MB 95 | March 2012 by Macau Business

MARCH 2012

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Economy & Finance 28 Small and fragile The chairman of Macau’s SME Association is worried about the sector’s outlook

Greater China 38 Committed to growth Understanding what is at stake at this month’s Chinese People’s Political Consultative Conference and National People’s Congress 42 Time for change New Hong Kong government should go ahead with tax reform, experts say

Survey 44 Money minded The Macau Business Quality of Life Report points out that salary is the most important factor for motivating workers

Transport 54 Piling it on Foundation works for phase one of the light rail transit system begin

Telecommunications 58 Competition on call Count down to the end of CTM’s landline telecommunications monopoly MARCH 2012

Property 60 Market watch Jones Lang LaSalle says home prices to remain stable this year 64 For most, a mirage Third phase of One Oasis on sale this month

Business 66 Franchise Man Centroid wants to expand its Dairy Queen and Subway franchises 68 Cold hard cash Travelex opens its first shop

MB Report 70 Women at work Macau has a long way to go before it achieves parity of the sexes in business or politics

Gaming 78 Billions race Gross gaming revenue growth surprises analysts 80 Stock watch Gaming shares maintain rising trend 84 Wynn at war Quarrel between Steve Wynn and Kazuo Okada continues 88 The curtain falls Despite the end of “Zaia”, Sands China says it has not given up on non-gaming entertainment

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92 A new era for slots Regulator releases long-promised rules for electronic gaming machines 94 Of pros and cons Fake casino raises concern about big-time scams making their way to Macau 96 Surprise, surprise New website CasinoLeaks-Macau wants to shed light on the local gaming industry 100 The main game StarWorld has been hosting the world’s biggest cash poker games for the past two years 104 Beyond hardcore gaming What makes casinos so attractive to mainland visitors? 106 Take a shot U.S. sports betting making its way to Asia 110 Dangerous games Singapore government may extend third-party casino exclusion programme 112 Cashing in Gaming accounts for 1 percent of the U.S. economy

Hospitality 114 Finishing line Final preparations underway for Sheraton Macao Hotel’s September opening

MARCH 2012

Arts & Culture 118 Words of discomfort Commercial book publishing is nonexistent in Macau 122 Spot the difference Growing demand for Chinese antiquities has also generated a slew of fakes from con-men

Opinion 14 From the publisher’s desk Paulo A. Azevedo 17 Editorial Emanuel Graça 27 Seizing sustainable development Jacob Zuma and Tarja Halonen 37 Take the direct path Bill Kwok-ping Chou 41 Nixon then, China now Minxin Pei 59 Tomorrow’s ‘Pax Pacifica’ Kevin Rudd 65 Truth in numbers José I. Duarte 69 Technical education Keith Morrison 108 Dreamtime on the Philippines David Green 117 Message in the music Gustavo Cavaliere 125 The ethics of Internet piracy Peter Singer

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The tipping point IF THERE IS ANYTHING TO BE LEARNED FROM the mainland’s political experience, is that the popular old saying “the wheels of justice grind slow, but they grind exceedingly fine” is as certain as destiny itself. But in Macau, the wheels of justice tend to grind slower than elsewhere, with results that are hard to see. In the past few years we have witnessed a countless number of completely unacceptable complicities here. They mostly go unnoticed because it is too difficult to gather evidence. In corruption cases, for example, evidence is next to nonexistent. Neither the corrupter nor the corrupted have any interest in publicising their actions. A web of silence emerges that allows corruption to spread, causing similar cases to blossom. Sometimes, one party is aware of the other’s wrongdoing but no one talks for fear of being exposed. In a small city such as Macau, a city often ruled in silence, suspicion of wrongdoing is prevalent. There are government bodies and powerful business conglomerates that have become experts in the art of saying nothing. It is the silence of the guilty. That is why we applauded the creation of an official system of spokesmen for all government bodies. From day one, we supported and promoted the strengthening of the system, although we didn’t really believe it would totally succeed. We do know that any break in the manipulative silence that pervades Macau will generate long-term advantages, should we really want a less corrupt and more transparent city. But there are agents offering a strong blockade to any move to increase transparency. They emerge occasionally and are found everywhere; the Executive Council, the MARCH 2012

Legislative Assembly, the employers’ representative associations and even the groups that pledge to defend the rights of workers. The reach of these agents renders inglorious most attempts to obtain information on suspicious deals, be it in situations involving land swaps, incredible increases in the number of storeys allowed in some new residential buildings, international tenders that end up in court or fantastic price hikes in public construction projects that lack any apparent common sense – let alone scientific – explanation. Still, throughout the years, we at Macau Business have reported on these scandalous cases, albeit in vain because no authority inquires any further. We will continue to support efforts to bring relevant information to the public, even if moves towards further transparency are stymied. We fear that a turning point has been reached in the government’s move towards greater transparency. We are concerned that the agents manning the blockades are too strong and too widespread through Macau’s social, political and economic fabric to allow further improvements.

Transparency online The times they are a-changin’. They must. In the gaming sector, new sources of inquiry have emerged, such as the online project CasinoLeaks-Macau. This controversial website promises to “bring greater transparency and accountability to Macau”. One of the first cases it has investigated reveals dangerous liaisons involving members of the Legislative Assembly. It is not quite earth-shattering. Several media outlets have reported details such as these for years but this is a compendium, and a new effort

You talking to me?

We fear that a turning point has been reached in the government’s move towards greater transparency. We are concerned that the agents manning the blockades are too strong and too widespread through Macau’s social, political and economic fabric to allow further improvements that pledges to gather information and spread it over the Internet at the speed of a single click. As we explain in this edition, in an article from our partners at GamblingCompliance, CasinoLeaksMacau promises to release information on organised crime’s influence in the city’s gaming industry, and is financed and authorised by a major United States trade union. Jeff Fiedler, a contact at the wiki, is also the director of special projects and initiatives for the Washington-based International Union of Operating Engineers, and a four-term member of the U.S.-China Economic and Security Review Commission. Given Macau’s inability to “clean” itself, despite its rapid rise and growing influence as the world’s gaming capital, it was predictable that this kind of attention would fall on the territory. We would rather have this sort of initiative coming from inside the city, instead of outside Macau. But, unlike some voices that are sure to be heard soon against possible “interference on internal matters”, we prefer that something be done, rather than nothing at all. We hope that this new effort to clarify an alwaysevolving and complex industry does not follow in the footsteps of a study previously carried out by another group of so-called “experts”, which was nothing more than a badly disguised lobby, aligned to Atlantic City’s interests.

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MARCH 2012

VOL.1 Nº95

Editorial Council Paulo A. Azevedo, Tiago Azevedo, Duncan Davidson, Emanuel Graça, Cris Jiang Founder and Publisher Paulo A. Azevedo pazevedo@macaubusiness.com

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

Assistant Editor-in-Chief Sara Farr sarafarr@macaubusiness.com

Executive Director Business Development Luis Pereira pereiraluis@macaubusiness.com

Senior Analyst José I. Duarte jid@macaubusiness.com

Hong Kong Bureau Michael Hoare (Chief), Anil Stephen michael.hoare@macaubusiness.com

Special Correspondent Muhammad Cohen info@muhammadcohen.com

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

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

Assistant to the Publisher Laurentina da Silva ltinas@macaubusiness.com

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

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

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Media Relations GRIFFIN Consultoria de Media Limitada Translations PROMPT Editorial Services, Poema Language Services Ltd, TLS Translation and Language Services Agencies AFP, Lusa Exclusives Gambling Compliance, 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 MARCH 2012

1717 17

Emanuel Graça Editor-in-Chief

emanuel.graca@macaubusiness.com

Small mercies

While there must be sympathy for the problems faced by SMEs, they need to enhance their competitiveness. They must become meaner and leaner to survive in the city’s changing environment

IN THIS EDITION OF MACAU BUSINESS, WE interview the head of the Small and Medium Enterprises Association, Stanley Au Chong Kit. He shares with us his in-depth views of the challenges facing SMEs in Macau. Their troubles, it seems, are in sharp contrast to the city’s booming economy. While the territory has made headlines around the world for consistently breaking records for tourism arrivals, gross gaming revenue and retail sales, many SMEs have suffered in the shadows. Their costs are soaring in tandem with the competition they face from international players. They have to compete for labour in a tight market and, in some cases, face financing difficulties. It is hard for a small, street-side noodle stall operating on thin profit margins to compete for labour – even if non-skilled – with the restaurants within the city’s casinos. Family-run shops also struggle to cope with the high rents charged in the city’s prime locations, where international retail chains now hold the majority of retail space. Even so, SMEs play a vital role in the economy. They provide a big chunk of employment and flow of income. Small businesses are much more likely to use local suppliers and contractors, again providing a boost to the economy. Similarly, SMEs are more likely to spend their profits locally. A wave of SMEs going bankrupt might easily translate into economic and social instability. In gaming-centric Macau, where the casinos are controlled by an oligopoly, SMEs are even more important. They are the frontline in economic diversification and bring colour to the business sector.

Delicate tension

While there must be sympathy for the problems faced by SMEs, they need to enhance their competitiveness. They must become meaner and leaner to survive in the city’s changing environment. It is worth highlighting that most SMEs are run on outdated business models. The latest data available shows that just one in three restaurants in Macau uses a computer. The majority compile bills manually. Things are no better in the wholesale and

retail sectors, where the rate of information technology usage falls below 50 percent. The majority of SMEs are concentrated in these two sectors of the economy. Restaurants, wholesale and retail outlets represent more than 75 percent of the city’s companies. These are also arguably the two sectors where cut-throat competition posed by international players is most intense, posing the question of whether some SMEs should migrate into different industries or consolidate operations to create a critical mass. There are SMEs at odds with reality. They offer services or products which are of substandard quality, for which there is no longer enough demand, or at prices deemed too high by consumers. To thrive, they need to develop a smart strategy. They need to build up brands, products or services with added value for which they can charge a premium. Offering a bowl of noodles at a competitive price is no longer enough. Unfortunately, most businessmen in the SME sector ignore that fact. They prefer to complain, criticising foreign investors, while applying pressure to the government for greater support and more protectionist measures. The authorities have a role to play ensuring the survival of SMEs. It starts with adequate and timely access to imported labour of sufficient quantity and quality. The government should also assist SMEs to improve their operating models. There is much that can be done. The financial incentives currently offered are either unattractive or they do not properly stress the obligation for businesses to upgrade. What is more, those programmes do not focus on nursing innovation-driven companies. There are other ways to help. The government owns several buildings that could be made available for tech start-ups and small businesses at controlled rents. The city’s upcoming public housing buildings should also include mixed-use commercial areas for just this purpose. It is clear that the current state of affairs can no longer continue. Nor can SMEs continue operating on outdated business models, complaining about their problems but doing nothing to change. Nor can the government carry on embellishing the situation, without creating well-structured, in-depth measures. Someone must make the first move before the tension gives way. MARCH 2012

What is it going to take? What is it going to take for the government to address road safety? Note that speed cameras don’t count. I highlight an accident that happened on a zebra crossing on February 16 on Estrada Almirante Magalhães Correia, a busy road in Taipa leading to the Friendship Bridge. Macau Anglican College students had just been released and many kids, including mine, were heading to the only bus stop in the area accompanied by parents and domestic helpers. Two cars had stopped to let a domestic helper and a student cross but a scooter rider and another car failed to do so, hitting the woman and badly injuring her. The student was spared as the helper took the full impact of the crash. Although in other countries it is normal to have attendants at zebra crossings near schools looking after children’s safety, at that road this seems to be only provided in the mornings and apparently not by the government. Why doesn’t the government have crossing attendants at all crossings near schools? And why, at night, aren’t these crossings properly lit, as they are purportedly the safe place to cross the road? Still on road safety for students, can we really consider ourselves to be a developed society if we have not yet made it compulsory for school buses to have seat belts? Much can be done to improve traffic in Macau. The flow of vehicles would be much smoother on a roundabout if people showed courtesy to other drivers by using their indicators. The same would be the case if drivers – taxis, please take note – understood that it is not ok to get onto the outside lane of a roundabout unless taking the first exit. This screws up the whole purpose of having a roundabout and has been the cause of multiple accidents. Why doesn’t the government fund more driver and pedestrian education projects? Why does it cover Coloane’s roads with multiple speed cameras but doesn’t invest in zebra crossing lighting? As with many issues in Macau, the traffic police and the Transport Bureau have not kept pace with the overall development. In fact, things have become worse. What needs to be addressed first are high risk areas like around schools, instead of having local authorities stopping people for petty misdemeanours like having darkened glass. Sandy Lee

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.

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GOV’T BUDGET SURPLUS UP

Total public revenue rose by 41.5 percent in 2011 mainly due to gaming tax revenues

A government budget surplus of MOP63.7 billion (US$8 billion) was recorded last year, up notably by 52.2 percent from 2010. Last year, total public revenue rose by 41.5 percent in comparison to 2010, to a total of MOP112.6 billion. This increment was due to noticeable increases in revenue from direct taxes on gaming, up by 44.8 percent, to MOP94.1 billion, according to provisional data from the Financial Services Bureau. Total public expenditure for last year was MOP49 billion, a yearon-year rise of 29.7 percent. As usual, the government was unable to spend all the money it had budgeted for capital investment: from the MOP11.37 billion allocated to the 2011 capital investment plan, only MOP8.9 billion was actually spent. Even so, the figure represents a sharp improvement over 2010, when the government used less than MOP5 billion from the capital investment plan, not fully executing the planned amount that year either.

INFLATION NOT SLOWING DOWN

CIVIL SERVANTS TO GET PAY RISE

Inflation rose by 6.8 percent in January compared with the same month last year. This is the highest it has been since November 2008. Figures from the Statistics and Census Service show that the increase was mainly attributable to meals bought away from home and outbound package tours. For the 12 months ended January 2012, inflation increased by an average 5.96 percent. In January alone, inflation increased 0.93 percent over the month of December.

Macau’s civil servants are set to get a salary increase soon. A special committee created by the government to review the salaries of civil servants last month submitted two proposals to the government. The first proposal suggests a 5.6 percent increase while the second aims for a 6.5 percent increase. Now it is up to the government to make the final decision. Estimates say that the government will spend between MOP700 million (US$87.5 million) and MOP800 million with such increases.

RETAIL SALES JUMP The total value of retail sales for the fourth quarter of 2011 reached MOP12.55 billion (US$1.57 billion), up by 44 percent year-on-year. Retail sales of watches, clocks and jewellery amounted to the biggest slice – MOP3.81 billion or 30 percent of total. The value of retail sales for the whole year stood at MOP43.34 billion, up substantially by 42 percent compared to 2010.

MARCH 2012

NEW RECORD PROFIT FOR BANKS Macauâ&#x20AC;&#x2122;s banking sector witnessed an improvement in profitability in 2011, setting a new record. Last year, the total operating profits of the local banking sector increased 29.6 percent year-on-year to MOP5.03 billion (US$629 million), data from the monetary authority shows. The previous record was set in 2006, when operating profits reached MOP4.05 billion. The total number of banks in Macau stands at 28, including 25 commercial banks, one postal savings bank and two offshore banking units.

CREDIT CARDS SOAR The total number of personal credit cards in circulation in Macau reached 527,000 at the end of last year, equivalent to a sharp increase of 23.5 percent from over a year before. The numbers of pataca cards stood at 399,000, up by 18.1 percent year-on-year. The number of renminbi credit cards continued to soar, more than doubling in 2011, to close to 62,000. As at the end of last year, credit card credit limit granted by banks in Macau reached MOP8.9 billion (US$1.1 billion), up 19.1 percent yearon-year. For the fourth quarter of last year, the credit card turnover grew 10.3 percent quarter-to-quarter to MOP2.8 billion.

CABLE TV SEEKS COMPENSATION The company is seeking MOP500 million in compensation from the government Macau Cable TV has filed a legal lawsuit with an arbitrary court for losses related to the activities carried out by the local unlicensed public antenna companies, which the government has allowed to go on unpunished. The company is seeking MOP500 million (MOP62.5 million) in compensation from government for the losses related to violations of its exclusivity contract. Portuguese news agency Lusa reported that the MOP500 million only represents half of the losses the company has incurred. Last year, the company had accumulated losses of up to MOP186 million. Macau Cable TV has an exclusivity rights agreement with the government that sees it as the only legal concessionaire of cable television services between 1999 and 2014. Unlicensed public satellite antenna service providers charge a low rental fee of about MOP25 per month, to retransmit TV channels from around the region to households, using unlicensed cable networks and without authorization from the copyright holders. These unlicensed antenna services are very popular in Macau with the majority of the population receiving TV signals in this way, a practice that has been tacitly allowed by the government.

MARCH 2012

WATER PRICES TO STAY PUT UNTIL 2014 The director of the Maritime Administration, Susana Wong Soi Man said last month that water tariffs are not expected to increase until at least 2014. The current raw water supply agreement between Macau and Guangdong expires in 2014. Since May 2011, Macau has been paying RMB2.07 (MOP2.63) per cubic metre of water. Ms Wong says the chances are high that the prices Guangdong charges Macau will be increased when the deal is reviewed, leading to a water tariff update in 2014. Water prices in Macau are partially subsidised by the government.

MARCH 2012

NEW LOSS FOR GOVERNMENT Court of Final Appeal says one more company was wrongfully excluded from wastewater plant tender The Court of Final Appeal confirmed last month that SinoBelgium consortium Waterleau Group NV was wrongfully excluded from the tender for the operation of the wastewater treatment plant on the Macau peninsula. This is the latest in a string of court decisions against the government regarding the tender. In June 2010, the commission that opened the tender proposals said Waterleau lacked documents to prove it had at least 10 years experience in wastewater treatment,

a decision the Court of Final Appeal now says was wrong. In mid-October, the Court of Final Appeal had already ruled against the government’s decision to exclude another company, Va Tech Wabag, from the tender. From a total of seven companies bidding in the tender, only two were accepted. A consortium composed of local company CESL Asia, Investimentos e Serviços, Portugal’s Indaqua, Indústria e Gestão de Águas and mainland’s Tsing Hua Tong Fang won the tender and has

been operating the plant since October 1, although the contract has not yet been signed. There seems to be three options now on the table for the government: either it cancels the tender; it reopens the tender to accept Waterleau’s bid, as it did with Va Tech Wabag in November (Wabag is challenging this in the courts, saying the contract had in fact already been awarded by the time its proposal was accepted); or it compensates the wrongfully excluded companies.

BUSINESS FAILS AT INDUSTRIAL PARK

ECONOMY TO EXPAND BY 9.8 PERCENT

Five years down the road and business is not blooming at the Zhuhai-Macau Cross-Border Industrial Park. According to media reports, the industrial park has lost one third of its companies and 77 percent of the total area is vacant. Chan Wai Chi, head of the industrial park’s trade association, says that when the park opened in December 2006, Macau businesses made up 70 percent of all operations within the park. Today only around 30 businesses remain. Mr Chan blamed the Macau and Zhuhai governments for these numbers and said the authorities should do more in terms of clear strategic planning to develop the site.

Macau’s economy is expected to grow by 9.8 percent for overall 2012, says the latest report from the Economist Intelligence Unit, of the Economist group, which publishes The Economist magazine. The report predicts economic growth will accelerate to 13.5 percent in 2013. For 2011, Macau’s GDP is expected to have increased by 20.8 percent in real terms in comparison with a year ago. Inflation is expected to drop from 5.8 percent last year to 4.0 percent this year. In 2013, prices growth should again accelerate, with inflation reaching 4.5 percent, says the Economist Intelligence Unit.

AIRPORT TO UPDATE FACILITIES The Macau International Airport Company Ltd. (CAM) will spend as much as MOP160 million (US$20 million) to renew facilities including four jet bridges and the restructuring of the parking apron. Liu Suning, executive director of the company, also said that there are plans to reorganize the layout of the aircraft parking without having to reclaim more land. Last year, the airport’s total revenues reached MOP3 billion, while the revenue of CAM totalled MOP660 million. MARCH 2012

MARCH 2012

LAND OF OPPORTUNITY Macau’s booming economy is working as a nursery for new companies. Last year, an average of nine firms were incorporated in the territory per day. But there were also three companies disappearing every two days, a new record

EXPORTS RISE

The total value of merchandise exports from Macau increased slightly by 0.2 percent year-onyear in 2011 to MOP6.97 billion (US$871 million). This was the first rebound since 2006, according to the Statistics and Census Service. Meanwhile, the total value of merchandise imports grew by 41.2 percent to MOP62.29 billion. Thus, the merchandise trade deficit widened by 48.9 percent yearon-year to MOP55.32 billion in 2011.

3,405

The number of new companies incorporated in Macau last year. This represents an increase of 13.8 percent over 2010 and equalled 2007’s record

MOP983 million

The total value of registered capital for all the companies incorporated in 2011. It represents a 94.1 percent jump from the previous year

INTERNET MARKET EXPANDS FAST

1,228

Macau’s Internet market grew at a two-digit rate last year. At the end of 2011, the number of Internet services subscribers reached 209,000, up by 23 percent in comparison with 2010. The number of hours spent online soared at an even faster rate. According to data from the Statistics and Census Service, the cumulative duration of Internet usage totalled 528 million hours in 2011, up 25 percent year-on-year.

The number of new wholesale and retail companies incorporated last year. The figure was up 7.8 percent year-on-year and represented roughly one third of the overall new incorporations

72%

The percentage of new companies in 2011 with Macau shareholders. In total, 2,452 new firms had local shareholders, including 388 that were jointly established by shareholders from Macau and other jurisdictions

LESS CONSUMER COMPLAINTS IN 2011

159

The number of companies in the wholesale and retail sector that folded last year, leading the ranking of dissolutions. The business services sector came in second, with 92 closures

MARCH 2012

SOURCE: STATISTICS AND CENSUS SERVICE

511

The number of companies in dissolution last year, up by 3.9 percent over 2010. This is the highest figure since the handover. The number of dissolved firms has been increasing steadily since the end of 2004

The number of complaint cases received by the Consumer Council in 2011 went down by 34 percent year-on-year, to 1,689. The Consumer Council says the drop was due to the boom in complaints in 2010, fuelled by Viva Macau’s closure. Telecommunication services took the top category among the complaints received. Tourist cases accounted for around 22 percent of total complaints. Overall, the Consumer Council received 6,850 cases last year: 1,689 were complaints, 4,987 were enquiries and the rest were suggestions.

27 ANDREW SHENG PRESIDENT OF SOUTH AFRICA

TARJA HALONEN PRESIDENT OF FINLAND

Seizing sustainable development IF WE WORK TOGETHER, WE CAN HELP TO STEER OUR WORLD ONTO A SAFER, MORE EQUITABLE AND MORE PROSPEROUS COURSE he world is on an unsustainable path and must urgently chart a new course forward, one that brings equity and environmental concerns into the economic mainstream. To do so, we must put sustainable development into practice now, not in spite of the economic crisis, but because of it. Our challenges today are many. Economies are teetering, ecosystems are under siege and inequality – within and between countries – is soaring. Taken together, these are symptoms that share a root cause: speculative and often narrow interests have superseded common interests, common responsibilities and common sense. As co-chairs of the United Nations’ High-Level Panel on Global Sustainability, we have been asked by U.N. secretarygeneral Ban Ki-moon to work with 20 of the world’s most eminent leaders in grappling with these issues. Our task is clear: propose how to provide greater opportunity for more people with less impact on our planet. A quarter-century ago, the Brundtland report, named for former Norwegian Prime Minister Gro Brundtland, called for a new paradigm of sustainable development. It stated that durable economic growth, social equality and environmental sustainability are mutually interdependent. Human wellbeing depends on their integration. We are convinced not only that this concept is sound, but also that it remains more relevant than ever. Now we need to put theory into practice by moving sustainable development into mainstream economics and making clear the costs of action – and inaction – today and in the future.

Pricing what matters By 2030, as the human population swells and appetites increase, the world will need at least 50 percent more food, 45 percent more energy and 30 percent more water. Our planet is approaching, and even exceeding, scientific tipping points. This has serious implications for how we manage the global commons – and for reducing poverty: if developing countries are to realise their legitimate growth aspirations, they will need more time, as well as financial and technological support, to make the transition to sustainability. Yet we remain optimistic. Representative democracy is now the world’s dominant form of government. Advances in science have given us a better understanding of climate and ecosystem risks. Billions of people are connected by technologies that have shrunk the world and expanded the notion of a global neighbourhood. We believe that we can summon the wit and the will to choose our future, rather than have it choose us. The greatest risk lies in continuing down our current path. In 2030, a child born this year will come of age. We cannot mortgage her future to pay for an inherently unsustainable and inequitable way of life. So, how do we begin to tackle the massive challenge of retooling our global economy, preserving the environment and providing greater opportunity and equity, including gender equality, to all? The panel’s report, “Resilient People, Resilient Planet”, offers suggestions. First, we need to measure and price what matters. The

marketplace needs to reflect the full ecological and human costs of economic decisions and establish price signals that make transparent the consequences of action – and inaction. Pollution – including carbon emissions – must no longer be free. Price- and trade-distorting subsidies should be made transparent and phased out for fossil fuels by 2020. We also need to build new ways to measure development beyond gross domestic product and propose a new sustainable development index by 2014.

