.62 billion for 2010, with a quarter including Golden Week to come. Revenue from other mass market gaming continued to pale against the baccarat juggernaut, but solid performances were registered by roulette, sic bo (listed as “cussec”), lucky wheel, live multi game, stud poker, casino war and Fortune 3 Card Poker, which all outperformed the 7 percent quarter-on-quarter revenue increase for games of fortune. Revenue for live multi game rose by 58.9 percent quarter-on-quarter to MOP89 million. Pari-mutuel and lottery revenue, meanwhile, rose 1 percent from the second quarter’s MOP295 million and was down from MOP338 million yearon-year, largely due to the 2010 FIFA World Cup. Greyhound racing continued to suffer, however, with a year-on-year drop in revenue of 10.5 percent for the first three quarters. The drop in betting volume over the same period was 11.5 percent. * EXCLUSIVE GAMBLINGCOMPLIANCE/MACAU BUSINESS NOVEMBER 2011


70

Gaming | Stock Watch the announcement of an agreement to expand the European Financial Stability Facility to €1 trillion (MOP11.3 trillion). On the domestic front, Premier Wen Jiabao said last month that his government would fine-tune its monetary policy “at a suitable time and by an appropriate degree” as mainland economic expansion moderated. That led investors to believe that the government may relax monetary policy to ensure growth, which could be expected to help Macau’s gaming industry. Of even greater benefit to casino stock prices was the gradual fading of fears that a slowdown in the mainland would lead to a squeeze on credit for VIP junkets due to informal lenders being less open-handed. After analysts and casino executives repeatedly stressed that there were no indications of liquidity problems in the Macau gaming sector, the worries started to dissipate towards the end of October. Earlier in the month fear of a slowdown caused double-digits falls in the shares of all Macau gaming companies.

Stellar Galaxy

Hitting high notes Casino stocks rebound on the eurozone bailout deal and on fewer jitters about informal lending in the mainland BY RAY CHAN

asino stocks rose sharply by the end of October in active trading, with renewed hope for an end to the lingering European debt problems after the eurozone’s policymakers made a breakthrough in their search for a general agreement on what to do about Greece’s huge debt burden. At the same time, investors were showing signs that their worry about the exposure of Macau’s VIP gaming sector to informal

C

NOVEMBER 2011

lending in the mainland is easing. Stocks of Macau casino companies rose by an average of nearly 11 percent in the month ended October 28, while the Hang Seng Index rebounded by 11.1 percent and the Hang Seng China Enterprise Index rebounded by 14.5 percent. One day before, French president Nicolas Sarkozy said Chinese president Hu Jintao had pledged to help out after a European summit in Brussels ended with

The extra ingredient in the mixture that fuelled the rebound was the strong results for the third quarter posted by Galaxy Entertainment Group Ltd. (0027. HK), Sands China Ltd. (1928.HK) and Wynn Macau Ltd. (1128.HK). Galaxy Entertainment’s stock has risen by more than 90 percent this year, making it the biggest gainer among the six casino operators. The Hang Seng Index has fallen 13 percent this year. Galaxy Entertainment said its adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) for the third quarter rose to HK$1.8 billion (US$231 million) from HK$616 million a year before. It was the company’s 12th consecutive quarter of EBITDA growth. Revenue more than doubled to HK$13 billion. Galaxy Entertainment gave no net profit figure. The company’s performance was boosted by its new flagship, Galaxy Macau, which opened in May and posted EBITDA of HK$973 million for its first full quarter in operation. The casino resort will open a cineplex, to be managed by Hong Kong’s UA Cinemas, on December 15. The UA Galaxy Cinemas cineplex will occupy about 16,000 square metres of floor space, have nine 3D-capable screens and up to 1,000 seats. On the same date Galaxy Macau will also open Galaxy Square. The


71 Share price performance (HK$/US$)

Name

As of October 28, 2011

52-week high 52-week low

Change (%)

28/10/2011

Year-to-date Month-to-date

SJM Holdings Ltd.

21.00

9.88

14.28

15.72

1.28

Galaxy Entertainment Group

22.45

7.05

16.92

92.27

45.61

Wynn Macau Ltd.

29.10

15.02

22.75

30.75

21.14

Sands China Ltd.

26.60

14.90

24.85

45.49

33.32

Melco International Develop.

10.76

4.18

6.60

48.65

26.20

Melco Crown Entertainment

16.15

5.55

11.92

87.42

43.44

MGM China Holdings Ltd.

18.20

8.05

12.90

-

25.00

Shanghai SE Composite

3,186.72

2,307.15

2,473.41

-11.92

4.84

Hang Seng Index

24,988.57

16,170.35

20,019.24

-13.09

13.79

Hang Seng China Ent Index

14,219.48

8,058.58

10,625.16

-16.29

19.15

Las Vegas Sands Corp.

55.47

36.05

45.40

-1.20

18.41

MGM Resorts International

16.94

7.40

11.72

-21.08

26.16

172.58

97.54

136.89

31.83

18.95

44.29

31.68

37.08

5.49

11.38

12,876.00

10,404.49

12,208.55

5.45

11.87

1,370.58

1,074.77

1,284.59

2.14

13.54

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

Share price performance of Hong Kong-listed gaming stocks (Rebased as HK$100) 300 250 200 150 100 50 1-Jan-2011

1-Feb-2011

1-Mar-2011

1-Apr-2011

1-May-2011 1-Jun-2011

1-Jul-2011

Sands China Ltd. SJM Holdings Ltd. Wynn Macau Ltd. Melco International Development Galaxy Entertainment Group Ltd.

1-Aug-2011 1-Sep-2011

1-Oct-2011

MGM China Holdings Ltd. Hang Seng Index As of October 28, 2011

Share price performance of U.S.-listed gaming stocks

(Rebased as US$100) 300 250 200 150 100 50 1-Jan-2011

1-Feb-2011

1-Mar-2011

Las Vegas Sands Corp. Penn National Gaming Inc.

1-Apr-2011

1-May-2011 1-Jun-2011

1-Jul-2011

Wynn Resorts Ltd. Melco Crown Entertainment-ADR

1-Aug-2011 1-Sep-2011

1-Oct-2011

MGM Resorts International S&P 500 Index As of October 28, 2011

2,100-square-metre plaza will have a 19-metre-high atrium that can accommodate a stage and red-carpet events, giant LED-screen walls and a broadcasting studio. Sands China’s earnings also surged in the third quarter. The casino operator’s net profit leapt by 41.6 percent from a year before to US$278.3 million. Net revenue increased by 11.1 percent to US$1.2 billion, while adjusted EBITDA rose by 18.9 percent to US$390.6 million. Las Vegas Sands Corp (LVS.NYSE), the parent of Sands China, doubled its thirdquarter net profit to US$353.6 million.

Wynn some Wynn Macau’s third quarter net profit jumped by 84 percent from a year before to US$209.9 million. Net revenue climbed by 41.7 percent to US$951.4 million. The company says it is near to deciding how big its Cotai resort project will be, how much it will spend on it and when it will be finished. The project has yet to be approved by the government. Wynn Macau officials say they expect to complete the financing arrangements for the project next year. Wynn Macau’s parent, Las Vegas’s Wynn Resorts Ltd (WYNN.NASDAQ) posted third-quarter net profit of US$127.1 million, compared with a loss of US$33.5 million a year before, when it repaid debt. There was more news last month about Melco Crown Entertainment Ltd.’s (MPEL.NASDAQ) intention to list on the Hong Kong Stock Exchange. The International Financing Review reported that the company was considering listing by way of introduction, instead of by selling new stock. This was because of volatile market conditions, the report said. It would mean the cancellation of a plan to sell at least US$300 million worth of new shares in Hong Kong. Listing by introduction entails the transfer of shares from another stock market. Also in the news was Stanley Ho Hung Sun’s reduction of his stake in Melco International Development Ltd. (0200.HK) to 24.28 percent from 26.79 percent in an on-exchange transaction. In another on-exchange transaction, Mr Ho’s son, Lawrence Ho, acquired a similar amount of shares, increasing his stake in the company to 60.57 percent from 59.09 percent. Melco International Development is one of the two reference shareholders in Melco Crown, with a stake of approximately one-third. NOVEMBER 2011


72

Gaming

SALARY RISE ON THE HORIZON

After several workers’ protests, gaming operator SJM Holdings says it will evaluate its employees’ salaries Gaming operator SJM Holdings Ltd. may soon increase the salaries of its workers. But the rate of the raise is still to be decided, the company’s chief executive officer Ambrose So Shu Fai said last month, adding the gaming operator is still looking into the matter. The move comes after Grand Lisboa’s cage cashiers held two demonstrations complaining that their wages had only gone up by MOP500 (US$62.5) since the property opened, far below the increases enjoyed by their fellow croupiers. Asked about the potential impact of the government’s plans to make the future Pac On ferry terminal in Taipa, the city’s main maritime border crossing in the future, on SJM Holdings’ business, Mr So said “building one more terminal is necessary, but it should only be there to help divert the flow of visitors, and not replace the [peninsula] terminal.” Currently, SJM Holdings is mostly peninsula-focused, with only a couple of satellite casinos in Taipa. It has no presence whatsoever in Cotai, although the gaming operator has a pending land request to build a resort there. The future Pac On ferry terminal is expected to be finished in mid-2013 and will have a capacity for 15 million passengers per year.

ALMOST 10 PERCENT OF YOUTHS GAMBLE

Less local youngsters are gambling but those that do are spending more money and time on it, a survey commissioned by the government shows. According to the results, 9.2 percent of the 3,992 interviewees admitted to have gambled in the month prior to questionnaire, a drop of 3.5 percentage points over the previous study, conducted in 2008. However, the time spent on gaming almost doubled to a monthly average of four and a half hours. The average amount of money wagered also soared to MOP4,800 (US$600) from MOP600. The survey was conducted in 2010 and interviewed youngsters between 13 and 29 years of age. Gambling activities included mahjong, card games, slot machines and football bets.

CASINOS AGREE TO REGULATE SHUTTLES

Casino operators have agreed to restrict the number of shuttle buses, the Transport Bureau director Wong Wan said. This comes as part of a wider government plan to improve traffic conditions in Macau. Mr Wong didn’t put forward any specific goal for the overall number of casino shuttles to operate in Macau in the future. As part of the overall plan to improve traffic, the government also wants to cap the growth in the number of private cars at four percent a year starting in 2020.

REGULATIONS FOR SMOKING OUT SOON

BUCCLEUCH VASES ARRIVE AT WYNN

Stephen Wynn, the chairman and chief executive officer of Wynn Macau Ltd. and Edmund Ho Hau Wah, vice chairman of the National Committee of the Chinese People’s Political Consultative Conference officially unveiled last month the Buccleuch vases at Wynn Macau. “I am delighted to announce that we are returning an extraordinary collection of porcelain vases from the Qing Dynasty to the People’s Republic of China,” said Mr Wynn. Wynn Macau Ltd. acquired the group of Jiaqing period (1796-1820) vases at a Christie’s London sale in July. The vases were purchased at auction for more than MOP100 million. The only other set of four vases matching these are in Buckingham Palace and belong to the Queen of England.

NOVEMBER 2011

The government is planning to release the technical requirements regarding the setting up of smoking and non-smoking areas for casinos by the year-end, the Health Bureau director Lei Chin Ion told reporters. Macau’s new tobacco control law will come into effect in January next year. It will ban smoking in almost all workplaces, except for casinos, where smoking will be permitted on up to half the floor area. Casinos will be granted one extra year exemption to set up the designated smoking areas.



74

Gaming

The cap fits Although the gaming industry appears to be nearing the government’s table limit, there is evidence to suggest there is capacity to spare BY LUCIANA LEITÃO

he assertion by the secretary for economy and finance Francis Tam Pak Yuen that the 5,500 table limit on live gaming tables will not be lifted before 2013 has left many wondering how casino projects in the pipeline will be affected. At least one industry insider told Macau Business there is little to worry about because several casinos leave onefifth or more of their tables unused most of the time. “We said last year that the number of gaming tables would be maintained at 5,500. It is still our goal to maintain that number and we are still on target,” Mr Tam said last month. “Right now we don’t see any reasons to change it.” At the end of September the government had licensed 5,379 live gaming tables – just 121 short of the cap, which was first announced in March last year. By mid-October, the number had dropped by 100, our source says. What is more, most casinos fail to make full use of their licensed tables. Our source says up to about one-third of the Venetian Macao’s tables are unused on any given day. Other casinos also leave up to 30 percent idle. In smaller casinos, the percentage is lower. This would make it easier for Sands China Ltd. to scrape together enough tables for the two casinos it means to open next year. It could transfer unused licences to its new casinos. The first phase of Sands China’s Sands Cotai Central development is

T

set to open in March and will include a 9,850 square-metre casino and VIP gaming areas. The company expects to open a second casino there by the third quarter of the year. In May 2010, Sands China Ltd chairman Sheldon Adelson already confirmed the Sands Cotai Central development would feature unused or underutilised tables from other properties, as well as a new mix of electronic table games. In the interview published in this issue (see CEO Interview), Mr Adelson assures that the gaming operator will have enough tables for its new development.

So wear it Gaming companies apply for more table licences than they need for several reasons. One is that the more tables they have, the more they can borrow from the bank, our source says, because the number of tables counts with bankers. Eventually, casinos choose how many tables to operate in light of demand and their ability to staff them. During peak seasons, such as Golden Week, they usually use more tables. The government has said the 5,500 cap will be lifted in 2013. The annual growth in the number of tables will be then limited to 3 percent for the following 10 years – meaning around another 2,000 tables by 2023. This is reasonable, our source says. It means there will probably be

Most casinos fail to make full use of their licensed tables. Our source says up to about one-third of the Venetian Macao’s tables are unused on any given day. Other casinos also leave up to 30 percent idle. In smaller casinos, the percentage is lower NOVEMBER 2011

enough tables for all the casinos expected to open in Cotai between 2013 and 2023. These include at least one casino each for SJM Holdings Ltd., MGM China Holdings Ltd., Wynn Macau Ltd. and Melco Crown Entertainment Ltd.’s Macao Studio City – all still awaiting government approval. Galaxy Entertainment Group Ltd. and Sands China Ltd. also have more land to develop in Cotai. A source with knowledge of government operations told London-based


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research company GamblingCompliance that the incremental cap is set to be liberally applied such that new tables will be allotted from the total number that will accrue by 2023 rather than be squeezed into the market through marginal annual increases that could hold back the opening of new casinos. Our source has confirmed that information. Our source also added that fully electronic gaming tables would not be considered in terms of the gaming cap,

unlike semi-automated units, which are already licensed as live tables. The gaming industry has so far greeted the announcement of the limit of 3 percent on the annual growth in the number of gaming tables with equanimity. “That is the cap that has been put out by the government for a reason, and we understand it and we can live with it,” Sands China chief executive Edward Tracy told reporters last month. MGM China Holdings chairperson

Pansy Ho Chiu King has also shown support for the policy. “This is a very prudent way to regulate. That is exactly the issue. While policies have helped promote injection of capital and growth there must also be some balance,” Ms Ho told Portuguese news agency Lusa. Ms Ho said, “a certain balance has been found, or at least a view upon which everyone agrees on how the market should be regulated”. NOVEMBER 2011


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Gaming

Crystal clear

Clarity, transparency and regulation are the house rules for Nasdaq-listed VIP junket operator Asia Entertainment and Resources BY LUCIANA LEITÃO

f one reads the international news, Macau junket operators are mostly depicted as shady businesses. At Nasdaq-listed Asia Entertainment and Resources Ltd. (AERL), the company’s chief executive Kenny Leong Siak Hung says that is far from the truth. “In Macau, the junket business is no longer a secret, and it is transparent,” he tells Macau Business. Asia Entertainment currently operates VIP facilities at the Venetian Macao, StarWorld and Galaxy Macau. The company plans to expand in the next three years, by the end of which time it wants to have VIP room promotion agreements with all six local gaming concessionaires. It currently has 29 high-roller tables, trailing industry heavyweights Suncity Group, Jimei Group and Neptune Group. The firm deals with mid to high-tier VIP customers who spend at least HK$10 million (US$1.3 million) a visit. The company listed in New York in July last year. Asia Entertainment chose a United States listing over Kong Kong because “not many people knew about VIP [gaming promotion]” in the neighbouring SAR, Mr Leong says. “In the U.S., so many casinos are listed that they [investors] have experience on how to monitor the casino business.” It was also easier to win approval. Mr Leong says Asia Entertainment’s activities are transparent, fulfilling all the requirements of U.S. regulators. “At the beginning we felt it was very difficult but now we submit everything. All our figures can be confirmed. Every month we disclose our turnover,” he says. To avoid running foul of the regulators, Asia Entertainment has rules to control its associates’ activities. “Every half year, we do a random checking of all our agents to confirm the receipts,” says Mr Leong.

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Cleaning up Mr Leong believes the poor image of junkets is something of the past. “Before, junkets had a bad image, because the crime rate was very high, but today that has totally changed.” He points to his own company. “You can check all of our records, we have no crime record nor has our chairman or directors.” Mr Leong also dismisses the commonly made link between junket operations and triads. “If we were ruled by secret societies, it would be almost impossible to be transparent.” He considers the current regulations overseeing junket activities in Macau as sufficient. If they were to be tightened further, NOVEMBER 2011

“In Macau, the junket business is no longer a secret, and it is transparent,” says Asia Entertainment and Resources Ltd.’s chief executive Kenny Leong Siak Hung. “You can check all of our records, we have no crime record nor has our chairman or directors”


77 it would be much more difficult to do business, Mr Leong says. Junket operators are vital for Macau’s casinos. VIP gaming accounts for roughly three quarters of the overall gross gaming revenue. Commissions paid by casinos to VIP junkets are calculated on a monthly basis. There are two compensation methods: chip commission calculated by reference to monthly rolling chip turnover, with the casino bearing the risk of losses from the gaming operations; and percentage of gaming wins before expenses and taxes, where both the casino and the VIP junket share the risk of losses. The rolling chip-based compensation method is currently capped at 1.25 percent. “Revenue share is not subject to a cap but will normally be anywhere from 40 to 48 percent of VIP gaming revenue” in favour of the junket, says David Green, gaming consultant at Newpage Consultant. Asia Entertainment currently works with the rolling chip commission model but Mr Leong hopes within three years to divide the business 50-50 between the two methods to hedge risk. Last month the company posted a US$2.11 billion (MOP16.9 billion) unaudited rolling chip turnover. That represents an 84 percent increase year-over-year, double the rate of growth of gross gaming revenue over the same period. For the first 10 months of the year, Asia Entertainment’s rolling chip turnover was US$16.47 billion, up 109 percent year-over-year.