The long view Second, we must put science at the centre of sustainability. We live in an era of unprecedented human impact on the planet, coupled with unprecedented technological change. Science must point the way to more informed and integrated policy-making, including on climate change, biodiversity, ocean and coastal management, water and food scarcities, and planetary “boundaries” (the scientific thresholds that define a “safe operating space” for humanity). To see the big picture, we propose a regular global sustainability outlook that integrates knowledge across sectors and institutions. Third, we need to provide incentives to take the long view. The tyranny of the urgent is never more absolute than during tough times. We need to place long-term thinking above short-term demands, both in the marketplace and at the polling place. Limited public funds should be used strategically to unlock greater private investment flows, share risks and expand access to the building blocks of prosperity, including modern energy services. The U.N.’s Millennium Development Goals – aimed at, among other things, halving global poverty by 2015 – have served us well. Governments should develop a post-2015 set of universally applicable sustainable development goals that can galvanize long-term action beyond electoral cycles. Fourth, we should prepare for a rough ride ahead, because extreme weather, resource scarcity and price volatility have become the “new normal”. We need to strengthen our resilience by promoting disaster risk reduction, adaptation and sound safety nets for the most vulnerable. This is an investment in our common future. Fifth, it is crucial to value equity as opportunity. Inequality and exclusion of women, young people and the poor undermines global growth and threatens to unravel the compact between society and its institutions. Empowering women has the potential to reap tremendous benefits, not least for the global economy. Ensuring that developing countries have the time – and the financial and technical support – to make the transition to sustainable development ultimately benefits all. Promoting fairness and inclusion is the right thing to do – and the smart thing to do for lasting prosperity and stability. No expert panel, including ours, has all the answers. But if we work together, we can help to steer our world onto a safer, more equitable and more prosperous course. We call on leaders across all sectors of society to join us. The need is urgent; the opportunity, enormous. Let us seize it. MARCH 2012

Photos: Carmo Correia

Economy & Finance

MARCH 2012

SMALL AND FRAGILE Times are hard for small and medium-sized enterprises, says the chairman of Macau’s SME Association, Stanley Au. The government could do more and the business sector should help itself

he dragon is an auspicious, powerful symbol in Chinese culture and while the Year of the Dragon was welcomed not long ago, Macau’s small and medium-sized enterprises (SMEs) are far from optimistic about business in 2012. SMEs are likely to face a difficult time, says Stanley Au Chong Kit, chairman of the Small and Medium Enterprises Association of Macau and boss of Delta Asia Financial Group, which owns Banco Delta Asia. Apart from a trying global outlook, there are difficulties at home for SMEs; mainly rising rents, rising rates of pay and the shortage of labour. He says shop and office rents have surged by 50 percent to 100 percent over the past three years, suffocating SMEs and outraging several business owners. Many shop owners have even chosen to stop doing business and let their shops because it is more profitable. “I have also seen a lot of SMEs that were forced to close down because of the high rents,” Mr Au says. Other reasons for the closure of SMEs include the legal obligation to pay employees triple time for working on statutory holidays, difficulty in hiring Macau residents and the rising cost of importing workers. Mr Au predicts that some SMEs may do better this year. Businesses selling high-end goods and services should benefit from the rising number of mainland tourists and from a steady stream of foreign gamblers. However, most of these are owned by businessmen from Hong Kong or overseas, as few local SMEs are involved in the luxury goods sector, he says.

IF THE HAT FITS S

tanley Au Chong Kit is chairman of the Delta Asia Financial Group, which owns Banco Delta Asia. He was brought to the world’s attention in 2005 when the Macau authorities took control of the bank after the U.S. claimed it was used to launder money from North Korea. Nothing was proven and control of the bank was returned to Delta Asia Financial Group two years later. Mr Au was already a well-known figure in Macau. He ran a losing campaign against Edmund Ho Hau Wah in the election for the first chief executive in 1999. Afterwards Mr Ho appointed Mr Au to the Legislative Assembly. Mr Au was re-appointed in 2001 but not in 2005, when the Delta Asia controversy erupted. Previously, Mr Au was a financier in Hong Kong. In 1993, he was elected to the council of the Hong Kong Stock Exchange, and re-elected in 1996. Mr Au has been the chairman of the Small and Medium Enterprises Association of Macau since its inception in 1998.

Late leavers Mr Au says there is an imbalance between demand and supply in the labour market. “There are people who can’t find a job whilst there are jobs that no one wants to do.” MARCH 2012

Economy & Finance

He blames “overly lenient” examinations and assessment at schools. “Because of the 15-year free education, local youths basically find it very easy to get into university, with no need to pay tuition fees. But I think it’s a mistake,” he says. “Young people who aren’t keen to study will continue to do so in order to get a university qualification. With a university certificate, they will not prefer blue-collar jobs. Meanwhile, those with low educational qualifications will go to become casino dealers because of the relatively high salaries.” Mr Au suggests the establishment of vocational institutes to teach building and renovation, electrical and electronic engineering, fashion design and carpentry to students interested in learning a trade. “This way society can be developed in a more balanced manner and it will be easier for SMEs to hire the people they need.” He strongly opposes the government’s cash handouts, which began in 2008. He says the money could have been used to help SMEs increase their knowledge and to diversify the economy. This year the government will give MOP7,000 (US$875) to each permanent resident and MOP4,200 to each temporary resident. That is the same amount offered last year and will cost the government more than MOP4 billion.

Diversification dead-end The biggest challenge for SMEs, Mr Au says, is lack of knowledge. This makes it hard for them to progress and adapt to changes in the business environment. Although Beijing and the Macau government have continued to tout the importance of economic diversification, Mr Au says it cannot be achieved because of the lack of official support and the low level of professionalism in SMEs. “Macau’s development in diversifying the economy has remained stagnant,” he says. The businessman suggests the most effective way to diversify the economy is to buy patents for technologies developed by universities elsewhere, including the mainland, and put them to commercial use, setting up production lines and marketing and head offices in Macau. Mr Au says a lot of SMEs have “very strong financial capability”, so it is not lack of finance that hampers them, but MARCH 2012

“I don’t see Hengqin providing any significant opportunities for Macau’s SMEs in the next five years,” says the chairman of Macau’s SME Association, Stanley Au

the shortcomings of the owners. “They don’t have the vision, the knowledge and the determination,” he says. “They tend to be conservative and don’t like to take risks, and would rather keep their money safe to ensure a stable retirement life.” Looking on the bright side, chief executive Fernando Chui Sai On announced last year that the government would accelerate the processing of applications by SMEs to import labour. Mr Au says he has seen some improvement in this respect. “The Macau government has shown

31 more understanding and sympathy by shortening the approval process and making it easier for us to get higher numbers of workers. If we apply for 10 imported workers, in the past we could only get two. But nowadays we can get four to five,” he says. “But, of course, the increase is still not enough.” Mr Au admits however that labour importation is many times not only dependent on the Macau government. He points out that requests to import workers from the mainland are also subject to approval from authorities there.

Fantasy island Mr Au says support from the government means more than just speedier imports of labour. He says the Macau government’s record in supporting SMEs is worse than the mainland government’s. The authorities here “spend too much energy on the gaming, tourism and convention industries and have neglected the SMEs”. He questions the ability of some officials to come up with helpful initiatives. Mr Au’s association, in partnership

ROLLING WITH THE PUNCHES T

he chairman of the Small and Medium Enterprises Association of Macau, Stanley Au Chong Kit, says Macau’s economic performance this year is tightly linked to what happens globally and particularly in the mainland. The biggest economies – the United States, the European Union and the mainland – face a slowdown or even recession, Mr Au says. He believes that Macau’s economy will be affected, just as it was in the last quarter of 2008 and the first half of 2009, when the collapse of Lehman Brothers and the ensuing global financial crisis hit hard. “I anticipate that the situation will gradually deteriorate. For example, if the Chinese economy encounters big problems, I believe mainlanders travelling on the individual visitor scheme will decrease,” he says. He points out that Macau is highly dependent on the mainland and that any minor change in regulations there can have a huge effect here. Even so, he remains optimistic about the economic outlook for Macau. In view of the “special economic structure of Macau and the protection provided by the central government’s policies”, Mr Au expects that the effect of the world’s economic problems will not have as great an impact in Macau as it will have elsewhere in Asia, although growth will certainly decline.

with the University of Macau, is due to publish a white paper on the SME sector at the end of September. It will be sent to the government to help it make policy. Preliminary findings were disclosed last month, showing that 24 percent of SMEs are not optimistic about the local business environment and want more government subsidies and tax reductions.

“We hope the government can set up an SME bureau which will be run by people who have the professional knowledge of our sector and the economy – not just by ordinary civil servants,” he says. Mr Au suggests that the government give SMEs financial support to get into innovative and creative businesses. “Macau needs to have an investment board, like in Singapore, for people

MARCH 2012

Economy & Finance

who have a business idea, but don’t have enough funds, to work in partnership with the government.” The development of neighbouring Hengqin Island is supposed to create valuable business and expansion opportunities for SMEs in Macau. Mr Au is sceptical. “I don’t see Hengqin providing any significant opportunities for Macau’s SMEs in the next five years. Since the project requires huge investment injection and the Chinese economy is slow-

Stanley Au thinks a minimum wage would serve only political purposes, force SMEs to close and create “disharmony in society”

ing down, I believe the construction there will subsequently slow down as well,” he says. “To be honest, you can forget about Hengqin in the next 10 years.” Mr Au sees more potential in other parts of the mainland. “I think it’s better to invest in the tier two or three cities such as Chengdu and Dalian than in Hengqin, where business opportunities will only be generated after a lot more infrastructure is built and more people are present there.” He suggests that in the next few years, SMEs put their energy into the five parcels of land that the Macau government aims to reclaim. This 3.6 square kilometres of reclaimed land will be the biggest opportunity, he adds.

Cuts both ways Mr Au also does not believe a minimum wage would do SMEs any good. Talks between the government and representatives of employers and employees about introducing a minimum wage began last year, but they are still in their early stages. Mr Au thinks a minimum wage would serve only political purposes, force SMEs to close and create “disharmony in society”. He says the wages of casino croupiers already serve as a reference for white-collar workers and that the low-income subsidy is in effect a kind of a minimum wage. Low-income subsidies are paid in cash by the government to resident fulltime workers aged 40 or above, earning below MOP4,400 a month, in order to bring their income up to that level. In 2010, about 6,000 people were paid lowincome subsidies. “The minimum wage is a doubleedged sword,” Mr Au says. “On one hand it seems to raise some people’s wages but, on the other hand, it may even make them lose job opportunities.” He adds that “the people who need to be protected are cleaners and doormen, but in fact most of them are already over the retirement age.” Last November, in presenting his 2012 Policy Address, chief executive Chui Sai On urged private companies, if able, to give their employees a pay rise. Asked if SMEs can afford to emulate casino operators in complying with Mr Chui’s request, Mr Au replies: “This year the business environment will just get harder and harder, so what do you think?” MARCH 2012

MARCH 2012

Economic Trends by JosĂŠ I. Duarte Energy

GRAPH 1 - Indexed growth in energy consumption LPG

Electricity

Year 2000=100

Natural Gas

Liquid fuels

Energy consumption is traditionally a good indicator of economic activity in a country. This is also the case in Macau. GRAPH 1

250

200

150

100

50 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

GRAPH 2 - Electricity consumption per capita and per GDP unit kWh/per capita

kWh/MOP100,000 GDP unit

7,000

The consumption trends displayed in the first graph reflect the rapid economic growth that has taken place on a global scale in Macau since 2000. The consumption of electricity, which is usually most closely associated with economic output, rose by more than 1.3 times between 2000 and 2010. That equates to an average annual growth rate of about 8.8 percent that, if sustained, would result in a doubling of consumption every eight years. Liquefied petroleum gas or LPG tracks the growth in population more closely, since it is used by households for cooking and heating. Consumption has increased by about 70 percent during the same period. The demand for liquid fuels declined after 2005. The contraction at least partly represents the closing down of manufacturing industries that began at about that time. The volume of liquid fuels consumed now accounts for less than two-thirds of the amount consumed in 2000. The decline accelerated with the introduction of natural gas as a major source of energy. GRAPH 2

Measured against population and gross domestic product, electricity consumption displays two opposing trends. Per capita consumption is rising, suggesting the economy is becoming more energy-intensive or less concerned with conserving energy. On the other hand, electricity measured against each MOP100,000 (US$12,500) unit of GDP is relatively stable, even declining slightly since 2009. That trend may reflect the transition to a servicebased economy as little additional energy is required to power casino tables to generate more gambling revenue.

6,000 5,000 4,000 3,000 2,000 1,000 0 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

GRAPH 3 - Consumption of liquid fuels Gasoline

Unit: 103 litres

Kerosene

Diesel

Fuel oil

400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 100 2000

2001

2002

MARCH 2012

2003

2004

2005

2006

2007

2008

2009

2010

GRAPH 3

There has been a significant change in the use and demand for liquid fuels. Consumption of fuel oil and kerosene has declined rapidly. That change reflects the restructuring of the economy. Only gasoline consumption is increasing among the liquid fuels category, a result one might expect, taking into consideration the increase in number of vehicles on the cityâ&#x20AC;&#x2122;s roads.

Vehicles and accidents

GRAPH 4 - Indexed growth in registered vehicles Light automobiles

Year 1999=100

Heavy automobiles

Motorcycles

200

Although there are clearly more vehicles on the roads in Macau, the number of accidents causing non-fatal injuries has declined since the end of 2008. GRAPH 4

The extent of the change in vehicle numbers on the city’s roads is made clear in this graph. Vehicles in each of the three categories represented have increased by between about one-third for heavy vehicles and more than 80 percent for the motorcycles category. The number of licensed heavy vehicles seems most sensitive to the city’s economic restructuring. There was a decline after the handover and slowing of growth between 2002 and 2003, and again since 2008. The remaining two categories seem mostly immune to the economic cycles.

150

100

50 1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

GRAPH 5 - Reported road accidents Number of accidents

With fatalities

With injuries

Other

100,000

GRAPH 5

Interestingly, the significant increase in the number of vehicles on the road has not translated into a matching increase in the number of traffic accidents. Total accidents have risen by around 33 percent over the past decade and the number of non-fatal injuries has even declined slightly since the end of 2008. The scale used in this analysis is logarithmic, a treatment that “flattens” oscillations in data over time. The same happens in Graph 6.

10,000 GRAPH 6

This analysis plots the total number of accidents per 1,000 vehicles and the number of accidents with injuries (fatal or not) for every 1,000 vehicles. The total number of accidents has stabilised at about 67 for every 1,000 vehicles a year since 2009. The rate has declined significantly from values between 85 and 90 just after the handover. The number of accidents with injuries (fatal or not) for every 1,000 vehicles has also declined, after reaching a peak in 2008.

1,000

100

1 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

GRAPH 6 - Accidents per 1,000 vehicles Accidents causing injuries (fatal or non-fatal) per 1,000 vehicles

Number of accidents per 1,000 vehicles

Accidents per 1,000 vehicles

100

1 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

MARCH 2012

Economic Trends by JosĂŠ I. Duarte

Output and expenditure 2010 GDP current (in MOP) Consumption (in MOP) Investment (in MOP)

Economic Activity

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

217,324 17,496 27,727 17,496 - 42,676 164,086 207,194

million million million million million million million

% var

31.4 9.8 - 13.6 9.3 21.5 54.2 26.2

Latest

Notes

% var

75,396 15,706 9,715 4,982

million

-16,672 61,664 66,750

million

30.7 15.6 20.7 15.4 46.8 43.1 21.1

million million million

million million

Q3 Q3 Q3 Q3 Q3 Q3 Q3

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

39,153 million 301,700 million 164,829 million 295,784 million 113.4 base - 2008 0.50 %

17.4 25.6 32.4 25.9 6.81 --

Latest

% var

November November November November December January

Population/Labour force

Labour force Median wage rate (in MOP) Unemployment

522,300 330,900 9,000

% var

3.0 %

-1.9 0.5 4.7 -0.1

2010

% var

Notes

560,100 347,200 10,000

2.1 4.9 11.1

2.1 %

-0.6

Nov, var

Q4 Q4

Construction

Major sectors

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

Finished

m2 tons million million

- 19.8 - 9.58 - 22.6 117 113

Latest

368 455,537 52,147 668 939

Notes

% var

m2 m2 tons million million

-88 62 47 15.1 -53

December December December November December

Gaming 2010 Gross revenue (in MOP) Casinos Tables Machines

189,588 33 4,791 14,050

million

% var

Latest

57 2 0.4 2.2

23,705 34 5,302 16,056

% var million

25 1 10.7 14.3

Notes December Q4, var, ytd

Q4, 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

2,546,000 1,820 1.00 days 22,335 89.1 % 1.45 nights

% var

Important note: The inflation base period has changed ( New base: April 2008 to March 2009 = 100) MARCH NOVEMBER OCTOBER SEPTEMBER 2012 2011 2011 2011

Notes

December 12.1 Q4 8 Q3, var -- days November 11.3 Nov, var 5.64 Nov, var --

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

Q4, ytd

JANUARY 2012

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

2010 Population

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

Take the direct path TRUE POLITICAL REFORM SHOULD MEAN THE ELIMINATION OF INDIRECTLY ELECTED AND GOVERNMENT-APPOINTED LEGISLATORS he central government’s call for electoral reform in Macau shows its dissatisfaction with the political status quo here. The biggest problem is that the region has been unable so far to produce an efficient and popular government. In Hong Kong, the government in Beijing evaluates a group’s or individual’s popularity through small circle, one-person, onevote direct elections. Their results are often taken as the gauge for the appointment of officials. Cast your mind back to the case of the Hong Kong Progressive Alliance, a pro-Beijing political party. The party won five seats in the 1998 elections for the Hong Kong Legislative Council and four in the 2000 elections. In all, only one of its members in the council was directly elected. Even so, the election results put the party in the limelight. The problem was that the Hong Kong Progressive Alliance rested on its laurels, rather than actively drumming up public support. It thought its loyalty to Beijing would be sufficient to maintain its support. The party believed it could keep its political influence in the Legislative Council just by having members indirectly elected. Eventually the progressive alliance’s complacency and sluggishness meant the central government did not support its candidates in the Legislative Council indirect elections in 2004. In the end, the party lost all its seats in the council and was taken over by the Democratic Alliance for the Betterment of Hong Kong.

If the belief is that political talent can be fostered through indirect elections or by having legislators appointed by the chief executive, is it any wonder that Macau lacks politically savvy individuals? What is more, the political system here tends to favour business and the leaders of big associations. Members of the electoral committee for the post of chief executive and indirectly elected members of the Legislative Assembly are often selected in negotiations behind closed doors among businessmen and heads of big associations. Since the public is kept in the dark, such negotiations cannot reflect the will of the people. So the chief executive selected by these people and the bills enacted by the Legislative Assembly, where indirectly elected and governmentappointed members together have a clear majority, lack sufficient public support. Chief executive Fernando Chui Sai On has been handing out cash to residents since he took office, but this boon did not buy him popularity. Instead, even some of the legislators he appointed and other pro-government public figures are accusing him of nurturing a culture of dependency. The secretaries nominated by Mr Chui usually act in defiance of public opinion. But this doesn’t seem to bother them at all. It must have something to do with the lack of openness in the political system.

Flush of youth Winds change The central government may be thinking the same way in demanding political reform in Macau. Direct elections for the Legislative Assembly may let it distinguish which of the many individuals and associations that back Beijing and the Macau government have real public support, and which depend only on Beijing’s patronage to gain political power. In recent discussions about political reform, many proBeijing associations here openly supported maintaining indirectly elected and government-appointed seats in the Legislative Assembly. In doing so, they may be going against the central government’s plans. Another problem with the Macau political system is its inability to cultivate political talent effectively. Many local associations start off with governmental funding and with their leaders serving on special committees and in other government-appointed positions. Therefore they have neither to explain their political thinking to the public and central government, nor to prove themselves by their deeds, as politicians elsewhere usually need to. They do not have to do any policy research, debate with other associations or mobilise the public in support of their causes. On the contrary, in their discussions and management of political affairs, these “politicians” know only how to read from the script, parroting what they believe to be the rhetoric of top officials in Beijing.

All these problems point to one solution: political reform should follow a path that will one day lead to the election of the chief executive and all legislators by universal suffrage. To reform the system step by step, the government can first reduce the number of members of the Legislative Assembly that it appoints, or even eliminate them altogether, while increasing the number of directly elected members. Meanwhile, it should adopt the one-person, one-vote method for the functional constituencies that choose the indirectly elected members of the assembly and the members of the election committee for the post of chief executive, as in Hong Kong. More directly elected seats would give more young people and more middle-class people the opportunity to take part in politics. Some have already shown interest. Take the Macau New Chinese Youth Association. It has never missed a Legislative Assembly direct election since its establishment in 2003. U Wai Ang, the chairwoman, was defeated in its first attempt to win a seat in 2005. Four years later Agnes Lam Iok Fong and her Civic Power group ran for election with New Chinese Youth Association’s support but also failed. If more directly elected seats had been available in the last Legislative Assembly election, young middle-class candidates like Ms Lam, Chan Hong of the Women’s General Association and Jason Chao Teng Hei of the New Macau Association might have been elected. MARCH 2012

Greater China

Committed to growth All eyes are on Beijing this month as Premier Wen Jiabao and President Hu Jintao start their goodbyes BY MARIA JOÃO BELCHIOR IN BEIJING

wo big meetings mark this month. The Chinese People’s Political Consultative Conference (CPPCC) and the National People’s Congress (NPC) will gather to discuss what the future will bring for China this year. The meetings represent the beginning of the end of the 10-year President Hu Jintao and Premier Wen Jiabao administration. In October, they will begin handing over power to the subsequent fifth generation of Chinese leadership. Their terms will officially end in March next year. For now, it is the economy that is worrying the Chinese leaders. The financial crisis, particularly in the United

MARCH 2012

States and Europe, is putting pressure on the world economy. And China, the strongest economy in the BRICS group, has had to deal with a difficult external environment. The slower growth in demand for Chinese exports, a trend in the last three years, is making Beijing rethink its goals of development. China was off to a good start in the first year of the 2011-2015 plan amidst a very unstable world economy. Gross domestic product is expected to grow slightly above 8 percent this year, showing that so far Beijing has been successful in its policies. Since the start of the global financial

crisis in 2008, the central government has been taking measures to minimise its impact on China. After introducing an economic stimulus plan in 2009, the slowdown in the world’s economy ultimately did not badly affect the country. However, as the crisis persists, a new stimulus package might be needed, analysts say, although Beijing is likely not to rely on the banking sector but on central and local government budgets.

Here’s to the people As in previous years, the state-owned newspaper, People’s Daily, conducted an online survey to measure what readers consider are the more important issues to

39 be discussed during the NPC and CPPCC meetings. On the top of the list was social security. Last year, this topic also ranked as the top concern for respondents. Internet polls began with the current administration. Taking people’s opinions into consideration, policies to be announced this month are likely to further extend healthcare to rural areas of the country. The government wants to focus its attention on more economically deprived regions and it will continue to provide an insurance scheme that covers more than 70 percent of medical costs to farmers. Analysts say such measures could contribute to a decrease in household savings and work to boost internal consumption. Controlling inflation, which last year stood much higher than the official 4-percent goal, is also on Beijing’s main agenda, as complaints of higher prices are echoed throughout the country. But China will not be exempt from the rising food prices in the domestic market in 2012. The cost of labour, land and energy are also expected to continue to increase.

Housing needs At the beginning of the year, the China Banking Regulatory Commission mentioned the need to prevent systematic financial risks. Mortgage loans are to be more controlled by Beijing and local governments are being encouraged to refrain from taking out risky loans for construction projects. Local government debt stood at RMB10.7 trillion (MOP13.57 trillion) at the end of 2010, of which RMB1.84 trillion is due this year. The central government has also said it won’t waver from its measures to keep housing affordable. Some cities have introduced mortgage rates at the benchmark level for first homebuyers. Prices of real estate have increased considerably faster than in any other sector. For fears that the property bubble would burst, Beijing has also introduced new regulatory measures to deflate it. Mortgage loans for third houses are being banned and tighter restrictions extended to second homebuyers. Real estate was once the most reliable investment for Chinese businesses looking for safe profits. Beijing says it won’t stop the cash flow given the importance the sector represents in the overall economy, but it wants to introduce new rules in the game.

IS THERE A REAL ECONOMIC IMBALANCE? H

ow to rebalance the Chinese economy? This is the million-dollar question. But to get the right answer there is the need for the right approach, and some doubts persist as to how imbalanced the Chinese economy really is. Premier Wen Jiabao has been addressing the country’s economic imbalance in a few of his latest speeches. Similar to last year’s National People’s Congress meeting, the central government is set to again stress this year the need to increase internal consumption. Facing challenges posed by the global financial crisis, Beijing wants an economic growth model less dependent on exports and foreign direct investment. As a share of the gross domestic product, consumption in China is quite low compared to other countries. Chinese families continue to be good money savers and in spite of the growth in household income, the share of consumption remains the lowest among the world’s biggest economies. The apparent problem has made some look more carefully at the data published. Yukon Huang, former World Bank director for China, considers migrant workers are vital for a change in the pattern of internal consumption. He says that in Beijing migrant workers save twice as much as urban households. This is because they lack the same rights of urban citizens. China’s major structural change from an agrarian to an industrial economy in recent decades has strongly impacted the country’s demographic profile. The

National Bureau of Statistics announced in January that the urban population had surpassed that of rural areas for the first time in the country’s history. About 51 percent of the Chinese population lives in cities today – that is over 680 million people. It is estimated that in 2020, the share will jump to 70 percent. Today there are more than 220 million migrant workers who have moved from the countryside to cities. But by not holding a city residency permit, also known as a “hukou”, they are saving for a rainy day without either investing or consuming. A few years ago the government announced it would be reforming the “hukou” system, but this is a long process. The goal would be for migrant workers to become officially urban residents through a smooth process. Mr Huang says this could contribute to resizing the consumption-to-GDP ratio in China. Giving migrant workers a sense of higher safety regarding their legal status in urban areas would work as a stimulus for them to save less and consume more. This idea is shared by some in the central government and is likely to become more frequent in speeches made by Beijing when it measures the importance of different steps for keeping economic growth on track. Mr Huang says the consumption-toGDP ratio will not change sharply with one adjustment only, but China has a huge internal consumer market to explore as exports slow down. M.J.B. MARCH 2012

Greater China

Diversifying domestic private investment, in a scenario where new foreign direct investment is now harder to attract than a few years ago, should contribute to ending old monopolies considered unfair. Small investors heavily criticise big state-owned corporations, which are vital for the economy, for receiving privileged treatment. Private capital is to be welcomed in areas like finance, energy, transport and social services. The latter comes as a novelty in a country where an aging population will require new services to be created in the near future.

More for SMEs One of the risks of the global financial crisis for China relates to the closing of factories across the country as a result of a slowdown in exports. To prevent this from happening, the central government is likely to formally announce more support to small and micro-sized enterprises. New access to credit facilities should not rest on low interest rates alone but, as the Peopleâ&#x20AC;&#x2122;s Bank of China announced, new products should be cre-

MARCH 2012

CHINA IN 2011 GDP growth

9.2 percent

GDP

RMB47.16 trillion

Inflation

5.4 percent Source: National Bureau of Statistics

China was off to a good start in the first year of the 2011-2015 plan amidst a very unstable world economy. Gross domestic product is expected to grow slightly above 8 percent this year ated within the banking industry to facilitate borrowing to the private business sector. After many years of development originating mainly from costal areas, China is now entering a new phase where growth is expected to be stronger in less developed provinces in the

western part of the country. From Inner Mongolia in the far north to Guizhou in southern China, the central government is expected to introduce new areas for investment in less developed provinces. Preliminary statistics show these regions should grow above the 8 percent estimated for the national GDP.