NOT FEELING THE PINCH J

unket operators in Macau remain liquid and are not feeling any funding squeeze, analysts say. Their views come despite fears that tighter informal credit conditions in the mainland could curtail junket operators’ ability to extend credit to players. “While it is possible that some smaller, less liquid junket operators may be feeling pressure from reduced credit availability on the mainland, larger players have apparently not been affected as yet,” ratings agency Fitch said late last month. Fears first emerged following reports in September that company bosses in Wenzhou, the mainland’s entrepreneurial hub and the capital of coastal Zhejiang province, had fled after failing to repay informal loans due to a slowdown in the country’s economic growth. That allegedly led informal lenders to tighten credit, which could potentially hurt junkets financed from China’s informal lending system. A report by Macquarie Equities Research published last month says there was a low risk of junket liquidity being restricted. The report claims junkets have become significantly more institutionalised in the sourcing of capital, which has driven strong liquidity flow into the junket system. “Macau’s junket liquidity is likely to remain strong over the near term,” says Macquarie Equities Research.

NOVEMBER 2011


78 DAVID GREEN GAMING CONSULTANT, NEWPAGE CONSULTING

What a surprise! THE LATEST REPORT FROM THE U.S. CONGRESSIONAL-EXECUTIVE COMMISSION ON CHINA SAYS AMERICAN GAMING EXPERTS SHOULD PROVIDE TECHNICAL TRAINING AND ASSISTANCE TO MACAU AUTHORITIES. ONE WONDERS “WHAT FOR?” he 2011 Annual Report of the U.S. Congressional-Executive Commission on China, released last month, has garnered rather more media attention than it deserves. Its findings and recommendations are almost entirely predictable, given the commission’s legislative mandate to monitor and report on human rights and the development of the rule of law in China. The chairman of the commission is a 16th-term Republican, congressman Chris Smith, from, wait for it, New Jersey, the state that famously found Pansy Ho Chiu King to be an unsuitable associate of MGM Resorts International. Notable amongst the legislation he has this year introduced to the U.S. House of Representatives is a bill called the “China Democracy Promotion Act of 2011”, a bill which appears to have little to do with democracy, since its primary aim is to deny entry to the United States of senior leadership of the People’s Republic of China and individuals who may have been involved in human rights abuses in the mainland. While Macau only attracts a few pages of findings in the U.S. Congressional-Executive Commission on China’s report – mainly the recycled view of others, not the product of the commission’s own research – they are, of course, adverse. No surprises there. One recommendation is, however, a surprise: it entreats the U.S. government to “arrange for regulatory experts from states with gaming industries, such as Nevada, to provide technical training and assistance to Macau authorities on how to control criminal activity, and ensure that U.S. casino owners and operators in Macau are adhering to the highest standards for the gaming industry.” This recommendation is founded, in part, on a view that Macau is more corrupt now than in the recent past. The evidence for that is said to lie in the fact that Macau has dropped from 43rd to 46th place on the Corruption Perceptions Index, published annually by Transparency International. What the report does not say is that in the same period as Macau’s ranking declined, so too did that of the United States, from 19th to 22nd. In fact, the United States has been trending in the direction of the more corrupt end of the scale since 2001, when it ranked 16th. What the report also fails to say is that the index measures only perceived public sector corruption; it does not extend to the private sector. The index is therefore not necessarily reflective of corruption across the board.

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Simply the best? Congressman Smith’s home state experienced something of an epiphany this year, when it realized that its cherished gaming regulatory system was not only hugely expensive to administer, but was significantly unfriendly to business. Actually, the two factors were related, since fines imposed on licensees by the Casino Control Commission in part funded the New Jersey regulatory machinery. Hence, justice was rarely tempered with mercy. I was a guest of the New Jersey Casino Control Commission some years ago and attended a hearing in Atlantic City, in the course of which a casino licensee was fined US$25,000 (MOP200,000) for being a day late with a tax payment, a delay resulting from a change of its banking arrangements, rather than a wilful disregard of its obligations. Earlier this year, the functions of the Casino Control Commission were largely transferred to the Division of Gaming Enforcement, and significant amendments were made to New Jersey’s gaming law to NOVEMBER 2011

make it more competitive and business-friendly. This recommendation for the need of U.S. gaming experts to provide technical training and assistance to Macau authorities must also have come as a surprise to the International Masters of Gaming Law. The organisation last month bestowed the honour of “Regulator of the Year - Evolving Jurisdictions”, upon Manuel Joaquim das Neves, the director of the Gaming Inspection and Coordination Bureau, Macau’s gaming regulator. The International Masters of Gaming Law membership comprises gaming regulators, attorneys and advisors from many jurisdictions, including U.S. states. At the presentation of the “Regulator of the Year” awards, Mark Lipparelli, chair of the Nevada Gaming Control Board and winner of the corresponding award for the Americas, commented that Nevada also needs to reform its regulatory system, presumably to ensure that it reflects contemporary realities and achieves an appropriate balance between societal expectations and the business imperatives of industry participants. Do your homework first A more serious criticism of the U.S. Congressional-Executive Commission on China recommendation is that it is not internally consistent. It references Nevada as a source of expertise for technical training and assistance to “Macau authorities” on how to control criminal activity – so far, so good. However, it goes on to imply that U.S. operators in Macau are not adhering to the highest standards for the gaming industry. Was the commission not aware of the fact that Nevada is one jurisdiction which has foreign gaming provisions, applicable to its licensees, in its gaming law, the effect of which is to require such operations to be conducted in compliance with Nevada regulatory standards? Why do Macau authorities need to concern themselves with the adoption of other jurisdictions’ standards, the implementation of which might relieve Nevada of having to do its job of enforcing the foreign gaming operating provisions of its law? Moreover, why is it assumed that “the highest standards for the gaming industry” are those operating in Nevada or anywhere else in the United States? A reasonable argument could be made that the “highest standards” are now those observed in Singapore or Australian states, which have developed eclectic regulatory models specifically adapted to those jurisdictions. It is 10 short years since Macau dismantled the STDM gaming monopoly. There are still gaps in the legislative framework by which gaming is regulated but it does not necessarily follow that gaming is unregulated or even poorly regulated. It simply means that the regulatory system which has evolved to date is specific to the needs of Macau and takes account of societal and government expectations, the history of the industry and its evolution and wider parallel developments in corporate and prudential regulation. Macau has not had a Lehman Brothers, an Enron, Global Crossing, Tyco, WorldCom, Dot-com bubble, savings and loans crisis or gubernatorial scandal or any systemic regulatory failure to contend with or influence its thinking. It is getting on with the business of responsibly developing a sustainable industry, which just happens to be by far the largest on the planet. It deserves some respect, especially from the occupants of glasshouses.


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HAMMER TIME AT PONTE 16

WORRYING TREND

Casino-related crimes on the rise Macau’s public prosecutions office says the number of casino-related cases is increasing. “There was a growth in the number of money-laundering cases connected with the gaming industry, mainly with illegal gambling in VIP rooms,” the public prosecutions office said today in a press release. During the first eight months of 2010, the number of money-laundering cases handled by the public prosecutions office soared by 40 percent year-on-year, the body said, without providing figures. At the same time, illegal gambling and loan sharking cases went up by 6 percent, while those of extortion and fraud went up by 11 percent. According to the public prosecutions office, theft and robbery cases went up by 23 percent year-on-year from January to August, with a “significant increase” in the number of thefts taking place inside casinos or somehow related to the gaming industry.

Last month’s “Legends” auction at hotel-casino Ponte 16 brought in nearly US$2 million (MOP16 million), with 517 auction items sold during the 11-hour auction. The auction was conducted by Julien’s Auctions. Marilyn Monroe’s “River of No Return” dress sold to a private buyer for US$504,000. Madonna’s “Who’s That Girl” Tour bustier (photo) sold for US$72,000. Before the “Legends” auction, more than 100 pieces were on exhibit at Ponte 16 for a week, attracting around 10,000 people, according to the organisation.

ARISTOCRAT AND IGT REACH SETTLEMENT

GLI ASIA EXPANDS SERVICES Gaming test lab GLI Asia is expanding its testing services to the lottery industry. The Macau-based subsidiary of Gaming Laboratories International has recently executed numerous lottery projects in Beijing, South Korea and Taiwan. “We are absolutely thrilled with the growth of our Asia operation, both in terms of clients served and our expanding staff. We recently added more than 10 full-time engineering staff in the GLI Asia fullservice lab, and the lab has doubled in size since its opening in January 2009,” said Ian Hughes, managing director of GLI’s Asia Pacific operations.

Aristocrat Technologies Australia Pty Ltd. announced last month it reached an agreement with International Game Technology, Inc. (IGT) to settle several intellectual property disputes. Under the agreement Aristocrat and IGT will enter into a crosslicensing arrangement involving Aristocrat’s Hyperlink and Ante-Bet patents and IGT’s Alcorn patents. Aristocrat managing director and chief executive officer Jamie Odell said Aristocrat was pleased to have reached agreement with IGT. “Aristocrat’s intellectual property is a crucial company asset and the company has taken a proactive approach to aggressively protect and defend intellectual property as a core part of our business strategy,” said Mr Odell.

RAIDEN KAN WINS POKER CUP CHAMPIONSHIP PokerStars player Raiden Kan took home the HK$1.25 million (US$160,000) grand prize for the main event of the Macau Poker Cup Championship 2011. The 27-year old is the first Malaysian to win a major tournament on the Asian poker circuit. PokerStars Macau at Casino Grand Lisboa hosted the Macau Poker Cup Championship 2011 from October 7 to 16. The main event set new Macau Poker Cup Championship records for both field size and prize money as 308 players competed for a piece of the HK$5.55 million prize pool.

NOVEMBER 2011


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MICE

Powerhouse potential Fewer meetings and conferences have been held this year, but the industry is confident the city can become a leading events destination BY SARA FARR

he government may have said that a way to increase tourism and diversify Macau’s economy is to develop the meetings, incentives, conventions and exhibitions industry or MICE, but the figures show otherwise. The number of MICE events is dropping and the number of participants is also falling. And the industry’s economic weight is still negligible. Data from the Statistics and Census Service shows that in the second quarter Macau played host to 258 MICE events, 29 percent fewer than a year before. The average duration of MICE events dropped from 2.3 days to 2.1 days and the number of participants fell by around 9 percent to 119,000. The data seems to indicate that exhibitions attract more participants than meetings or conventions. About 91,000 people attended the 10 exhibitions held

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NOVEMBER 2011

in the second quarter. But it is unclear how many were trade visitors, because many exhibitions are open to the general public, if only on certain days. And while the average duration of MICE events was 2.1 days, the exhibitions lasted, on average, 4.2 days. The president of the Macau Convention and Exhibition Association, Eva Lou I Wa, says the number of MICE events is dropping because there is strong competition from neighbouring countries, mainly Singapore and Malaysia. “Our competitors are very aggressive,” she says. Ms Lou says Macau should step up its game. “The natural disaster in Japan, the March earthquake and tsunami, also affected their events,” she says. Japan is an important source of MICE business for Macau.

The vice-president of convention and exhibition operations at the Venetian Macao, Gene Capuano, has a more cheerful outlook. He says the number of MICE groups from various countries holding events at the Venetian Macao has increased since the casino resort first began offering convention and exhibition services.

Small beer Mr Capuano says that on occasions Macau has outbid other countries for MICE business. “Macau has actually emerged as a premier meetings and incentives destination in Asia,” he says. He attributes this to the fast development and “rapid sophistication” of the MICE industry here. But Mr Capuano admits “Macau is still in the growth stages of becoming a MICE destination when compared to those major cities and countries that have had MICE facilities and an inventory of hotel rooms for some 20 to 30 years or more.” Commerce, trade and management top the list of topics for MICE events held in Macau. Technology is second on the list, followed by travel and tourism. Most events are corporate meetings. To tap demand for corporate meetings, two months ago the Mandarin Oriental hotel began offering a special package with a choice of Macau-themed, team-building activities. The package “seeks to differentiate itself from other meeting packages by adding Macanese cultural flair to regular meetings,” the company said in a press release.


81 Nonetheless, the MICE industry’s contribution to the economy remains small, by any measure. The combined revenue of MICE events in the second quarter was MOP20.6 million (US$2.57 million), of which 94 percent came from rent for exhibition booths. The figure does not reflect the spillover effect on the revenues of the hospitality and retailing sectors. The industry does not employ many people directly. At the end of last year there were just 24 companies working in the sector, together employing fewer than 120 people. And the events do not lead to world-shaking deals. Agreements signed during the exhibitions held here in the second quarter were worth a mere MOP21.5 million. Of the exhibitors, 39 percent were from the mainland and one quarter were Macau residents.

Rich future Mr Capuano believes the industry will turn around and that Macau has the potential to become a preferred business travel destination. “With the availability of meeting space, [and] additional retail, dining and

“Macau is still in the growth stages of becoming a MICE destination when compared to those major cities that have had MICE facilities for some 20 to 30 years or more,” says the vice-president of convention and exhibition operations at the Venetian Macao, Gene Capuano entertainment facilities, integrated resorts have successfully enticed more visitors to stay longer in Macau,” he says. There is “a perfect balance of gaming activities, meetings and entertainment” and this could lure a good mixture of business and leisure travellers to Macau. The numbers may be down but Mr Capuano considers the MICE market

“very stable” and says this encourages the growth of infrastructure, hotels and other facilities. “MICE events worldwide are, in most cases, season-oriented for specific markets. This includes influences from fiscal years for some companies, launching of products for the coming years for others, and incentive trips around summer time,” he says. The automotive, pharmaceutical, direct marketing, insurance, and information and communication technology industries have been the main sources of the Venetian’s MICE business, Mr Capuano says. But the MICE industry may find that events concerned with luxury goods may help it grow. The gaming industry attracts thousands of wealthy people to town – just the kind of people likely to buy such goods. Last month, Macau Fisherman’s Wharf held the inaugural Macau International Yacht Import and Export Fair. The event attracted top brands and dozens of yachts were exhibited ashore and afloat. And the Venetian will have the world’s most exclusive cars at its maiden Top Marques Macau event from November 24 to 27.

NOVEMBER 2011


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MICE

Crowds and cash

The Macau International Trade and Investment Fair closes with strong increases in deals signed and attendance BY LUCIANA LEITテグ

NOVEMBER 2011


83 here were 81 deals worth MOP5 billion (US$625 million) signed at this year’s Macau International Trade and Investment Fair. While participants were happy with the number of visitors at last month’s event, not everyone did good business. The fair received more than 95,000 visitors – 17 percent more than last year – and there was an increase of 30.7 percent in deals signed and a 25 percent rise in the amount of money they are expected to generate, according to the fair’s organisers, the Macao Trade and Investment Promotion Institute. Deals were struck between companies and representatives from Macau, the mainland, Taiwan, Portugal, Hong Kong, Canada and Switzerland. They covered areas including tourism, creative industries, meetings and conventions, information technology, manufacturing, real estate, heavy engineering and chemical industries among others. During the four-day event at the Venetian Macao, 47 forums, conferences, seminars and presentations were held with more than 7,000 people attending, while there were about 1,500 businessmatching sessions, a 30.5 percent yearon-year increase.

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Patchy results The good attendance numbers did not necessarily translate into success. An Xiu Fen, manager of Kashigar Folk Handicraft Centre, a company from Xinjiang autonomous region, did not have a successful fair. The purpose of the company’s participation was to showcase the folk handicrafts from Xingjiang. “Macau people are not very familiar with this. So, we just gave information to the people,” she says. Displaying eye-catching carpets and jade pieces, Ms An was satisfied with the number of visitors showing an interest. However, buying was a different story as there were not so many people interested in acquiring such pieces.

The fair received more than 95,000 visitors – 17 percent more than last year – and there was an increase of 30.7 percent in deals signed NOVEMBER 2011


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MICE

“Some people show interest but these are expensive products. Many cannot afford them,” she says. Yan Pang, director of export sales at Foshan Shanghu Electric Appliances Co. Ltd., participated in Macau’s trade fair for the second time. “We thought it would be good to [promote] our products,” he says. Mr Yan admits this year there were more visitors. He received a lot of enquiries at his booth but achieved fewer business agreements. “Next year we will continue to work hard, to be better.”

International flavour Vu Thi Nam, deputy manager of Tan Nhat Huong Co. Ltd, says her company was represented for the first time at the fair. The company targeted their culinary products to the Vietnamese community in Macau. Again, Ms Vu had a similar story: even though a lot of people did come to their booth asking for information, there were no significant deals done during the event, she says. Printing company Line Media e Tipografia Lda has been a regular at the trade fair since 2009, the year the firm was established. In the beginning, it was a chance to showcase their brand to the public. Three years later, Floria Yip, from Line Media’s marketing office, says their participation has paid off. “People now know our company. I think the Macau trade fair did have an impact,” she says. There was an 18 percent increase in booths at this year’s edition, with 1,650 units spread over 30,000 square metres. The fair welcomed more than 850 exhibitors from more than 60 countries, mainland provinces and regions. Nepal and Kenya debuted and countries including India, Pakistan, Vietnam, Korea and Peru also had their own exhibition areas for the first time. Organised since 1996, the Macao International Trade and Investment Fair is the largest international exhibition in the territory. In 2005, it became Macau’s first approved event of the Global Association of the Exhibition Industry. The goals of the fair are to promote Macau products and introduce investors to the investment environment in the territory. Furthermore, it targets at strengthening the position of Macau as a regional trade services platform. Next year’s edition will be held from October 18 to 21. NOVEMBER 2011

Jackson Chang and Fernando Chui Sai On

Francis Tam

QUALITY CONCERNS A

ttendance at the 2011 Macau International Trade and Investment Fair was higher than last year’s event, thanks to local interest. While the fair is popular with locals seeking good deals in the small and medium enterprises’ retail sales areas, the number of trade visitors fell to 5,700 from 8,200 a year before, organisers said. Despite the drop, the president of Macau’s trade institute, Jackson Chang, says the fair “is eventually gaining wider recognition by the business communities at home and abroad”. Secretary for economy and finance Francis Tam Pak Yuen agrees. Mr Tam says this year’s edition was the biggest yet, with more than 350 delegations with 3,700 members, from 60 countries and regions – an increase of more than 12 percent over last year’s event. The fair’s organisers stress the improvements in the participants’ profiles this year. The trade institute said it was “attaching more importance to the practical results of the meetings and activities” held during the four-day event. This year, specialised trades exhibition areas were enlarged and new categories of participating trades included. Investment promotion seminars on Hengqin Island and Nansha, a district of Guangzhou, were also held.


Hospitality

TOURIST SATISFACTION DROPPING The Macau Tourist Satisfaction Index is dropping, according to the most recent study from the International Tourism Research Centre of the Institute for Tourism Studies. Compared to the first half of 2010, the overall visitor satisfaction in Macau declined in the first six months of 2011. According to a press release, the main causes for declining visitor satisfaction are high expectations of visitors, low service performance, and/ or low perceived value. The research team says “it is becoming clear that some service sectors are more vulnerable or less capable in satisfying visitors over time.”

FULL HOUSE

Hospitality sector passes the 800,000-guests mark for the first time

Hotels and guesthouses received 809,000 guests in August, up by 16.3 percent year-on-year, with the majority coming from the mainland (53.9 percent of total) and Hong Kong (21.8 percent). This is a new all-time high, beating the 796,000 record set in the previous month. The average occupancy rate of hotels and guesthouses achieved 88.3 percent, up by 6.0 percentage points year-on-year. The average length of stay of guests decreased by 0.05 nights to 1.4 nights, according to the Statistics and Census Service. At the end of August, the total number of available guest rooms of hotels and guesthouses in Macau was around 22,000 rooms, with that of five-star hotels accounting for 63.4 percent of the total.

MORE VISITORS The total visitor arrivals to Macau increased by 17.8 percent year-on-year to 2.17 million in September, according to the Statistics and Census Service. Same-day visitors accounted for 52.9 percent of the total. Analyzed by place of residence, visitors from the mainland surged by 39.3 percent year-on-year to 1.25 million, mostly from Guangdong (625,000), Fujian (82,000) and Hunan (47,000) provinces. Total visitor arrivals reached 20.66 million in the first three quarters of 2011, up by 11.2 percent year-on-year.

HOTEL REVENUE SOARS The total revenue recorded by Macau’s hotel sector amounted to MOP14.24 billion (US$1.78 billion) in 2010, up by 29.2 percent year-on-year. According to the Statistics and Census Service, this was attributable to the continuous increase in hotel guests. Total expenditure of the sector rose by 12.9 percent over 2009 to MOP15.65 billion. Among the non-operating expenses, depreciation of fi xed assets (MOP3.02 billion) increased by 10.4 percent yearon-year, while interest paid (MOP1.23 billion) decreased by 21.9 percent. The gross value added, which measures the sectoral contribution to the economy, surged by 36.4 percent over 2009 to MOP7.08 billion. A total of 91 hotels and similar establishments were in operation in 2010, comprising 60 hotels and 31 guesthouses. The hotel sector had 26,700 persons engaged at the end of 2010, up by 1.5 percent from a year earlier.

NOVEMBER 2011

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CITY GETS HARBOUR CRUISE Macau’s first harbour sightseeing cruise started operations last month. Operated by Macau Cruise Development Company, the triple-deck cruise carries passengers for sightseeing trips along the peninsula coast. The boat has capacity for 388 passengers and includes dining facilities. Each trip lasts around one and a half hours and prices start at MOP120 (US$15). The company invested MOP20 million in the project and expects to operate up to six cruises per day.

PRICES FOR TOURISTS GO UP The Tourist Price Index for the third quarter of 2011 surged by 16.70 percent year-on-year. The index reflects the price changes of goods and services purchased by visitors. The sub-index for accommodation rose by 47.41 percent, while that for restaurant services went up by 13.82 percent. The notable yearon-year increases were attributable to rising hotel room rates and charges for restaurant services, as well as dearer prices of food and gold jewellery, according to the Statistics and Census Service. The Tourism Price Index for the third quarter of 2011 increased by 4.80 percent quarter-to-quarter.

KEEPING TRADITION ALIVE Government signs agreement with rickshaws

The Macau Government Tourist Office and the Macau Pedicab Drivers Union last month signed a cooperation agreement to promote pedicab (usually known as rickshaws) services. The agreement states that every Thursday to Sunday until the end of this year, rickshaws will be placed in front of the Ruins of St Paul’s, A-Ma Temple, Senado Square and Avenida da Praia in Taipa for visitors to take photos. The agreement also includes a revamping and facelift for 60 rickshaws, while members of the Macau Pedicab Driver Union will wear uniforms provided by the Tourist Office while working. Currently, there are about 60 pedicab drivers, working full-time or parttime, of which 50 are members of the union.

NOVEMBER 2011

BRING IN THE STUDENTS The Macau Government Tourist Office is trying to tap into the student excursion market to further diversify Macau’s source market profile. The body last month launched an incentive scheme to encourage students and educational institutions to choose Macau as the destination for student excursions. Groups applying should have a minimum of 50 non-local students staying in Macau’s hotels for two consecutive nights. The scheme will provide support to their related activities in Macau, offering tourist information kits, and facilitate liaising with other relevant official entities and educational institutions.


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

A game everyone loses THE MOST POPULAR GAME IN TOWN IS NOT BACCARAT, BUT JOB-HOPPING magine you are one of Macau’s six casino operators. After years of getting permits, battling bureaucracy and what-haveyou, you finally break ground on your new mega-hotel-casino. Then follows the challenge of construction. Six to eight months before your opening date, you start hiring and training your hotel staff, with all the complications that this entails. New uniforms are given out, while meals are provided and salaries paid for several months, even before the employees say their first “hello” to a guest. Finally, the big day arrives. Your workers now know how you want guests to be treated in order to burnish your company’s image – knowledge that took months to impart. Suddenly, you start losing employees to the competition. These are assets you have spent lots of time and money training and developing and now they have taken their skills to the hotel across the street. This is the reality in Macau and something that is becoming more and more common. It is also unfair to hoteliers. To understand this trend properly, I talked to hotel employees and managers to get their side of the story. At the newest hotel-casino in town, the most common answer I got from workers betrayed just how unconcerned they are about their jobs and their employers. One told me that his colleagues were leaving the hotel “because the employee cafeteria is too far away from our workstations and we spend a lot of time walking during our breaks”. At first I just could not believe what I had heard. But I quickly remembered that I was in Macau, where circumstances give young and inexperienced workers just embarking on their careers, base salaries as high as MOP16,000 (US$2,000) per month, yet allow them to behave irresponsibly, hopping from one hotel to another, time and time again.

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Mediocrity abounds When I talked to a hotel manager about what I had just learned, he admitted there was little management could do about it. Employees hop from one establishment to another for as little as an extra MOP200 a month. Yes, can you believe it? Just MOP200! Let us cut to the chase. This is the result of a combination of mediocre regulations, mediocre employees and mediocre managers. Our mediocre labour rules are hurting the hospitality industry. The city is growing at a stunning pace but the government is not keeping up with all the needs of the industry, even though it calls Macau an “international tourism destination”. If the city really wants to become an international tourism destination, it is about time that our officials started laying the foundations for the improvement of customer service. Then you have mediocre employees that keep hopping from hotel to hotel without realising that sooner rather than later this nonsensical game will be over. These workers are so naïve that they fail to understand that carrying on in this way will only damage their own interests in the long run. Hotel employees should be focusing on education,

training and plotting a proper career path. Instead, they chase immediate gratification. It adds no value to what they have to offer employers, and turns them into a commodity in the eyes of hotel managers. Over the long run, chasing after every extra pataca offered is not the best way to increase one’s income. Lots of short job stints on a curriculum vitae will eventually raise doubts about a job applicant’s work ethic and loyalty.

Biggest loser Finally, mediocre managers do not know how to retain staff. Instead, they cite high employee turnover as the easiest of excuses for their failures. It is the managers that have the power to transform the way employees think. They can show a worker the advantages and long-term benefits of sticking with their current employer instead of hopping around. If managers fail to do so, they are not doing their jobs properly. In the final reckoning, however, the responsibility for the labour merry-go-round in the hospitality industry ultimately belongs to the hotel operators. It is the hotel operators that keep hiring these flighty workers and this thus perpetuates the problem. Things would be different if hotels stopped hiring employees that just hop around. Things would be different if hoteliers got together once and for all to make some ground rules for the business in Macau – pending the government getting round to doing something about it. Until that happens, the hopping game will go on, with no winners, only losers. NOVEMBER 2011


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November Date: Event:

Venue:

3rd - 5th

4th China (Zhongshan) International Games & Amusement Fair

Complex Hall of Zhongshan Expo Center, Zhongshan, China Organiser: China Zhongshan Municipal Government/ Guangzhou Grandeur Address: 2nd Floor, No.318 Chebei Road, Guangzhou, 510660, China Tel: (86) 20 2210 6418 Fax: (86) 20 82579220 Website: www.zsgaf.com E-mail: info1@grandeurhk.com Date: Event:

9 th - 11th

SAGSE – South American Gaming Suppliers Expo & Congress

Venue: Centro Costa Salguiero, Av. Costanera and J. Salguero Organiser: Monografie S. A. Address: Av. Alvear 1883 Loc. 21, (C1129AAA) Cdad. Aut. de Buenos Aires, Argentina. Tel: (54) 11 4805 4623 Fax: (54) 11 48054791 Website: www.monografie.com E-mail: info@monografie.com Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:

9 th - 10 th

Asian Casino and Gaming Congress

Marina Bay Sands, Singapore Beacon Events 20/F Siu On Ctr, 188 Lockhart Rd, Wanchai, Hong Kong (852) 2531 6107 (852) 2586 1999 www.beaconevents.com cs@BeaconEvents.com

Date: Event:

15th - 17th

6th Anti-Corruption China Summit 2011

Venue: Organiser: Address: Tel: Fax: Website: E-mail:

JW Marriott Hotel Beijing Beacon Events 20/F Siu On Ctr, 188 Lockhart Rd, Wanchai, Hong Kong (852) 2531 6107 (852) 2586 1999 www.beaconevents.com cs@BeaconEvents.com

Date: Event:

11th

Date: Event:

29 th - 30 th

Venue: Organiser: Address: Tel: Fax: Website: E-mail:

Marina Bay Sands, Singapore Beacon Events 20/F Siu On Ctr, 188 Lockhart Rd, Wanchai, Hong Kong (852) 2531 6107 (852) 2586 1999 www.beaconevents.com cs@BeaconEvents.com

Venue: Organiser: Address: Tel: Fax: Website: E-mail:

Le Meridien Picadilly Hotel, London American Conference Institute 45 West 25th Street, 11th Floor, New York, NY 10010 (1) 212 352-3220 (1) 212 352-3231 www.c5-online.com/gambling info@americanconference.com

Date: Event: Venue: Organiser: Address:

14th - 16th

Tel: Fax: Website: E-mail:

Asian Sports and Welfare Lottery Summit

2nd Annual Integrated Resorts

Resorts World Sentosa, Singapore marcus evans CP21, Suite 2101, Level 21, Central Plaza, 34, Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia (603) 2723 6736 (603) 2723 6699 www.integratedresorts-lse.com estherw@marcusevanskl.com NOVEMBER 2011

C5 International Gaming Law Summit

December Date: Event:

5th - 6th

Venue: Address: Tel: Website: E-mail:

Hilton Alexandria Mark Center, Washington D.C. P.O. Box 16899, Clayton, MO, USA 63105 (1) 314 685 8965 www.bvmediagroup.com/ info@bvmediagroup.com

DGLP – Digital Gaming and Lottery Policy Summit


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Marina Bay Sands Expo and Convention Center Date: Event:

7th

Venue: Organiser: Address: Tel: Fax: E-mail:

The Grange Hotel, Tower Hill, London Terrapinn Ltd Wren House, 43 Hatton Garden, London, EC1N 8EL (44) 20 7092 1000 (44) 20 7242 1508 enquiry.uk@terrapinn.com

Social Gaming and Virtual Goods World

January Date: Event: Venue: Organiser: Address: Tel: Website: E-mail: Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:

23rd

International Gaming Awards Sheraton Park Lane, London Clever Duck Media Suite 105 Park Plaza, Point South, Hayes Way, Cannock, WS12 2DB, UK (44) 0 1543 57 86 89 www.gaming-awards.com colin@gaming-awards.com

24th - 26th

ICE Totally Gaming

Earls Court Exhibition Centre Clarion Events Warwick Road, London, SW5 9TA, UK (44) 20 7370 8200 (44) 20 7370 8344 www.icetotallygaming.com charlotte.cowdrey@clarionevents.com

February Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:

14th - 17th

5th Anti-Corruption Asia Congress

Renaissance Harbour View Hotel Beacon Events 20/F Siu On Ctr, 188 Lockhart Rd, Wanchai, Hong Kong (852) 2531 6107 (852) 2586 1999 www.beaconevents.com cs@BeaconEvents.com

Date: Event:

21st - 23rd

Venue: Organiser: Address: Tel: Fax: Website: E-mail:

Panama City, Panama Terrapinn 96 Spring Street, 4th Floor, New York, NY 10012 (1) 212 379 6322 (1) 212 379 6319 www.terrapinn.com enquiry.us@terrapinn.com

Gaming Executive Summit LatAm

If you know of an event that you believe should be listed with Macau Business, please drop us an e-mail: calendar@macaubusiness.com. In the subject bar, type in “List me as an event�. TBA : To be advised |

: A Macau Business partner event

NOVEMBER 2011


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Technology

It might be a small market but Apple products are thick on the ground in Macau and Steve Jobs’ passing is unlikely to change that BY HÉLDER BEJA

Apple flavoured he death of Apple Inc.’s founder Steve Jobs has put the company under the spotlight. In Macau, Apple has been centre stage in recent years, especially in the smart phone and tablet computer markets. Apple Asia has no numbers for Apple’s sales in Macau. There is no official Apple Store here – the company opened its first official store in Hong Kong, its sixth in China, in September – but a stroll down the street is enough to show how deeply entrenched iPhone culture is here, as it is everywhere. DG Lifestyle Store is the largest chain of Apple premium resellers in Asia and has an outlet in the Venetian Macao shopping mall. But Original

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Technologies is the city’s best-known premium reseller. It has four stores, two on the peninsula, one in Taipa and another at City of Dreams. Original Technologies began selling Apple products in 2007, the year the iPhone was released. That was nearly five years ago but the smart phone is still their customers’ favourite product, a company representative says. iPads are swiftly gaining popularity and Macintosh computers – the great-grandchildren of the personal computer Mr Jobs helped create in the late 1970s – are getting more attention due to what the company calls the “halo effect” of the iPhone and iPad. Original Technologies does not dis-

close sales numbers and did not wish to talk to Macau Business about its business strategy. But Apple’s official figures for Greater China show an upward trend. Greater China accounted for just 2 percent of Apple’s revenue in its 2009 financial year but comprised 12 percent this year. Apart from the premium resellers – shops that sell only Apple products – there are 17 authorised resellers in Macau, according to Apple’s Hong Kong website. The iPhone has been crucial to Apple’s success in Macau. “There are several of these markets that, historically, Apple has not been strong [in] and that the iPhone has really


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CHINA CALLING

Illustration: Rui Rasquinho

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opened up, and [that] introduced Apple to a whole set of customers that didn’t get excited about looking at other products that we have,” the company’s new chief executive, Timothy Cook, said in a conference call last month.

Touching legacy The local division of Hutchinson Telecommunications Hong Kong Holdings Ltd, 3Macau, became the first mobile phone network to carry the iPhone in Macau, in August 2008. It’s exclusive contract, combined with the iPhone’s popularity, helped 3Macau to become the second-largest mobile network in the city. Eventually CTM and SmarTone began carrying the iPhone.

t will not be easy, but Apple Inc. will have to learn how to live without the man that changed the way we deal with gadgets and the Internet. Apple founder Steve Jobs has passed away but the company he created is as strong as ever and wants to make the mainland one of its priorities. Apple’s new chief executive, Timothy Cook, has to live with his predecessor’s legacy. It may be a heavy burden, but it may also make Mr Cook focus on the essential issue: what Apple has to do to keep the status (and the results) the company has achieved so far. Last month, in his first conference call since the death of Mr Jobs, Mr Cook said it was “pretty clear” that the tablet computer market “will be larger than the PC market” and that in Asia – and specifically in China – “the sky is the limit”. Apple’s revenue in Greater China ballooned to US$13 billion (MOP104 billion) in its financial year ended on September 24 from US$3 billion last year. There are three Apple stores in Shanghai, two in Beijing and one in Hong Kong. There are also hundreds of Apple resellers, some in Macau. Greater China “is our fastest growing major region by far,” Mr Cook said. “It is growing at a feverish pace.” In Apple’s last financial year greater China accounted for 12 percent of its revenue, just behind the United States, and company officials believe there is a lot of room for growth. “We’re continuing to make investments” in the mainland, Mr Cook said. “It’s an area of enormous opportunity.”