41 MINXIN PEI PROFESSOR OF GOVERNMENT, CLAREMONT MCKENNA COLLEGE

Nixon then, China now

AS WE REFLECT ON CHINA’S REMARKABLE PROGRESS SINCE 1972, IT IS ALSO AN OPPORTUNE TIME TO CONSIDER HOW CHINA CONTINUES TO FALL SHORT IN OVERCOMING SYSTEMIC OBSTACLES TO LONG-TERM SUCCESS hen U.S. President Richard Nixon embarked on his historic trip to China 40 years ago, he could not have imagined what his gamble would unleash. The immediate diplomatic impact, of course, was to reshape Eurasia’s geopolitical balance and put the Soviet Union on the defensive. But the long-term outcome of America’s rapprochement with China became visible only recently, with the economic integration of the People’s Republic into the world economy. Had Mr Nixon not acted in 1972, China’s self-imposed isolation would have continued. Deng Xiaoping’s reform and opening of China to the world would have been far more difficult. Four decades after the “Nixon shock,” no one disputes that China has benefited enormously. Today, the impoverished and autarkic country that Mr Nixon visited is history. Global reintegration has turned China into an economic powerhouse. It is the world’s largest exporter in volume terms and is the world’s second-largest economy. China’s presence is felt around the world, from mines in Africa to Apple stores in the United States. As we refl ect on China’s remarkable progress since 1972, it is also an opportune time to consider how China continues to fall short in overcoming systemic obstacles to long-term success. Because China is widely regarded as a winner of globalization, it is natural to assume that the country has developed the means to meet its challenges. But, while China has implemented policies to maximise the benefi ts of free trade (undervaluing its currency, investing in infrastructure and luring foreign manufacturing to increase competitiveness), the country remains unprepared for deeper integration with the world.

Hidden weaknesses One sign of this is China’s lack of the necessary institutions and rules. For example, China has become a significant player in providing economic development assistance (often tied to its strategy for acquiring natural resources). Its loans and grants to Africa have now surpassed those made by the World Bank. But China has no specialized agency in charge of international development assistance. As a result, its foreignaid programmes are poorly coordinated and often seem counterproductive. Instead of earning goodwill, they are viewed as part of a sinister neo-colonial plot to grab natural resources in poverty-stricken nations. Another example is China’s lack of an immigration policy. Even though China is beginning to attract labour from around the world, it has yet to promulgate a comprehensive legal framework that would allow the country to compete for the most talented people or to deal with the complexities of international migration. A third example is the absence of independent policyresearch organizations. Owing to political control and inadequate professional development, government-run

research institutions can seldom provide the high-quality, unbiased analysis of global issues on which sound policymaking depends. Perhaps most importantly, two decades of rapid gross domestic product growth have masked serious weaknesses on the economic front. Because China continues to favour state capitalism and discriminates against the private sector, it lacks strong private firms that can take on Western multinational giants. Except for Huawei, Lenovo and perhaps Haier (which is nominally collectively owned), there are no private Chinese firms with a global footprint. Until now, China has not paid dearly for this. Its role in the global economy is confined to low-to-medium-end processing and assembly functions. The most critical, sophisticated and profitable parts of the value chain – research and development, product design, branding, marketing, service and distribution – are occupied by American, European, Japanese, South Korean and Taiwanese companies. China simply “outsources” these high value-added functions to the likes of Apple and Walmart.

Deficient education Of course, China does have huge firms, but they are inefficient state-owned behemoths that owe their size and profitability to their legal monopolies and government subsidies. They may have the heft needed for global operations, but they lack the motivation to compete with world-class Western firms and are greeted with suspicion and fear around the world. A China deeply embedded in globalization also needs a large pool of talented people, comparable to the best that the West can produce. Today’s China lacks that pool. While tens of millions of Chinese young people display impressive innate abilities, the country’s system of higher education does an abysmal job cultivating their talents. For most, the curriculum is largely obsolete and skewed toward rote learning of theory at the expense of basic analytical and critical-thinking skills. Education in social sciences and humanities is particularly deficient, owing to lack of investment in these disciplines and excessive political control of curricula. As a result, Chinese graduate from colleges and universities having learned relatively little about the outside world in fields such as anthropology, sociology, international relations, comparative literature and history. Unless China reforms its ossified system, the country will not be able to produce enough highly trained talent to compete with the world’s best and brightest. None of these shortcomings – the lack of globalizationfriendly institutions, rules, corporations and talent – is an insurmountable obstacle. The real question is whether China can remove them under a one-party regime that is hostile to the liberal values that inspire and underpin globalisation. Mr Nixon himself was probably not bothered by the nature of the Chinese regime four decades ago. The fact that the question must be addressed now attests to China’s astonishing progress since then. But it also shows that China’s long march toward global integration remains unfinished. MARCH 2012

Greater China

Time for change Hong Kong falls behind on tax reform, analysts say BY STEPHEN COATES*

ong Kong’s competitiveness as a regional centre for business and trade is under threat from the very thing often credited with its success – its tax system, analysts say. The former British colony is holding elections this month to choose a new chief executive and experts are already urging the next government to undertake a comprehensive tax review for the first time in almost 40 years. The city doesn’t need to raise more money – fiscal reserves stood at HK$654.9 billion (US$84.5 billion) on December 31, or about 2.5 years of government expenditure. What it needs, analysts say, is a broader tax base to give it greater flexibility to spend its reserves while reducing its dependence on volatile income taxes and stamp duties. A survey in January of 200 finance, accounting and business professionals by accounting body CPA Australia found overwhelming support for sweeping change to the city’s tax regime. More than 80 percent agreed that a broad tax review should be a priority of the incoming administration, citing the need to pay for an ageing population and maintain Hong Kong’s edge as the best place to do business in Asia. “While our business community has adapted to the monumental shift in the global economy, our tax system has remained largely the same for the last 35 years,” Loretta Shuen of CPA Australia’s Greater China division says. “Hong Kong is widely recognised as having the freest economy in the world but to maintain this position our tax system needs to be looked at.”

Feeling insecure The Hong Kong Institute of Certified Public Accountants has been issuing similar appeals since at least 1999 when it laid out the “case for a fundamental review” of Hong Kong’s revenue stream amid the Asian financial crisis, a crash which led to five years of deficits. “While Hong Kong’s relatively simple, low-rate tax system remains an advantage, from a tax perspective our competitiveness continues to be eroded as other jurisdictions seek to attract more business through changes in their own tax regimes,” the institute said in January in a pre-budget report. Taxation is just one of several areas where Hong Kong is feeling insecure about its long-term attractiveness as a business centre. The list includes a lack of affordable housing, poor air quality and a shortage of school places. Corporate income tax rates in Singapore – Hong Kong’s main rival as Asia’s premier business hub – have fallen to within a whisker of Hong Kong’s over the past 15 years. The introduction of a goods and services tax (GST) in 1994 allowed Singapore to cut income taxes and offer incentives to newcomers to start or headquarter businesses there, KPMG China tax partner Jennifer Wong says. Singapore’s corporate income tax has fallen from 30 perMARCH 2012

cent on the day before the GST was introduced, to 17 percent currently. Many analysts say that’s a little too close to Hong Kong’s 16.5 percent for comfort. Meanwhile, as the GST has climbed from 3 percent to 7 percent, Singapore’s revenue base has stabilised and its flexibility to offer exemptions and other investment incentives has increased.

Everyone pays “A GST of 7 percent helped the government reduce the corporate income tax by 13 percentage points,” Ms Wong, who supports the introduction of a GST in Hong Kong, told AFP. “The reason to introduce a GST is not to increase revenue but to widen and stabilise the tax base,” she said, adding that visitors could receive GST refunds, as they do in Singapore, to protect Hong Kong’s tourism industry. A GST would also mean that “everyone has to pay”, Ms Wong adds. And that’s the hitch. Less than 40 percent of Hong Kong’s roughly 3.4 million workers currently pay tax, according to KPMG figures.

we live inside ideas. As the government heard loud and clear when it last consulted the public about a GST in 2006, very few people want to pay. The idea has been on ice ever since, and there appears to be little political will among the leading candidates for chief executive to do more than tinker around the edges of the current tax system. Unveiling his final budget last month, finance secretary John Tsang disappointed those who might have been hoping for a last-minute epiphany from the outgoing administration. “Some people have suggested, among other things, that this year’s budget is not visionary or daring enough, or that it lacks new and exciting initiatives,” Mr Tsang said. “As far as that is concerned, all I can really say is: Guilty as charged.” The 2012-2013 budget promised HK$80 billion in stimulus spending and one-off tax breaks, but ignored pressure for long-sighted tax reform. “Hong Kong people will benefit from the string of measures like tax reductions ... But in the long run, there are no promises,” Hong Kong Taxation Institute vice-president Godwin Ng says. * AFP NEWS AGENCY

+853 2833 1258 info@goldfishmacau.com www.goldfishmacau.com MARCH 2012

Survey

MONEY MINDED Salary is the single most important factor for retaining staff, according to the Macau Business Quality of Life Report BY SARA FARR

anagers, take note: salary is by far the single most important factor in determining a worker’s motivation to stay at their current job. That is the finding of the latest Macau Business Quality of Life Report, which surveyed workers about their commitment to their jobs, likelihood to seek a new job and reasons why they would stay put. A team of experts from the University of Saint Joseph was commissioned to carry out the survey on behalf of Macau Business and its sister publication, the Chinese-language Business Intelligence magazine. More than 1,000 people were surveyed in early January. The primary motivation for employees to leave their job lies in one reason alone. Salary was the most important reason for 42 percent of respondents, who were asked what was the single most important factor in determining their motivation to stay at their current job. A distant second factor was work environment, highlighted by just 9 percent of respondents. A breakdown of the responses shows that even though salary is a very important factor for most, it is less important for high income earners. Workers taking home more than MOP60,000 (US$7,500) a month said income was just as important as the “meaning” or “interest” derived from their work. For workers in the next lowest monthly income bracket, between MOP40,000 and MOP60,000, the survey found that income was again the most important contributor to job satisfaction. “Job status” and “career path” were both relatively more important for workers in this segment than for people earning smaller salaries. If you had to chose one, what is the single most important factor in determining your motivation to stay at your current job? 42%

Salary 9%

Work environment Match personal interests Job status Job security Flexible schedule Career path Accomplishment

Colleagues

Retirement plan

Meaningful work

“Make a difference”

Control over work

1% 0%

10%

MARCH 2012

15%

20%

25%

30%

35%

40%

45%

The University of Saint Joseph analysis says the results are not surprising. The Macau finding is consistent with the results of a global survey by human resources consultancy Mercer. That report found workers in the Asia-Pacific region value money more than those in the rest of the world – out of 17 markets surveyed Hong Kong was the only place where employees said basic pay was what motivated them most and kept them engaged. The survey took the opinions of about 30,000 employees between the fourth quarter of 2010 and the second quarter of last year.

Rules of engagement The latest edition of the Macau Business Quality of Life Report also surveyed workers’ engagement. Compared to results from 2008, most eye-catching was a significant increase in the number of people who are not “engaged” by their work. About 41 percent of respondents did not feel engaged at work. That statistic, the sum of all responses less than “neutral” on a seven-point scale, is well above the 27 percent recorded in 2008. In the opposite direction, engagement increased, by a slight margin. The sum of responses above “neutral” tallied 39 percent, compared to 35 percent four years earlier.

How engaged do you feel with your job? 2012

2008

7 - Engaged

1% 14% 12%

39% / 35%

4 - Neutral

37% 22%

15%

1- Disengaged

41% / 27%

3% 0%

10%

15%

20%

25%

MARCH 2012

30%

35%

40%

Survey

Rate the following statement: “I intend to quit my current job within the coming 12-month period” 7 - Totally agree

12%

4% 6% 4 - Neutral

18% 11% 13% 42%

1 - Totally disagree 0%

10%

15%

20%

25%

30%

35%

40%

45%

The result represents a “good balance”, the University of Saint Joseph analysis concluded. Compared to the findings from 2008, there were fewer “neutral” responses and more responses at either end of the scale. Workers with the longest job tenure and more post-secondary school education, including professionals and management executives, reported higher levels of engagement. The report’s authors said a collection of characteristics were found to influence engagement in Western studies. Among the most significant were interference between professional and private lives, pressure at work and role ambiguity. Opportunities for development, autonomy, the opportunity to use one’s skills and feedback on performance are known to be positive factors that can have a positive impact on worker engagement.

Bye, bye boss Although the survey indicates that many staff are not engaged by their work, very few employees interviewed are preparing to quit their current job in the next 12 months – only 12 percent. The report says the number could not be considered high and may reflect a deteriorating economic situation. Since the figure reflects an intention rather than actual preparation to leave their job, the authors said it was likely that the actual rate of turnover will be lower. “Should this number become fact, it would result in another year of high staff turnover in Macau,” they wrote. Younger workers and those with shorter tenure at their current jobs were more likely to change jobs. Similarly, highly educated, white-collar workers and executives also said they were more likely to change jobs. The latest data from the Statistics and Census Service on job swapping found a turnover rate of 12.1 percent in 2008. Anecdotal evidence suggests that several companies are experiencing higher rates of staff turnover. Data for selected sectors reveals a turnover rate of 4.9 percent for the gaming industry in the second quarter of last year. The figure in the retail sector was 8.2 percent, while in the hospitality sector, data from the third quarter shows an employee turnover rate of 7.2 percent. The highest figure was in the security industry, at 11.4 percent. According to the analysis by the University of Saint Joseph, it is important to understand people’s appreciation of their work situation in Macau, since the city’s limited workforce is a major bottleneck to economic development. MARCH 2012

WEALTH WOES The hip-pocket nerve is jangling, with the economy taking priority in most residents’ minds, says the latest Quality of Life Report

eoples’ perception of the government and governance has taken a backseat while their concerns are focused on the world’s economy, according to the Macau Business Quality of Life Report. People in the first survey for this year were more satisfied with their own lives and with living in Macau compared to the fourth quarter of last year, revealing “a considerable positive momentum,” says the report carried out by the University of Saint Joseph. The upturn may be a “relief rally” inspired by “some better news from Europe and better than expected economic data from the United States, signalling a potential turning point for the global economic situation,” the report said.

Happy days Both the Personal Wellbeing Index and the National Wellbeing Index are at their second-highest points since the Macau Business Quality of Life Report began in 2007. The report said “the relatively high scores are explained mostly on the basis of the relatively privileged situation of Macau” compared to recession-hit economies

QUALITY ASSURED T

his is the second instalment of the third series of the Macau Business Quality of Life Report, a project that started in 2007 to monitor critical components of the city’s development. The Macau Business Quality of Life Report is a project by De Ficção – Multimedia Projects, the publisher of Macau Business and Business Intelligence. The study is carried out by the University of Saint Joseph. The university conducts quarterly telephone surveys on quality of life indicators in Macau, collecting at least 1,000 valid responses. The Macau Business Quality of Life Report uses the International Wellbeing Index. The index is used by independent researchers to measure the perceived happiness of people around the world. Each survey is supplemented with data on a different special topic. In this edition, it was Macau’s work environment. The International Wellbeing Index has two component scales, each of which are further divided into smaller topics. The National Wellbeing Index asks people about their satisfaction with different aspects of their life in Macau. The Personal Wellbeing Index asks about satisfaction with their own life. For both indexes, values are presented in percentages reflecting the strength of satisfaction with the specific domain asked. Values below 50 percent indicate dissatisfaction.

elsewhere. “People are being continuously informed about deteriorating economic activity in other regions, but Macau continues to boast a strong economy and the employment market continues to be at a near full-employment level.” In January, Macau people reported an overall Personal Wellbeing Index of 65.7 percent. This figure is 1.9 percentage points higher than in the previous report. Researchers say the index is within the range considered the “gold standard” for non-Western societies, between 60 and 70, and is “relatively high” in comparison to prior surveys. Across most of the components that go towards making up the index, there have been improvements against the fourth quarter of last year. Only “Personal Relationships” remained at the same – albeit high – level. There were noticeable increases in “Future Security”, “Community Connectedness” and “Achievements in Life”. The National Wellbeing Index also increased. It now stands at 61.2 percent, up by 2.1 percentage points over the previous quarter. The latest data shows increases in satisfaction across the board, except for “Territorial Security”, which declined marginally. MARCH 2012

Survey

Satisfaction with the government improved considerably on a quarter-on-quarter basis, posting a jump of 5.4 percentage points. “This substantial increase allowed satisfaction with government to climb from its traditional position [in Macau] of lowest-scoring National Wellbeing Index domain, surpassing satisfaction with the state of the environment,” the report said.

People in the first survey for this year were more satisfied with their own lives and with living in Macau compared to the fourth quarter of last year, says the report carried out by the University of Saint Joseph

MARCH 2012

Researchers say the cost of housing, inflation and the public transport network have traditionally ranked as people’s major concerns in the past, and tended to depress the index. The considerable increase in government approval could reflect a change of emphasis to the macro-economic situation. The researchers add that measures to counter some of these problems announced by chief executive Fernando Chui Sai On in November’s policy address may also have led to an increase in government approval. Mr Chui announced subsidies for housing, education and medical care, as well as the continuation of the cash handout scheme. Overall, the happiest respondents were highly educated, held higher-status jobs and earned the most of all respondents. The lowest levels of personal satisfaction were reported by those respondents with fewer years of formal education, the smallest monthly wage, and employed in semi-skilled jobs or unemployed.

National Wellbeing Index

Personal Wellbeing Index 66.7%

67.0%

66.0%

65.7%

65.5% 65.0%

63.7%

64.0%

62.0%

61.0%

64.4% 63.9%

64.0%

63.4%

60.2% 63.8%

63.8%

60.0%

59.1% 61.2%

63.3% 63.0%

63.0%

62.0%

61.0%

59.6% 59.9%

58.0%

57.6%

57.9% 57.4%

56.0%

1Q2007 2Q2007 3Q2007 4Q2007 4Q2008 1Q2009 2Q2009 3Q2009 4Q2011 1Q2012

54.0%

1Q2007 2Q2007 3Q2007 4Q2007 4Q2008 1Q2009 2Q2009 3Q2009 4Q2011 1Q2012

VARIATION

PERSONAL WELLBEING INDEX

1Q2012

4Q2011

(percentage points)

Personal relationships

70.4%

0.0

Safety

67.5%

66.8%

0.7

Health

66.7%

66.0%

0.7

Standard of living

63.9%

62.8%

1.1

Community connectedness

65.5%

61.6%

3.9

Future security

65.4%

61.3%

4.1

Achievements in life

60.6%

57.6%

3.0

OVERALL

65.7%

63.8%

1.9

NATIONAL WELLBEING INDEX

1Q2012

4Q2011

(percentage points)

Territorial security

66.1%

66.5%

-0.4

Economic situation

64.8%

63.7%

1.1

Business

61.2%

58.9%

2.3

Social conditions

60.9%

57.9%

3.0

State of the environment

57.6%

53.9%

3.7

Government

58.9%

53.5%

5.4

OVERALL

61.2%

59.1%

2.1

VARIATION

MARCH 2012

HISTORY IN THE MAKING Sands China Ltd. has changed the face of Macau with its Cotai Strip development MARCH 2012

Sponsored Feature

the local economy, the Venetian Macao includes 120,000 square metres of meeting, convention and exhibition space, more than twice the amount at the Hong Kong Convention and Exhibition Centre. The Venetian Macao’s success was immediate: during the first full 24 hours of operation more than 114,000 people passed through its doors. The property became a tourism magnet. In its first year in operation it attracted nearly 25 million visitors and according to a study conducted by the University of Macau, more than 60 percent of all tourists to Macau identified a trip to the Venetian as their primary reason for visiting the territory. The Venetian Macao’s attractiveness carries on today. During the last Chinese New Year holiday, 750,000 people flocked to the property.

Another milestone The second stage of the Cotai Strip kicked off on August 27, 2008, with the opening of the Four Seasons Hotel Macao, featuring 360 guestrooms and suites, and a variety of conference, banquet and business services and facilities. The ceremony also marked the world premiere of Cirque du Soleil’s “ZAiA” at the Venetian Macao, the territory’s first Las Vegas-style resident show, and the official opening of the luxurious new Shoppes at Four Seasons. “Today marks yet another significant milestone in the overall effort to transform Macau into an international leisure and business destination,” said Mr. Adelson at the time. “The key to building a successful tourist destination is being able to assemble the critical mass of attractions needed to make the location more unique and compelling than its rival destinations. “That is why we continue to add more and more important components, like luxury retail and worldclass entertainment, to our Cotai Strip development.” Mr. Adelson made sure he kept his word. Even if works on the Cotai Strip had to be temporarily suspended due to the 2008 global financial crisis, he always stuck to his plan and construction restarted in early 2010. Meanwhile, as Cotai continued to expand, Sands China also made sure its projects became increasingly more environmentally-friendly. The company invested a swath of efforts and resources to reduce its footprint across all of the properties in Cotai; today, the Venetian Macao uses less energy than when it opened, although the number of rooms and its retail area have increased dramatically.

The future Next month, Sands China will open the third phase of its Cotai Strip development – Sands Cotai Central, the largest integrated resort development in the company’s history, featuring three inter-

The Venetian Macao under construction

connected buildings. Located directly across from the Venetian Macao and the Four Seasons Hotel Macao, the 1.3-million square metre property will add substantial scale to the Cotai Strip and will include amenities and attractions designed to broaden and deepen Macau’s appeal as a destination for business and leisure travellers. Importantly, Sands Cotai Central will feature at completion more than 5,800 hotel rooms, which are a vital component for the future growth and continued maturation of the meetings, incentives, conventions and exhibitions business in Macau. It will also include over 20 dining outlets, nearly 100 retail stores, live entertainment and two world-class casinos. During the first stage, more than 600 rooms and suites from Conrad, and over 1,200 guestrooms and suites from Holiday Inn will be available. When Sands Cotai Central is fully completed in 2013, Sheraton will oﬀer close to an additional 4,000 well-appointed guestrooms and suites. Each of these hotels is the largest in the world of its respective brand. And Sands China has more to come. The company has already delivered to the government the development plans for its next Cotai project, to feature 4,000 hotel rooms. In a few years time, Sands China will have created on the Cotai Strip Asia’s premier entertainment, leisure and convention destination. Where before there was just water, a new tourist paradise will have emerged. MARCH 2012

Transport

ight years after the first studies were made, work on laying the foundations of phase one of the light rail transit (LRT) system has begun. While construction officially kicked off with the groundbreaking ceremony for the LRT depot in November, work on the line actually began only last month, with the breaking of ground for the first stretch, between Ocean Gardens and Galaxy Macau in Taipa. The government aims to have the LRT up and running by 2015, connecting the Border Gate with the Taipa Ferry Terminal through the business district and Cotai. Secretary for transport and public works Lau Si Io says the system will help ease road congestion, which he acknowledges, is getting worse. It will also allow for smoother travel between Macau and Guangdong.

The LRT was first proposed in 2003 but the project languished for several years. In 2007, the cost of the first phase was estimated at MOP4.2 billion (US$525 million). By 2009, the estimation had increased to MOP7.5 billion and to MOP11 billion last year. The estimated costs omit the transport interchanges to be built in Taipa and Barra that could cost MOP2.3 billion. The government has admitted construction costs may rise again. The LRT was originally due to start operating last year. The government’s most recent schedule indicates that trains may run three years from now but there have been delays in contracting out the project, which includes a mix of elevated and underground sections. Mitsubishi Heavy Industries Ltd. of Japan won the contract to build the system and supply the rolling stock in December 2010 with a MOP4.69 billion bid.

Outer Harbour Ferry Terminal Northeast

Golden Lotus Square

Dr. Carlos D’Assumpção Park Art Garden

Nam Van Lake

Piling it on Work on the light rail transit system has at last started, but final cost estimates could still go up BY SARA FARR

The LRT was first proposed in 2003 but the project languished for several years. In 2007, the cost of the first phase was estimated at MOP4.2 billion. By 2009, the estimation had increased to MOP7.5 billion and to MOP11 billion last year. The government has admitted construction costs may rise again Airport

Taipa Ferry Terminal

Macao Dome Macao University of Science and Technology

Lotus Port West Cotai

East Cotai

Macau Stadium

Taipa Village

Macau Jockey Club

Ocean Gardens

Sai Van Lake

Barra

PHASE ONE FACTS Length: 21 km Number of stations: 21 Average speed:

About 30 km/h Travel time: About 38 minutes a circuit Train frequency: One every 3 to 5 minutes Capacity: Up to 8,000 passengers

an hour in each direction, with an increase to 14,200 passengers planned by 2020

Transport

The Transportation Infrastructure Office is running the project. Its deputy director, André Ritchie, says the estimated costs have risen “mainly because in 2007, when the project was designed, the regional scenario was different”. In its infancy, the LRT was designed to serve Macau alone but now it must be integrated with the railways being built across the border in Zhuhai, Mr Ritchie says. “We had to increase the capacity of the system in order to allow this kind of connection in the future.” The cost of materials has also risen by around 10 percent between 2006 and last year, he says. And the number of infrastructure projects in the Pearl River Delta means labour costs have also increased. “I was talking to a contractor who said that one of their problems was not only the prices of raw materials but to get truck drivers to drive from the factory to the construction site.” The strengthening of the renminbi and Japanese yen has also pushed up costs. MARCH 2012

It is hard to predict how much further the cost of the LRT will increase, but the Transportation Infrastructure Office says it is doing its best to control spending. It is cooperating more closely with the contractors to “avoid surprises”, Mr Ritchie says. “We did our best to cut superfluous things.” He says his office follows the principles of “value engineering”, the idea of doing only what is essential and doing it for the lowest cost. Land on the Taipa side of the Sai Van Bridge is already being prepared for the piling that will support a 2-km stretch of the line linking Ocean Gardens, the Jockey Club, Macau Stadium and Estrada da Baía Nossa Senhora da Esperança, in front of Galaxy Macau. Mr Ritchie says everything is being done to ensure that the project is as environmentally friendly as possible. Diesel pile drivers will not be used for the foundation work, making it “easier on the en-

vironment and the people,” he says. The sections of viaduct that will carry the railway will be made abroad and assembled here. “The good thing about this construction method is that everything is made outside Macau, so we just bring it to Macau, hoist and assemble it.”

Handled with care Mr Ritchie says the work will be done in off-peak hours. The contractor and the infrastructure office will work out the best times to do the work. “We will have continuous communication between the government and the residents,” Mr Ritchie says. The foundations for the first Taipa segment will take about a year and a half to complete. Not all contracts for the first phase have been awarded. The remaining contracts for work on the Taipa side are expected to be signed in the first half of this year, Mr Ritchie says. His office is also aiming to put work

THE VIEW FROM MONTREAL S

ome kind of rail-based public transport system is really necessary for Macau,” argues John Zacharias, a professor and urban planner at Concordia University in Canada. Mr Zacharias says that the more people use the railway, the more prices of nearby real estate will rise. Businesses, he says, could do more business “provided the light rail transit system is designed appropriately for the local environment”. He says the advent of a railway is a “golden opportunity” to change the use of the lower floors of buildings adjacent to stations – floors often used only for car parking. In the Canadian cities of Vancouver and Calgary, residents living close to railways complain about noise and obstruction of the view from their windows but Mr Zacharias says there are always technical solutions to these problems. The trains in Macau’s light rail transit system will run on pneumatic tyres and so the noise will be minimal, the Transportation Infrastructure Office says.

“

Nam Van Lake station

on the peninsula side to tender in the first half of the year. “And hopefully in the second half of the year we can start some works.” The foundations will be constructed in places where there are a lot of water mains, sewers and electricity cables. The plans for the LRT were changed slightly in 2008 to avoid any clashes between the project and underground infrastructure. The government commissioned a survey by the University of Macau in 2006 and 2007 regarding whether the public thought Macau really needed the LRT or not. The results showed that 74 percent said they supported the project and 80 percent said they would use the railway. But since then there has been opposition in the NAPE area, where residents say the trains will pass too close to their homes. Experts in the United States believe that having a railway in the vicinity of shops and homes is advantageous for residents and businesses alike, giving

residents access to more shops and shops access to more customers. Whether this would be the case here is hard to tell. “Macau is a special city. But one thing is for sure: when you have the stations, it will bring in more movement and we think it will be beneficial for businesses,” Mr Ritchie says.

Long-term plan Another study commissioned by the government indicates that in the first 10 years of operation, the LRT could create up to MOP16 billion in direct and indirect social and economic benefits. Mr Ritchie says one benefit is that it will burnish Macau’s reputation as an international city. It is estimated that the LRT will reduce the time spent travelling on public transport by almost two-thirds, saving energy and cutting greenhouse gas emissions by 20 percent. The railway is expected to help decongest the roads. “So people spend less

time in traffic jams, spend less on fuel and there are less accidents,” Mr Ritchie says. The LRT should employ about 1,000 people. How much revenue the railway will make has yet to be estimated because the government has yet to set the fares. In 2006, it said trips within the peninsula or Taipa would cost MOP3 and trips between the peninsula and Taipa would cost MOP4, but it has subsequently dropped that idea. At the time, it would have been cheaper to take a bus. The second phase, if approved, would extend the LRT to Coloane. Other plans yet to be approved are to use the LRT to connect Macau to Hengqin Island and to the Hong Kong-Macau-Zhuhai Bridge. “We’re in compliance with these long-term studies and we are maintaining some provisions in phase one so that if the government decides to go ahead with other phases we do not have to interfere with phase one,” Mr Ritchie says. MARCH 2012

Telecommunications

Competition on call CTM will know later this month which companies want to compete against it when the monopoly ends on landline telecommunications services he names of the companies looking to break CTM’s monopoly on landline telecommunications services will be revealed by the end of the month. The government’s tender commission is scheduled to open all proposals the day after the public tender closes on March 27. The government has outlined a plan to introduce two new players to the market. It says “it is the appropriate moment” to issue licences, to attract more investment to the telecommunications sector and improve the quality of the services to households and businesses. Another happy by-product should be reduced tariffs. By the end of last month, no company had announced it would take part in the tender but the telecommunications regulator confirmed that at least six firms had requested for more information. One of those companies was Hutchison Telephone (Macau) Co. Ltd., the Macau mobile telecommunications division of Hutchison Telecommunications Hong Kong Holdings Ltd. Chief executive officer Ho Wai Ming confirmed the news late last month. Although Mr Ho would not confirm if Hutchison would bid for a place in the landline market, he said the company was interested and had written to the Bureau of Telecommunications Regulation requesting more information. Only then would it decide how to proceed. Hutchinson provides landline-based telecommunications services in Hong Kong.

Out for the count One of the tender terms is for new operators to lay their own network lines to cater for a minimum coverage of 30 percent of residential buildings when the operator commences business – no later than 18 months after winning a licence. Mr Ho said the deadline may be too tight for Hutchison. The company has welcomed the opening of the market, arguing that more competition could lead to a decrease in costs to consumers. February will hardly be a month MARCH 2012

February will hardly be a month to remember for CTM. While counting down its last days as the city’s sole landline telecommunications provider, its services suffered a major black out to remember for CTM. While counting down its last days as the city’s sole landline telecommunications provider, its services suffered a major black out, leaving thousands of customers unable to use their landline telephones or access the Internet for at least six hours. CTM’s mobile network was also affected. The company said the blackout was likely due to a software malfunction. Following the major service outage, CTM announced a series of special one-off discounts to all customers. The discounts are expected to cost the company around MOP30 million (US$3.75 million). While CTM was still investigating what caused the network to crash, mobile

telecommunication provider SmarTone – Mobile Communications (Macau) Ltd. was considering seeking reimbursement. During the outage, all 200 telecommunications stations it rents from CTM were affected, impacting its services. SmarTone’s chief executive officer, Patrick Chan, criticised CTM for not having a back-up system. SmarTone saw its Macau business grow significantly last year. The company’s operating income climbed to HK$42 million for the six months to December, up by 163 percent year-onyear, while revenues rose by 35 percent to HK$179 million, driven by higher revenue from both local and roaming services.

59 KEVIN RUDD AUSTRALIA’S FORMER MINISTER FOR FOREIGN AFFAIRS

Tomorrow’s ‘Pax Pacifica’ THE CONCEPT OF A SINO-AMERICAN DUOPOLY IS NEVER GOING TO FLY IN ASIA lthough the relationship between China and the United States is critical to Asia’s future, this does not mean that the region will become a Sino-American duopoly. The concept of a “G-2” is never going to fly in Asia. To begin with, excluding China, Asia’s combined gross domestic product is roughly equivalent to that of the U.S. and it vastly exceeds that of China. Furthermore, Japan remains the world’s third-largest economy, while economies like India, South Korea, Indonesia and Australia are growing rapidly. Under President Susilo Bambang Yudhoyono’s direction, Indonesia is on the cusp of becoming a US$1 trillion (MOP8 trillion) economy. With a population approaching 250 million, the country’s annual GDP growth has been consistently above 6 percent. At this rate, Indonesia is likely to emerge as one of the world’s top six economies by 2030. Moreover, most of these dynamic emerging economies are also robust democracies and are committed to open economic policies. Indeed, free-trade agreements are expanding across the region. Australia and New Zealand’s free-trade agreement with South East Asia, for example, which is now in force for all 12 signatories, creates a free-trade area embracing more than US$3 trillion of regional economic activity. Australia is also concluding a free-trade agreement with South Korea and is involved in similar negotiations with China, India and Japan. Negotiations on a Trans-Pacific Strategic Economic Partnership at the 2011 Asia-Pacific Economic Cooperation Summit in Hawaii reflected the pursuit of such opportunities by other countries in the region. From a global perspective, Asia’s economic dynamism is impressive: Asia accounted for less than 20 percent of global GDP 30 years ago, whereas the U.S. represented 30 percent. But, within the next five years, Asia will constitute nearly onethird of global GDP, with the U.S. share falling to less than one-fifth.

Challenges ahead Nonetheless, both continental and archipelagic Asia remain beset by unresolved territorial disputes over areas such as the Korean Peninsula, the East and South China Seas, the Taiwan Straits, the Thai-Cambodian border and Burma’s restive border regions. Each of these conflicts could undermine the prosperity that the region has built so far. Indeed, while Asia is home to all of the world’s hopes for

Although the relationship between China and the United States is critical to Asia’s future, this does not mean that the region will become a Sino-American duopoly. The concept of a “G-2” is never going to fly in Asia

the 21st-century global economy, it is handicapped by all of the rigidities of an almost 19th-century set of territorial and security disagreements. Although some of these disputes are intrinsically internal, there is an interest across Asia in collectively charting a common course on some of the region’s seemingly intractable problems, lest they spiral out of control. Moreover, Asia has been demonstrating democratic progress, as well as a strong interest in expanding its economic openness (both internally and externally). The region is also acknowledging the need for national sovereignty, whereby countries do not have to fear outside interference with domestic politics. Finally, across the region, there is a pervasive desire to avoid polarisation into Chinese and American blocs. Instead, countries in the Pacific region are attempting to build the institutions and the habits of cooperation that will enable all of us to collaborate in addressing individual security challenges as they arise. But can the dissonant values, aspirations and interests of the U.S., China, and the rest of Asia be reconciled in the decade ahead? Or do we face a future defined by strategic drift, ideological conflict, and irreconcilable interests? I firmly believe that Sino-American conflict is not inevitable and that it would undermine the interests of all parties, as well as their fundamental values.

Building bridges A step in the right direction, albeit an imperfect one, was taken with the establishment of the G20. China, India, Korea, Indonesia and Australia, along with Japan, now sit at the same table to deliberate on global financial regulation, financial imbalances and the global recession. So far, China has played a significant and constructive role in this forum. In fact, without China, the global economy would not have recovered as rapidly as it did from the most recent crisis. As China seeks to take its place in the global order, it has increasingly sought to enhance its global leverage by cooperating with other emerging economies – the other “BRICS” (Brazil, Russia, India, China and South Africa) – in major global negotiations. The BRICS’ regular meetings and cooperation at multiple levels are likely to be a continuing feature of the international system. But, with the exclusion of the U.S., this does not provide a common platform to deal with shared policy challenges in Asia (or, for that matter, elsewhere). In his recent book “On China”, former U.S. Secretary of State Henry Kissinger argues for the development of a Pacific Community. In 2011, a good start at following through on this vision was realised at the East Asia Summit in Bali, where, for the first time, China, the U.S. and the region’s other principal players gathered around a table to deliberate their interests. It was a historic opportunity to begin forging a common vision for Asia’s future. The task today is to craft what future historians might call a ‘Pax Pacifica’ – a peace that will ultimately be anchored in the principles of common security, and that recognises the realities of U.S. and Chinese power, without turning the rest of the region into collateral damage should the Sino-American relationship deteriorate. MARCH 2012

Property | Market Watch

Fortune telling Jones Lang LaSalle expects residential prices to remain stable amid fewer transactions this year. Rents should continue going up his could be a challenging year for residential real estate in Macau. Global real estate services firm Jones Lang LaSalle expects the number of transactions to stay low but does not anticipate a reduction in homes prices. “Backed by low holding costs, healthy labour market conditions and tight supply in the pipeline, we do not expect to see a major correction in the city’s residential prices,” says Jeff Wong,

MARCH 2012

Jones Lang LaSalle’s head of residential in Macau. Preliminary data for January from the Financial Services Bureau provides mixed signals. The average price per square metre for residential premises transacted dropped sharply month-onmonth to MOP45,540 (US$5,692), a significant 14.5 percent decrease. But that was widely expected as December’s price hike was mainly due to sales in

three major luxury residential projects under construction. On a year-on-year basis, home prices in January were up by 23.4 percent and above the figure recorded for 2011 as a whole, when the average transaction price of residential units increased by 33.6 percent year-on-year to MOP41,433 per square metre. Mr Wong says that, for the years to come, competition in the primary sales

Year

Month

Year

Month

2010

January

2010

January

2011

Number of Transactions 1,297 February 1,084 March 1,503 April 2,202 May 1,627 June 1,543 July 1,204 August 940 September 1,505 October 1,312 November 1,818 December 1,954 January 1,541 February 788 March 2,225 April 3,485 May 2,402 June 2,368 July 878 August 645 September 671 October 606 November 681 December 886

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

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

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

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 1,815 1,661 1,714 2,893

Source: DSEC

Residential units sold as per record of stamp duty*

* 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.

Total number of buyers in residential transactions in 2011:

23,185

58.9 billion Proportion of buyers

12% 88%

Non-Residents

Residents

24% 76%

Non-Residents

Residents

No to stamp duty New private market supply to be entering the market between 2012 and 2014 is estimated at about 6,100 units; however, over 4,700 have already been sold, data provided by Jones Lang LaSalle shows. For now, the main worry for realtors is the special stamp duty on the re-sale of residential units within two years of their acquisition. Some real estate agencies expect sales to further plunge 10 to 15 percent this year mainly because of the levy, but also due to an uncertain international economy and the government’s massive public housing projects. The president of the Macau General

GOOD DEAL

acau property continues to attract big investors.Last year alone, the total value of transactions worth HK$40 million (US$5.2 million) or more, amounted to HK$4.9 billion, data from Jones Lang LaSalle shows. Even so, that was a yearly drop of almost 20 percent. Among the eye-catching deals from last year was the AIA Tower transaction, sold by Speymill Macau Property Company PLC for HK$1.26 billion to American International Assurance Company (Bermuda) Ltd.

The Manhattan South Tower was sold by investment fund Apollo to a local investor for HK$600 million. Macau 39 was traded for HK$950 million by Westport Capital Partners LLC. and Tenacity Real Estate Group to a group of Hong Kong investors. Gregory Ku, Jones Lang LaSalle’s managing director in Macau, says it is difficult to expect similar sized deals for this year. “The market is still very attractive for big investors; the problem is the stock – all the saleable stock is already gone.” MARCH 2012

Source: DSEC

Proportion of buyers

market will remain negligible, meaning less pressure for developers to push down prices of new homes.

Total value of residential transactions in 2011:

Property | Market Watch

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

6,000 5,000 4,000 3,000 2,000

Source: DSEC

1,000 0

Jan

Mar

May

Jul

Sep

Nov

Jan

Mar

May

2010

Jul 2011

Sep

Nov

* 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 (MOP)

60,000 55,000 50,000 45,000

Source: Financial Services Bureau

40,000 35,000 30,000 25,000 20,000 15,000 10,000

Jan

Feb

Mar

Apr

May

Jun

Jul 2011

Aug

Sep

Oct

Nov

Dec

Jan 2012

* 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.

LET’S DO BUSINESS D

emand for office space continues to gain momentum in Macau, boosted by demand from both the public and private sectors. Jones Lang LaSalle says rental prices for Grade A offices should carry on going up this year. “We expect to see new demand to continue to come from international retail brands and other service providers for the new gaming facilities,” says Gregory Ku, Jones Lang LaSalle’s managing director in Macau. “At the same time, government departments will remain the key source of expansion and relocation demand.” Macau is set to welcome a new office building this year – Nam Van Lake Lot A6 project. Located across the street from the New Yaohan department store, the long-standing unfinished building resumed construction last year. It will add a total of 37,000 square metres of new office stock MARCH 2012

to the leasing market, “relieving a bit the pressure of tight vacancy,” says Mr Ku. The average vacancy rate for offices already fell to 18 percent last year from 24 percent in 2010, data from Jones Lang LaSalle shows. Some of the major office buildings such as Bank of China Tower, Landmark and AIA Tower even achieved occupancy levels of 90 percent or above as of December-end. For 2011 as a whole, office rental values rose by 16 percent year-on-year, while office capital values grew strongly by 35.5 percent, says Jones Lang LaSalle. Over 930 office sales were recorded last year, up by 43 percent. The total value of transactions more than doubled yearon-year, to MOP3.0 billion (US$375 million). The average price of office units transacted rose by 53.5 percent to MOP35,076 per square metre, according to official data.

Association of Real Estate, Chong Sio Kin, says the levy is having a negative impact on the sector and is leading to a devaluation of the real estate assets owned by most residents. He last month called for an end to the measure. Jones Lang LaSalle’s Mr Wong also opposes the special stamp duty, saying it makes the overall market less efficient. He adds that the levy is a sign of government intervention, and is not positive in the long term. The special stamp duty for residential real estate transactions came into effect last June. It levies a 20 percent special stamp duty on residential properties resold within a year of their purchase. The levy is reduced to 10 percent if the resale takes place between one and two years after purchase. A revision of the stamp duty is to take place mid-next year, taking into account changes in the real estate environment in Macau. For now, the most obvious impact of the stamp duty is a sharp drop in the number of transactions. But that is not the case in prices. Capital values for high-end residential properties in Macau rose by an average of 15.2 percent year-on-year last year, despite the slower growth momentum in the second half, according to Jones Lang LaSalle’s data. For the mass and medium residential market, capital values recorded an estimated growth of 10.6 percent in comparison with 2010. The number of residential units transacted in Macau last year dropped by 4.5 percent year-on-year, to less than 17,200, data from the Statistics and Census Service shows. Even so, the total value of transactions went up by 28.1 percent to MOP58.86 billion. Close to 4,900 units were sold for over MOP4 million. Mr Wong says Macau’s residential rental market will lend support to the city’s residential capital values. He expects rents to increase this year within a range of 5 percent to 10 percent, depending on the property profile. With the strong expatriate demand led by the opening of new gaming facilities, the average rental value of high-end residential properties grew strongly by 22.6 percent year-on-year in 2011, according to data from Jones Lang LaSalle. The average rental value for the mass and medium market also rose significantly by 25.3 percent year-on-year.

AVERAGE TRANSACTION PRICE PER SQUARE METRE OF RESIDENTIAL UNITS BY DISTRICT AS PER STAMP DUTY RECORDS

Source: DSEC

(MOP) 2010

District

2011

Macau

26,845

32,026

30,347

33,397

38,261

44,269

36,345

41,519

Macau Peninsula Ilha Verde Tamagnini Barbosa Areia Preta and Iao Hon Areia Preta new reclamation zone (NATAP) Mรณng Hรก and Reservoir Fai Chi Kei Lamau Docks Horta e Costa and Ouvidor Arriaga Barca Patane and Sรฃo Paulo Conselheiro Ferreira de Almeida Ferreira do Amaral (Guia) ZAPE NAPE and Praia Grande Bay reclamation area Downtown Macau Barra / Manduco Praia Grande and Penha

26,674 22,182 19,942 19,812 32,307 20,993 22,744 28,151 25,261 19,396 19,107 21,020 20,308 16,011 59,793 19,931 16,556 21,153

27,603 23,108 25,141 22,857 34,413 25,145 24,895 29,157 25,745 18,875 20,538 20,476 25,713 19,620 48,445 19,383 26,676 24,888

29,517 24,524 25,886 21,887 34,615 23,506 25,437 28,099 28,603 18,849 20,990 21,948 24,953 20,705 58,820 18,223 23,058 32,955

29,664 27,365 27,819 22,519 32,314 26,495 24,072 34,437 29,111 21,853 21,387 23,371 27,565 24,399 51,835 20,742 27,491 37,988

37,159 40,402 26,959 28,581 43,266 30,706 28,762 36,867 32,437 25,714 23,271 27,004 26,267 28,915 67,891 27,878 30,973 35,151

42,296 44,075 34,159 32,586 51,255 33,789 37,637 35,081 32,889 30,370 27,901 30,460 54,703 30,228 76,634 27,862 36,663 34,709

35,416 37,154 31,614 31,455 43,308 32,225 35,682 39,655 34,592 27,438 28,945 29,030 38,596 30,410 60,393 29,745 30,180 36,672

39,228 34,363 30,563 32,246 45,984 36,135 33,401 38,787 38,461 27,574 29,676 33,714 57,699 31,196 61,126 28,197 32,085 32,470

Taipa Ocean Gardens and Taipa Pequena Downtown Taipa University and Pac On Bay Pac On and Taipa Grande City and Jockey Club

27,342 27,893 27,255 20,774 54,776 15,876

28,372 29,608 28,366 21,897 50,445 27,062

29,583 31,888 28,280 26,228 57,185 26,654

39,876 28,837 41,527 22,054 56,702 27,596

33,402 35,102 31,750 26,991 82,688 27,346

42,457 45,435 38,869 34,566 73,898 28,948

38,162 36,629 36,733 37,502 68,090 27,588

45,057 36,115 45,243 41,668 66,910 35,360

Coloane

25,778

59,509

64,087

64,398

67,484

70,098

61,893

64,063

Notes: 1. The above information covers building units with stamp duty paid in the reference quarter 2. Including residential units that were exempt from the payment of stamp duty ~ No figure provided/confidential data

AVERAGE TRANSACTION PRICE PER SQUARE METRE OF OFFICE UNITS BY MAIN DISTRICT AS PER STAMP DUTY RECORDS (MOP) 2010

District Macau ZAPE NAPE and Praia Grande Bay reclamation area Downtown Macau Praia Grande and Penha

2011

23,740 18,869 28,486 23,186 ~

22,169 16,896 22,252 28,838 ~

23,374 18,839 27,940 16,305 ~

27,078 32,046 27,802 25,801 ~

27,700 27,393 30,819 ~ 19,649

36,618 35,277 37,909 32,506 31,391

34,011 23,937 35,200 32,004 35,023

38,404 34,674 39,068 37,662 37,549

Notes: Only covers office buildings with ten storeys or higher ~ No figure provided/confidential data MARCH 2012

Property

For most, a mirage Homes in the third phase of One Oasis will go on sale shortly and are expected to fetch higher prices than units in phases one and two BY XI CHEN

bout 300 homes in the third phase of One Oasis, named Park Residence, will be put up for sale to the public sometime this month, according to Empresa de Fomento Industrial e Comercial Concórdia S.A., the company that manages the project. They comprise studio, one-bedroom and two-bedroom flats, and four-bedroom duplexes. One Oasis is intended as a high-end residential complex, with Europeanstyle landscaping, clubhouses, a shopping mall, a six-star hotel and a proposed international school. It will be in Coloane, close to the south end of Cotai, facing the University of Macau Hengqin campus across the river, and will have the Caesars Golf Macau course and the panda pavilion as neighbours. It is being developed by five partners: ITC Properties Group Ltd., Nan Fung Group, Linkeast Investments Ltd., ARCH Capital Management Co Ltd. and Success Universe Group Ltd. ITC Properties is the biggest stakeholder. Three blocks, each of 44 floors, will be constructed in this phase. Space is expected to fetch, on average, more than HK$5,000 (US$625) a square foot – more than the HK$4,000 a square foot the first phase commanded and the HK$4,800 a square foot in the second phase. “It will be around HK$5,500 to HK$6,200, based on the resale prices of the apartments in phase one and two. Some luxury special units are already being sold at HK$8,400 to HK$10,600 per square foot,” says Wilson Chung Wai Suen, marketing director of the project. The first phase of One Oasis is expected to be completed in 2013, the second in 2014 and the third in the second half of 2015. However, reports in some news media say the completion dates may be postponed because of a lack of manpower due to government restrictions on importing construction workers. The developers have given no schedule for the construction of the public facilities in the complex. Like the space in phases one and

MARCH 2012

Space is expected to fetch, on average, more than HK$5,000 a square foot two, space in phase three is likely to be snapped up mainly by Macau residents and mainland Chinese. Mr Chung says more than 60 percent of the homes in the first two phases were bought by local residents, around 30 percent by mainlanders and the rest by Hongkongers or the odd Southeast Asian or European.

Take me higher One Oasis is part of the latest flurry of high-end housing projects, riding the wave of the city’s rapid economic growth. Financial Services Bureau data shows that in Coloane the average price of residential space reached MOP95,981 a square metre in December - 11 out of the 15 purchases from which that figure was derived were from homes in One Oasis, and more than half of those 11 homes bought in One Oasis were duplexes. The average price of residential

property in Macau as a whole in December was the highest for a year. Other new high-end housing projects include the Paragon, being developed by China Overseas Land & Investment Ltd., which will contain 189 homes, and a complex with 1,147 dwellings and a hotel on Estrada de Seac Pai Van in Coloane, being developed by Cheuk Nang (Holdings) Ltd. Chinese Estates Holdings Ltd is expected to put space in its HK$20-billion La Scala housing development on the market soon. The first phase will have 800 homes. La Scala, in Taipa, near the airport, will be built by 2014. One Central and One Grantai are currently at the very top of the high end of the housing market. Space in One Central is being re-sold for nearly HK$8,000 a square foot, on average, and space in One Grantai for nearly HK$7,000 a square foot, on average.

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

Truth in numbers THE STATISTICS AND CENSUS SERVICE SEEMS A LITTLE TOO HASTY IN DECLARING VICTORY IN THE GOVERNMENT’S CAMPAIGN AGAINST PROPERTY SPECULATION n November of last year, a press release issued by the Statistics and Census Service began with a bold statement. Commenting on property transactions in the third quarter of last year, it declared: “Purchase and sale of property decreased signifi cantly ... on account of the measures introduced by the government to curb property prices”. Those measures – a special stamp duty on the resale of homes within two years of being purchased, and a tightening of the supply of credit for housing – had been implemented at the beginning of the third quarter. The press release implied that the effects had been almost instantaneous. In the December issue of Macau Business, I suggested in the Economic Trends section that celebrations might have been premature. The data for the fourth quarter, released last month, seem to indicate that my suggestion was correct. The government took the measures it did because it thought speculative, short-term purchases, coupled with easy credit, were driving prices up. Rising prices make it increasingly diffi cult for residents of Macau, particularly young couples, to buy a home. So the government tried to kill two birds with one stone. The special stamp duty was meant to increase the cost of sales by speculators and therefore deter them from buying in the fi rst place, thus stopping and perhaps reversing the rise in property prices. By stopping and even reversing the rise, the government would achieve its main goal of allowing Macau residents to re-enter the market for homes.

Stable door

But from the beginning the government’s thinking appeared woolly and the methods it used to put its words into action

Was the Statistics and Census Service declaration of victory over speculators in the third quarter premature? The latest available data suggest a “rescheduling” of sales, rather than a slowing of the rate of increase in their value

seemed inappropriate. First, much of the new housing in Macau is meant for non-residents, including wealthy occasional visitors. Such buyers are unlikely to be deterred by the government’s measures. Anyway, the price of the kind of homes they buy is far beyond the means of the average Macau resident – with or without government intervention. Second, the market anticipated the government’s measures. Buyers rushed to buy before they came into force, so that in the second quarter of last year transactions reached an unprecedented peak. Sales in the second quarter were worth 70 percent of the value of sales recorded in all of 2010. Sales in April alone were worth 40 percent of the value of sales in 2010. The number and value of sales dropped in the third quarter, not because nobody wanted to buy but because everybody had already bought in the second quarter. Third, tightening the supply of credit for housing does nothing for the buying power of Macau residents. And it is unlikely to hamper speculators and wealthy outsiders, who already have money or access to credit elsewhere. Fourth, speculators are more likely to buy new homes before they are built, so it is not much of a handicap for a speculator that wishes to avoid the stamp duty to sit on a property for two years. The special stamp duty is more likely to penalize ordinary owners that are compelled to sell by some misfortune.