At the time of going to press, Apple had not announced when the new model iPhone 4S will officially arrive to Macau, although it is already available from parallel traders who sell goods that come from sources other than official importers. It will be available in Hong Kong starting from November 11. The iPhone 4S went on sale in the United States, Australia, Canada, France, Germany, Japan and Britain on October 14, and was available in another 22 countries by the end of last month. If the iPhone 4S gets as good a reaction from the Chinese consumer as the iPhone 4 did, its success is assured. It is fair to say that most of what the

iPhone 4S is and does reflects the Steve Jobs way of looking at gadgets, and his attitude that “you can always do better, even when you think you cannot”. The next and most important question (but one Mr Cook does not have to answer right now) is: will Apple be able to continue innovating and combining style with technological quality? Insiders say it was always Mr Jobs that had the final say on product design – and everyone knows how important that is. Mr Jobs had a peculiar way of looking at business. When someone asked the man in blue jeans what market research went into the iPad, he replied: “None. It’s not the consumers’ job to know what they want.” NOVEMBER 2011


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Lifestyle

Liquid market Cognac Croizet is expanding sales in the mainland, where one of its vintage cognacs has set a new world record price BY LUCIANA LEITÃO

he most expensive cognac in the world is now available for sale at MGM Macau for HK$1,188,888 per bottle at Imperial Court and Aux Beaux Arts restaurants. This is the latest step in the two-year cooperation between the French Cognac Croizet brand and the hotel-casino. Two months ago, a bottle of 153-year-old Cognac Croizet Cuvée Léonie was sold at a charity auction in Shanghai for RMB1 million (MOP1.26 million), creating a new record for cognac in an unadorned bottle. The sale has spurred Cognac Croizet and MGM Macau to roll out a special partnership and a new price – before it was HK$300,000 – per bottle of 1858 Cuvée Léonie, which is exclusively available in

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NOVEMBER 2011

Macau at the property. The relationship between MGM Macau and Cognac Croizet extends back to 2009, when the casino became the first outlet in Asia to carry the brand’s products. MGM Macau’s senior vicepresident of casino marketing, Brian Fiddis, says Cognac Croizet products are also used as rewards in the hotelcasino’s loyalty programme. Croizet Hong Kong Ltd’s president of international marketing, Jason Gillott, said the label has also held co-branded events at MGM Macau. Macau is a much more attractive market for spirits than Hong Kong, in part because of the gaming industry and the number of affluent customers it attracts, Mr Gillott says. Another reason is

that the ad valorem excise duty on spirits is 10 percent in Macau, compared with 100 percent in Hong Kong. The auction in Shanghai has made Cognac Croizet more conspicuous in the mainland, where the brand has been available for six months. Cuvee Léonie was the star of the auction, sold in its original bottle for more than double its reserve price of RMB388,888. The previous record price for a bottle of cognac in an unadorned bottle was €25,000 (MOP279,000) fetched in Paris two years ago by a 1788 Vieux Cognac. The highest price for a bottle of cognac was US$2 million (MOP16 million) paid in 2008 for a 100-year-old Henri IV Dudognon Heritage sold in a specially-made container encrusted with


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SIP SLOWLY C

ognac Croizet’s Cuvée Léonie is a remarkable pre-phylloxera cognac derived from a single grape harvest, that of 1858. For cognac lovers, it is a big deal. In the middle of the 19th century, an infestation of aphids, phylloxera, laid waste almost all the vineyards in France, destroying the wine and cognac industries. The French came up with an innovative solution. They grafted noble French varieties of vine onto North American rootstock that was immune to the pest. But this move forever altered French wines. Cognac made before the outbreak is far more valuable. Cognac Croizet still holds a wide collection of pre-phylloxera cognacs sealed in hand-blown bottles and stored in a warehouse for ageing spirits. The Cuvée Léonie lot is among them. The lot was part of the wedding dowry of the great granddaughter of the founder of the Cognac Croizet brand, Léon Croizet. She kept it and it was released for sale only in 2007, and the first bottle in Asia arrived at MGM Macau in 2009. Another bottle was sold in September, at a charity auction in Shanghai for a record RMB1 million (MOP1.26 million). The winning bidder was Maggie Vong, an entrepreneur from Hong Kong who has relatives in Macau. Ms Vong has been interested in cognac since her father introduced her to the drink. “It’s really unique and there are only a few bottles left in the world,” she says of her most expensive cognac. But what can you do with such an exquisitely expensive tipple? “I’ll have it at my home,” Ms Vong says. “I may drink it for a very, very special occasion.”

Two months ago, a bottle of 153-yearold Cognac Croizet Cuvée Léonie was sold at a charity auction in Shanghai for RMB1 million (MOP1.26 million), creating a new record for cognac in an unadorned bottle

diamonds and inlaid with 24-carat gold and platinum.

Status in a bottle Sales of spirits in the mainland grew by 25.9 percent last year, driven by Chinese spirits. Cognac and scotch are the bestselling imports. Cognac outsold whisky for the first time since 2004 last year, according to the International Wine and Spirit Research Spirits in China Report. The volume of cognac sold in the mainland is almost half the amount sold in the United States but the value is 70 percent greater, the report says. Pernod Ricard SA’s Martell and LVMH Moet Hennessy Louis Vuitton SA’s Hennessy brands are the money-spinners in the mainland market, as expensive French

cognacs are regarded there as a symbol of high status. Croizet Hong Kong’s president, Alexander Shponko, says the success of cognac in China also has to do with pairing. “Cognac pairs well with Chinese food, better than any other spirit and that is one of the keys,” he says. Mr Gillott says growth in sales in the mainland has been steady so far. “We have to manage it very carefully. When you have vintage cognacs, you can’t just make them mainstream,” he says. Cognac Croizet’s marketing strategy in China is to stress exclusivity. In Macau, its cognac can be tasted only courtesy of MGM Macau. The brand will adopt a similar tactic in the mainland. NOVEMBER 2011


Arts& &Culture Culture Arts

MODERN MASTERS

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A PAIR OF ASIAN PAINTERS BRINGS AN EXHIBITION THAT IS STRIKINGLY CURRENT

odern art from a pair of contemporary Asian masters is on display for the remainder of the month at the Tap Seac Gallery. “Beyond Space” is an exhibition by Taiwan’s Chu Teh-I and South Korean Kim Yong Sik on show until November 27. The pair has brought 37 tense and powerful works to the Tap Seac Gallery, outlining a dialogue between the artists’ different styles. The works are representational and abstract, with flashes of other styles. They reveal the hidden depths of their consciousness, as well as their attitudes toward the art of painting. In the 1970s and 1980s both studied overseas in France and the United States, epicentres of an exploding modern art scene. The pair has together pursued novelty in their work and has incessantly studied the art of painting, yet the works on display for Macau audiences will reveal two distinctive styles. Born in 1954, Kim Yong Sik has had 14 solo exhibitions and participated in another 300 exhibitions. He earned a bachelor and then master’s degrees from NOVEMBER 2011

Chu Teh-I

the painting department at Seoul National University. After graduating, he taught art at university. He moved to New York in 1989 to enrol in the School of Visual Arts where he achieved his master’s degree in Printmaking and Painting. Returning to Korea in 1992, he became a professor of the Painting Department at Sung Shin Women’s University. In 2002, he stayed in Melbourne for a year as an exchange professor at RMIT University. He has also been a committee member of the Korean Fine Arts Competition and a board


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Kim Yong Sik

BEYOND SPACE EXHIBITION BY

CHU TEH-I AND KIM YONG SIK DATE Until November 27 TIME 10am – 7pm daily

member of the Seoul Art Exhibition. He was the formal president of the Korea Contemporary Printmaker’s Association and the dean of the Fine Arts College in Sung Shin Women’s University. He is currently a professor of the Painting Department in Sung Shin Women’s University. Chu Teh-I was born in 1952 and studied in France after completing his undergraduate studies at the National Taiwan Normal University. At L’École Nationale Supérieure des Beaux-Arts de Paris and L’École Nationale Supérieure des Arts-Decoratifs de Paris, he paid attention to the Support-Surface trend in French contemporary art. Adherents treat the raw materials in their work with a rational, scientific approach that sees them make the best use of the canvas, wood and pigments in their work. Chu applies this thinking in many of his works, using the colour of the canvas and linen he works with as part of the painting.

VENUE Tap Seac Gallery, Avenida Do Conselheiro Ferreira de Almeida, No.95 ORGANIZER Cultural Affairs Bureau TICKETS Entry is free MORE INFORMATION VISIT www.icm.gov.mo or phone (853) 2836 6866

In another thoroughly modern twist, Cubism has also influenced Chu’s work. Colour blocks and collage pepper his art. He has exhibited more than 10 solo shows and participated in dozens more group exhibitions around the globe. The exhibition “Beyond Space” runs daily from 10am to 7pm, at the Tap Seac Gallery, located on Av. do Conselheiro Ferreira de Almeida. Admission is free. NOVEMBER 2011


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Corporate Social Responsibility Responsibilty

Charity hole-in-one

Photo: Gonรงalo Lobo Pinheiro

Caesars Golf Macau and Sands China II teams won the fifth edition of the Annual Macau Business Charity Golf Tournament, destined to raise funds for good causes


97 ne more edition, another success for charity: the fifth running of the Annual Macau Business Charity Golf Tournament attracted record numbers and once again showed that local companies care. In the end, the Greatest Caesars team, made up of Eason Lee, Chris Connell and Bo Lai Ao, was the net score tournament winner. They won the right to nominate a charity to forward their HK$100,000 winnings to and chose the Macau Special Olympics. The gross score tournament winners were Ben Toh, Siu Bing Cheung and Zhi Hang Guo, from the Sands China Team II. They nominated Caritas’ Lar de Nossa Senhora da Penha as their beneficiary. The institution, which takes care of abandoned children and those at risk from physical or psychological abuse, was already one of last year’s recipients. A record 33 teams participated in the fifth edition of the Annual Macau Business Charity Golf Tournament, which once again could count on the support of several local and international companies. Melco Crown Entertainment, The Star, Caesars Golf Macau, Sands China, Galaxy Entertainment Group, SJM Holdings, MGM China Holdings, Wynn Macau, Aristocrat, Silver Heritage, BNU, Walker Digital Gaming, IGT Asia, Aruze Gaming, TH Fine Wines, Sniper Capital, Meco Engineering, Shuffle Master Asia, Aspect Gaming, Lusa, Egis Rail, and Winning Asia were among the socially responsible corporate patrons represented on the greens.

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Following last year’s format, the tournament was again divided into two rounds. The first leg took place at Caesars Golf Macau on September 25 and it had a more relaxed feel, with fun challenges like teeing off with a tennis racket and putting with an umbrella, among other surprises. The second round, at the Macau Golf and Country Club, was initially set to take place on September 30 but was postponed to October 21 due to Typhoon Nesat. Here, things got a bit more competitive, but good vibes were always present on the fairways. As usual, the tournament followed a Threesome Texas Scramble format, while scoring was calculated according to a double Peoria system to allow for a relatively even ground among players of different levels. Long-term supporter Melco Crown Entertainment once again backed the tournament as its main partner, this year joined by Australian casino The Star, Caesars Golf Macau and The Westin Resort. Other leading sponsors included: Sands China, Galaxy Entertainment Group, MGM China Holdings, SJM Holdings and Wynn Macau. Aristocrat, Silver Heritage, Morton’s The Steakhouse, Transcity Asia and YES! Golf were the other event partners.

Prizes for (almost) all Aside from the two main awards, the organisers handed out several other trophies to players. The Greatest Caesars’ team, playing on their home course, won the first

Janet Lai presents the Mocha Clubs ‘Special Prize’ Trophy to Macau Special Olympics athlete Tam Kit and head coach Lenlison Lo

round, and got their hands on the trophy presented by The Star. Jason Elton, John Orth and Stephen Moore from the Walker Digital Gaming team claimed the ‘Net Score Round’ Award for the initial leg, sponsored by Caesars Golf Macau. Dennis McDowell, from the Grand Lisboa team, won the Sands China ‘Longest Drive’ Trophy for the first round. Eason Lee, from the Greatest Caesars’ team, was awarded the SJM ‘Nearest to the Pin’ Trophy, while Ryan Beauregard, from the Wynn I team, got the Wynn Macau ‘Driving Range Challenge’ Award. Team Aspect Gaming’s Andrew Macaulay, Bob Campbell and Gary Mak won the Sands China ‘Putting Contest’ Award. Fátima Hung, from the all-female team IGT Asia, got the SJM ‘Best Lady’ Award for the first round, while Macau Business’s publisher, Paulo A. Azevedo, was awarded the ‘Funniest Golfer’ Trophy, presented by Seapower Trading. The Macau Special Olympics, which is launching an innovative golf project and had some youngsters at the Caesars Golf Macau round testing their skills, was given a special prize, sponsored by Mocha Clubs. Going into the second round results, the day’s winner was the Aristocrat team, grabbing The Westin Resort Trophy. In the second leg, the putting kings were the Venetian Team II members. They claimed the MGM Macau ‘Putting Contest’ Trophy. Aristocrat team’s Troy Harris hit the longest drive, getting the respective trophy, presented by Galaxy Entertainment Group. Terence Howard, from the TH Fine Wines team, took home the MGM Macau ‘Straightest Drive’ Trophy for the second round. Brendon Dobbs, from Melco Crown Entertainment Team A, won the ‘Nearest to the Pin’ Award, presented by Galaxy Entertainment Group. Beth Doherty was the best lady in the second round, grabbing the respective SJMsponsored trophy. TH Fines Wines, with Gary Chin, Terence Howard and Kent Leung on the team, grabbed the tournament’s ‘Best Overall Performance’ Trophy, presented by Wynn Macau. NOVEMBER 2011


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Round one | Caesars Golf Macau

The traditional family photo

Give room for the all-ladies team: Alice Costa, Fatima Hung, Jenny Elton and Beth Doherty, representing IGT Asia colours

The Galaxy Entertainment Team II NOVEMBER 2011

Eric Wong, Ronald Leung and Alice Tang, from Team Winning Asia

Wynn I’s Ryan Beauregard studies the putt with Nathan Fisher

Photos by Renato Marques and Nuno CortĂŞs-Pinto


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Richard Thomas, Paul Day and Brendon Fischer, from Melco Crown Entertainment Team B, with their caddie

Playing like a true champ

Chip Lawson, from the Wynn II team

A good shot for team Meco II

Ruby Wang, from the Aruze Gaming team

Colin Edwards, from Galaxy Entertainment Team I

Merrall Sims, from the Egis Rail team

William Eaton, from the The Star team

Bo Lai Ao, from the Greatest Ceasars’ team NOVEMBER 2011


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Meco II team

Roberto Sousa, from the MBSK team

Georg Fekete, from The Shufflers team

Lindsay Stewart, from the Grand Lisboa team

Cliff Chan, from Sands China Team I, prepares to hit the ball, as team members Charles Newland and Gunther Hatt watch

Team Silver Heritage tries the English umbrella challenge NOVEMBER 2011

The IGT Asia team in action

MGM Macau’s João Antunes tees off with a tennis racket

The caddie gives Melco Crown Entertainment Team A’s Stuart Cations a couple of tips

Photos by Renato Marques and Nuno Cortês-Pinto


Round Two | Macau Golf & Country Club 101

David Largent, Paulo A. Azevedo and Chen Lin from the Macau Business team with José Costa Santos, from the Lusa team

Golfer in action

Now, that’s what I call a driver!

Good times on the green

Photos by Gonçalo Lobo Pinheiro

The tournament trophy

The Star team ready to shine

Patrick Gerard Lafferty, from Team Caesars’ Gladiators NOVEMBER 2011


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Playing like a true champ

Time to go to the next hole boys

Pedro Vairinhos, from the BNU team

Mike Bolsover, from the Silver Heritage team

Alice Costa, from the IGT Asia team

Byron Wright, from the MGM Macau team

NOVEMBER 2011

Luis Pereira, from the MBSK team

David Maxwell, from the Egis Rail team

Trevor Hammond, from the Venetian I team

Dave Batt, from the Wynn II team

Photos by Gonรงalo Lobo Pinheiro


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Terence Howard, from the TH Fine Wines Lindsay Stewart, from the Grand Lisboa team team, won the straightest drive challenge

The Aspect Gaming team

Andrew Macaulay, from the Aspect Gaming team

Dave Williamson, from the Wynn I team

The Grand Lisboa team

JosĂŠ Costa Santos, from the Lusa team

Dennis Hudson, from the Wynn II team

Gary Mak, from the Aspect Gaming team

Golf is all about energy and effort

Galaxy Entertainment Team I NOVEMBER 2011


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Helping hand

Welcome!

The Annual Macau Business Charity Golf Tournament Gala Dinner helped to raise charity funds through its traditional memorabilia auction

rapping up one more successful edition of the Annual Macau Business Charity Golf Tournament, the event’s gala dinner further continue its charity fund-raising activities. The gala dinner took place at the exquisite Pool Loggia, at The Westin Resort. Fine wines and spirits distributor Seapower Trading and luxury cigar brands Davidoff and Habbanos by Pacific Cigars were the special sponsors for the event, where the golf tournament winners were announced. Golfers and other guests bid avidly in the charity auction of memorabilia from the fields of sport, music and other fields of entertainment. Among the items put up for auction were a Manny Pacquiao’s signed boxing glove, a FC Barcelona football jersey signed by all players and an Elvis Costello signed guitar, as well as several golf-related items. The evening was crowned by a lucky draw of prizes from supporters such as EPLD, Hutchison Telecom Macau, SJM Holdings, the Macau Golf and Country Club, Caesars Golf Macau, The Westin Resort, Galaxy Entertainment Group, Melco Crown Entertainment, Sands China, Wynn Macau and MGM China Holdings.

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Greatest Caesars chose the Macau Special Olympics as the recipient of their winnings

Sands China Team II chose Lar da N. Sra. da Penha from Caritas as the recipient of their winnings NOVEMBER 2011

Photos by Renato Marques


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Luis Chan and Ana and Jo達o Tique

Scott Wessel and Raymond Bell

Bob and Janelle Campbell

Iain Carlyle, Cristine Ng and John Douglas

Cristina Lobo and Luis and Mafalda Melo

Stephan Winkler and wife

Tim Shepherd, Andy Crisafi and Jo Lyn

Andrew Bullen and Lisa Demchenko

Lucas Wong and Gary Chung

James Chu and Rebeca Lei

Greg and Andrea Mansfield NOVEMBER 2011


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Stefan Kuehn and Paulo A. Azevedo present the MBSK ‘Challenger’ Trophy to the Greatest Caesars team

Michael French presents the Melco Crown Entertainment ‘Gross Score’ Trophy to Team Sands China II, composed of Ben Toh, Zhang Xiao Ping and Guo Zhihang

Stephan Winkler presents the Westin Resort ‘Net Score’ Trophy (round two) to Aristocrat team members Matthew Wilson, Peter Johns and Troy Harris

William Eaton presents The Star ‘First Round Winner’ Trophy to Greatest Caesars team members Chris Connell and Eason Lee

Katharine Liu presents the Wynn Macau ‘Best Overall Tournament Performance’ Trophy to Team TH Fines Wines team members Terence Howard, Gary Chin and Kent Leung

Lucas Wong presents the MGM Macau ‘Putting Contest’ Trophy (round two) to Team Venetian II team members Iain Carlyle and John Douglas

Lindsay Stewart presents the SJM ‘Best Lady’ Trophy (round two) to Beth Doherty, from the IGT Asia team

Gary Chung presents the MGM Macau ‘Straightest Drive’ Trophy (round two) to Terence Howard, from TH Fine Wines team

Trevor Hammond presents the Sands China ‘Longest Drive’ Trophy (round one) to Dennis McDowell, from the Grand Lisboa team

Li Wei presents the Caesars Golf Macau ‘Net Score Round Winner’ Trophy (round one) to Stefan Kuehn on behalf of the Walker Digital Gaming team NOVEMBER 2011

Reddy Leong presents the Wynn Macau ‘Driving Range Challenge’ Trophy (round one) to Ryan Beauregard, from the Wynn I team

Lindsay Stewart presents the SJM ‘Nearest to the Pin’ Trophy (round one) to Eason Lee, from the Greatest Caesars team

Stefan Kuehn presents the Seapower Trading ‘Funniest Golfer’ Trophy to Paulo A. Azevedo, from the Macau Business team

Jimmy Lim presents the Galaxy Entertainment Group ‘Longest Drive’ Trophy (round two) to Troy Harris, from the Aristocrat team

Grant Cheeseman presents the Sands China ‘Putting Contest’ Trophy (round one) to Gary Mak, from the Aspect Gaming team

Vicky Wu presents the Galaxy Entertainment Group ‘Nearest to the Pin’ Trophy (round two) to Brendon Dobbs, from the Melco Crown Entertainment Team A

Lindsay Stewart presents the SJM ‘Best Lady’ Trophy (round one) to Fatima Hung, from the IGT Asia team

Photos by Renato Marques


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Li Wei presents the Caesars Golf Macau prize to Richard Thomas

Billy Chan receives the City of Dreams prize from Brendon Dobbs

Diogo Geraldes presents the EPLD prize to Deny Lau

Chan Chan Hung presents the SJM D. Alfonso prize to Jo Lyn

Gary Mak receives the Hutchison Telecom Macau prize from Kenny Lo

Katharine Liu presents the Wynn Macau prize to Jo達o Antunes

Brian Cheng presents the Westin Resort prize to Sher Limbu

Melina Leong presents the Sands China prize to Alastair Dick

Jullie Walker presents the Galaxy Cotai prize to Nathan Carle

Cristina Kuok presents the MGM prize to John Douglas

Arnaldo Santos, Melina Leong and Annie Lam

Jiji Tu and Beth Doherty

A variety of memorabilia items were put up for auction

Bid for charity, folks!

SJM Holdings patrons

Matt Hacking presents the Macau Golf and Country Club prize to Bina Gupta NOVEMBER 2011


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NOVEMBER 2011


109 BRAHMA CHELLANEY AUTHOR OF THE BOOK “WATER: ASIA’S NEW BATTLEGROUND”

The water hegemon CHINA, THE WORLD’S BIGGEST DAM BUILDER, IS RAPIDLY ACCUMULATING LEVERAGE AGAINST ITS NEIGHBOURS BY UNDERTAKING MASSIVE HYDRO-ENGINEERING PROJECTS ON TRANSNATIONAL RIVERS nternational discussion about China’s rise has focused on its increasing trade muscle, growing maritime ambitions, and expanding capacity to project military power. One critical issue, however, usually escapes attention: China’s rise as a hydro-hegemon with no modern historical parallel. No other country has ever managed to assume such unchallenged riparian pre-eminence on a continent by controlling the headwaters of multiple international rivers and manipulating their cross-border flows. China, the world’s biggest dam builder – with slightly more than half of the approximately 50,000 large dams on the planet – is rapidly accumulating leverage against its neighbours by undertaking massive hydro-engineering projects on transnational rivers. Asia’s water map fundamentally changed after the 1949 Communist victory in China. Most of Asia’s important international rivers originate in territories that were annexed to the People’s Republic of China. The Tibetan Plateau, for example, is the world’s largest freshwater repository and the source of Asia’s greatest rivers, including those that are the lifeblood for mainland China and South and Southeast Asia. Other such Chinese territories contain the headwaters of rivers like the Irtysh, Illy, and Amur, which flow to Russia and Central Asia. This makes China the source of cross-border water flows to the largest number of countries in the world. Yet China rejects the very notion of water sharing or institutionalized cooperation with downriver countries.

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Cold shoulder Whereas riparian neighbours in Southeast and South Asia are bound by water pacts that they have negotiated between themselves, China does not have a single water treaty with any co-riparian country. Indeed, having its cake and eating it, China is a dialogue partner but not a member of the Mekong River Commission, underscoring its intent not to abide by the Mekong basin community’s rules or take on any legal obligations. Worse, while promoting multilateralism on the world stage, China has given the cold shoulder to multilateral cooperation among river-basin states. The lower-Mekong countries, for example, view China’s strategy as an attempt to “divide and conquer.” Although China publicly favours bilateral initiatives over multilateral institutions in addressing water issues, it has not shown any real enthusiasm for meaningful bilateral action. As a result, water has increasingly become a new political divide in the country’s relations with neighbours like India, Russia, Kazakhstan, and Nepal. China deflects attention from its refusal to share water, or to enter into institutionalized cooperation to manage common rivers sustainably, by flaunting the accords that it has signed on sharing flow statistics with riparian neighbours. These are not agreements to cooperate on shared resources, but rather commercial accords to sell hydrological data that other upstream countries provide free to downriver states. In fact, by shifting its frenzied dam building from internal rivers to international rivers, China is now locked in water

disputes with almost all co-riparian states. Those disputes are bound to worsen, given China’s new focus on erecting megadams, best symbolized by its latest addition on the Mekong – the 4,200-megawatt Xiaowan Dam, which dwarfs Paris’s Eiffel Tower in height – and a 38,000-megawatt dam planned on the Brahmaputra at Metog, close to the disputed border with India. The Metog Dam will be twice as large as the 18,300-megawatt Three Gorges Dam, currently the world’s largest, construction of which uprooted at least 1.7 million Chinese.

The master of Asia’s water taps In addition, China has identified another mega-dam site on the Brahmaputra at Daduqia, which, like Metog, is to harness the force of a nearly 3,000-meter drop in the river’s height as it takes a sharp southerly turn from the Himalayan range into India, forming the world’s longest and steepest canyon. The Brahmaputra Canyon – twice as deep as the Grand Canyon in the United States – holds Asia’s greatest untapped water reserves. The countries likely to bear the brunt of such massive diversion of waters are those located farthest downstream on rivers like the Brahmaputra and Mekong – Bangladesh, whose very future is threatened by climate and environmental change, and Vietnam, a rice bowl of Asia. China’s water appropriations from the Illy River threaten to turn Kazakhstan’s Lake Balkhash into another Aral Sea, which has shrunk to less than half its original size. In addition, China has planned the “Great Western Route,” the proposed third leg of the Great South-North Water Diversion Project – the most ambitious inter-river and interbasin transfer program ever conceived – whose first two legs, involving internal rivers in China’s ethnic Han heartland, are scheduled to be completed within three years. The Great Western Route, centred on the Tibetan Plateau, is designed to divert waters, including from international rivers, to the Yellow River, the main river of water-stressed northern China, which also originates in Tibet. With its industry now dominating the global hydropowerequipment market, China has also emerged as the largest dam builder overseas. From Pakistani-held Kashmir to Burma’s troubled Kachin and Shan states, China has widened its dam building to disputed or insurgency-torn areas, despite local backlashes. For example, units of the People’s Liberation Army are engaged in dam and other strategic projects in the restive, Shia-majority region of Gilgit-Baltistan in Pakistan-held Kashmir. And China’s dam building inside Burma to generate power for export to Chinese provinces has contributed to renewed bloody fighting recently, ending a 17-year ceasefire between the Kachin Independence Army and the government. As with its territorial and maritime disputes with India, Vietnam, Japan, and others, China is seeking to disrupt the status quo on international-river flows. Persuading it to halt further unilateral appropriation of shared waters has thus become pivotal to Asian peace and stability. Otherwise, China is likely to emerge as the master of Asia’s water taps, thereby acquiring tremendous leverage over its neighbours’ behaviour. NOVEMBER 2011


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SWEET-AND-SOUR SCAM Punters, think twice the next time an attractive girl approaches you. She may be in it for the money. Hong Kong police have uncovered a loan-sharking operation that used a “honey trap” to snare gamblers. The newspapers reported that a Hong Kong man met a girl in an Internet chat room. She convinced him to visit Macau and the pair went to a casino, where he was persuaded to gamble. After losing his money, he was enticed to borrow about HK$180,000 (US$23,140) from loan sharks, which he also lost. With big debts and facing threats from the loan sharks (and of course no more girl), the victim went to the police, who arrested

FOR A FEW GOOD MEN The number of illegal workers entering Macau is on the rise again. Between January and July, authorities found more than 400 illegal workers. Customs officers detected another 200 people trying to enter the territory illegally during the first eight months of the year. The figures show there is a clear demand from companies for illegal labour. The territory is strapped for human resources and businessmen feel it is worth the risk. Instead of highlighting the increase in illegal workers detected as a victory, the government should probably see it as a wake-up call. Something is wrong with the city’s human resources policies.

FUNNY-OLD FARE FUMBLE Ferry operator CotaiJet increased its prices last month. To be more accurate, the company increased economy class fares by up to MOP18 (US$2.25) a ticket, while dropping first class fares by up to MOP39. Frozen Spy is sensitive to the company’s arguments, namely that this is its first price increase in four years and that fuel prices have increased 35 percent this year. What is difficult to understand is why regular customers are the only ones who will face a price hike. CotaiJet says the drop in first class fares “is an effort to make luxury travel more affordable to everyone”. What about making affordable travel (no thrills needed, thank you) available to everybody in the first place?

HEAVY-HANDED HISTORICAL REVISIONISM There are some decisions made by the public administration so doltish they are hard to believe. The latest is the decision to remove the Portuguese coat of arms from the cover of the online editions of the Official Gazette released prior to the handover. Frozen Spy wonders why the heavy-handed erasing is needed. Portugal was the ruling power in Macau for centuries, a fact peacefully acknowledged by Beijing. Also, the historical interaction between Portugal and the mainland is seen as an exemplar, which continued during the handover process. Why this current nonsense? Is it a clumsy beginners’ attempt at historical revisionism? Let us hope it is not the start of a wider campaign to “sterilise” Macau’s past. There are hints that process is already underway.

MORE BAD BOYS WEARING BLUE There is something strange taking place in the ranks of the Public Security Police. According to Portuguese language newspaper Ponto Final, there were more disciplinary processes, 334, in the force last year than commendations, 240. There were many reasons for the disciplinary actions, from officers who allegedly were not wearing their uniforms properly to cases of assault. The figures themselves do not seem too surprising. There are plenty of “bad cop” stories in Macau. It is time the city saw the “good cop” in action.

NOVEMBER 2011


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King of pit lane Trevor Carlin’s ups and downs Seventh heaven Rutter shoots for race record Grandstand finish Sponsors get behind title races NOVEMBER 2011


MACAUGP

It is November, the month of the Macau Grand Prix and for one week, the city becomes the playground for some of the world’s fastest drivers. Whether you love the smell of gasoline and burning tyres or not, Macau is overtaken by such a rush that nobody can stop the adrenaline pumping. You will not see Valentino Rossi or Sebastian Vettel at the Melco Hairpin – although Vettel raced here just a couple of years ago. But there will be plenty of reasons not to miss this unique show on the 6.2-km circuit, created almost by mistake by three Portuguese enthusiasts more than five decades ago. Although it is an extremely dangerous track, the excitement and thrill of the Grand Prix carnival lures drivers from all over the world to Macau in the third week of November. It is nonstop action for four days, with races of all kinds, for all tastes: touring cars, GT cars, Formula 3 single-seaters and motorbikes. Macau has kept the formula for success and this year’s programme has a familiar look to it. High emotion is guaranteed, with the two final rounds of the FIA World Touring Car Championship, the uncertainty of the always-mad Macau Motorcycle Grand Prix and the most prized race for young guns, the FIA Formula 3 Intercontinental Cup. Four other races complete the programme, the only event in the world that features both car and motorcycle races sanctioned by the respective international federations.

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MACAUGP

SO WHAT'S NEW THIS YEAR? There will be seven different races instead of the eight there were last year. BMW Motorsport decided to end the Formula BMW Pacific series and the Grand Prix organisation has not introduced a replacement event. Gaming operator Sociedade de Jogos de Macau takes the main sponsor’s role, replacing Star River-Windsor Arch. The headline races of the Grand Prix – Formula 3, motorcycles and the Guia Race – are part of international series. The Macau GT Cup will be a feature on every day of racing. Event broadcaster TDM will broadcast digitally in widescreen 16:9 ratio signal.

BY THE NUMBERS Grand Prix budget:

MOP140 million (US$17.5 million) Expected sponsorship revenue:

MOP35 million Expected revenue from ticket sales:

MOP9 million Number of drivers expected:

226 Countries represented:

34 Local drivers expected:

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58TH MACAU GRAND PRIX

PROGRAMME

17th November 06:00 06:30 07:30

07:00 08:30

08:55 09:55 10:55 12:00 12:50 13:50

09:35 10:35 11:40 12:30 13:30 14:20

14:40 15:50

15:10 16:35

18:30

*

07:00 08:15

08:30

09:00

09:20

09:50

10:10 11:00 12:15

10:40 11:45 12:45

13:05 13:55 14:35 15:25

13:35 14:15 15:05 16:15

18:30

*

T H U R S D AY

Circuit closed Circuit inspection City of Dreams Macau Motorcycle Grand Prix - 45th Edition - Practice Hotel Fortuna Macau/Hong Kong Interport Race - Practice Suncity Group Macau Road Sport Challenge - Practice SJM Formula 3 Macau Grand Prix - Practice Star River 路 Windsor Arch Macau GT Cup - Practice CTM Macau Touring Car Cup - Practice FIA WTCC - Guia Race of Macau - Presented by SJM - Testing SJM Formula 3 Macau Grand Prix - Qualifying City of Dreams Macau Motorcycle Grand Prix - 45th Edition - Qualifying Circuit opened

18th November 06:00 06:30 07:30

17th to 20th November 2011

F R I D AY

Circuit closed Circuit inspection City of Dreams Macau Motorcycle Grand Prix - 45th Edition - Qualifying FIA WTCC - Guia Race of Macau - Presented by SJM - Practice Hotel Fortuna Macau/Hong Kong Interport Race - Qualifying Suncity Group Macau Road Sport Challenge - Qualifying SJM Formula 3 Macau Grand Prix - Practice FIA WTCC - Guia Race of Macau - Presented by SJM - Practice CTM Macau Touring Car Cup - Qualifying Star River 路 Windsor Arch Macau GT Cup - Qualifying SJM Formula 3 Macau Grand Prix - Qualifying FIA WTCC - Guia Race of Macau - Presented by SJM - Qualifying Circuit opened

19th November 06:00 06:30 07:30

07:00 07:50

08:20

09:20

09:50

10:50

11:20 12:50 14:00

12:20 13:10 14:50

15:30

16:30

18:30

*

07:30 08:30

09:00 10:45

10:00 13:15

13:45 15:00 15:30 18:30

14:45 15:15 16:30 *

Note: The organizer reserves the right to re-schedule the programme without prior notice. * If the circuit opens before the programmed time, it will be announced.

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Circuit closed Circuit inspection City of Dreams Macau Motorcycle Grand Prix - 45th Edition - Warm up Hotel Fortuna Macau/Hong Kong Interport Race - 10 laps Suncity Group Macau Road Sport Challenge - 10 laps CTM Macau Touring Car Cup - 12 laps Star River 路 Windsor Arch Macau GT Cup - Qualifying SJM Formula 3 Macau Grand Prix - Qualification race - 10 laps City of Dreams Macau Motorcycle Grand Prix - 45th Edition - 15 laps Circuit opened

20th November 06:30 07:00 08:15

S AT U R D AY

S U N D AY

Circuit closed Circuit inspection FIA WTCC - Guia Race of Macau - Presented by SJM - Warm up Star River-Windsor Arch Macau GT Cup - 12 laps FIA WTCC - Guia Race of Macau - Presented by SJM - Two races of nine laps each with 15 minutes break between races Special event Lion dance SJM Formula 3 Macau Grand Prix - 15 laps Circuit opened


MACAUGP

The Guia Circuit

Fishermen’s Bend

Ticketing Stalls

D. Maria Bend

Melco Hairpin

Ma ri Ben a d

(min width: 7M)

Reservoir

Do

na

R Bend

Grand stand A | B Start | Finish

GP Building Reservoir stand A | B

Solitude Esses Length: 6.2 km Minimum width: 7 metres at the Melco Hairpin

Maternity Bend

Maximum width: 14 metres at Avenida da Amizade

Mandarin Oriental Bend

S. Francisco Hill Bend

Characteristics: A street circuit with a combination of long, fast straights and sharply twisting corners. It is recognised as one of the most demanding circuits in the world. Formula 3 lap record: Edoardo Mortara, 2009, Dallara Volkswagen, 2:10.732 Motorcycle lap record: Stuart Easton, 2010, Kawasaki 1000cc, 2:23.616

Lisboa Bend

Lisboa stand

WTCC lap record: Tiago Monteiro, 2009, SEAT León TDI, 2:32.076

Champions | 115


FORMULA33 FORMULA

The future starts here Although this was a crisis year for Formula 3, the Macau Grand Prix presents an impressive entry list Formula 3 is facing tough times all around the world. This year’s grids were shrunken in both the European and Japanese series, with some of the most prestigious races failing to attract high numbers of drivers. Only nine have taken part in the inaugural FIA Formula 3 International Trophy, a competition that FIA started this year, expecting to create a new aura around the category. The final rounds of the trophy will be held in Macau, with Saturday’s qualification race and Sunday’s Grand Prix each counting as a round. The Formula 3 Macau Grand Prix will still be the race for the FIA Formula 3 International Cup. The proliferation of alternative junior singleseater series, especially the GP3 Series, is seriously threatening the future of Formula 3, and it seems that the category is no longer

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a compulsory stage for any driver aiming to live the Formula 1 dream. The Macau Grand Prix is an exception however. FIA Trophy organiser and Macau Formula 3 Grand Prix coordinator Barry Bland has again done a great job of gathering a respectable entry list. The race retains its significance, with official records indicating that of this year’s 28 Formula 1 World Championship registered drivers, 20 have previously raced in the Formula 3 Macau Grand Prix, although of these, only Michael Schumacher actually won it, in 1990. Five past or present Formula 3 champions, plus a host of GP3 race winners, have signed up to be part of a 30-driver field for this year’s event. Edoardo Mortara made history last year, being the first driver to win the race twice but he will not try for a third time – at least,

not this year. That means Spaniard Roberto Merhi, who has already won the inaugural FIA Formula 3 International Trophy and the Formula 3 Euro Series this year, will come to Macau as a natural favourite after an incredible season. Also chasing victory are 2011 British Formula 3 champion Felipe Nasr and 2007 British Formula 3 champion Marko Asmer. They are joined by newly-crowned GP3 champion Valtteri Bottas, who is returning to Macau – and Formula 3 – with unfinished business, after finishing third last year in his second attempt on the Guia circuit. Uncertainty lurks on every corner of the Guia circuit and looking at the entry list, one is forced to add to the favourites 2011 Zandvoort Formula 3 Masters winner Felix Rosenqvist, German Formula 3 Cup champion Richie Stanaway and Japanese Formula


FORMULA 3

Carlos Sainz junior

3 runner-up Hironobu Yasuda. The field includes a long list of aspirants to victory on Sunday afternoon, including Portuguese motor sport hope António Félix da Costa and Briton Alex Sims, who will be the number one driver of the ever-strong Tom’s team from Japan. Once more, 42 year-old Michael Ho will fly the flag for Macau. The basics: Formula 3 is a development category tailor-made for young drivers looking to reach Formula 1. The chassis are made by Italy’s Dallara Automobili and are powered by 2.0-litre engines from Volkswagen, Mercedes-Benz, Toyota, Nissan or Honda. The race: A 15-lap race on Sunday with a 10-lap qualifying race on Saturday.