Looking foolish

So was the Statistics and Census Service declaration of victory over speculators in the third quarter premature? The latest available data suggest a “rescheduling” of sales, rather than a slowing of the rate of increase in their value. The data shows housing sales last year were worth almost 30 percent more than in 2010. The average price per square meter of residential space was about a third higher last year than in 2010. These fi gures do not indicate a cooling of the market. There were also fewer new residential mortgages granted in the fourth quarter than in the third quarter or at the same stage a year before. This seems to indicate that the intended benefi ciaries of the government measures – Macau residents – are buying less. Everything points to a failure of government policy. This did not prevent the Statistics and Census Service from saying in its press release announcing the data for the whole year of 2011 that, “on account of the measures introduced by the government to curb property prices, the ... number of [purchases and sales of] residential units (17,176) dropped by 4.5 percent year-on-year whereas the total value (MOP58.86 billion) went up by 28.1 percent”. Quite apart from the question of whether such a comment is inappropriate for a body that ought to be impeccably independent, we should ask: is the Statistics and Census Service so focused on touting the success of the government’s measures that it is blind to the selfcontradiction in its own pronouncement? MARCH 2012

Business

Franchise Man Centroid wants to expand its Dairy Queen ice cream and Subway sandwiches’ footprint in Macau BY ALEXANDRA LAGES

orris Man grew up in Canada and in the United States. When he came back to Macau to create his own business 12 years ago, the chairman and chief executive of Centroid Group (International) Ltd. figured the city did not have enough food and beverage outlets for westerners. He grabbed the opportunity, getting franchises to sell Dairy Queen ice cream and Subway submarine sandwiches. Mr Man has different approaches to each franchise. While his Subway business is a runaway success, his Dairy Queen business is growing more slowly, he says. Centroid signed a franchise contract with International Dairy Queen Inc. in 2009. A year later it opened two

MARCH 2012

stores, one near the ruins of Saint Paul’s and the other in the central business district. An outlet in Taipa and another on the peninsula have been added since. Although turnover is growing at a rate of 25 percent a year, the Dairy Queen operation is still not profitable. But Mr Man is optimistic, with business increasing as new outlets open. Mr Man says that after the first year there was a need for changes in the business plan for Dairy Queen. “We opened one shop near the ruins of St. Paul’s and another downtown because we wanted to find a balance between the two different markets, which are tourists in the St. Paul’s area and locals in the residential-commercial area,” he says.

“We tested that for a year and in 2011 we decided to concentrate on the local market and build a brand, instead of spending on more high-cost rents in tourist areas.” Boosting brand awareness among residents will be Dairy Queen’s aim for the next two years. “Of course, if it is economically reasonable, we will try leasing some stores aimed at the tourist market,” Mr Man says. He explains that International Dairy Queen is looking not for fast growth in the number of outlets around the world but for sustainable expansion. Even so, Centroid is planning to open three more Dairy Queens here this year, matching the brand’s fast growth in the mainland.

67 Dairy Queen opened its 500th outlet in the mainland last month and has plans to open more than 100 more there by the end of this year. The mainland is the market where Dairy Queen has expanded the most, the chain having opened its first shop there only in 1991, in Beijing. Its 500th mainland outlet, in Shanghai, is operated by Shanghai Shida Catering Management Ltd., which has more than 350 Dairy Queens in southern and eastern China.

Long lunches As Centroid opens more Dairy Queen outlets in Macau, Mr Man hopes to start making its products here, instead of importing them from the mainland. One of the main reasons is the appreciation of the renminbi against the pataca. “The renminbi is going up so fast that we cannot make enough patacas to actually maintain our costs at a low level. We are trying to get products manufactured locally, but since we only have four stores we are not buying enough. We will solve it next year. We should have about eight more stores by the end of 2013,” he says. Mr Man says the Subway business is having a much easier time. The brand is owned by Doctor’s Associates Inc. and Subway is one of the fastest-growing chains in the world, with around 36,000 shops in almost 100 countries. Centroid opened its first Subway outlet in 2009 in the NAPE area, and now has a Subway shop in Taipa. They are doing MOP300,000 (US$37,500) worth of business per month, including deliveries. “We spent about a year and a half in the red and we started using different marketing strategies. Last year, we opened the second store in Taipa and the business has improved,” Mr Man says. Centroid is planning to open a new Subway outlet on the peninsula this year. The company is also negotiating with the Venetian Macao to open an outlet in the casino- hotel’s food court.

No complaints “Subway is becoming known really fast. I’m expecting a regular store to be doing about MOP500,000 a month,” Mr Man says. Centroid was set up in 2008. At present Dairy Queen and Subway are its only franchises in Macau. But the company is looking at other franchis-

“Subway is becoming known really fast. I’m expecting a regular store to be doing about MOP500,000 a month,” says Norris Man, the CEO of Centroid Group ing opportunities, such as DQ Grill and Chill, an International Dairy Queen full-service restaurant chain. Centroid concentrates on selling products to suit western tastes. “I want the local market to experience more western culture, because I grew up there. And I want foreigners that are working here to feel like they’re home,” Mr Man says. High rents and wages hamper most small and medium enterprises in Macau, and Centroid also feels the pinch. However, Mr Man says: “Complaining is not the way to solve problems”. Instead, he acts. “Especially for these two franchise businesses, we try to create a career for

young people who are graduating or have left school, through internal promotions and a lot of training,” he says. “They can expect to work for us for the next 10 years. They could become a store manager, a trainer, etcetera.” Mr Man thinks a helping hand from the government in finding suitable recruits would be welcome. But he adds: “Businesses also should figure out a way to keep their employees in the company.” Mr Man is also the head of Hon Hoi Group (International) Co. Ltd., created in 2000. It is in the food and beverage, entertainment, electric motorcycle, real estate, cleaning and design businesses in Macau, the mainland and Canada.

SWEET-TOOTHED ORACLE I

nternational Dairy Queen Inc. is known for two reasons: it sells soft serve ice-cream and fast food, and is owned by Warren Buffet’s Berkshire Hathaway Inc. Mr Buffet is the world’s third-richest person, according to Forbes magazine, and is widely regarded as one of the world’s most successful investors. Mr Buffet, 81, habitually snacks on a Dairy Queen dessert before his company’s annual meetings in his home town of Omaha, Nebraska. Based in Minneapolis, Dairy Queen has more than 5,700 outlets in 22 countries. Berkshire Hathaway Inc. bought the company in 1998 for US$585 million. The acquisition left some analysts puzzled. They said the ice-cream chain was not the kind of investment expected of Mr Buffet, often called the “Oracle of Omaha” because of his business acumen. “We have put our money where our mouth is,” is how Mr Buffett explained the investment in his annual letter to shareholders in 1998. He added that he himself was a frequent patron of the brand. Dairy Queen also suited Mr Buffett’s oft-stated preference for “companies that I can understand”. As time went by, the acquisition of Dairy Queen has passed into investment lore as another triumph for Mr Buffet. MARCH 2012

Business

Cold hard cash Bureau de change Travelex has opened an outlet in Macau and is preparing to open up to four more BY SARA FARR

fter 35 years and establishing a network of 1,000 outlets worldwide, Travelex Holdings Ltd. has added Macau to the list. “The world’s gravity has been moving east and clearly we have been too,” Peter Jackson, the Travelex chief executive told Macau Business. The British company makes the bulk of its revenue from currency exchange, a service it will now offer the millions of tourists that visit Macau every year. The new bureau de change opened at AIA Tower last month and there are plans to open up to five more this year. Travelex country manager for Hong Kong and Macau, Vincent Arcuri, says negotiations are ongoing but the second bureau could open as early as next month, a third in June and two more between October and December. Mr Jackson doesn’t rule out the possibility of opening a bureau at Macau International Airport but says the company is interested in busier locations. Hong Kong International Airport has 20 Travelex outlets and there are two at Zhuhai airport. The Macau bureau has three staff and is supported by the Hong Kong office. As additional outlets open, the company says it would look into building a management structure to oversee operations here.

Retail focus Branches within the city’s casinos are not on the agenda, with Mr Arcuri saying the company hopes to target a different segment of the tourist market. “What we’re trying to do is position ourselves in some high-level tourist areas where we feel that the brand can grow,” he says. “There are probably three or four bases of customers we want to attract and one segment we are after is a high-traffic business area. [At AIA Tower] we have the Grand Emperor Hotel casino across the road, which has a lot of tourists. We felt it was a good location for a starting point for the brand.” Mr Arcuri says the company invested millions establishing the Macau bureau but would not give a specific figure. Its staff have been trained in the mainland, where Travelex has around 20 bureaus and money has been spent building a “state of the art” outlet. Chairman of the British Business Association of Macau, Henry Brockman, is also the director of Travelex Macau Ltd. He says the bureau doesn’t levy a service charge, buys all currencies and sells 15 currencies.

MARCH 2012

“What we’re trying to do is position ourselves in some high-level tourist areas where we feel that the brand can grow,” says Travelex country manager for Hong Kong and Macau, Vincent Arcuri The bureau currently operates all week from 10am to 8pm. “It’s still a trial but hopefully we’ll have it open from 10am to 9pm,” Mr Arcuri says. “The store is open after the banks are closed.” The company decided to focus on its retail business last year, selling its prepaid cash card operation to Mastercard for £290 million (MOP3.7 billion) and its business payments arm to Western Union for £606 million. Travelex says it processes £20 billion of foreign exchange transactions a year. Travelex reported that its global revenue rose 9 percent in the first half of last year, to £360.8 million, while earnings before interest, taxes, depreciation and amortisation reached £52.1 million, up by 16 percent.

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

Technical education ONE SCHOOL’S REVOLUTIONARY USE OF TECHNOLOGY IS CREATING REGIONAL STANDARDS IN BROADENING THE EDUCATION AND EMPLOYMENT HORIZONS OF ITS STUDENTS e frequently hear that Macau’s students lack open minds, creativity, ambition, innovation, flexibility and an entrepreneurial streak. They cannot, apparently, question why, nor can they think out of the box. We hear they are schooled into conformity, silence, learned helplessness and obedience. Data from two rounds of the Organisation for Economic Co-operation and Development’s Programme for International Student Assessment (PISA) shows that students’ performance has declined in mathematics and reading. Macau’s students are now below average in reading and effective strategies to understand, remember and summarise information. They feel disconnected from school, yet stay silent. They live with daily stress and pressure from tests and examinations in a marks-driven, memorise-and-repeat culture, with rote learning of a curriculum that is irrelevant to the outside world. This flies in the face of Macau’s breakneck economic development, where precisely those skills that its students lack are those which employers seek. Macau had the lowest score of all PISA’s 65 participating countries, territories and cities for the items “most of my teachers really listen to what I have to say” and “the teacher shows students how the information in texts builds on what they already know”. The city had the second lowest score for the item “the teacher encourages students to express their opinion about a text” and the third lowest for “most of my teachers treat me fairly”. These occur despite Macau’s schools having the highest autonomy in resource allocation and the fourth highest autonomy in devising their curricula and assessment.

Leadership role Wouldn’t it be good if a mainstream Macau school could create a major initiative to address these problems and become a regional leader? The good news is there is one school, Escola São Paulo, that has started such a project. I am a member of a small team of external, impartial evaluators to the programme. The project is designed to improve students’ motivation, attitudes, higher order thinking, autonomy, voice and enquiry and research skills. It also aims to boost parental involvement; active, interactive and collaborative learning; student engagement and involvement in, and responsibility for, their own learning. The school is changing several pedagogical strategies and has installed new information and communication technologies, furthering the Macau government’s encouragement of using such tools in education. Students have their own tablet computer to use at home and at school in a technology-rich learning environment. The school has relieved students of the literal burden of carrying kilograms of books to school, by loading a range of learning resources onto the tablets.

This is the most advanced information and communication technologies project of its kind in the region. It is supported by the direct involvement of Microsoft, H3C and Lenovo. The school has partnered with major education software companies such as Dyknow and Sonic Foundry from the United States to implement sophisticated technology to facilitate interactive, dynamic classrooms. The project has been running for only a short time, yet already it shows positive results. The evaluators report a rise in active and interactive learning, student motivation, enthusiasm and more positive attitudes to learning. The evaluations also show hugely increased information and communication technologies’ usage, greater student voice and autonomy, and teachers listening to students and taking them seriously.

For the future Classrooms buzz with student involvement, engagement and on-task enjoyment. Unlike in many other classrooms around Macau, there are no sleeping students. The students are connected to their learning. The teachers listen to them and act on what they hear, promoting learning differentiated to individual needs. Learning is real world, relevant and student centred. Alongside this runs formative, learning-related and participation-related continuous assessment (assessment for learning), providing feedback to and from teachers on which they act, with immediate in-class polling and the opportunity for each student to contribute directly to shared learning. This changes lessons from the teacher’s coverage of the syllabus, regardless of whether or not students listen or learn it, to motivated, real and engaged learning. The school’s advanced e-environment is stimulating powerful pedagogies which are already benefiting learners across the age and ability ranges. No wonder, then, that the project is attracting international attention, with several groups of visitors coming from across Southeast Asia. Here at last, in its early stages, is a promise of better education, of the development of the kinds of people that Macau needs, and leadership in breaking the dullness, initiative-starved, limited horizons and foreshortened ambitions that are so deadening to Macau’s development. MARCH 2012

WOMEN AT WORK mbreport 71

IN SEARCH OF EMPOWERMENT THIS MONTH THE WORLD MARKS INTERNATIONAL WOMEN’S DAY, BUT MACAU HAS A LONG WAY TO GO BEFORE IT ACHIEVES PARITY OF THE SEXES IN BUSINESS OR POLITICS. A SOCIETY BOUND BY TRADITION IS PARTLY TO BLAME BY LUCIANA LEITÃO

hen James Brown recorded the song “It’s a Man’s, Man’s, Man’s World” in 1966 he may not have imagined that the words, described by Rolling Stone magazine as “almost biblically chauvinistic”, would still apply nearly half a century later. They are certainly relevant in Macau, where women are still seldom found in top positions. Businesswomen and female politicians interviewed by Macau Business say the main obstacle is the difficulty of reconciling their careers with motherhood. A survey in 2008 commissioned by the Consultative Commission on Women’s Affairs concluded that among women’s main concerns in Macau were emotional problems caused by family pressures, and the lack of family services and community centres. Six out of 10 bore the main responsibility in their households for the housework, and only 8 percent had a domestic helper. One in three women without a fulltime job had given up working for the sake of family. In families with members that needed special care, women shouldered 64 percent of the burden of taking care of them. The results also indicated that women had difficulty in getting promoted at work. Jane Liu, executive director of Ricacorp (Macau) Properties Ltd., says that for a female estate agent to succeed she needs to be better than her male col-

leagues. But she has never felt that she has been pushed aside; quite the opposite. “When you step into the business world, men quite enjoy having you there,” Mrs Liu says. She says male executives respect a woman that can stand shoulder-to-shoulder with them. She has never once felt disrespected because she is a woman. Of Macau’s labour force, 49 percent are women. But the percentage of top jobs held by women is drastically smaller. Among members of the Legislative Assembly, senior government officials, leaders of associations and directors and managers of companies, only one in three is a woman, data from the Statistics and Census Service show. This is despite the fact that most university graduates are women.

Already wealthy There are few businesswomen in Macau that are both successful and well-known, apart from Pansy Ho Chiu King or Susana Chou. “Many women, because their husbands or families are so well off, don’t feel they need to be so hard-working and empowered,” Mrs Liu says. She says that to reach a top position in a big company one needs to burn the midnight oil, and that some women just do not wish to lead that kind of life. Originally from Hong Kong, Mrs Liu first came to Macau 15 years ago with her husband and a babe-in-arms. She waited a while before starting her own career here. She says the paucity of women in po-

sitions of power in Macau is related to the city’s peculiarities. While the economy has grown swiftly because of the gaming industry, there is a general lack of competitiveness in the workplace, she says. “Families don’t need to be so competitive, because they already have a good life. Women in particular, according to the Chinese way of thinking, believe that if they marry a good husband, that gives them a good future. They don’t need to have their own career,” Mrs Liu says. “Macau people aren’t as competitive as the people in Hong Kong and in the mainland,” she says. “The women in Macau have to be more hard-working, not necessarily aggressive, to reach [high] positions.” Paula Ling Hsião Yun, a senior partner at Rato, Ling, Vong, Lei & Cortés Advogados, believes women in Macau may not climb the career ladder like men because they are more focused on their families. “Women are more sensitive. They have greater concern for their family, their elderly parents, their children – and thus cannot dedicate [themselves] exclusively to work,” she says. Ms Ling, who is also a member of the National People’s Congress, says that to reach high corporate or political positions, one needs to spend long hours working. When her children were younger, she could not dedicate herself to her work as she does today. “My father was alive, my children were underage and I could not be out of my house for long hours. I was concerned if my father and my children were well.” MARCH 2012

mbreport WOMEN AT WORK 72 Society is changing and more and more men do some of the household chores, Mrs Ling says. She expects this trend to continue. “My father, for instance, never helped with his children. But my husband already dedicates himself more to the house, to the children. My husband helped me a lot.” While Mrs Ling has had to strive to reconcile her private life and career, she has never felt that her gender is a disadvantage. She expects that as the economy changes, more women will reach higher positions. “Considering that Macau is a service-dominated economy and that in this sector it is easier for women to get a job, there is no big difficulty,” she says.

Dinner in the oven A service economy poses different problems, since many employees in service industries in Macau work round the clock – notably casino or hotel workers. One in three employed women must work shifts, says the 2008 survey from the Consultative Commission on Women’s Affairs, making it even harder to balance work and family duties. The chief executive of Macau Cable TV Ltd., Angela Lam In Nie, considers the city a good place for women to work. “It’s quite easy for us to carry out our jobs,” Ms Lam says. She has no children herself, but acknowledges that taking care of a family can be hard for a working mother. “I have some friends in Macau in high positions, and when they have children, they want to spend more time with them. Maybe when the child is six years old, they return to their working life.” Ms Lam’s friends usually do not completely abandon their careers during their stints as full-time mothers. “Some of them will help their husband and/or handle a family business.” She admits that if she had children it would be harder for her to focus on her career. “I would pass on some responsibility to my colleagues.” Ms Lam says times are changing and that more women are climbing the corporate ladder. “Most of the young women are well educated, no matter if in Macau or abroad, so I can see a future,” she adds. “These women can find opportunities in local companies.” The government could also do more, Ms Lam says, not to favour women but to give them equality of opportunity. The rest, she says, is up to society in genMARCH 2012

“The women in Macau have to be more hardworking, not necessarily aggressive, to reach [high] positions,” says Jane Liu, executive director of Ricacorp (Macau) Properties Ltd

Constance Hsu, president of Mocha Clubs, says Chinese women usually give priority to their families. “This might be changing, but it’s not changing very quickly”

eral and women in particular. Constance Hsu Ching Hui is the president of Mocha Clubs, a subsidiary of Melco Crown Entertainment Ltd., running a chain of slot machine parlours in Macau. She is one of the few women in top positions in the gaming industry here. Ms Hsu has worked for Mocha Clubs since 2003. She was the financial controller, then became chief administrative officer (overseeing finance, treasury, audit, legal compliance, procurement, administration and human resources functions) and now heads the company.

publisher of the Chinese-language Soda Magazine. She is also a director of the Mspa spa at the Westin Resort. Mrs Lei says it is not difficult for a woman in Macau, foreigner or local, to reach a top position, owing to career opportunities created by the liberalisation of the gaming industry. She concedes there are still very few female top executives here, but she believes this is due more to personal choice than sex discrimination. Usually it is only single women who put all their effort into their careers, she says. “Macau is a Chinesebased society and most believe that the wife shouldn’t be stronger than the husband and that women should put their family as a priority.” Ms Lei is also the president of the International Ladies Club of Macau, which organises fund-raising events, community services and social activities. The club gathers many female expatriates living here, who she says, have some of the same problems that local women do. Many arrive in Macau with their husbands and children, but they must leave behind their relatives and the social circles in which they used to move. “They have less support from parents and friends emotionally. And they might not have better career opportunities than in their home country” if they come as imported labour, due to all the job changing restrictions attached, Ms Lei says.

Join the club Being a woman is an advantage, Ms Hsu says, for reasons of character and personality. “It affects the way we manage and the way we get along with our colleagues.” She has never experienced any difficulty in getting promoted or in being a leader of men. She believes one reason for the scarcity of top businesswomen and female executives in Macau is that Chinese women usually give priority to their families. “This might be changing, but it’s not changing very quickly.” Ms Hsu has no children but believes that if she did, life would be different. “I would be more dedicated to being a family woman. That would change my life and my attitude towards living.” Sophie Lei heads several companies, among them Aqua Media, the

mbreport WOMEN AT WORK 74

FAMILY BEFORE SERVICE

rights. But she says women have to be more aggressive to reach positions of power. Mrs Chan, the wife of businessman and former legislator David Chow Kam Fai, says women have played an increasing role in public life in the past 10 years and expects this momentum will be maintained. “We can assume that in 10 years’ time there will be more positions of power for women.”

Change coming

THE GOVERNMENT AND THE LEGISLATIVE ASSEMBLY ARE STILL DOMINATED BY MEN BY LUCIANA LEITÃO

MARCH 2012

“We can assume that in 10 years’ time there will be more positions of power for women,” says legislator Melinda Chan

PHOTO: COURTESY OF JORNAL TRIBUNA DE MACAU

s in the corporate world, in politics, there are few women in top positions. And once again the usual reason women give is the difficulty they have balancing public life with family life. The number of women in public life is low. A survey in 2008 commissioned by the Consultative Commission on Women’s Affairs found that only one in four women participated in the activities of associations and only 3.2 percent often or occasionally expressed their opinions publicly, meaning there is an imbalance between the sexes in terms of political activity in Macau. Of the Legislative Assembly’s 29 members, only four are women, and in the cabinet, only one is a woman – the secretary for administration and justice Florinda Chan. Of Macau’s 40 judges, 16 are women, including Song Man Lei, recently appointed to the Court of Final Appeal. Directly-elected member of the Legislative Assembly, Kwan Tsui Hang, who is also vice-chairwoman of the Macau Federation of Trade Unions, is one of the most respected political figures in the city. She says it will take some time to make the number of men and women in top political positions more even. She says it is a good sign that there is at least one female cabinet secretary and that two women presided over the Legislative Assembly consecutively from 1992 to 2009. Another directly elected member, Melinda Chan Mei Yi, believes that most of the time men and women in Macau are considered equal and have the same

“Today, men and women share much more of the household chores, even if in traditional societies men always have priority,” says former Legislative Assembly president Anabela Ritchie

Mrs Chan says she won a seat in the assembly through hard work. She says any man would need to expend the same amount of effort to achieve the same result. But looking at the figures, she knows something is preventing more women from engaging in politics. Mrs Chan believes culture is the reason. “It has to do with the Macau culture and with Chinese women. They pay more attention to home,” she says. She knows a lot of women that attained high positions in big companies, but then got married and had children, and their families became the priority. “They don’t want to spend so many hours working. They prefer to stay at home.” Mrs Chan has two children. She says that when she was pregnant, she slowed down. As her children got older, she went back to work, helping her husband in his business. She believes that eventually the winds of change blowing from the West will arrive in Macau. “Women have to be more aggressive. We need to encourage women to attend social works, social associations. Then they will know more people.” Mrs Chan adds an extra ingredient to her recipe for success: for a woman to reach a high position, she needs the help and encouragement of her husband and family. “Women need support, otherwise no-one takes care of the family. In this case, domestic helpers are very important, because they can release the women to go out and work.” Companies should also support working mothers, she says. “When women get pregnant, for some the first few months are very difficult. They need to see the doctor and sometimes have to stay home resting.” Ms Chan says one of the positive effects of Macau’s shortage of labour is that companies are now more willing to cater to the needs of working mothers. “Manpower is so tight that now I think companies will try to help.”

Anabela Ritchie was one of the first women in Macau to break into the male preserve of politics. She was the president of the Legislative Assembly from 1992 until 1999, and held a string of other high positions before the handover. She is now mostly retired from active politics, but still holds posts in local associations and other bodies, including the Consultative Commission on Women’s Affairs. Mrs Ritchie says that when she was president of the assembly it was not that hard for a woman to attain important positions. She was nervous at first, but that had nothing to do with her gender. “When my fellow colleagues came to

me and told me they were going to vote for me to succeed Carlos d’Assumpção [a prominent lawyer and politician who passed away during his term as president], it was a big scare because it is not easy to follow a man like that.”

Crumbling traditions Mrs Ritchie is convinced that her gender had nothing to do with her being elected president. “It was not because I am a woman that my colleagues thought of me. They thought of a set of requirements and conditions that they would like to see in the president, and I happen to be a woman.” Looking at the present composition

of the assembly and the government, Mrs Ritchie says there could be more women, but adds that it is hard to mesh politics and family life. “We [legislators] have a very hard life, with long working hours. It is not only the plenary sessions, but also the standing committee meetings.” She does see signs of change since 1992. “We lived in a society that was much more sexist than it is nowadays. Today, men and women share much more of the household chores, even if in traditional societies men always have priority.” Mrs Ritchie believes society will continue to change step by step, and give more opportunities to women. MARCH 2012

mbreport WOMEN AT WORK

SEAT AT THE TABLE

GENDER DISCRIMINATION IS BANNED BY LAW BUT WOMEN STILL STRUGGLE TO WIN EQUAL PAY AND TOP JOBS BY LUCIANA LEITÃO

acau’s laws are meant to prevent unfair discrimination on the grounds of gender, but many say it still exists, not least of all in the workplace. The latest United States Department of State report on human rights worldwide says there is still a “significant difference” between the salaries that men and women earn in Macau, particularly for unskilled work. The Statistics and Census Service does not give separate earnings data for men and women. The most recent information on this matter appears in a survey in 2008 commissioned by the Consultative Commission on Women’s Affairs. It shows

77 that about 8 percent of women earned MOP3,000 (US$375) or less a month, 22 percent earned between MOP3,001 and MOP6,000 and 20 percent earned between MOP6,001 and MOP9,000. The survey results do not include earnings data for men, making comparisons impossible. However, the survey found that over 70 percent of employed women had not been promoted in the preceding five years. Despite this, most female respondents expressed satisfaction that women are treated fairly in Macau. Only 12.3 percent expressed dissatisfaction. The findings indicate that the more traditional the values of the women, the more likely they were to feel satisfied that they are treated fairly, and the more modern their values, the more likely they were to feel dissatisfied. A former president of the Legislative Assembly, Anabela Ritchie, says that while the law mandates equal pay for equal work, employers treat women unfairly in other ways. “It might happen that an employer hires a man over a woman because a woman might get pregnant and will need to stay at home for a few months,” she says. Mrs Ritchie is a member of the Consultative Commission on Women’s Affairs. She says the commission has so far dealt mainly with the need for more homes for the elderly and nurseries. The goal is to “create conditions to solve women’s daily problems, so they can focus on the professional area”. The commission also supports victims of domestic violence. This year, it will look into what women can do to protect the environment when doing domestic chores.