Kevin Magnussen

Chips off the old engine block There have been many drivers following in their father’s footsteps in Macau. This year brings the sons of two motor sport stars to the Formula 3 race This year’s Macau Formula 3 Grand Prix line-up has some familiar surnames: Sainz and Magnussen. Not the seniors but their offspring. Motor sport stars Carlos Sainz and Jan Magnussen have given way to their sons, Carlos Sainz junior and Kevin Magnussen. Double World Rally champion and 2010 Dakar Rally winner Sainz senior is a living legend. Nicknamed “El Matador”, he drove for Toyota, Lancia, Ford, Subaru and Citroën in the World Rally Championship. At the age of seven, Sainz junior began to drive go-karts at his father’s indoor kart track in Madrid. He began serious competition in 2005, aged 10. It was in karts that he made his debut in Macau, at the Coloane circuit in 2007, finishing third in the Asia-Pacific KF3 competition. The next year, he clinched the title. Last year, Sainz junior contested the Formula BMW European Championship and took part in three races of the Formula BMW Pacific Championship, including the race in Macau, were he won in his debut on the Guia circuit. One year later, now 17, he returns to contest the Formula 3 Grand Prix, having spent the season in Formula Renault in Europe, where he became the youngest Formula Renault 2.0 Northern European Cup champion. Unlike Sainz senior, who never raced in Macau, Jan Magnussen finished third in

the 1994 Formula 3 Grand Prix – ahead of Ralf Schumacher – behind Sascha Maassen and runner-up Kelvin Burt. Earlier that year Jan Magnussen had dominated the British Formula 3 Championship, winning a record 14 of the 18 events. He eventually went on to race in Formula 1 but not with the same level of success. He still races and is successful in the American Le Mans Series for sports cars. Like his father, Kevin Magnussen found success in karts in Scandinavia and Italy, which led him to Formula Ford in his native Denmark, winning the national championship in 2008. He switched to Formula Renault for 2009 and scored a race win in the Formula Renault 2.0 Northern European Cup. Third in the German national Formula 3 series last year and also a race winner on his debut in the Formula 3 Euro Series, this season he has impressed many – not least team boss Trevor Carlin, another regular in Macau – by winning several races and finishing runner-up in the British championship to Felipe Nasr. “I am proud to race on a classic circuit like Macau, as my father did in the 1990s,” says Kevin Magnussen. “I hope I can follow him into Formula 1 as well.” Look out for Sainz junior and Kevin Magnussen at the 58th Macau Grand Prix. They are both names you should hear more about and not just because of their famous fathers.

Champions | 117


FORMULA 3

A happy accident Trevor Carlin is arguably Formula 3’s most successful team principal BY Jeff Heselwood

Trevor Carlin has been around Formula 3 forever, seemingly – first with Bowman Racing, then West Surrey and now Carlin, a team that has won seven British Formula 3 titles, as well as the Macau championship race and others. Carlin will bring four of their six regular drivers to Macau this year. Multiple British Formula 3 race winner Kevin Magnussen, FIA Trophy racers Carlos Huertas and Jazeman Jaafar and British Formula 3 champion Felipe Nasr make up Carlin’s Dallara-Volkswagen line-up. “We come back to Macau each year because it is probably the most exciting racetrack in the world for Formula 3 cars. It’s the atmosphere, the end of the year, end of term,” Carlin says. “We come to Macau to try and prove ourselves against the best in the world. We need to race against the

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best to keep improving.” The Carlin team have already tasted success on the Guia circuit. Takuma Sato won in Macau in 2001 and Robert Kubica was second here in 2005. But there are also some painful memories of the Guia circuit for Carlin. “Narain Karthikeyan comes to mind. He had a big lead [in 2000] and threw it away,” he says. “We were so dominant throughout, with Sato and Karthikeyan. They both led the race and both crashed while leading. That is undoubtedly my most memorable moment.” Carlin started out as a junior mechanic with Pro Racing Services in Formula Ford in 1980, when he was 17. He became team manager of Bowman Racing in British Formula 3, overseeing Gary Brabham’s campaign in 1988. The following year David Brabham

won the title for the team and ended the season with a win at the Macau Grand Prix. Illustrious alumni Carlin set up his own business in 1996 and eventually established a team to enter cars in the British Formula 3 Championship. “This happened by accident. It was never on the agenda to have my own team. It just kind of happened,” Carlin says. “Here we are, 10 years later,” he says. “I look around me sometimes and I’m a bit shocked.” Carlin ran Karthikeyan in the British Formula 3 series in 1998 and the Indian won two races the next year, the team’s first full season of racing. Their first British Formula 3 title came in 2001, with Takuma Sato. The Carlin team’s credentials are impressive. Besides their victories, bear in mind that the likes of Sebastian Vettel, Nico Rosberg and


FORMULA 3

Jenson Button were all part of the Carlin stable at one time. This year, the team has competed in the British Formula 3 Championship, the GP3 Series, the Renault World Series and the GP2 and GP2 Asia series. Carlin does not like the mushrooming of competitions. “I think it is bad that there are so many single-seater series. It means trying to stretch the money between too many championships,” he says. The Carlin team have won more than 210 races and had over 175 drivers. Asked why the team has been so successful, Carlin replies: “I don’t really know, but we’ve got a great bunch of blokes, great staff.” “We had a good basic foundation when we started and we’ve kept things simple. We work very hard and we encourage our drivers. We help them.”

A TASTE OF FORMULA 1 Like many of the drivers he has overseen, Trevor Carlin spent some time in Formula 1. His memories of it are not among his favourites. Carlin was announced as Midland team’s sporting director in October 2004. Midland subsequently acquired the Jordan team, now reincarnated as Force India. “I signed to join what was essentially a new team, starting afresh, having a year to prepare and doing a proper job. But in the end, for one reason or another, they decided to buy Jordan,” Carlin recalls. “Financially, I can understand why they did it but the drive and ambition to win did not seem to be there. We like winning. It’s hard work but winning makes it worthwhile.” Carlin left Midland in the middle of 2005 after only seven races. Carlin was also involved in the A1 Grand Prix series but admits he could never understand the organisers’ business plan. “I predicted it would eventually go bust. As far as I could see, there was only one way it was going to go.” The series lasted for only four seasons, giving up in 2009. “I doubt very much whether it will ever be resurrected,” says Carlin. It makes no commercial sense. None at all. The business model was entirely wrong.”

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FORMULA 3

Motor matters Volkswagen wants to become the most successful engine manufacturer in Macau Formula 3 Grand Prix history A driver’s

skills can make a big difference on the Guia circuit – and so can his engine. Volkswagen is aiming to become the manufacturer with the most victories in the Macau Formula 3 Grand Prix. The German manufacturer has seven victories so far, the same number as Toyota. Opel is the third-ranked engine manufacturer, with four wins. Looking at the entry list, there is a good chance Volkswagen could achieve its goal. The lion’s share of the field – 15 drivers from 12 countries, including the new British Formula 3 champion, Felipe Nasr, and the German Formula 3 Cup champion, Richie Stanaway – is relying on the nearly 210 horsepower four-cylinder VW engines from Wolfsburg. From the beginning of the Formula 3 era of the Macau Grand Prix in 1983 until 1990, Volkswagen clinched five of the eight possible

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victories. However, it was almost another 20 years before the engine maker could celebrate here again. Edoardo Mortara won in 2009 and last year, both times with a VW engine. “With seven victories, Volkswagen is one of the most successful engine manufacturers at the Macau event. Our aim must be to continue our two triumphs from 2009 and 2010 and our successful statistics,” says Volkswa-

gen Motorsport director Kris Nissen. The Guia track “is arguably the world’s most challenging city circuit,” Nissen says. “The track combines long straights and extremely narrow turns and therefore requires an engine that delivers both high power output and good driveability. In addition, driving skills are more important here than at most other racetracks.”


FORMULA 3

Star studded Galaxy Macau sponsors the Double R Racing Formula 3 team, securing GP3 champion Valtteri Bottas as lead driver Galaxy Macau

will sponsor Formula 3 team Double R Racing for the 58th Macau Grand Prix, with the team renamed Galaxy Double R Racing for the event. Double R Racing is bringing its top guns to Macau, including current GP3 Series champion Valtteri Bottas and Marko Asmer, a former lap record holder for the Guia circuit. This is not the first time Galaxy Entertainment Group Ltd., the owner of Galaxy Macau, has sponsored a team. In 2007, Bruno Senna, now a driver for Lotus Renault Formula 1, raced in the casino-hotel operator’s colours – also with Double R Racing.

“We are incredibly excited to be once again partnering with Double R Racing and continuing to support the Macau Grand Prix’s rich heritage,” says Michael Mecca, the president and chief operating officer of Galaxy Entertainment. Double R Racing team principal, Anthony Hieatt, says: “Macau has always had a long history of showcasing the leading drivers and future stars of Formula 1, making this event the most anticipated and competitive race in the Formula 3 season. Our partnership with Galaxy Macau has enabled us to bring two of the most exciting young drivers in the world to the city.”

The deal will give Galaxy Macau prominent exposure, on clothing worn by the drivers and the team, and on their equipment. Galaxy Macau and its sister property StarWorld will invite fans of their Facebook, Weibo and Jiepang sites to win a chance to become a member of the Galaxy Double R Racing team for the week, with full VIP access to the team garage and social events. The Double R Racing team will race with Mercedes engines, tuned by HWA, that have powered them to two victories in the British Formula 3 International Series this season and 25 others during the past four years.

Galaxy also sponsored Double R Racing team in 2007

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FORMULA 3

Rollercoaster

ride

Sebastian Vettel, Formula 1’s youngest double world champion, has had his ups and downs in Macau BY Sérgio Fonseca

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FORMULA 3

Vettel was third in Macau in 2005

Sebastian Vettel

became Formula 1’s youngest double world champion this year, at the wheel of a Red Bull Racing car. The boyish 24-year-old German is the new motor racing king but has never tasted success in Macau, where he raced in 2005 and 2006. Vettel made his Macau Grand Prix debut in the same ultra-fast Dallara package powered by a Mercedes-HWA engine, in which Lewis Hamilton had dominated that year in the Formula 3 Euro Series with the French ASM team. Vettel, who had had an excellent Formula 1 test-drive for Williams BMW only a few days before Macau, arrived in town rated as one to watch. He did not disappoint. He finished eighth in Saturday’s qualifying race but the best was yet to come. The following day, Vettel was the man of the race, climbing past five other drivers to finish third and mount the podium at the Guia circuit for his first and only time. The 18-yearold held up his arms as if celebrating victory and described the result as “fantastic”. Vettel was spotted by Red Bull when he was 12, and his performance in Macau stunned the hard-to-impress Helmut Marko, the motor racing consultant to fellow-Austrian Dietrich Mateschitz, the man that made billions from the Red Bull energy drink and who now owns two Formula 1 teams: Scuderia Toro Rosso and Red Bull Racing. Marko rewarded Vettel with a second fullysupported run in Formula 3.

The following year, Vettel returned to Macau as runner-up in the 2006 Formula 3 Euro Series, behind team-mate Paul di Resta, now a Force India Formula 1 driver. Vettel had just become BMW Sauber’s third driver, after Robert Kubica was called up to replace Jacques Villeneuve in the Swiss Formula 1 team. However Vettel’s return to the Guia circuit was not the stuff of fairy tales. He was placed in the British Carlin team instead of the ASM team, with whom he had raced for the whole season, to mark the start of the relationship between Carlin and the Red Bull junior driver programme. At the time, Carlin were still racing Neil Brown Engineering’s Mugen Honda engines against the more powerful Mercedes engines. Vettel struggled all weekend to make the top 10. Coming 11th in qualifying, he tried everything to find a way up the order in the qualification race but with two laps left his efforts culminated in his car hitting the barriers so hard that he wiped himself out of the contest. In the Grand Prix race, Vettel started last in a field of 32 drivers. With nothing to lose, he seemed to jump the lights at the start. He was not penalised but clashed with Robert Streit at the Lisboa corner. He finished in 23rd position. It was not a glorious episode but Vettel already had his hands on a contract to race for Carlin in the 2007 Renault World Series and a guarantee that he could test drive for the BMW Sauber Formula 1 team.

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WTCC

World versus light blues Macau once again hosts the final two rounds of the FIA World Touring Car Championship The Guia Race is a favourite among Macau Grand Prix fans and this year it celebrates its 40th anniversary. Since 2005, the race has been part of the FIA World Touring Car Championship (WTCC), with the final two races taking place in Macau. All WTCC drivers’ titles except for last year’s, have been decided here. The WTCC is considered the third most important FIA championship after Formula 1 and the World Rally Championship. This year’s Guia Race will once again be decisive. The driver’s championship will be decided on the Guia Circuit, between reigning FIA WTCC champion Yvan Muller (400 points) and Robert Huff (380 points), both Chevrolet drivers.

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Points are awarded in the same scale as Formula 1, with 25 points per race win. Since the departure of the BMW and SEAT factory teams, Chevrolet has been on its own at the forefront of the WTCC. The three light blue Cruze 1.6Ts of Alain Menu, Rob Huff and Yvan Muller have dominated all season, and Chevrolet won its second consecutive manufacturer’s championship in September in Valencia in Spain, even before the long sea journey to Asia for the last three events. Given that Chevys are always strong on street circuits, can anybody beat them in Macau? Private Spanish outfit SUNRED will try. The team that inherited the spoils of SEAT Sport is entering 2009 world champion, Gabriele Tarquini, and former Formula 1 driver, Tiago Monteiro. Both have nothing to lose in Macau. The new SEAT 1600cc turbocharged engine had a tough start this season, but the team will have the precious help of local hero André Couto, a special addition for the Guia Race. The 2000 Formula 3 Macau Grand Prix winner will have the crowd on his side, and on a good day Couto is one to watch.


WTCC

Andy Priaulx and Augusto Farfus are no longer in the WTCC and hopes for the BMW marque – the most successful in Guia history – rest with Tom Coronel, driving for the ROAL Motorsport team. If you are looking for a dark horse, then it is worth keeping an eye on what Polestar Racing’s Robert Dahlgren can do with his factory-supported Volvo C30. Apart from Couto, Macau will be represented by Jo Merszei, driving a BMW 320si; Felipe Clemente Souza, who debuts in the big race in a Chevrolet Lacetti after several years racing in the support races; veteran driver Kuok Io Keong, also in a Lacetti, and former MTCS regular Mak Ka Lok in a BMW 320si. The basics: The cars are based on road cars, with 1600cc turbocharged or 2000cc normally-aspirated engines. Chevrolets, SEATs, BMWs and Volvos race in the series, which follows the FIA rulebook, but only Chevrolet has a factory-backed team. The race: Two races of nine laps each on Sunday, with 15 minutes break in between.

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ISSUE 4 ON SALE

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WTCC

The winner of the “101 Guia Laps”

Mutation sensation The Guia Race could have been quite different from the one we know today The Guia Race

is considered one of the most outstanding events in the world for touring cars, and this year is its 40th anniversary. Since its inception in 1972, it has passed through several stages. What few people know, is that what is today an event with two legs of nine laps each, could well have become a 12-hour race. When the Macau Grand Prix began in 1954, Formula 1 did not have the status it enjoys today. At the time, sports car racing was what thrilled fans the most. The 24 Hours of Le Mans in France, the Mille Miglia in Italy or the British RAC Tourist Trophy – all endurance races – were the events that attracted the best cars and drivers. Endurance races were the headliners of motor sport. Things were no different in Macau and the first Grand Prix could itself have been an endurance race. As it turned out, it was not, in part because most of the field was made up of local drivers and there were worries whether they and their cars were fit enough

to survive such a challenge. So the race was limited to four hours. The success of the first Grand Prix postponed the realisation of any dream of having an endurance race in Macau, but the intention was kept alive. In 1968, the organisers announced a “12 hours of Macau” for the following year – a shorter reproduction of the famous 24 Hours of Spa, in Belgium. Eventually, the idea was dropped. It was decided instead to hold a “101 Guia Laps” in which the cars would cover 626.2 km, with the event taking place outside the Grand Prix calendar, in May 1969. Some of the race was run at night – a first for Macau. It started at 3pm in sunshine and ended at 9pm. Of the 40 or more cars on the starting grid, fewer than two-thirds finished. The winner of the “101 Guia Laps” was one of the two Mercedes-Benz 300 SEL 6.3s sent specially for the race by the German manufacturer, driven by E. Waxenberger and Al-

bert Poon. The event’s innovative format made it a big success and the organisers conceded that a 12-hour race was maybe no longer needed. The “101 Guia Laps” turned out to be a one-off but it formed the basis of what is today the Guia Race. With the debut of the first true single-seater works team at the 1968 Grand Prix, the organisers recognised that these cars would come to dominate the main event – what is today the Formula 3 Grand Prix. At the same time, there was a need for a touring car race, because the European Touring Car Championship – the ancestor of today’s WTCC – was starting to gain global attention. So the organisers introduced the Guia 200 event, based on the 101 Guia Laps, in the 1972 Grand Prix. It was meant for saloon cars and covered 200 miles (321.9 km). As time went by the race was shortened to 100 miles and the name changed accordingly but it was recognisable as what we now call S.F. the Guia Race.

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MOTORCYCLEGP

The usual suspects Michael Rutter leads the Guia circuit veterans onto the track for the Macau Motorcycle Grand Prix No matter

how huge an effort the organisers put into safety every year, the Macau Motorcycle Grand Prix remains one of the world’s most dangerous races. This year 28 riders will enjoy the unique sensation of sliding a bike out onto the fast section of the track and speeding by less than two centimetres from the metal barriers in the Solitude Esses. Michael Rutter will try to overtake Ron Haslam’s record. Riding a Ducati entered by Hong Kong’s Team of Paris, “The Blade” is looking for his seventh win. His fiercest rival over the past three races is out of the picture. Stuart Easton, the race winner in 2008, 2009 and 2010, is recovering from injuries caused by a highspeed accident at the North West 200 in May. Paul Bird Motorsport’s Kawasaki Racing Team are among the favourites. Podium finisher Conor Cummins and Jeremy Toye

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– the first American rider on the Macau Grand Prix podium in a decade, after taking third place last year – will line up alongside Michael Dunlop for Kawasaki. Racing in Macau for the first time, Michael and his brother William Dunlop are the sons of 1989 winner, the late Robert Dunlop, and nephews of the late road-racing great, Joey Dunlop. William will ride for the Wilson Craig team. The entry list includes regulars on the international road-racing scene, including 2001 race winner John McGuinness, riding for SMT Honda. Zhuhai Superbike Championship former champion João Fernandes and veteran Sou Sio Hong will form up the grid for Macau. For the second year, the motorcycle race will also be the season finale for the Duke Road Race Rankings, a series that recognises season-long performance on the world’s premier road circuits.

The basics: The bikes are derived from standard production models. They have the same profile as their road-going counterparts with four-stroke engines between 850cc and 1200cc for twins or between 750 cc and 1000 cc for four-cylinder machines. The race: A 15-lap event on Saturday.


MOTORCYCLEGP

No mid-life crisis The Macau Motorcycle Grand Prix is now in its 45th year. We look back at the competition’s history and remember some of its heroes and most closely-contested races

The beginning

The Japanese dominate

1967 Japan’s Hiroshi Hasegawa won the first Macau Motorcycle Grand Prix. Riding a Yamaha RD 56, he completed the 30-lap the race in 1:53:34.00. 1968 Hasegawa was again the man to beat, winning the Motorcycle Grand Prix for the second year in a row. 1970 Benny Hidajat of Indonesia took the chequered flag, riding a Yamaha YSI. 1971 After two years without any victories, Japanese riders took the top honours. O. Motohashi was first and S. Minuro second, both on factory Yamahas. 1972 This was the beginning of an era dominated by Japanese riders, who crowded the podium for four years in a row. The trophy this year went to Yamaha TR3 rider Ikujiro Takai.

John MacDonald 1969 Hong Kong’s John MacDonald became the first and only man to have won both the Macau Grand Prix, in 1965, and the Macau Motorcycle Grand Prix. He had come second in the motorcycle event the year before. Later, in 1972, he would win both the first Guia Race and the Grand Prix, which made him the only competitor to have won all three international events.

1973 There were more than 100 entries for the Motorcycle Grand Prix, which led to the introduction of a six-lap Organiser’s Trophy Race for non-qualifiers. Japan’s Ken Araoka on a Suzuki won the main race. He also set a new lap record of 2:56.68, becoming the first rider to complete the Guia Circuit in less than three minutes. 1974 Japan was again in the spotlight, with Kawasaki Hiroyuki the victor, riding a Yamaha. 1975 The top three places in the 25-lap event all went to Japanese riders: Hideo Kanaya, Ken Araoka and Sadeo Asami, in that order.

1976 England’s Chas Mortimer ended the era of the Japanese riders, albeit on a Japanese bike, a Yamaha. Chas Mortimer 1977 Another Englishman, Mick Grant, set a new lap record of 2:48.38 on his Kawasaki, which helped him on his way to victory.

Mick Grant 1978 As the Macau Grand Prix celebrated its 25th anniversary, Sadeo Asami was the winner in the motorcycle event, riding a Yamaha 750. 1979 For the first time, the Motorcycle Grand Prix was run in two legs of 15 laps each. Reigning champion Sadeo Asami, on a Yamaha TZ-OW, was the winner of both.

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MOTORCYCLEGP

A rocket on the track

1987 Typhoon Nina lashed the coast but the winds subsided long enough to run a 10-lap Motorcycle Grand Prix. Haslam won again, becoming the Grand Prix’s most successful rider, with six wins to his credit. He would never ride again in Macau, which meant he never lost a race on the Guia circuit.

Sadeo Asami 1980 Asami made history, becoming the first competitor to win the same event at the Macau Grand Prix for three consecutive years.

1982 In the rain and wind, Haslam took pole position and won the Motorcycle Grand Prix for the second consecutive year. Charlie Williams clocked a lap time of 2:35.76, setting a new record. It was not beaten for a decade. 1983 Haslam’s victory on his Honda 500 meant he equalled Asami’s record of three consecutive wins. 1984 Haslam’s non-appearance left the field wide open. Mick Grant, second in 1982, took victory on his Suzuki 500.

Ron Haslam

1985 Haslam came back to the Guia circuit and to the highest step on the podium, winning an unprecedented fourth victory. Belgian star Didier de Radigues was second.

1981 A new star was born as “Rocket” Ron Haslam of England took victory in the 30-lap race in 1:22:57.75, beating reigning champion Asami.

1986 Haslam’s winning streak continued. As in 1985, it was an all-Honda top three, with second place going again to de Radigues.

Kevin Schwantz

1988 With Haslam out of the picture, American rider Kevin Schwantz put on a show with his highriding antics, including highspeed wheelies, on his way to victory.

1989 Bad weather and fading light shortened the Motorcycle Grand Prix to eight laps. Ulsterman Robert Dunlop won the race, riding a Honda. His sons Michael and William are racing in the Motorcycle Grand Prix this year.

Battling for honours 1990 Scotsman Steve Hislop rode to his first victory in the Motorcycle Grand Prix, beating Peter Rubatto and Dave Leach. 1991 World Championship rider Didier de Radigues rounded off his motorcycleracing career by winning the 25th Macau Motorcycle Grand Prix and setting a new lap record.

Didier de Radigues

1992 England’s Carl Fogarty and Jamie Whitham, and Japan’s Toshihiko Honma put on quite a show in their battle for the trophy, which eventually went to Fogarty. He also set a new lap record of 2:33.94.

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MOTORCYCLEGP

Steve Hislop

1993 1990 winner Steve Hislop took the chequered flag four seconds ahead of 1989 winner Robert Dunlop, who set a new lap record of 2.33:18.

1994 Hislop, riding a 500cc Yamaha Grand Prix machine, took his third trophy. Just 2.97 seconds behind was Englishman Mike Edwards, with Ulsterman Phillip McCallen in third. 1995 In a thrilling duel between 1994 runners-up Edwards and McCallen, Edwards took victory by just over a tenth of a second. Consolation for McCallen came in the form of a new lap record. 1996 On his eighth attempt, McCallen finally won the Motorcycle Grand Prix. Unlike the year before, the gap between the winner and the runner-up, Scotsman Roger Bennett, was clear: nearly 14 seconds. In third place was a rider that would later become a legend at Macau: Michael Rutter of England. 1997 Veteran Swiss road racer Andy Hofmann, on a 750cc Kawasaki, won the race by almost seven seconds ahead of 1996 winner McCallen on a Yamaha 500cc. Shawn Higbee, on a Suzuki 900, took third, making him the first American privateer on the podium for almost a decade. 1998 Michael Rutter stormed to victory, shattering the lap record by over 2.2 seconds and coming in ahead of his Honda Britain team-mate Ian Simpson by more than six seconds. England’s John McGuinness was third. 1999 England’s David Jefferies won on his second attempt in Macau, beating 1997 winner Andy Hofmann. In third place was Rutter.

The Rutter years

Michael Rutter

2000 Michael Rutter claimed his second victory on the Guia circuit but he had strong opposition from David Jefferies, who finished second but set a new lap record.

2001 John McGuinness was the winner, in his fourth year in Macau. Roger Bennett was second, followed by Jefferies. 2002 Rain delayed the Motorcycle Grand Prix until the Sunday. That did not seem to matter to Rutter, who won the event for the third time. Jefferies, in third, would be killed the following year in an accident during the Isle of Man TT. 2003 Rutter did it again, and in style. He dominated the race from start to finish on his Renegade Racing Ducati and set a new lap record. The only rider to get near him, 2001 winner John McGuinness, came in more than 5.5 seconds behind.

2005 Another impressive victory by Rutter meant he equalled Haslam’s record of six Macau victories. He took pole position on a 1000cc Red Bull Honda and led from start to finish. Second-placed McGuinness came in almost 17 seconds behind. 2006 For the 40th Macau Motorcycle Grand Prix, all eyes were on Rutter’s attempt to break Haslam’s six-victory record. It was not to be. Steve Plater of England emerged triumphant, after a furious battle with Rutter during which the lap record was broken four times. 2007 A year on, it was the same story. All eyes were on Rutter but it was Plater who clinched victory. Rutter did not make it onto the podium. 2008 Stuart Easton took his first victory but had to battle for it with Rutter, who finished second. McGuinness was third, nearly 30 seconds behind the first two. In the Supersport 600cc class, João Fernandes became the first local rider to end up on the podium, taking third place.

2004 Rutter, on a Honda CBR 1000, made it three wins in a row but he had to work hard for it, with McGuinness proving to be a worthy opponent. Scottish rider Stuart Easton finished third. Stuart Easton 2009 Easton proved his victory the year before was no fluke. He took pole position and led for almost the entire race, losing the lead only momentarily to Conor Cummins. Easton also set a new lap record of 2:25.170. Fernandes was again third in the Supersport 600cc class. 2010 Easton won for the third time in a row. As in 2008, Rutter came second, even though he had started from pole position. Easton, on a Kawasaki 1000cc, also set a new lap record of 2:23.616.

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SUPPORTRACES

Muscling in The Macau GT Cup brings stiff competition to the Guia circuit, including current Formula 3 Grand Prix winner Edoardo Mortara As

Macau’s luxury car market continues to gather speed, the supercar aficionados will get an overdose of thrills as they see the best GT racing cars in the world perform on the Guia Circuit. With the strongest entry in its four-year history, the lure of the race has proved so great that it has attracted the man that made Formula 3 Macau Grand Prix history by becoming the only driver to win the race twice, in 2009 and last year. Italian DTM driver Edoardo Mortara will race an Audi R8 LMS GT3 supported by Audi Sport Customer Racing China, making his debut at Macau in a GT car. It will clearly be a four-car fight for the trophy. Mortara will face opposition from the mighty new GR Asia Ltd.-sponsored McLaren MP4-12C GT3 in the hands of experienced Briton Danny Watts. Two-time Macau GT Cup winner (2009 and 2010) Keita Sawa of Japan returns to defend his crown and will be assisted by a new and healthy SPS Motorsport Lamborghini LP-560 GT3. Macau’s Rodolfo Ávila of Team Jebsen could be the fourth player in the fight for the trophy and a serious contender for a place on the podium. In the past, the GT Asia Series included the Macau GT Cup but only as an invitational race. This year, for the first time, the Macau GT Cup will be a championship round – and not just any round but the final round, which will decide the champion. The GT Asia Series crown is still up for grabs, with Mok Weng Sun’s Ferrari 458 GT3, Dilantha Malagamuwa’s Lamborghini LP560-4 and Eddie Yau’s Porsche 911 GT3-R, racing for the local Asia Racing Team, all in a position to be crowned champion. Apart from Ávila, three other local racers will line up with the GT masters of Asia: Porsche Carrera Cup Asia regular Keith Vong Keng

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Fai, occasional formula car female driver Diana Rosário and Ivo Yiu. The format of the race has been enhanced for this year, with a practice session on Thursday followed by qualifying sessions on Friday and Saturday, and with Sunday’s race increased to 12 laps. The basics: A big range of supercars is accepted, having as ground rules the FIA GT3 regulations. Thanks to the implementation of the FIA’s balance-of-performance system, a level playing field is supposed to be guaranteed. The race: A 12-lap race on Sunday.


SUPPORTRACES

Tune up, turn out For the boy racers among us, the Road Sport Challenge is the event to watch The

Macau Road Sport Challenge is a big deal in the Pearl River Delta region. Its success is built on the popularity of car tuning and the support of the Automobile General Association Macao-China, the Hong Kong Automobile Association and the Guangdong and Zhuhai circuits. Most of the suped-up hardware is made in Japan but most of the drivers are from the Delta. Last year’s winner, Japan’s Manadu Orido, will not be taking part this year, leaving last year’s runners-up, Macau’s Sun Tit Fan and mainland China’s Tan Wei, both driving Mitsubishi EVO9s, as favourites. Another strong contender is Japan’s Tatsuya Tanigawa, driving a Mazda RX8. Thai veteran Nattavude Charoensukhawatana, in an EVO9, is a special guest this year, returning to the circuit he has raced on previously. In a glittering career, Nattavude has raced – and won – on motorcycles and in single-seaters, touring cars and sports cars. Local ace Sun Tit Fan won the first two races held and this year there is more local blood, including the winner of the Macau Roadsport series, Kelvin Tse Wing Kin, driving a Mazda RX-7, and the runnerup, Ip Un Hou, competing in an EVO9. Hélder Assunção, in a Subaru Impreza WRX, who was third in the Macau series, and former motorbike racer Sérgio Lacerda of Portugal, driving a Mitsubishi EVO7, are also worth keeping an eye on. Last year the race was in the news for the worst of reasons: too many crashes, which badly damaged the circuit’s safety barriers.

The basics: Almost anything with four wheels and a lot of horsepower, preferably labelled “Made in Japan”, is allowed to take part in the race. Most participants qualify through the Roadsport series run by the Automobile General Association Macao-China and the Hong Kong Automobile Association but there are some special guest competitors. The race: A 10-lap race on Saturday.

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SUPPORTRACES

Asian tour de force A perennial favourite, the Macau Touring Car Cup brings together Asia’s leading touring car drivers The Macau Touring Car Cup race was first run in 1991. The field includes a mixture of drivers from Macau, Hong Kong, the mainland and elsewhere in Asia, earning a reputation as a race to help decide the best of Asia’s touring car drivers. The healthy rivalry between the neighbouring SARs also means plenty of action on the track. This year’s line-up includes BMW, Chevrolet, Honda and Toyota. Last year’s winner in Macau and this year’s Hong Kong Touring Car champion, Paul Poon Tak Chun, will be back to defend his crown at the wheel of a Chevrolet Lacetti. Poon’s persistent rival, Kenneth Look, will not race this year but Poon will have stiff competition from Hong Kong competitors Kenneth Lau Chi Yung, driving a Honda Accord CL7, and Lo Ka Fai in a Honda Civic FD2. Not so long ago, Macau drivers had a hard time competing against their Hong Kong rivals, but times have changed. This year the Macau squadron includes the top three finishers in the Macau Touring Car Championship S2000 category: Eurico de Jesus, driving a Honda Integra DC5; the best Macau finisher in the race last year with a fourth place, Leong Ian Veng, in a Honda Accord CL7; and former WTCC racer Henry Ho Wai Kun in a BMW 320si. All will be looking for places on the podium, along with Guia circuit specialists Jerónimo Badaraco, Lui Man Kit and Célio Alves Dias, all driving Honda Integra DC5s. Representing Japan is Asian Touring Car Series podium regular Hideharu Kuroki in a Honda Integra DC5, while the mighty Singha Honda Total Team Thailand had to cancel its participation due to the floods in Thailand. The popular Ferdinand Pastor, at the wheel of a Toyota Altezza, will fly the flag for the Philippines, and the mainland will be represented by some local Touring Car Championship stars like He Xiao Le or Sun Zheng, both in Honda Integra DC5. The basics: FIA S2000 and Super Production cars are accepted. Most of the participants qualify through the Asian Touring Car Series and the Macau and Hong Kong championships, and there are some special guests who come only from Asia. The race: A 12-lap race on Saturday.

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OCTOBER 2011


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SUPPORTRACES

Neighbourly rivalry Macau’s best go head-to-head with their Hong Kong peers in the Interport Race First

run in 1958, what is now the Macau-Hong Kong Interport Race is one of the oldest events in the Grand Prix weekend. The competition has varied over the years: there was a time when it was for Macau drivers only, with most racing for the first time on the circuit. This is how it came to be called “the beginners’ race”. The story is completely different today. This year, 36 drivers – 18 each from Macau and Hong Kong – will participate and most of them know their way round the Guia track with their eyes shut. All are competing in Group N 2000cc cars, either Honda Integra DC5 or Civic FD2 models. This year Macau’s entry is theoretically stronger than Hong Kong’s. Attempting to uphold the city’s pride will be last year’s winner Álvaro Mourato, who will be back to try to defend his crown. Joining him are Macau Touring Car Championship runner-up Chou Keng Kuan and Wong Wan Long. Two big names in motor racing and

former winners of the event return: Daniel Gomes (2005) and Chan Man Fong (2006). Hong Kong’s hopes rest with Billy Lo Kai Fung, Samuel Hsieh and this year’s Hong Kong Touring Car Championship N2000 class champion, Li Kwok Chuen. Since 2008, when the Interport race adopted its present format, the ledger stands at Macau three, Hong Kong nil. The basics: Only FIA Group N 2000cc cars are accepted. All entrants qualify for the race through participation in either the Macau Touring Car Championship or the Hong Kong Touring Car Championship, with the top finishers in each of the series awarded the coveted positions on the grid in Macau. The race: A 10-lap race on Saturday.

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PITSTOP

André Couto Guia Race

Macau is represented in all seven Grand Prix races. We peer into our crystal ball and select the best pick for each event

André Couto knows the Guia circuit like no other and his participation always generates a particular buzz among the crowds. The only local driver to ever win the Macau Formula 3 Grand Prix, he will try again to match Jörg Müller’s record of being the only driver to have won both the Macau Formula 3 Grand Prix and the Guia Race – not an easy task. He will jump from the rear-wheel-drive 500 bhp Lexus SC430 3400cc V8 that he drives in Japan’s Super GT series, into a front-wheeldrive 300 bhp SEAT Léon 1.6 Turbo. Macau Grand Prix result last year: Did not finish the first leg of the Guia Race; did not start the second leg This season: Japanese Super GT series Career highlight: Winner of the Macau Formula 3 Grand Prix in 2000

Michael Ho

João Fernandes

Formula 3 Grand Prix

Motorcycle Grand Prix

The Guia circuit is the favourite testing ground for future Formula 1 stars but that goal is out of 43-year-old Michael Ho Hon Keong’s league. He is hoping to just cross the finish line on the Sunday. But one advantage he has is his knowledge of the track: no other driver has competed in so many Macau Formula 3 Grand Prix. This will be his 12th. Ho will be driving for the Mucke Motorsport team. He is the only Macau representative in this race.