A dim picture Hao Zhidong, a professor of sociology at the University of Macau, who has done research on gender inequality, says that on the surface women in Macau seem to be doing well, probably because of the colonial legacy. “The Portuguese government introduced gender equality after democratisation in the 1970s,” he says. But problems remain. “More people feel that they are more equal at home than at the workplace,” Mr Hao says. For instance, women continue to be hired mostly for administrative jobs or positions similarly lacking in prestige, and so take home less money. Mr Hao says that correcting this requires a clearer picture of the how much gender discrimination there is. “In

WICKED BUSINESS W

“Here and in the mainland, there is a quota that must be filled by women. For some positions, women must have a certain number of seats,” says veteran lawyer Paula Ling. The quota is informal Macau, we don’t even see statistics, except on rare occasions. There should be government research every year, or, at least, every five years.” Kwan Tsui Hang, a directly-elected member of the Legislative Assembly and vice-chairwoman of the Macau Federation of Trade Unions, agrees that gender discrimination persists but to a lesser extent than before. “Women are not discriminated [against] in taking part in political and social affairs and gender discrimination no longer exists in most cases,” she says. Ms Kwan says that during her childhood, discrimination was much more evident. It was common for people to say that boys should have access to better education than girls. She says things have improved since then, but adds: “People subconsciously [still] believe that women should be responsible for housework, while women have their own sense of bearing more responsibility to do housework and childcare.” Another member of the Legislative Assembly, Melinda Chan Mei Yi, is more optimistic. “I don’t think there is discrimination in Macau because it has to do with a woman’s confidence. I am quite confident, so I never felt that,” she says.

Positive thinking If discrimination still exists, it is positive discrimination – at least in politics, says Paula Ling Hsião Yun, a lawyer at Rato, Ling, Vong, Lei & Cortés Advogados and a member of the National People’s Congress. She says she has ben-

omen continue to be victims of human trafficking in Macau but the courts have convicted just four people of the crime between 2008 and last year. Macau is recurrently mentioned in the U.S. Department of State annual report on human trafficking, mainly as a destination for women and children subjected to sex trafficking but also, to a much lesser extent, as a source. Most victims are from the mainland, with plenty of them travelling here in search of better employment. Many are duped by false advertisements for jobs in casinos or other legitimate employment in Macau, but upon arrival, are forced into prostitution, the report says.

efited from it personally. “Here and in the mainland, there is a quota that must be filled by women. For some positions, women must have a certain number of seats,” she says. The quota is informal. Mrs Ritchie has also benefited from positive discrimination. She was first invited to become a member of the Legislative Assembly in 1976 by Portuguese governor Garcia Leandro, because he wanted the assembly to have more female members. “He believed it was essential to have more women,” Mrs Ritchie says. “If there was any discrimination, it was positive. But, throughout these years in politics, more and more women came along and it was no longer necessary to invoke the fact of being a woman.” Sophie Lei, chief executive and founder of Aqua Media Ltd., which publishes the Chinese-language Soda Magazine, says she has sometimes felt discriminated against on the grounds of her gender. “I did encounter some disrespect in short-term projects,” she says. “Most people think beauty and hard work can never walk side-by-side, but I totally disagree,” Ms Lei says. “Maybe people think that if you spend too much time dressing up, you have no time to work. I rather believe that if someone cannot take care of oneself, how can anyone expect those people to take care of their work?” Macau Business would have liked to have included the views of the Macau Women’s General Association in this report but none of the association’s leaders were available for an interview. MARCH 2012

Gaming | Billions Race

Deceptively resilient

February’s strong revenue take catches casino analysts by surprise acau’s gaming industry chalked up another development milestone last month when it recorded its 12th straight month of gross gaming revenue above MOP20 billion (US$2.5 billion). In February, the city’s casinos took in MOP24.29 billion in gross gaming

revenue – a 22.3-percent increase over the same month last year, data from the Gaming Inspection and Coordination Bureau shows. It was a surprisingly strong return for the year’s shortest month that is typically inflated by rich takings during the week-long Chinese New Year holiday. The holiday fell in

Gaming Results: Gross Revenue

In Million MOP (1HKD:1.03MOP)

28,000 26,000

24,306

24,000 22,000 20,000

19,863

20,087

20,507

Feb 2011

Mar 2011

Apr 2011

January this year, but February’s figure did benefit from the extra day due to the leap year. Commentators had predicted a trying February. Growth fell sharply from the 34.8 percent improvement recorded in January but it exceeded the expectations of most analysts. A Bloomberg

24,212

26,851

24,769

23,058

23,608

25,040

24,286

Jan 2012

Feb 2012

21,244

20,792

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

MARCH 2012

May 2011

Jun 2011

Jul 2011

Aug 2011

Sep 2011

Oct 2011

Nov 2011

Dec 2011

Gaming Results: Market Share Per Operator 2011

2012

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb *

SJM

31%

34%

30%

32%

29%

28%

27%

29%

26%

27%

26%

27%

28%

Sands China

18%

16%

17%

16%

15%

14%

16%

17%

19%

18%

Galaxy

11%

13%

15%

19%

20%

21%

20%

19%

17%

Wynn

15%

14%

17%

13%

15%

13%

12%

13%

14%

13%

MPEL

15%

14%

17%

14%

16%

15%

16%

15%

13%

14%

13%

14%

MGM

12%

11%

10%

11%

10%

TOTAL

100%

SJM

Sands China

Galaxy

Wynn

MPEL

MGM

Feb 2011

Mar 2011

Apr 2011

May 2011

Jun 2011

Jul 2011

Aug 2011

Sep 2011

Oct 2011

Nov 2011

Dec 2011

internal expectations are beginning to shift from a market-wide growth forecast of 15 percent to 20 percent [for the whole of 2012], to becoming more inline with our forecast of 20 percent plus.” Union Gaming says that if momentum carries forward, March gross gaming revenue growth should be around 28 percent, while April could post an increase of more than 20 percent.

Still leader Sands China Ltd. continues to lead the mass-market segment. Sands had a 34.3-percent weighted share of customers

FIVE-STAR RESULTS G

lobal gambling revenues surpassed US$400 billion (MOP3.2 trillion) last year, according to the latest research undertaken by Global Betting and Gaming Consultants. The provisional figures show that gambling activities generated US$419 billion in revenues across the world last year. The figure represents a 5.6-percent increase on the previous year and a new record. Global Betting and Gaming Consultants forecasts global gambling revenues will reach US$500 billion by 2014 as new casinos open up in Asia. Lotteries enjoyed the highest share of revenue, accounting for 28.4 percent of all gambling revenue but the consultants forecast that commercial casinos should overtake lotteries this year. Gambling’s growth in jurisdictions such as Macau and Singapore meant that commercial casinos, excluding revenue from casinos operated by Native Americans, accounted for a 27.7-percent share.

Feb 2012 * * estimated

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

survey of three analysts had a median estimate of MOP23.8 billion. Comparing the first two months of this year to last year gives a more wellrounded idea of the sector’s health: accumulated gross revenues are up by 28.3 percent, to MOP49.3 billion. “In part, we would attribute this delta simply to the underlying (and under-appreciated) current strength of the Macau market,” Union Gaming Research Macau wrote in an industry research note. “In our opinion, a strong February jibes with recent comments we’ve heard across the industry that

Jan 2012

in December and January period, Union Gaming Research shows. SJM Holdings Ltd. was second, with 27.2 percent, followed by Galaxy Entertainment Group Ltd., with one-fifth of the overall market. The gap between the three top operators and the rest is substantial, with fourth-placed Wynn Macau Ltd. with a 7.2-percent share, followed by MGM China Holdings Ltd. with 6.4 percent, and Melco Crown Entertainment Ltd. with 4.9 percent. In comparison with Union Gaming Research’s October/November survey, the relative positions between operators remained unchanged. By property, the top three shares continued to belong to the Venetian Macao, at 22.0 percent, followed by the combination of SJM’s Grand Lisboa/ Lisboa, with 15.5 percent, and Sands Macao, reporting a 12.3 percent share. Union Gaming estimates each operator and casino’s mass-market share by counting casino shuttle bus passengers at the Outer Harbour Ferry Terminal and the Macau Border Gate. With the current report, the company also began to include observations from the Taipa Ferry Terminal to account for 88 percent of inbound mass-market visits. MARCH 2012

Gaming | Stock Watch

Cotai or bust

Gaming shares continued their rising trend last month. Investors are now trying to guess which casino operator will next break ground in Cotai BY RAY CHAN

uelled by good results and some positive news from the mainland, Macau gaming stocks extended their winning streak last month. A better global economic outlook due to positive developments in the Euro zone also helped. Almost all gaming shares posted strong gains, largely beating the performance of Hong Kong’s benchmark Hang Seng Index. The exception was Wynn Macau Ltd. (1128.HK), reflecting investors’ worries about the corporate legal battles involving Kazuo Okada, the biggest single stakeholder in parent company Wynn Resorts Ltd. until he was unwillingly bought out last month.

MARCH 2012

MGM China Holdings Ltd. (2282. HK) led the gainers in Hong Kong. The company’s board announced a special dividend of approximately HK$0.816 per share, which cheered investors up. MGM China posted net profit of HK$3.28 billion (US$423 million) for 2011, 109 percent more than the year before. Casino revenue rose more moderately, by 65 percent to HK$19.97 billion. The casino operator is now awaiting the government’s green light to break ground in Cotai. MGM China cochairman Jim Murren said the company expects to invest US$2.5 billion in its new development there. The company’s

vice-president and chief financial officer, Hubert Wang, said: “We can finance [the Cotai project] with cash flow from this facility [the MGM Macau] and a credit facility from banking institutions.”

Staggering analysis The head of the Lands, Public Works and Transport Bureau, Jaime Carion, has said two of the three casino operators waiting for government approval to break ground in Cotai may get the thumbs-up this year. Apart from MGM China, SJM Holdings Ltd. (0880.HK) and Wynn Macau have applied for land in Cotai and have been waiting since 2007.

The Lands, Public Works and Transport Bureau says two of the three casino operators waiting for government approval to break ground in Cotai may get the thumbs-up this year

Mr Carion said his bureau might be able to approve two of the three applications this year. He explained it took a long time to approve applications because the process was complex. Union Gaming Research Macau analysts say there is more to it than that. “We believe the primary driver of the decision to approve only two of the applications this year is to intentionally stagger the timing of future development,” Union Gaming Research says in a note to investors. “It is also possible that the bureau truly is overwhelmed by the application process – not due to a lack of manpower, but rather due to shifting casino devel-

opment scopes. Given the high stakes, we can certainly envision the operators continually enhancing their proposals to include amenities (e.g. room counts and types, amount of expected local employment, scale of non-gaming attractions, total dollar investment, etc.) perceived to be the most likely to result in first approval.”

Johnny-come-lately SJM is hoping to be one of the lucky casino operators to get Cotai land this year. Its chief executive, Ambrose So Shu Fai, said it would submit its project master plan to the government last month. “We’re doing it now because withMARCH 2012

Gaming | Stock Watch

out this master plan it is not possible for the Macau government to calculate the premium to be charged and to start the land grant,” Mr So said. He added that once it had delivered the master plan, SJM would hope to have its land grant request approved by the middle of this year. Mr So said it was a good thing that SJM was a latecomer to Cotai. “We have the advantage of knowing what can be done and what cannot be done, what is successful and what is not successful.” He said that unlike SJM’s developments on the peninsula, which concentrate on gaming, its Cotai development would have more non-gaming elements.

SJM announced last month record results for 2011. Net profit jumped by 49.1 percent to a record HK$5.3 billion. This was fuelled by growth of 32 percent in gaming revenue to a record HK$75.5 billion. The casino operator proposed a final dividend of HK$0.43 per share and a special dividend of HK$0.22, compared with a final dividend of HK$0.30 paid last year. The company is currently reconfiguring space in the Grand Lisboa, which should ultimately accommodate an additional 40 VIP gaming tables that should come online throughout the third quarter of this year. Melco Crown Entertainment Ltd.

(6883.HK) announced management changes. Nick Naples, the co-chief operating officer for non-gaming, has departed, so Ted Chan, the co-chief operating officer for gaming, has become the sole chief operating officer. The company said this was intended to create a “new, streamlined management structure aimed at enhancing organisational efficiency, as well as improving the integration of gaming and non-gaming operations”. According to Dow Jones Newswires, Melco Crown’s senior vice-president of strategic marketing, Alidad Tash, will now also assume responsibility for gaming operations, and Sunny Yu has

NEW KID ON THE BLOCK S

ands Cotai Central is scheduled to open next month, Sands China Ltd. (1928.HK) has revealed. Sands China did not immediately announce an opening date. On February 1, Sands China’s parent company, Las Vegas Sands Corp. had said the first phase of Sands Cotai Central would open about eight weeks after that date. The development is expected to be a big earner for Sands China in the near future, boosting its share value. It will be the only casino to open in Macau until at least 2015. Reservations can now be made for accommodation from May 2 onwards, with room rates starting at HK$1,198 (US$154) a night. Sands Cotai Central will have 600 rooms or suites managed by the Conrad chain and over 1,200 managed by the Holiday Inn chain. When the development is completed in 2013, it will have a Sheraton hotel with 4,000 more rooms or suites, meaning Sands Cotai Central will have about 5,800 rooms or suites altogether. MARCH 2012

Sands China has been looking exhaustively for more local people to work there. Since last July it has held over 20 recruitment fairs. More than 5,000 positions at Sands China were filled by residents last year. According to media reports, the government will allow the company to import 2,500 new workers. But to do so it must take on 3,100 new local workers by the end of this month. It was not immediately clear how many Sands China has hired already. The gaming operator also announced changes at the top, with Jacqueline Wu promoted to vice-president of events and special projects for Sands Cotai Central. Ms Wu was vice-president of public relations for Sands China, and will now be even closer to the effort promote Sands China’s largest casino resort. Melina Leong, the company’s vice-president of community relations, overseeing corporate social responsibility and community affairs, will be given extra responsibilities in media relations.

83 been promoted from vice-president of entertainment to senior vice-president of entertainment. Earlier, Melco Crown announced an annual increase of 560 percent in fourth-quarter net profit to US$107.5 million. Net revenue was US$1.01 billion, about 30 percent more than a year before. Chief executive Lawrence Ho said he expected growth of 15 percent to 20 percent in combined gross gaming revenue for the Macau casino operators this year.

Money sluices open All plans for Melco Crown’s Studio City project in Cotai are “effectively complete, and we are undergoing the necessary government processes to obtain the required approvals to commence construction,” Mr Ho said. “At the same time, we are working through our financing plans in relation to this project, which will potentially include a bank loan and other debt financing.” Melco Crown announced a pay increase of 6 percent for all eligible nonmanagement employees from April 1, becoming the latest casino operator to raise wages. From a wider perspective, the People’s Bank of China reduced the reserve requirement for commercial banks in the mainland. The cut of 50 basis points, which took effect on February 24, is expected to release up to RMB400 billion (US$63.5 billion) into the economy. Some is expected to end up on Macau’s gaming tables. Ticker

Name

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

SJM Holdings Ltd. Melco International Development Melco Crown Entertainment

1-Jun 2011

1-Jul 2011

1-Aug 2011

1-Sep 2011

1-Oct 2011

1-Nov 2011

1-Dec 2011

1-Jan 2012

1-Feb 2012

Sands China Ltd. MGM China Holdings Ltd.

Wynn Macau Ltd. Galaxy Entertainment Group Ltd. Hang Seng Index

As of February 27, 2012

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

1-Apr 2011

1-May 2011

Las Vegas Sands Corp. Penn National Gaming Inc.

1-Jun 2011

1-Jul 2011

1-Aug 2011

1-Sep 2011

1-Oct 2011

Wynn Resorts Ltd. Melco Crown Entertainment-ADR

1-Nov 2011

1-Dec 2011

1-Jan 2012

1-Feb 2012

MGM Resorts International S&P 500 Index As of February 27, 2012

Share price performance (HK$/US$) 52-week high

52-week low

Change (%)

27/02/2012

Year-to-date

Month-to-date

10.22

15.88

25.24

14.41

22.45

8.69

18.64

30.90

10.17

27.48

14.81

19.50

0.00

-1.91

Sands China Ltd.

31.05

14.90

28.40

29.38

8.19

Melco International Develop. Ltd.

10.76

4.30

7.46

29.29

13.55

6883.HK

Melco Crown Entertainment Ltd.

33.00

22.40

32.00

30.61

11.89

MPEL.US

Melco Crown Entertainment Ltd.

16.15

6.77

12.45

29.42

11.66

2282.HK

MGM China Holdings Ltd.

HIS.IND

Hang Seng Index

LVS.US MGM.US WYNN.US

Wynn Resorts Ltd.

PENN.US

Penn National Gaming Inc.

UNDU.IND

Dow Jones Indus. Avg.

SPX.IND

S&P 500 Index

0880.HK

SJM Holdings Ltd.

21.00

0027.HK

Galaxy Entertainment Group Ltd.

1128.HK

Wynn Macau Ltd.

1928.HK 0200.HK

18.20

8.05

13.30

30.91

16.06

24,468.64

16,170.35

21,217.86

15.10

4.06

Las Vegas Sands Corp.

54.00

36.05

53.35

24.85

8.63

MGM Resorts International

16.05

7.40

14.00

34.23

7.28

165.49

101.02

118.10

6.89

2.49

44.29

31.68

42.60

11.90

4.05

13,013.82

10,404.49

12,982.95

6.26

2.77

1,370.58

1,074.77

1,365.74

8.60

4.06

MARCH 2012

Gaming

Steve Wynn

Wynn at war Wynn Macau Ltd. has removed Japanese businessman Kazuo Okada from its board of directors but the Wynn-Okada saga is just heating up eports are a far cry from what has unfolded between Steve Wynn and former friend and business partner Kazuo Okada. Some analysts say the show is just getting started. Others claim Wynn Resorts Ltd. may have breached Macau’s privacy laws by reporting Mr Okada’s activities. The saga began unravelling in January (see report below) and continued last month when the board of Wynn Macau Ltd. voted to immediately remove Mr Okada as a non-executive director. A few days earlier, the board of parent company Wynn Resorts forcibly bought out Mr Okada’s 19.7-percent

MARCH 2012

stake at a steep discount. The shares were valued at 30 percent below the market price because, according to the company, they were restricted under the terms of an agreement between Mr Wynn, his former wife Elaine and Mr Okada that locked up their shareholdings and votes. Wynn Resorts went ahead with the forcible buyout after accusing Mr Okada of making payments totalling US$110,000 (MOP880,000) to executives of the Philippines gaming regulator, Pagcor, breaching United States anti-corruption laws. It is alleged he offered gifts, free accommodation and

dinners at Wynn’s properties in Macau and Las Vegas, Nevada. Wynn Resorts said it took back Mr Okada’s shares to protect the company’s gaming licenses.

Toxic gifts A year-long inquiry by Wynn’s compliance committee, which is chaired by former Nevada governor Robert Miller and included former Federal Bureau of Intelligence director Louis Freeh among the investigators, found “Mr Okada and his associates and companies appear to have engaged in a longstanding practice of making payments and gifts to his two chief gaming regulators at the Philip-

SPOTLIGHT ON VARSITY DONATION

Kazuo Okada

pines Amusement and Gaming Corporation (Pagcor), who directly oversee and regulated Mr Okada’s provisional licensing agreement to operate in that country”. The Freeh report says Mr Okada and his associates have “consciously taken active measures to conceal both the nature and amount of these payments”. Mr Okada was awarded a license in 2008 to operate a casino in what is now known as Entertainment City Manila, for which construction started in January. The Wynn Resorts board opposed Mr Okada’s decision to invest in gaming in the Philippines, which led to a split between both sides. Returning fire, the Japanese businessman said the forcible buyout was an “outrageous” action by the board and that he would take legal action. Although no longer on the board of directors at Wynn Macau, Mr Okada is on the Wynn Resorts board until he steps down or is voted out by shareholders at the company’s annual meeting,

Macau’s gaming regulator too requested Wynn Macau for more information on the decision made by Wynn Resorts Ltd. to forcibly buy out Mr Okada due to be held in May. The company has asked that he resign. Meanwhile, and largely based on the findings of the Freeh report, Wynn Resorts has filed a lawsuit against Mr Okada in Las Vegas accusing him of breaching fiduciary duty and related offences.

Next moves The Freeh report lists former Pagcor chairman Efraim Genuino and current chairman Cristino Naguiat having stayed at Wynn properties in Macau

Bloomberg News

ynn Resorts Ltd. announced last month that the United States Securities and Exchange Commission (SEC) is launching an informal inquiry over its subsidiary Wynn Macau Ltd.’s MOP1.1 billion (US$135 million) donation to the University of Macau. Wynn Resorts said in a regulatory filing that it had received a letter from the SEC requesting “the company preserve information relating to the donation to the University of Macau, any donations by the company to any other educational charitable institutions, including the University of Macau Development Foundation, and the company’s casino or concession gaming licenses or renewals in Macau.” Wynn Resorts said it would comply fully. The gaming operator said the letter follows the lawsuit filed against the company by Kazuo Okada. Mr Okada in January filed a lawsuit against Wynn Resorts alleging he was blocked from seeing the company’s financial records after he objected to the donation to the University of Macau. This was the incident that appears to have triggered the feud between both parties that saw Wynn Resorts forcibly buy out Mr Okada’s 19.7-percent stake in the U.S.-based gaming operator. In May last year, Wynn Macau made a commitment to the University of Macau Development Foundation consisting of a US$25 million payment and promises of additional donations of US$10 million a year from this year through to 2022. Wynn Resorts is the second U.S.based casino operator to face an SEC probe into its Macau operations. Las Vegas Sands Corp. said last year it faced an inquiry into compliance with US anti-bribery laws. Details of that case have been few and far between. MARCH 2012

Gaming

and Las Vegas. Disclosing that information may be a privacy breach, since Wynn Resorts made the report public in a filling. The Macau law on personal data protection came into effect in 2006. It states that information can only be collected for specific and legitimate purposes and says that any information gathered can only be used within Macau. It can only be transferred to outside of the territory in special cases. The Office for Personal Data Protection says that it is reviewing the Freeh report. “[The office] is aware of this matter and has deep concerns over this case,” a

MARCH 2012

spokesperson told Macau Business. “The case is complicated and the Office for Personal Data Protection needs to study the available documents carefully before determining whether there is any evidence suggesting a possible breach of the Personal Data Protection Act in Macau.” Macau’s gaming regulator too requested Wynn Macau for more information on the decision made by Wynn Resorts Ltd. to forcibly buy out Mr Okada. The head of the Gaming Inspection and Coordination Bureau, Manuel Joaquim das Neves said the regulator had been informed about the decision first hand but that more details were requested.

The quarrel between Wynn Resorts and Mr Okada should not have a direct impact on Wynn’s operations here since the Japanese businessman is not a direct shareholder of Wynn Macau, said Mr Neves.

Ripple effect While authorities in Macau sit and watch, deciding whether or not actions need to be taken, financial advisors expect investigations to be carried out by the Nevada Gaming Commission “into what transpired between the two parties, and a ruling on how the matter is going to be decided,” says Yale Bock, president of Y H & C Investments, a registered investment advisor based in Las Vegas. He says the “Securities and Exchange Commission and U.S. Department of Justice will probably investigate the details of the dispute, including all allegations of bribery.” In regards to Macau, “one can only imagine how government officials in China view the public airing of dirty laundry, but certainly it cannot be considered a good thing for Wynn Resorts,” Mr Bock says. For his part, Mr Okada says he will “vigorously” pursue his casino project in the Philippines. “I intend to vigorously continue my US$2-billion [MOP16 billion] investment” in Entertainment City Manila, Mr Okada said in a statement read to Philippines legislators and quoted by Bloomberg. “Rest assured that I will be able to prove that all of the accusations are baseless and are lies that have been blown out of proportion.” Philippine President Benigno Aquino ordered an inquiry into allegations that the Pagcor chairman Mr Naguiat accepted illegal gifts from Mr Okada. Mr Naguiat has said he will not quit, as has been requested by some. He has denied any wrongdoing but confirmed staying at Wynn Macau and Las Vegas. He said it was a standard industry courtesy and reciprocity. Other than complimentary accommodation, no gifts in cash or in kind were received by Pagcor officials during his tenure, Mr Naguiat added. Philippine politicians want to ban Mr Wynn from doing business in the country, saying his allegations of bribe taking by the country’s gaming regulator have denigrated the country’s image.

87 87

COMING SOON For more information visit macaubusiness.com or write to awards@macaubusiness.com MARCH 2012

Gaming

The curtain falls “Zaia” was performed at the Venetian Macao for the final time last month. Sands China says it has not given up on non-gaming entertainment BY SARA FARR

hree and a half years into its 10-year contract, Sands China Ltd. brought the curtain down on “Zaia”, Cirque du Soleil’s resident show at the Venetian Macao. However the casino operator says it has not given up on bringing international entertainment to Cotai. “We have done extensive research and have full confidence in the strength of the entertainment market here,” says Gus Liem, vice-president of entertainment at the Venetian. Sands China will now redesign its 1,800-seat theatre, which had been custom-made for “Zaia” and which cost more than US$100 million (MOP800 million). “In view of the market trend and customer demand shown in the research we’ve conducted, the company will again be investing to redesign the theatre to open up a new world of exciting entertainment opportunities for Macau,” Mr Liem says. The ongoing relationship between Sands China and Cirque du Soleil is unclear. At first Sands said it was “currently discussing a variety of options for working together on other projects”, but has said nothing since. Sands China has plans to include a theatre in its Sands Cotai Central development. The company has not made details about the theatre public, and there is no indication if it will host a resident show. Cotai Central will have a troupe of 40 acrobats, jugglers, magicians, musicians and street performers, just like the Venetian, Sands China says. Even without “Zaia”, Sands China is still one of the biggest players in entertainment in Macau. The company says it has held around 160 events at the CotaiArena in the Venetian before a cumulative audience of more than 880,000 people. These events have included concerts by stars such as Lady Gaga, international sports events and award shows.