Son of illustrious Portuguese rider António Contente Fernandes, João Fernandes was the only one of the three Macau riders to qualify for last year’s Macau Motorcycle Grand Prix. This time round Fernandes will be aiming to beat his performance last year, when he finished one lap behind Stuart Easton. Budget constraints meant Fernandes had focused this season on the Zhuhai Superbikes Championship. Fernandes is the only local rider to ever finish on the podium in Macau – in 2008 and 2009, in the 600cc class, which no longer exists.

Macau Grand Prix result last year: Did not finish the Formula 3 Grand Prix This season: Selected events in the Racecar Euro Series Career highlight: Asian Formula Renault champion in 2001

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Macau Grand Prix result last year: 21st in the Motorcycle Grand Prix This season: Zhuhai Superbikes Championship Career Highlight: Zhuhai Superbikes champion in 2009


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Rodolfo Ávila

Henry Ho

Macau GT Cup

Macau Touring Car Cup

Debuting in the Guia Race in 2002 as the youngest driver ever to take part in the event, Ávila failed to impress. However, the 24-year-old rising star of the Porsche Carrera Cup Asia tends to perform well when he is not under pressure, which is going to be the case in Macau this year. Last year he was the quickest in the GT Cup’s free practice and had just set the fifth-fastest qualifying time when a huge shunt brought his weekend to an early end.

Henry Ho Wai Kun plunged into motor sports hand-in-hand with André Couto, as his father sponsored Couto. The 29-yearold driver did not manage to win his fourth Macau Touring Car Series Challenge in a row this season, and instead of joining the Guia Race this year and enjoying better government support but having less chance of success, he has entered the Macau Touring Car Cup. Ho will drive a very competitive BMW 320si prepared in Portugal by Sports & You – the same car he badly damaged last year in the Guia Race. Although he has failed to make the podium since 2005, he is a serious contender.

Macau Grand Prix result last year: Did not start the Macau GT Cup race This season: Porsche Carrera Cup Asia - vice-champion Career highlight: Asian Supercar Challenge champion in 2008

Macau Grand Prix result last year: 21st in the first leg of the Guia Race; did not start the second leg This season: Macau Touring Car Series Challenge Career highlight: Winner of the Macau Touring Car Series Challenge in 2008, 2009 and 2010

Sun Tit Fan

Álvaro Mourato

Macau Road Sport Challenge

Macau-Hong Kong Interport Race

The KFS Racing Team leader is the driver with the best curriculum vitae in this race. He has taken two straight Class A and overall victories at the Macau Grand Prix and was just beaten last year by Japanese ace Manabu Orido. This season Sun did enough to qualify for the Macau Grand Prix; as usual won a couple of races in the Zhuhai Circuit Hero series; and turned in a few not-so-impressive performances in the Hong Kong series. His Mitsubishi EVO9 is a car-tuning masterpiece loved by many.

The Macanese driver has been in motor sport for a decade, and last year he won this race. In 2002 he finished first in its only-for-locals predecessor, called the Hotel Fortuna Trophy, but was disqualified after technical infringements of the rules were found in his car. This year he dominated the Macau Touring Car Series N2000 Class and ended up champion. To prepare for his defence of his Macau crown, he took part in two events of the Asian Touring Car Series, and achieved motivating results. Curiously, Mourato was one of the brave participants in the bizarre Macau Grand Prix Scooters Cup a couple of years ago.

Macau Grand Prix result last year: 2nd in the Macau Road Sport Challenge This season: Macau Touring Car Series Challenge, Hong Kong Touring Car Championship, Zhuhai Circuit Hero series Career highlight: Winner of the Macau Road Sport Challenge in 2008 and 2009

Macau Grand Prix result last year: Winner of the Macau-Hong Kong Interport Race This season: Macau Touring Car Series N2000 Class Career highlight: Winner of the Macau-Hong Kong Interport Race in 2010

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SJM has been a title sponsor for the Guia Race for ten consecutive years already

A full grid For the first time, all races in the Grand Prix will have a title sponsor The 58th

edition of the Macau Grand Prix has already set a new record, not on the track; but in terms of commercial partnerships. For the first time in the Grand Prix’s history all races have attracted title sponsors. Expected revenue from overall sponsorship for the Grand Prix is expected to reach MOP35 million (US$4.38 million). The largest partner this year is long-time Grand Prix supporter, gaming operator Sociedade de Jogos de Macau (SJM), which becomes the official sponsor of the 58th Macau Grand Prix. In addition, SJM is title sponsor for the Formula 3 Macau Grand Prix. While the season finale of the FIA WTCC will be held in Macau for the seventh successive year, 2011 also marks the 40th running of the Guia Race. Macau added the FIA championship round to the race programme in 2005, but the event has always retained its Guia Race name, and SJM has been a title sponsor for ten consecutive years already, this year included. “SJM is delighted to be the largest partner of this year’s Macau Grand Prix,” says Ambrose So Shu Fai, chief executive officer of SJM Holdings Limited, the parent company of SJM.

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“As a long-time supporter of the Macau Grand Prix for nearly half a century, SJM is proud to witness the development and progress of the local event into a world famous sports events.” The Macau Motorcycle Grand Prix this year has a title sponsor in the form of the City of Dreams hotel-casino. On the support races, the Macau GT Cup has attracted the sponsorship of developer Empresa de Desenvolvimento Predial Vitoria, S.A., under the banner of Star River · Windsor Arch. Grand Prix suppworters CTM and Hotel Fortuna return once again, sponsoring the CTM Touring Car Cup and the Hotel Fortuna Macau/ Hong Kong Interport Race respectively. Suncity Group will sponsor the Macau Road Sport Challenge for the first time. Still on the track, long-time Grand Prix supporter Yokohama is again the official Formula 3 tyre supplier as well as being the official, season-long tyre for the FIA WTCC. V.W.M. Motors Limited returns for the second year as official safety and rescue cars supplier, providing the crack team of rescue personnel and officials with high-performance Volkswagen vehicles.


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Driving passion Apart from being a busy shipbroker in Hong Kong, Richard Meins has a not-so-secret love: motor racing Motor sport

attracts thousands of fans in this part of the world but only a handful are able to make their dream of competing come true. Richard Meins is one of the lucky ones. He is returning this year to the Macau Grand Prix for the 11th time. Meins regularly races a variety of vintage single-seaters and sports cars throughout Europe and Asia. He is also involved in endurance racing. “First of all, I am not a ‘gentleman racer’. I don’t like the term,” says Meins. “I am a shipbroker by profession, based in Hong Kong. I buy and sell ships for people, so inevitably I travel a great deal. But this is my home: Hong Kong and Macau.” Meins’s racing experience dates back to 1995. “I raced saloon cars in the United Kingdom,” he says. “I became completely addicted and went into the Rover 220 Turbo series.” It was the beginning of a serious love affair. Meins first raced in Macau in 2000, in a Ford Focus. His car was involved in a big accident and he had to retire from the race. “It was the usual first time in Macau,” he observes, wryly. “It turned out to be an interesting learning curve.” Since then Meins has missed only the 2006 Grand Prix. On the Guia circuit Meins has competed in the Guia Race, the Porsche Carrera Cup Asia and, since 2008, in the Macau GT Cup. His best results were sixth place in the Guia Race in 2003 in a Ford Focus and victory in the Porsche Carrera Cup Asia Class B Division in 2007. Last year Meins qualified eighth for the Macau GT Cup in an Audi R8 but did not finish the race. Don’t rush it There is no doubt in Meins’s mind that Macau is his favourite race circuit. But at the same time it is the circuit he most respects, because

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Richard Meins

there is no room for error. Meins is also an avid collector of vintage cars. This passion began when he took up racing vintage cars. “I was lucky enough to be able to buy a Ford GT40 when the market was not like it is today,” he says. Soon he came to realise people spent more on these cars than they do on modern cars. “Over the years I bought and sold a number of cars because that was quite a lucrative thing to do as well.” One of the cars he treasures most is a 1974 McLaren in which Formula 1 great Emerson Fittipaldi raced. “When you drive it, you have to be ‘with the car’ and I think it is much quicker than anything else I’ve driven. You must not rush it. Just get comfortable with the car. Obviously, things are happening faster: you are approaching corners quicker and it is much more physical than anything else.” Among his latest acquisitions are a 1973 “Batmobile” BMW 3.0 CSL and yet another Formula 1 car: a 1981 Williams FW07 of the kind driven by Alan Jones and Carlos Reutemann. J.H.


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To the rescue The Macau Grand Prix has invested a lot since 2004 in the localization of its rescue team Macau

is one of the most challenging street circuits in the world. Accidents are common here, even if most are not that serious. But in case of a severe crash, every second matters. That is why the Grand Prix organisation puts a lot of time and effort into rescue team courses. This year is no exception. The Macau Grand Prix has been committed to the localization of the rescue team since 2004. The first fully local team was established in 2007. The efforts and ongoing professional training has now been recognized by the certification of attainment of international standards. Last month, the Macau Grand Prix committee invited FIA medical delegates Jean Jacques Issermann and Alain Chantegret to conduct a two-day training course for the local rescue team. The doctors provided professional instruction, shared their experiences, and gave practical demonstrations. A total of 33 firemen and 20 doctors took part in the sessions. The curriculum covered the various features and important elements of motor sport rescue, instantaneous problem solving in the event of an incident, and an introduction to the equipment and skills required for rapid intervention medical rescue. In addition, the rescue team also carried out incident simulation exercises and completed practical procedures, during which their skills were evaluated. The local rescue team had already completed practical team training sessions in June, July and September this year, which were held at the Macau Kartodromo in Coloane. Sessions included Formula 3 and touring car extrication techniques, and a familiarization session on the use of heavy cutting machinery. Rescue teams were first introduced in Macau in 1975, just one year after they made their debut at European race tracks.

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Rising dragon The popularity of motor sports is on the rise in the mainland, powered by modern tracks and an ever-increasing fan base The

Macau Grand Prix was already a highlight on the world motor sports calendar long before the mainland first got started in car racing. Times have changed, and now the sport is rapidly expanding on the other side of the border. A growing appetite for cars has helped to fuel mainland motor sports. The mainland surpassed the United States both as the world’s top automaker and biggest automobile market in 2009. Racing is growing domestically with an everincreasing fan base and strong financial support. Helped by the impact of Formula 1, all the other categories of car racing are having the times of their lives too. “Holding the event in Shanghai [Formula 1

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Grand Prix] drew more attention from the whole society to motor sport,” Zhan Guojun, vice-president of the Federation of Automobile Sports of China told the China Daily recently. “At that time [2004], China held about 30 motor sport events a year. Now the number is about 100 a year.” The number of drivers, including those in rally, cross-country and circuit races, increased by more than 400 last year to 2,680. Circuit racing is definitely the mainland’s most popular type of motor sport. The China Touring Car Championship is getting a respectable dimension with manufacturers such as Ford, Volkswagen, Nissan, Haima or KIA pouring some serious support into the series.

The success of the China Touring Car Championship has given rise to a lot of smaller, new one-make trophies. Meanwhile, Porsche China has taken control of the ultra-prestigious Porsche Carrera Cup Asia from Porsche Asia-Pacific. Even the Ferrari Drivers Academy, a programme dedicated to young drivers launched by the Italian scuderia in 2009, is observing the evolution of Chinese drivers. It is sponsoring the recently launched single-seater series Formula Pilota China. Success off-road There was a time in the 1990s when the China Rally was part of the World Rally Championship. The event has since been


PITSTOP dropped from the WRC calendar but it has paved the way for the success of the China Rally Championship. Unlike the China Touring Car Championship, the China Rally Championship is open to overseas drivers. In past seasons, the championship has hosted titanic battles between some of the biggest names on the international rally scene such as Patrik Flodin and former British rally champion Mark Higgins. Cross-country racing is also popular and there is a China Medium Truck series. Dutch-born driver Tung Ho-ping was the first ethnic Chinese driver to start an IndyCar Series race and to be named for a Formula 1 team, but he has never had the chance to race in a Grand Prix. Together with Mercedes-Benz DTM driver Cheng Congfu, Tung is the only Chinese driver on the prime motor sports scene. “Most of the younger Chinese drivers are not ready to leave their comfort zone. They prefer to race in China, where they are treated like heroes instead of taking the risk of racing abroad and facing fierce competition. It costs more money also,” explains motor sport freelance journalist Cheung Chi Wai. Chinese companies are not yet involved in motor sports championships overseas but some have latched onto Formula 1, such as IT companies Aigo and Lenovo who sponsor Formula 1 teams. The automakers are also taking the first steps into this uncharted territory. Last year, Chery and Great Wall were the first Chinese automakers to participate in the Dakar Rally, which is famously known as “The World’s Toughest Race”. Both companies repeated the experience this year. The team manager of the Macau-Zhuhai-based Asia Racing Team, Frenchman Philippe Descombes, was one of the first foreigners to arrive in the mainland to work in the sport a decade ago. “The biggest difference that I can see comes from the drivers and the people working in the sport,” he says. “Ten years ago car racing was just a hobby. Now they are getting a lot more professional in their approach and therefore they understand the importance of higher budgets, bigger teams, quality personnel and equipment.” The future looks bright for car racing in the mainland.

TRACKS FOR ALL The development of the mainland’s auto industry and the growing motor sports fan base has prompted local governments and property developers to invest in new racing facilities across the country. A track built for Formula 1, the Zhuhai International Circuit is still the busiest and most successful in the mainland. The permanent track was the first in the country and its development was encouraged by the affluent racing enthusiasts of Macau and Hong Kong. It harbours the headquarters of the most prominent teams in the region and hosts the grand finale of Intercontinental Le Mans Cup. Zhuhai may be the busiest track but the multi million-dollar Shanghai circuit is home to the Chinese Formula 1 Grand Prix. The area was transformed from swampland to international racetrack within 18 months and it has been described as the best Grand Prix circuit in the world. However apart from the Formula 1 circus and some local series, it has failed to attract any other top competitions. MotoGP and the popular Australia V8 Supercars championship gave up on Shanghai as the spectator numbers were low and Chinese companies were not interested in sponsorship. There is a second permanent track in Shanghai, in the district of Sheshan Songjiang, but it is mostly used for domestic motorbike racing. Miraculously, the track was chosen to host the mainland’s first FIA World Touring Car Championship race, at the beginning of this month ahead of the competition’s final round in Macau. Beijing is also home to a “baby circuit” – the Goldenport Park Circuit. Since its foundation, the circuit has lived under management incertitude, having been left off the international calendar. In September, it was picked by the FIA GT1 World Championship to replace a cancelled round in Brazil. Far to the north, Inner Mongolia’s Ordos International Circuit is now the benchmark of the mainland circuits. The dust blown by sudden gusts of wind onto the RMB680 million (MOP856 million) circuit can turn the track surface slippery in moments, requiring lightning-fast reactions from the drivers. On top of that, the mix of fast and slow corners and ups and downs makes it an obligatory stopover for every national championship. The two year-old Guangdong International Circuit is far from having such a seductive layout but is a “case study” of popularity. The circuit is the new home for both the Hong Kong and Macau’s automobile associations. At least three other racing tracks in the mainland are under construction or about to leave the drawing board. The country also enjoys a good reputation organising street circuit races, including the 2010 Pudong Shanghai Street Circuit and the 2006 Beijing Yazhuang suburban street circuit.

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Race on SJM launches contest to choose the prettiest pit girl Year after year

, pit girls are one of the most popular sideline attractions during the Macau Grand Prix weekend. This year, SJM Holdings Ltd. has decided to launch a series of “Vote for your favourite SJM Grand Prix Racing Girl” promotional activities to tap into this popularity. The gaming operator has hand-picked nine models and divided them into three groups under the names of SJM casinos – “Grand Lisboa GP Racing Girls”, “Crystal Palace at Casino Lisboa GP Racing Girls” and “Oceanus GP Racing Girls”. Interested participants can vote at the above casinos, and if the racing girl they vote for wins the greatest number of votes in her group, they will enjoy the chance of winning super prizes, with the finale grand prize being a BMW Z4. The good thing about the competition is that there are no limits for votes; so the more votes you cast, the more chances you will have to win.

Crystal Palace at Casino Lisboa GP Racing Girls

Oceanus GP Racing Girls

Grand Lisboa GP Racing Girls

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Speed fever For almost 60 years, Macau has been the proud host of one of the most exciting motorsport events in the world. The territory doesn’t just transform into a giant racing circuit, an electric atmosphere takes over the entire city. For four days, it is all about fast cars, gorgeous pit-girls and thousands of petrol-heads.

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FASTFACTS

Very fast facts Things you may not have known about Asia’s best-loved motor racing weekend

The Melco Hairpin, the circuit’s famous bend, is named after the former headquarters of the Macau Electric Co. (Melco), a company now connected to the city’s gaming industry. In 1989, in the Teddy Yip Mazda Race of Champions, the field included two former Formula 1 world champions – Alan Jones and Denny Hulme – and four Indy 500 winners, all competing in identical Mazda MX5 Miatas.

Ayrton Senna (1983) and Michael Schumacher (1990) were the only Macau Formula 3 Grand Prix winners who went on to capture the Formula 1 world title; Senna three times and Schumacher seven times.

Tom Coronel, who this year is driving a BMW in the World Touring Car Championship, used to fold the door mirrors of his SEAT inwards in qualifying to get closer to the walls.

Cathy Muller was the first and only woman to race in the Formula 3 Grand Prix, finishing 11th in 1983. Her brother, Yvan, will race this year as the leading Chevrolet WTCC driver.

The only years when the Macau Grand Prix was held over two weekends were 1972 and 2003.

A ladies’ race was held annually from 1955 to 1959.

An estimated 20,000 people watched the inaugural Macau Grand Prix, many of them from private houses. Soldiers filled the windows and covered the roof at the San Francisco barracks. The 1966 event saw advertising on cars for the first time.

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Damon Hill, the 1996 Formula 1 world champion, finished in second place in Macau in the 1988 Formula 3 race. He is said to have been in the casinos all night on the Friday and was slightly “tired” on race day. Slim Borgudd, who competed in the 1984 Formula 3 race, was best known for being the drummer with ABBA.

Since the beginning of the Formula 3 era of the Macau Grand Prix in 1983, only one driver has managed back-to-back wins: Edoardo Mortara in 2009 and last year. He returns this year to race in the GT Cup.


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152

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NOVEMBER 2011




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