Show stopper “Zaia” (meaning “life” in Greek) was first performed in August 2008, a year after the Venetian opened its doors. The 90-minute performance was the first Las Vegas-style resident show in Macau, but it failed to attract audiences, filling fewer than 40 percent of seats, on average. In view of the poor ticket sales, the decision

MARCH 2012

ANOTHER DOOR OPENS W

hile “Zaia” may have failed at the neighbouring Venetian Macau, Galaxy Entertainment Group Ltd. is considering introducing more entertainment in the next stages of Galaxy Macau. “Looking into the future, we will probably do more entertainment products,” says the casino operator’s vice-chairman, Francis Lui Yiu Tung. “As long has you have the right product, we think the customers and the citizens of Macau will be very happy to use them.” Mr Lui says that to have a successful product, casino operators must gaze into their crystal balls. “We have to evolve to a stage that we are looking into the future, the next four to five years, [and at] what kind of product will be well received by the customer.” Galaxy Macau, which opened last May, was the first big resort in Cotai without a resident show. Instead, it has relied on offering a wide choice of Asian restaurants, what it calls as the world’s largest sky-top wave pool and a cinema complex. “We are lucky that our wave pool has been successful. We were very happy that our cinema house has been very successful,” says Mr Lui. “These are the products that were in demand for the customers in Macau.” A private club and nightspot, China Rouge, to officially open soon, is the latest offering by Galaxy Macau. It will complete the first phase of the complex. Galaxy Entertainment has yet to announce its plans for the rest of the land it owns in Cotai.

Gaming

to close the show is hardly surprising. There had been rumours about Sands China being about to pull the plug on “Zaia” since at least 2010. French Canadian media have quoted Cirque du Soleil’s founder, Guy Laliberté, as saying his company’s 10-year contract with Sands China to put on “Zaia” guaranteed only the first three years of performances. “Macau is still a place mainly for gamblers. It’s not yet an international destination. We didn’t reach the [audience] figures we had set as a goal,” he was quoted as saying. Cirque du Soleil spokeswoman Renée-Claude Ménard told Macau Business the company “reached a key moment in our agreement [with Sands China] where we evaluated all possibilities” for the show and it was the “best time to minimise the financial impacts”. Ms Ménard says her company is now “making the best efforts to redeploy as many artists and employees as possible”. She says Cirque du Soleil “still believes in Macau”. “Zaia” was Cirque du Soleil’s first resident show in Asia. It mixed acrobatics, street-style entertainment and music in telling the story of a young girl who journeys into space on a voyage of self-discovery. MARCH 2012

The company made a final attempt to save “Zaia” in September. A media tour was organised and reporters were shown changes made to the show – including introducing a lion dance – that were meant to make it more appealing to Asian audiences.

Last rites At the time, Cirque du Soleil’s senior vice-president for resident shows, Jerry Nadal, described the notion that “Zaia” was nearing its end as mere rumour and said the show was here to stay. The media were told that audiences were growing and that the show was filling 60 percent of seats, on average. Even so, “Zaia” had not broken even. The combined cost of building the custom-made theatre and creating the show exceeded US$150 million. “Zaia” is the second resident show put on by Cirque du Soleil in Asia to close doors in less than three months. At the end of last year the company closed its “Zed” show in Tokyo because of a drop in audience numbers since the earthquake and tsunami in Japan one year ago. International media and some analysts saw the end of “Zaia” as a proof that Macau is not quite Las Vegas and that the city continues to be gamingdriven. For Ricardo Siu Chi Sen, a gaming and tourism expert at the University

of Macau, this was a one-off decision, as the show didn’t play to the Chinese market. He says closing “Zaia” was the “right business decision”. Mr Siu acknowledges that Cirque du Soleil is successful in Las Vegas “but when it was introduced here the Chinese did not have the same response as westerners.” This was because, unlike “The House of Dancing Water” at the City of Dreams, “Zaia” had few Chinese elements, he says. “The House of Dancing Water” has features dear to Chinese culture – such as water. “There’s also excitement in their performance. Apart from the water and dancing, there are the motorbikes and the music,” Mr Siu says. “The House of Dancing Water” is still regularly packed out. The HK$2billion show, also performed in a custom-made theatre, opened in September 2010. In its first year it entertained a cumulative audience of over 700,000, filling over 90 percent of seats, on average, according to Melco Crown Entertainment Ltd., the operator of the City of Dreams. Mr Siu argues that Cirque du Soleil should do in-depth research into what the public wants and come up with a different kind of show. “But how is up to them,” he says.

BALLY POWERS WORLD’S LARGEST SLOT TOURNAMENT

Gaming manufacturer Bally Technologies, Inc. announced that its award-winning iView Display Manager with Elite Bonusing Suite, has powered the world’s largest slot machine tournament. The tournament, recognised by the Guinness World Records organisation, took place last month at Pechanga Resort & Casino in Temecula, California. Bally Technologies also earned a Guinness World Records achievement for most slot machines running the same game simultaneously at the same venue. During the tournament, all participants played Bally’s Hot Shot Blazing 7s. The record-setting event featured more than 1,100 players simultaneously competing in a tournament in one location on slot cabinets made by five different slot-machine manufacturers. Over three rounds, 2,885 patrons competed throughout the casino floor for their share of more than US$100,000 (MOP800,000) in prizes in the free tournament.

PENTASIA OPENS MACAU OFFICE

Pentasia, an international provider of gaming and gambling technology staffing solutions, announced last month the inauguration of its new Macau based HR consultancy. Pentasia Macau Ltd. was first incorporated in November 2011 and provides human resources consultancy to the gaming market in Macau. Jonathan Pettemerides, Pentasia’s managing director for the Asia Pacific region hailed the office’s opening as a significant step forward. “Macau has been a developing market for Pentasia’s HR consultancy business for some time now and the opening of our new office further enhances the levels of local expertise and face-to-face contact we can provide our Macau based clients.”

NEED FOR OVERSEAS DEALERS Galaxy’s Francis Lui suggests government change human resources policy

SANDS DELIVERS HK$21 MILLION JACKPOT

Sands Macao casino has delivered what has been dubbed as Macau’s biggest jackpot ever. A slot player from Heilongjiang province hit a HK$21 million (US$2.7 million) Fa Fa Fa Grand Jackpot while playing a 5 Dragons slot machine. “We’re so thrilled for our winner and his fantastic luck here at Sands,” said Geoffry Andres, senior vice president and general manager of Sands Macao. Sands China Ltd.’s Macau casinos witnessed 229 jackpot wins in 2011 that were HK$1 million or above.

The vice-chairman of Galaxy Entertainment Group Ltd., Francis Lui, suggested last month the government give casinos the option to hire dealers from overseas, ending a policy to hire Macau talent exclusively. Mr Lui said the change would give gaming operators the option to promote domestic dealers to higher positions. He noted that Macau’s unemployment rate is currently at 2.1 percent, adding that several new gaming and non-gaming projects are in the pipeline, which should prompt the government to review its human resources policy to cope with future manpower needs. Mr Lui also unveiled Galaxy Entertainment Group would offer a pay-rise to its staff but said the details would only be announced by mid-this year. He forecast that Macau’s overall casino gross gaming revenue for 2012 should grow between 18 percent and 25 percent. MARCH 2012

Gaming

A new era for slots Macau forges ahead with new electronic gaming machine rules BY MARTIN JOHN WILLIAMS*

acau’s gaming regulator has released a long-promised electronic gaming machines technical standard specific to the territory. The Gaming Inspection and Coordination Bureau issued Instruction No. 1/2012 early last month, subtitled “Mandatory Gaming Machine Standard”, together with the regulations themselves, dubbed “Macau EGM Technical Standards, Version 1.0”. The instruction and the regulations, which were sent to relevant companies and are also publicly available on the regulator’s website, came into effect on February 10, though a grace period for non-compliant applications and machines applies until October 1. “The standard is intended to ensure that machines approved for operation in Macau are compliant with a single uniform set of technical requirements for both hardware and software,” the instruction says. “The principal objectives of the Gaming Inspection and Coordination Bureau with regard to gaming machines

MARCH 2012

operating in the Macau market are to ensure that the games they offer are fair, that the machines are secure, have reliable functionality and are efficiently auditable,” it says. One industry source says the new standard will not come into force without some effort on the part of manufacturers. “It’s quite political, you know. Right now the requirements require a lot of manufacturers to modify their current software to comply with the standards,” he says. “Most of the games on the floor right now will need to do some software changes.”

Technical fine-tuning But until the end of the grace period, the Gaming Inspection and Coordination Bureau “will accept applications for approval where compliance can be demonstrated either with the [original] 2004 instruction or with Macau EGM Technical Standards, Version 1.0,” the instruction says. “Manufacturers are encouraged to migrate to the new standard as quickly

as possible,” the instruction says. A second industry source says the grace period will be sufficient for his company to make the required changes. There are no problems “foreseeable from [our] perspective. It means you’ve got to do a bit more work, obviously, to incorporate what I believe the changes were. I think that gives us plenty of time to meet those requirements,” he says. The regulations have been in preparation for more than a year and a draft was presented to selected industry players in September. Feedback was solicited from manufacturers, manufacturer associations and testing laboratories until the end of October. Copies of the draft and final versions obtained by GamblingCompliance show little substantial difference and many cosmetic amendments. One notable change, however, was made to a clause in the draft that said the Gaming Inspection and Coordination Bureau “will not approve any game which ... violates the intellectual property rights of any third party”.

The final version softens the burden on the Gaming Inspection and Coordination Bureau by deleting this clause. In the final version, the regulator and its officers are indemnified against legal recrimination in a “Certification and Indemnity Form” for applicants in regard to intellectual property violations, among other matters. Most of the amendments, additions and deletions amount to technical finetuning, sources say. Changes to technical details are most apparent in specifications for electromagnetic interference and for power supply, surges and interruptions. Other changes increased both flexibility and strictness depending on the context.

Macau-specific standards “Any electronic gaming machine [that] plays a game that is recognisable to be a simulation of a live casino game ... must have an identical RTP [return to player rate],” says the revised version, potentially pushing that rate well above the default minimum for standard electronic

gaming machines of 70 percent. But the revised version also allows an increase from 1 percent to 4 percent for the difference between the maximum and minimum theoretical RTP following a change to betting options “within a single game configuration”. The previous electronic gaming machines instruction and standard were a stopgap measure announced in 2004. “That instruction was intended to be a short-term instrument to guide concessionaires and manufacturers as to the Gaming Inspection and Coordination Bureau’s minimum technical requirements for gaming machines, and the certifications it would accept as evidencing compliance with those requirements,” the new instruction says. The earlier standard referred to foreign standards as well as those developed by Gaming Laboratories International, which has an approved testing centre in Macau. Promises to issue an indigenous standard emerged in 2008, but it took at least another two years for the work to

begin in earnest. The regulator told the industry in September that it was time to move on. “A number of technical issues have arisen with gaming machines, which indicates that the approval process described in the 2004 instruction is not working as well as it should,” the regulator admits in the new instruction. “Allowing a choice of foreign jurisdictions and default Gaming Laboratories International Technical Standards is no longer viable. It has introduced too much variability into the market. It is timely for Macau to stand on its own feet as a jurisdiction,” it said in a closed-door power point presentation on September 28. Electronic gaming machine applications must be accompanied by certifications from at least one of Macau’s seven approved testing laboratories: Gaming Laboratories International, BMM International, Technical Systems Testing, Enex TestLab, QALab, Eclipse Compliance Testing and Slovenia Institutes of Quality and Metrology. * EXCLUSIVE GAMBLINGCOMPLIANCE/MACAU BUSINESS MARCH 2012

Gaming

PHOTOS COURTESY OF JUDICIARY POLICE

Of pros and cons It took the police a year to shut down a fake, mobile casino that swindled untold millions, tarnishing the city’s reputation

t sounds like a Hollywood sting. Imagine renting a hotel’s presidential or executive suites, converting them into a fake casino for high rollers, dressing for the part and luring mainland gamblers to play, before spiking their drinks and cheating them out of millions of dollars. That was the set up uncovered by police last month at one of Cotai’s casino resorts – although the authorities will not reveal which one. The gang had been running the scheme since March last year, according to a confession obtained in a preliminary inquiry by the Public Prosecutions Office. A police inquiry started with a tip-off in January, when one of the victims was conned out of MOP10 million (US$1.25 million). When local authorities raided three hotel rooms and an apartment last month, police found fake casino chips worth HK$100 million and arrested 16 people. Police say one of the ringleaders is still at large. The suspects – 13 men and three women – are aged between 27 and 63. One is a Macau resident and the remainder are from the mainland. Two suspects were remanded in custody to await trial.

MARCH 2012

“Before the victims entered the hotel room [converted into a fake casino], they would go through a security check. They [the gang members] had pretend public relations to escort them. They also had dealers and supervisors and each played a role. They made people feel like it was a real casino gambling room,” Vong Chi Hong, Judiciary Police spokesperson, said. Police also found collapsible baccarat tables, gaming equipment and a small quantity of illegal drugs and sedatives. “They operated fake casinos in the local hotel rooms with a large number of counterfeit gaming equipment similar to what the local legal gaming companies are using,” the Public Prosecutions Office said in a statement. The fake VIP room was moved from hotel to hotel and the gambling equipment was stored in suitcases.

Professional job The gang members lured gamblers from the mainland with tales of winning big in Macau. They would first tour other casinos with the victims before bringing them to the fake VIP room. There, their drinks would be spiked “to make them feel

“Before the victims entered the hotel room [converted into a fake casino], they would go through a security check. They made people feel like it was a real casino gambling room,” Vong Chi Hong, Judiciary Police spokesperson, said muddled”, while the members of the gang would rig the cards to ensure the players lost. “Their modus operandi was skilful,” the Public Prosecutions Office says. The preliminary investigation found that the gang members “succeeded many times” in conning gamblers. After each operation, the gang stored their paraphernalia at the home of the Macau resident and retreated to the mainland, where they waited for their next victims. The suspects now face charges of fraudulent gaming, among others. Police have yet to determine the number of victims or the amount of their losses. “They were professional and acted quickly every time they set up a scam, which did not last longer than three days,” Mr Vong said.

Insecurity cameras The sophistication of the operation has raised concerns within the gaming industry. SJM Holdings Ltd. says it is concerned about the advent in Macau of organised crime of this kind. “It doesn’t just damage the image of casinos, but that of Macau too. It’s in everyone’s best interest to eliminate all illegal operations like these,” Ambrose So Shu Fai, the company’s chief executive, says. Even so, he believes well-organised, big-time scams are still a rarity. The head of the Gaming Inspection and Coordination Bureau, Manuel Joaquim das Neves, says police have kept pace with fraudsters up until now but admits such scams sully Macau’s reputation. Last year alone, the Judiciary Police handled more than 2,000 crime inquiries that occurred within the city’s casinos, 22.5 percent more than the year before. There were also increases in crimes arising from gaming, such as unlawful detention and loan sharking. In one of the scams busted last year, swindlers changed several shuffling machines at one unidentified casino without security noticing. They swiped at least MOP24 million. Seven people from the mainland were arrested. The tampered shuffling machines were fitted with mirrors to reflect the faces of the cards into the lenses of tiny video cameras, which then relayed the images through infrared transmitters to accomplices. They kept track of the order in which the cards were dealt, relaying details back to the casino floor. One of the first notable scams after the liberalisation of the gaming industry occurred at the Sands casino soon after it opened in 2004. A group swindled the casino out of HK$30 million by swapping cards with accomplices at the baccarat table to build up a multimillion-dollar winning streak. At the time, Sands had yet to install shuffling machines equipped with an electronic eye capable of identifying the cards, and it was difficult to prove they had been conned.

It’s your It’s your daily daily business business

MARCH 2012

Gaming

Surprise, surprise

CasinoLeaks-Macau website director serves on U.S. trade commission BY MARTIN JOHN WILLIAMS*

MARCH 2012

97 new website that promises to gradually release information on organised crime in Macau’s gaming industry is financed and authorised by a major U.S. trade union and led by a four-term member of the US-China Economic and Security Review Commission. Jeff Fiedler, director of special projects and initiatives for the Washington-headquartered International Union of Operating Engineers, told GamblingCompliance that he is in charge of the CasinoLeaks-Macau website project. The controversial website, which came online only late month, says it intends to “bring greater transparency and accountability to Macau” to protect the interests of the union’s U.S.-based membership. Mr Fiedler, a veteran high-level union executive, was reappointed to the US-China Economic and Security Review Commission in December by U.S. House of Representatives Speaker Nancy Pelosi. The commission monitors, investigates and reports to the U.S. Congress on “the national security implications of trade and economic ties between the United States and the People’s Republic of China”, according to the commission’s charter. Mr Fiedler told GamblingCompliance, however, that the website is an International Union of Operating Engineers project under his direction. “There’s no one involved outside the union,” he says. Founded in 1896, the union is the 10th-largest union in the American Federation of Labour and Congress of Industrial Organizations, the biggest union federation in the United States. It claims more than “1,000 casino stationary engineer members in Nevada”, according to the CasinoLeaks-Macau website.

Shedding light on Macau The website describes itself as an “independent, critical website ... dedicated to shedding light on areas of the Macau gaming world that industry stakeholders – government regulators, casino operators, financial institutions – have worked to keep out of the public eye.” “The lack of transparency in Macau, particularly concerning the junkets and VIP rooms, we believe ultimately undermines the credibility of the whole system,” it says. The website contains work-inprogress lists of Macau’s junket com-

The CasinoLeaks-Macau website says it intends to “bring greater transparency and accountability to Macau” panies, junket bosses and individuals linked to them, as well as a larger list of more than 700 individuals in the Macau gaming industry and their corporate affiliations, including foreign nationals. It also features an essay on junkets and VIP gaming in Macau and began publication with a spotlight on the ongoing corporate connections of Wan Kuok Koi, or “Broken Tooth Koi”, a gangster intimately associated with Macau’s gaming scene prior to the arrival of U.S. gaming companies in the early 2000s. He was jailed in 1999 and is due for release later this year. The website also promises to profile “major VIP room and junket operators, some of whom are linked to alleged organized crime figures”, as well to as release information on mainland Chinese involved in Macau’s gambling industry. An update last month explored connections between alleged former associates of “Broken Tooth Koi” and Macau legislator Cham Meng Kam and Fujian province-based Xiamen Airlines, a subsidiary of the New York Stock Exchange-listed China Southern Airlines Company Ltd., or China Southern.

Connecting the dots The website’s launch comes at a sensitive time for U.S. gaming interests in Macau, with Las Vegas Sands Corp. and its Macau subsidiary Sands China Ltd. under investigation by the U.S. Securities and Exchange Commission and the U.S. Department of Justice, while Wynn Resorts Ltd. and potentially its MARCH 2012

You talking to me?

It’s amazing how you can survive in this region, being understood and understanding just a small part of the communication. That’s ok for you but not for your business.

subsidiary Wynn Macau Ltd. are also subject to a preliminary SEC probe. When asked how regulatory affairs in Macau might be relevant to casino workers in the United States, Mr Fiedler alludes to the requirement that Nevada gaming licensees enforce state gaming standards in foreign jurisdictions. “It’s hard to say that the regulatory regime in Macau has much rigour, number one. And number two, it’s very hard to say whether the Nevada regulatory regime has ever been enforced ‘vis-à-vis’ Macau,” he says. “It is always in the interests of our members that their bosses are honest and not involved in anything untoward. We believe that job security of our members is predicated on completely law-abiding bosses. That’s our interest,” he says. “Are our members aware of [the website]? The answer is yes. Are our members involved in the gathering of information? The answer is no. We’re a democratic organisation; our members know what’s going on.” The CasinoLeaks-Macau website says “the security and integrity of Nevada gaming and its institutions are intimately related to our members’ wages, hours and working conditions”. “As several Nevada-based gaming companies began establishing casino operations in Macau, we monitored their progress as their success or failure abroad can affect our members in Nevada,” it adds. “We have followed with growing alarm as news outlets and government agencies have reported on alleged organized crime activity, including money laundering, in Macau’s now US$33 billion [MOP264 million] gaming industry.” The CasinoLeaks-Macau website goes on saying that “due to a dearth of concrete information on Macau gaming supplied by either regulators (in Macau and in the U.S.) or the casino companies themselves, particularly concerning the VIP room and junket industry, we have begun conducting our own research into Macau, which we will begin to unveil in this website”.

No leaks At goldfish we know how to adjust your message for each audience or product and make it effective. Yes. We are talking to you.

+853 2833 1258 info@goldfishmacau.com www.goldfishmacau.com

MARCH 2012

But Mr Fiedler says CasinoLeaks-Macau has not published “leaked” documents at this time. “It seems to me there’s a huge vacuum of information and we are only using public documents, corporate documents, whether they are Macau documents, Hong Kong documents, or Hong Kong Stock Exchange documents, U.S. stock exchange documents,” Mr Fiedler says. “We’ve simply analysed the documents better than anybody else, apparently.” However, the website does invite readers to submit information. “If somebody wants to offer us some information, we’ll take it,” Mr Fiedler says. “That doesn’t mean we will use it in terms of publishing it, because I’ve got to corroborate whatever somebody says. I have to try to document it,” he explains. “But in the end, all of our information is documentable.” Mr Fiedler says a predecessor website campaign in March 2011 had “focused more on Pansy Ho Chiu King at the time.” Ms Ho, daughter of Stanley Ho Hung Sun and a key executive with MGM Resorts International subsidiary MGM China Holdings Ltd., was found to be an “unfit partner” by a New Jersey Division of Gaming Enforcement report that prompted MGM Resorts to move away from its gaming interests in that state and consolidate its presence in Macau. “This [website project] is different from that. We decided to take the other one down and actually do a better job,” Mr Fiedler says. * EXCLUSIVE GAMBLINGCOMPLIANCE / MACAU BUSINESS

Gaming

ALTIRA KING OF ENERGY SAVING

Altira Macau was the big winner of the “Macau Energy Saving Contest 2011” jointly held by electric utility CEM and the Office for the Development of Energy Sector. The property owned and managed by Melco Crown Entertainment Ltd. was crowned with the “Energy-saving Concept” Grand Award for saving the highest electricity (768,120kWh) among all the participants. Altira Macau engineering department manager Gerald Cheung said the property has installed a number of energy-saving devices in recent years, which has helped the hotel casino to achieve significant energy savings. The contest is based on the comparison of electricity consumed by participants from June to November 2011 with that of the same period in 2010.

WING HING GETS CONTRACT EXTENDED

UNDER FIRE

Donald Tsang spotted at VIP club spring gathering at City of Dreams Hong Kong chief executive Donald Tsang Yam-kuen was photographed last month at a Spring gathering at City of Dreams with junket operators and high rollers. The images led to strong criticism from the media and political opponents who say Mr Tsang should not have joined a dinner with people said to be of “dubious backgrounds”. The banquet was a spring gathering of the Li Ying Club, a VIP club at City of Dreams. According to a spokesperson from the Hong Kong government, Mr Tsang was in Macau on a private tombsweeping trip. The spokesperson added that he and his wife had not done anything improper and that they did not enter the gambling floor. Unlike in Macau, Hong Kong doesn’t ban its civil servants from gambling. Following the trip to Macau, Mr Tsang also faced accusations of possibly having breached the bribery law by accepting tycoons’ offers of trips on private jets and luxury yachts. He came to Macau on a yacht belonging to a Hong Kong wealthy businessman.

Sociedade de Lotarias Wing Hing, Lda. has had its monopoly contract for the Chinese lottery extended until the end of this year. According to the official gazette, the company will have to pay a MOP500,000 (US$62,500) premium to the government. Aside from this, the contract remains unchanged. Last year, the Chinese lottery’s gross gaming revenue reached MOP6 million. The annual value has remained stable since 2007.

GALAXY DISPLAYS MIO PANG FEI WORKS

Contemporary artworks by Mio Pang Fei are on display in Galaxy Macau until March 11. The exhibition features 24 masterpieces. Shanghai-born Mr Mio has been living in Macau for almost 30 years. His art has been displayed in a number of cities and regions including Shanghai, Kuala Lumpur and Singapore. Galaxy Macau is hosting the exhibition together with Casa de Portugal with the support of the Cultural Affairs Bureau. MARCH 2012

100

Gaming

The main game The world’s biggest cash game of Texas Hold ‘em has kept top-class players at the table and put Macau on the map. Could the city do more to cash in? BY XI CHEN

ne hand, one million dollars, no tears.” The surreal bet that defined Wall Street bond traders in Michael Lewis’ book “Liar’s Poker” has met its match in Macau, where huge sums of money are being wagered in an onagain, off-again, no-limit Texas Hold ‘em poker game at StarWorld’s Poker King Club. The combatants are the world’s best professional players and wealthy international tycoons. The game is grand enough to have earned its own name – the Macau Big Game. “This is the biggest cash game at casinos at the moment. The average pot size is about four to five times larger than Las Vegas,” says Andrew Robl, one of the top American professional players who has participated. With blinds of HK$10,000/HK$20,000 (US$1,290/US$2,580), one can easily see a pot in the millions. The biggest pot recently was HK$30 million, according to Winfred

“

MARCH 2012

Yu, the chief executive officer of Poker King Club. The Big Game has run on and off for the past two years at Poker King Club. The games attract top tier professional players to Macau a few times each year. Some of the sessions have been epic marathons, lasting more than 24 hours. The action takes place behind closed doors but the professional players do share insights on Twitter, their blogs and with specialty poker websites. The game is being driven by wealthy businessmen from Macau, Hong Kong, the mainland, Malaysia and further afield who want to play against the world’s best. Previous media reports said wealthy Chinese businessmen who have given up on VIP baccarat are among those leading the heavy betting. Poker King Club keeps their identities

a secret but there is the suggestion that some players may be mainland government officials. Star players including Phil Ivey, John Juanda and Gus Hansen have been spotted in Macau. The pros typically stay for a week, maybe 10 days, before jetting out. While researching this report, some sources said a handful of players had set up temporary bases here. The Big Game might have benefited from “Black Friday”, the crackdown on online gambling in the United States last year. With several poker sites shuttered, professional gamblers have ventured to new territories where they can play online and live, as is the case in Macau.

Tough crowd Calling Macau his favourite gaming destination, Mr Robl says the Big Game is the world’s toughest. “Poker has really changed in

101 Macau. There are more local players now. Some of the people we play with are very close to pros in their skill levels,” he says. Mr Yu shares a similar view, saying that professional players might have just a 10-percent advantage over the businessmen they play against. In some cases, the tycoon-players have other trump cards such as deep pockets. A poker enthusiast since youth, Mr Yu officially established the Poker King Club in October 2009 to promote poker. “Asia is a less mature market for poker. Not many Chinese understand the game,” he says. Casinos initially turned down his poker room project before he met Alvin Chau, the chairman of Suncity Group, arguably the biggest and most successful junket operator in Macau. Mr Chau saw the potential and Poker King Club took off. Among the big-time professional players, poker is considered a game of skill and they compete fiercely for rankings, tournament trophies and money. In the U.S., where the game is arguably most mature, television coverage has increased the game’s popularity and created a handful of globetrotting celebrities. “Poker is an entirely different breed of game. With other types of gambling, you are not expanding your mind but with poker you can learn a lot and keep improving. It is a more rewarding experience,” says Tom Dwan, a young superstar in the poker world who dropped out from an engineering degree in Boston University a few years ago to pursue poker full-time. He too has been coming to Macau to play at the Big Game.

The biggest pot recently was HK$30 million, according to Winfred Yu, the chief executive officer of Poker King Club

Space invaders

No favours The emergence of Texas Hold ‘em in Macau has been impressive. Last year, casinos took MOP277 million in gross gaming revenue from the game – a 400-percent increase over 2008, the year the game was launched here. Still, it is hard to draw a clear picture of how strongly poker is growing in Macau. The data made public by the Gaming Inspection and Coordination Bureau refers only to gross gaming revenue generated for the casino, failing to give details of the volume and size of bets. It is unlikely to be a significant proportion of the gaming pie, considering

that baccarat is the most popular game in Macau. It accounts for more than 90 percent of casino gross gaming revenue, when VIP and mass market segments are both taken into account. At the moment, there are fewer than 40 Texas Hold ‘em tables in Macau, or about one for every 150 live tables, according to Mr Yu. The game is played at just four casinos: Wynn Macau, StarWorld, Venetian Macao and the Grand Lisboa. City of Dreams closed down its Hard Rock Poker Lounge last year, making Venetian the only place to play poker in Cotai. The government cap on live gaming tables does not favour the game’s development. With casinos running at near the cap’s 5,500-capacity – there were 5,302 tables licensed by the end of December – it is highly unlikely that new units will be devoted to poker. If anything, the scale of Texas Hold ‘em is likely to be reduced in exchange for higher-yielding games that give operators the opportunity to squeeze out higher profits. Texas Hold ‘em poker games are normally classified as “rake” games, where players pay a commission to the casino on each hand. In Macau, the maximum rake is capped – it tops out at five times the value of the big blind. These games generally yield far less revenue to the casino and take more time to play, making them less attractive from an operational point of view.

“This is the biggest cash game at casinos at the moment,” says Andrew Robl, one of the top American professional players who has participated

Some with interests in the game want an exclusion from the cap for live Texas Hold ‘em poker tables. “Poker games should be changed to a different category,” Mr Yu says. “And all casinos should work together on this, as no one alone is willing to petition the government for change.” Mr Robl agrees. “It is very unfortunate some tables were closed down. Poker tables shouldn’t be counted in the total table numbers because it is not a house game.” In a “house game”, players bet against the casino. In a regular game of Texas Hold ‘em, players bet against each other. “The regulation should change. Macau can be the new poker capital of the world or at least the Asian poker capital,” Mr Dwan says. He has visited Macau no less than seven times since October and says he will continue to MARCH 2012

102

Gaming Bucking the trend is Poker King Club, which says it will persist with its high-stake cash games. The club will also host a leg of the Asian Poker Tour in late July. Mr Yu says the World Series of Poker and the World Poker Tour have also expressed an interest in bringing tournaments to Macau. Before that can happen, he says the climate needs to change.

Gaming drawcard

“Restricting the growth of poker restricts the growth of a new category of tourism for Macau,” says Mr McDonagh, PokerStars director of live operations for the Asia-Pacific come back as long as there are great poker games. A spokesperson for the Gaming Inspection and Coordination Bureau told Macau Business that the government has not considered exempting specific games from the table cap. Another option is to increase the number of electronic tables. Although they are excluded from the cap, they are not popular with serious players. PokerStars Macau’s live poker room at Grand Lisboa, opened in 2009, has also suffered setbacks. The casino hosted the most popu-

lar event ever in Asia last year when 1,329 entrants played in the Macau Millions. But this year’s event has been postponed indefinitely as PokerStars’ contract to operate events and tournaments at the Grand Lisboa expires this month. It is also unclear if Macau will host a stage of the Asia Pacific Poker Tour this year, which is run by PokerStars. “We’ll have further announcements about the future of PokerStars Macau coming soon,” says Danny McDonagh, PokerStars director of live operations for the Asia-Pacific.

“Poker games can be great marketing tools for Macau,” Mr Yu says. “The World Series of Poker now attracts tens of thousands of poker players [to Las Vegas], with their families and associates coming to town. It would be a great boom for local retail and tourism.” Mr McDonagh agrees with Mr Yu. Both say as long as poker plays second fiddle, lacking infrastructure and support from both the casinos and the government, any hope of Macau becoming an international poker destination is little more than a dream. “Restricting the growth of poker restricts the growth of a new category of tourism for Macau. The greatest value of poker to Macau is its global appeal, particularly amongst the North American and European tourist audiences,” says Mr McDonagh. Last year, the Macau leg of the PokerStars’ Asia Pacific Poker Tour set a new tour attendance record of 575 players from 54 countries. “These audiences bring new demands that mean growth opportunities for local Macau businesses in categories including family-oriented entertainment and Western food and beverage,” says Mr McDonagh.

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MARCH 2012

104

Gaming

Two researchers try to understand what makes Macau’s casinos so attractive and addictive to mainland visitors

Beyond hardcore gaming t is no secret that mainland visitors love Macau’s casinos. Are they crazy for gambling? Are they all in for the experience? Or are they simply in love with all of it? Researchers Anthony Wong Ip Kin, from the Institute for Tourism Studies, and Mark Rosenbaum, from the Northern Illinois University in the United States, say they have proof that there is something more than hardcore gambling that attracts at-large mainland tourists. In a study published in last month’s edition of the “Journal of Hospitality & Tourism Research”, their evidence suggests that gambling is only part of the complete experience that most visitors seek from a casino. Their conclusions come from a survey of over 300 mainland tourists, mostly if not all mass market customers. “Our findings suggest that the emergence of integrated, theme parklike casinos has fostered a new travel phenomenon: casino tourism,” the report says. According to their empirical data, tourists’ casino excursions are primarily motivated by five factors: enter-

MARCH 2012

tainment and novelty seeking, leisure activity, escape from pressure, casino sightseeing and socialisation. The findings suggest that although gambling is part of the package that people want, mainland tourists are looking for assorted travel and leisure experiences to satisfy their more varied and complex desires. Many tourists view “casino touring and experiencing casino properties as a major value proposition to their travel experience,” the report says. “Hence, a commercially built environment is not simply a place where business transaction takes place but also a major means for tourists’ travel experience.” That includes fulfilling tourists’ physical, social and emotional needs.

Leaving the table Mr Wong and Mr Rosenbaum say findings such as theirs underline the need for casino-resorts to include attractions beyond gaming tables. They conclude this is a “crucial” draw card to attract Chinese visitors. “With intensified competition, it is prudent for traditional non-Vegas casino operators to reconsider their cur-

rent business strategy to focus more on hedonic leisure offerings that could ultimately satisfy the at-large Chinese consumers.” If patrons are seeking entertainment and novel experiences, they are likely to be attracted by high-quality leisure offerings and social opportunities associated with casinos. Their visits are unlikely to be used to escape from day-to-day pressures or to sightsee. The type of tourist keen on integrating the casino’s leisure activities into their visit is also more inclined to tour the casino, perhaps to enjoy luxury facilities and to shop. The trip may include a family element, rather than a break from day-to-day pressures. The two researchers divide Macau’s typical casino patrons into two segments: entertainment-for-socialisation seekers, representing 44 percent of their sample, and sightseeing-forescape seekers, which accounted for 54 percent. “Although these two segments share similar socio-demographics and visitation profiles, entertainment-forsocialisation seekers are more likely to be middle class, while the other seg-

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ment is more likely to be older and less educated,” Mr Wong and Mr Rosenbaum say. Perhaps a more important differentiation between these two casino segments lies in their underlying travel motives. “Our findings indicate that entertainment-for-socialisation seekers are prone to seek excitement and adventure, to consume high-end leisure offerings and to nurture family relationships.” Not only are these tourists willing to pay a premium for quality but they are also willing to pay providers who can satisfy their needs.

Gender games These visitors, according to the researchers, are also “more likely to utilise casinos for family gatherings than to relax from pressure.” Instead, ‘sightseeing-for-escape’ visitors tend to enjoy casino sightseeing as a means for relaxation. The survey also found some differences between genders. Despite the common view that Chinese men have the stronger affinity for casino gambling, the report concluded

Many tourists view “casino touring and experiencing casino properties as a major value proposition to their travel experience,” the study says

that there was not enough evidence to suggest that was the case in Macau. “Rather, our findings indicate older females are more inclined to enjoy casinos for novelty seeking and relaxing from pressure. “Hence, casino managers must consider the interaction effects of tourist demographics to gain a better vantage point on their target customers.” The study suggests that other potentially successful marketing strategies could emphasise a family theme, perhaps a “bounce-back” weekend, or accentuate how Macau may permit mainland tourists to escape to another world – one filled with new casinos, spas, entertainment, nightlife activities and luxury shopping – for a reasonable price. The report signs off with a warning. “Given that novelty seeking, such as experiencing casinos and nightlife entertainment, is a major driver for mainland Chinese tourists to Macau, the special region’s travel authority needs to tout new product/service offerings, as the mainland Chinese tourists may become bored with the place after the first visit.” MARCH 2012

106

Gaming

Take a shot U.S. sports betting has a huge market in Asia and is no stranger to Macau BY SARA FARR

BA star Jeremy Lin probably never imagined that apart from having a big basketball career in North America, he would also play an important role in sports betting in Asia. “When you combine the love of wagering with the additional perspective you get from understanding and seeing the action, you are left with a compelling product that offers countless sports betting variants,” says Benjie Cherniak, president of Don Best Sports, a U.S. company that gives sports betting odds. Mr Cherniak is one of the speakers at this month’s iGaming Asia Congress, where he will examine the growth of U.S. sports in the Asian and European sports betting markets, and the emergence of a round-the-clock sports betting market. He says a sport becomes popular when it becomes a “social currency” – in other words, when it is followed so widely that despite language and cultural barriers people can still communicate about it. This is the case with basketball and baseball. “We have met [sports betting] operators who ‘live’ baseball and basketball and immerse themselves in the culture and statistics of these sports that they can share with millions of others,” Mr Cherniak says. In-play betting – betting while the match is underway – has become popular among punters, especially in Asia and Europe, as they want to be part of the game. This is one of the reasons, Mr Cherniak says, that U.S. sports are “perfectly positioned” to complement football in the Asia-Pacific region. In Macau, punters can place bets on NBA games through Sociedade de Lotarias e Apostas Mútuas de Macau Lda., SLOT for short. The company also accepts bets on football.

MARCH 2012

Jeremy Lin

“When you combine the love of wagering with the additional perspective you get from understanding and seeing the action, you are left with a compelling product that offers countless sports betting variants,” says Benjie Cherniak, president of Don Best Sports, a U.S. company that gives sports betting odds

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GET VIRTUAL V

irtual sports betting is gaining popularity in this part of the world. Virtual sports betting is betting on fantasy teams and leagues, with the winner decided by a random number generator. “Our research in Asia has shown football is the greatest opportunity for us,” says Nick Gardiner, commercial director for virtual sports for Inspired Gaming Group Ltd., a British supplier of sports betting products. Mr Gardiner says his company’s revenue is expected to “track at the same rates as live sports betting”. Inspired Gaming’s virtual football leagues include replicas of the real ones most popular in Asia, such as England’s Premier League, Italy’s Serie A, Spain’s La Liga and Germany’s Bundesliga, says Mr Gardiner, one of the speakers at this month’s iGaming Asia Congress. The aim is “to make the betting experience as reflective of real life as possible”. The introduction of the Asian handicap has increased virtual sports betting revenue by 25 percent, Mr Gardiner says. The Asian handicap reduces the possible outcomes of a football match from a win, a loss or a draw to simply a win or a loss, giving punters a fifty-fifty chance. “This proves that players like different odds,” he says. Another virtual sport that is gaining popularity is virtual tennis. Last year, the mainland’s Ministry of Finance, which regulates lotteries there, approved Inspired Gaming’s “Lucky Racing” car-racing game. The game is supplied by a joint venture between British bookmakers Ladbrokes Plc and AGTech Holdings Ltd. This is reportedly the mainland’s first legitimate high-frequency fixed-odds virtual sports lottery platform and game.

THE TWAIN SHALL MEET B

etween 250 and 300 people are expected to take part in this year’s iGaming Asia Congress, the organisers, Beacon Events Ltd., say. The three-day event will be held at the Grand Hyatt at City of Dreams between March 6 and 8. Rosalind Wade, the company’s general manager, says that this year’s big theme is “what both the West and the East can learn from each other and how to identify partners and opportunities”. Each year has seen an increase in the number of participants and Ms Wade says there are more mainstream companies and “big European brands” attending. “We have brought back the jurisdiction round-tables on day one, which allows people to meet in more intimate groups and ask legal and technical questions,” Ms Wade says. This year there will be a focus on social gaming and social media. Other areas of interest are in-play betting on poker games and online mahjong. Ms Wade says people also want to hear about the practicalities of marketing in Asia and how to work with junket operators and agents.

In Asia, punters enjoy watching “their home-grown stars play at the highest levels in North American leagues,” says Mr Cherniak. The following that NBA stars such as now-retired Yao Ming attract show the cultural resonance that U.S. sports have with their global audience, he says.

Career highs “Asian fans really feed off the recognition of seeing what they perceive as ‘their’ players performing well,” Mr Cherniak says. “The more fans, the more betting interest.”

It is not just the fans that are responsible for the growing interest in betting. U.S. sports leagues are making a stronger effort to attract an international following. The NBA and Major League Baseball have focused on Asian fans and regularly play exhibition matches in important markets. Some NBA exhibition matches were played in Macau in 2007. Mr Cherniak argues that the football betting market is becoming saturated, so it is more interesting for punters to bet on sports that give them more statistics and other data about the play-

ers and teams. “Likewise, operators are keen to create high-value, high-volume opportunities to grow their share of the market,” he says. There is more to sports betting than meets the eye. For example, Asian bookmakers are increasingly using U.S. sports to create new markets. But this does not always work properly because they do not have all the data they need, Mr Cherniak says. “They lack the complete algorithm inputs and other critical messages that, for example, European traders will typically use to price and manage risks.” MARCH 2012

108 DAVID GREEN GAMING CONSULTANT, NEWPAGE CONSULTING

Dreamtime in the Philippines IF ALL GOES WELL, THE NEW CASINOS IN MANILA WILL BOOST THE PHILIPPINE GAMING INDUSTRY TO NEW HEIGHTS. BUT THAT IS A LONG WAY FROM SAYING THE COUNTRY CAN BEAT THE BIG BOYS ANY TIME SOON have long been impressed by the ability of successive administrations of the Philippine Amusement and Gaming Corporation (Pagcor) to talk up the prospects of the Philippine casino industry. The latest to talk a good game has been the current company chairman and chief executive officer, Cristino Naguiat, who reportedly recently forecast that “in five years, we will beat Las Vegas ... and generate annual gambling revenue of US$10billion-US$11billion”. This implies that annual gross gambling revenue of at least US$10 billion (MOP80 billion) will be achieved at latest by 2019, which should see the fifth anniversary of the operations of all the casino resorts currently under development at Entertainment City Manila – assuming all are in fact built. Sounds great until you realise this is at best aspirational and realistically improbable. In 2011, Pagcor’s casino operations generated about US$582 million in gross gaming revenue. In addition, Resorts World’s Manila casino accounted for an estimated US$800 million. It is unlikely all of the casino resorts now under development in Manila will be operational before 2014 but assuming that they are, to achieve gross gaming revenue of US$10 billion by 2019 would require the industry to grow at a compound annual rate of 28 percent, commencing 2012. To put that in perspective, Macau’s compound annual growth rate over the eight-year period from 2004, when the first non-SJM properties opened, to 2011 was around 32 percent. Nothing wrong with being optimistic, but even at the low end of the range estimate that is highly unlikely, even taking account of the fact that Macau liberalised off a higher base gross gaming revenue in 2002 (US$2.8 billion) than is the case with the Philippines (approximately US$1.38 billion in 2011). Here’s why.

Lack of strong drivers Last year the Philippines welcomed just fewer than four million visitors, about 24 percent of whom originated from Korea. South Korea currently has only one casino open to locals. The reported expansion of the casino industry in that country is likely to allow locals to access casinos to be located at the mooted new resort properties. Remember the fallen powerhouse, Atlantic City? The greatest single cause of its precipitous decline has been the opening of casinos in Pennsylvania, a key, adjacent source market. In a similar vein, it is notable that overall number of visits by Singaporeans to the Philippines went up by less than 17,000 year-on-year in 2011. There was also a decline in the number of visitors emanating from Hong Kong, though in fairness the reason for that decline is probably attributable to the travel alert issued by the SAR government, following the dreadful massacre of Hong Kong tourists in Manila in 2010. It may rebound in the MARCH 2012

future, though what the attraction for Hong Kong gamblers in the Philippines will be over Macau is not readily apparent. It certainly isn’t convenience. Although there was some growth in the number of mainland Chinese visitors, they represented only around 6 percent of all visitor arrivals to the Philippines in 2011. Now, we are all familiar with the mantra “build it and they will come”, which has certainly gained disciples since the dramatic rise of both Macau and Singapore as gaming destinations. Unlike Singapore and Macau, however, the Philippines is an archipelago, with no shared international land border. That precludes arrival of international tourists by road and rail; the options are by sea and air. In one sense, that is positive. It virtually eliminates the day-trip market. However, the flip side is that travellers to the Philippines must be intent on staying for several days. And visitors arriving by air will probably pass through the Ninoy Aquino International Airport in Manila, which is rated in several international surveys as one of the world’s worst airports. In short, people travelling to the Philippines have to have good reason to go there and stay. It must stand as a destination, not simply a convenience. While the Philippines does have a large domestic population, it only approximates the population of Guangdong, yet with considerably lower per capita income and far more dispersed.

Not enough attractions Will casino resorts provide sufficient attraction for tourists? In the absence of regional competition, perhaps, but gamblers in Asia are spoilt for choice already. Unlike Macau, Singapore and indeed Las Vegas, there is little cultural affinity between the Philippines and its key target markets. In the case of Japan, China and Korea, the Philippines

Pagcor expects (hopes?) capital investment in the new casino resort projects in Manila will reach US$5 billion. Assuming it does so, in five years the recurrent gross gaming revenue is supposed to reach US$10 billion. In other words, recurrent annual revenue of US$2 is expected for every US$1 of investment

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has no common official language. Moreover, there is no common history, unless the Japanese invasion and occupation of the Philippines during World War II qualifies. While there is an indigenous ethnic Chinese community, the low visitation by mainland Chinese visitors suggests the ties that bind are not particularly strong. Manila is a city of extreme contrasts. The urbanisation that has occurred in the Philippines resembles what has happened in mainland China, but unlike the mainland, many of the people leaving rural areas in search of better lives are migrating to a single city – Manila. This has stressed infrastructure, particularly roads. The Pasig River has been a severely degraded and unattractive waterway for years. Travellers can choose whether to expose themselves to this, but if they do not wish to, their mobility and the quality of their travel experience will be considerably restricted. Just as Manila Bay is not Manila, Manila is not the Philippines. But many visitors won’t get to see the “real” Philippines if they are limited to a casino resort for the duration of their stay. Pagcor expects (hopes?) capital investment in the new casino resort projects in Manila will reach US$5 billion. Assuming it does so, in five years the recurrent gross gaming revenue is supposed to reach US$10 billion. In other words,

recurrent annual revenue of US$2 is expected for every US$1 of investment. By comparison, investment in the gaming industry in Macau since liberalisation in 2002 approximates US$20 billion, yielding recurrent gaming revenue last year of about US$33.5 billion, a return of US$1.68 for every US$1 invested. In Singapore, where over US$7 billion was initially expected to be spent on its two integrated resorts, the relationship after three years is likely to be US$1 to US$1. Singapore can hardly be seen as a precedent for the Philippines likely emulation; it receives more than 12 million tourist arrivals each year. In any event, sources suggest that up to 60 percent of casino visitations are by locals. Singaporeans have high disposable incomes and a high propensity to gamble. Moreover, the country has attracted two well-recognised international brands, including Sands, which through group companies has a significant presence in both Macau and Las Vegas. The leverage associated with established gaming industry brands cannot be overstated. It is in the industry’s interests and the interests of the people of the Philippines to see these new developments in Manila prosper. Credible and experienced people are involved in the projects and, if the stars align, they could do very well. Just don’t bank on matching or beating the big boys anytime soon. MARCH 2012

110

Gaming

Dangerous games Singapore casinos face tougher ‘problem customer’ regulations BY DAN TOWNEND*

ingapore’s casino operators face tougher regulation on the monitoring of customers after research suggested more low-income punters and gambling addicts are visiting the state’s casinos. Findings from the 2011 Survey on Participation in Gambling Activities indicate a small but rising proportion of low earners betting amounts exceeding S$1,000 (MOP6,360)-a-month and a high proportion of “probable pathological gamblers” are visiting the island’s two casino resorts. Acting minister Chan Chun Sing said that the government would consider extending a third-party casino exclusion order to Singaporeans on social assistance schemes. Third-party exclusions, which currently number nearly 30,000, apply to bankrupts and those on state public support aid. Mr Chan said that “going forward, we will evolve a model whereby the help will come not just from the social organisations but also casino operators working in concert with government agencies. “What we want are targeted measures rather than very blunt measures that cut across different groups, which may not give us the necessary impact or which may cause unintended consequences.” Potential regulatory measures, which may be introduced over the next few months, could include recipients of social assistance being barred from entering casinos, operators playing a bigger role in the monitoring of frequent visitors and the introduction of “circuitbreakers” that prevent casino gamblers from chasing their losses.

Double-edged sword Mr Chan said that people requiring help with employment and those on the medium-term ComCare Transitions assistance scheme could come under thirdparty exclusion schemes. The 2011 survey by the National Council on Problem Gambling found that nearly seven in 10 probable pathological gamblers gambled at least once a MARCH 2012

week in the past 12 months. Chan said that there were “conflicting opinions” on the issue of raising entrance levies — one suggested solution to the issue. Increasing the levy may not deter frequent gamblers and may cause some to intensify their betting when in the casinos, he said. Another fear was that gamblers might substitute casino trips with alternatives such as online gambling that could be more problematic. “Because of differences in the nature of gaming products, we have to be quite surgical in the way we apply the measures,” Mr Chan said. The government will study measures already in place in casinos in Austria, Australia and the Netherlands. “If you look at the models which have been practised by casinos in either Holland, Australia or Austria, the casinos find that it is in their interest to also not have the pathological gamblers among their clientele ... because it is also with their interest to promote responsible gaming,” Mr Chan says. Whatever regulatory changes are brought in, the S$100 levy for Singaporeans to enter the casinos at the Marina Bay Sands and Resorts World Sentosa will remain unchanged because of a 10-year contractual agreement fixing the price. Singapore’s two casinos have al-

ready had reprimands over their entrance policy but both have agreed to support any government policy. A Marina Bay Sands spokesperson said it would “continue to work in a cooperative and collaborative manner with regulatory authorities”. The spokesperson added that Marina Bay Sands was committed to providing information and guidance to its guests on the rules and regulations that govern the casino environment in Singapore. Resorts World Sentosa said it strongly supported the government’s initiative to protect Singaporeans from pathological gambling. It also welcomed the measures to exclude recipients on social assistance from gambling in the casinos. The 2011 Survey on Participation in Gambling Activities showed a 7 percentage-point drop from 54 percent to 47 percent in gambling participation overall and a fall in the number of Singaporean visitors as the novelty factor of the casinos wears off. The survey found that the proportion of low-income gamblers went up from between 0 percent and 0.8 percent in 2008 to 2 percent in 2011. These gamblers earn less than S$2,000 a month but they place an average monthly betting amount of more than S$1,000. * EXCLUSIVE GAMBLINGCOMPLIANCE / MACAU BUSINESS

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MARCH 2012

112

Gaming

Cashing in New research concludes that gambling accounts for one percent of the U.S. economy

Las Vegas Strip

lthough feeling the impact of the global financial crisis in 2010, casinos in the United States still contributed about 1 percent to the country’s US$14.5 trillion (MOP116 trillion) gross domestic product that year. The estimate is in the results of a study released by the American Gaming Association last month, which show the effect the commercial casino industry has on the U.S. economy. “Beyond the Casino Floor: Economic Impacts of the Commercial Casino Industry” is said to be the first report of its kind, offering an in-depth analysis of the gaming industry. The report also includes data on the wealth directly or indirectly generated by the industry. The study, by consulting firm Brattle Group and commissioned by the American Gaming Association, did not take into account the estimated US$27 billion spent at casinos on U.S. Indian reservations. American Gaming Association president Frank Fahrenkopf says the commercial casino industry is a “significant and vital” part of the U.S. economy.

MARCH 2012

“The industry generates and supports economic activity that stretches far beyond the communities that host casinos and into the greater American economy,” he says.

Jobs, tax revenues The report says casinos in the 22 states where gambling is legal paid US$7.6 billion in taxes on their combined gaming revenue of US$34.6 billion in 2010. The casinos paid another US$8.3 billion in other ancillary taxes. The report calculates that, taking into consideration all direct taxes paid by commercial casinos, the industry has an average effective tax burden of 32 percent, although tax rates vary significantly from state to state. That rate is considerably higher than the overall average tax rate of 27 percent. The more than 500 casinos in operation in 2010 accounted for about US$125 billion in spending and close to 820,000 jobs, the study found. “Commercial casinos directly generated US$49.7 billion in consumer

spending and about 350,000 jobs, with salaries and benefits totalling nearly US$15 billion in 2010,” the report says. A little more than two-thirds of the consumer spending generated directly by casinos – or US$34.6 billion – was generated on the gaming floors. When indirect and induced spending is taken into consideration, the industry contributed to another US$76 billion in spending and more than 470,000 jobs. Salaries in the gaming industry exceeded those in other recreation and retailing industries. The report says that in terms of sustaining jobs per dollar of revenue, “the commercial casino industry compares favourably to other similarly sized U.S. industries”. “The data in this report shows the significant scope of impact of this industry,” says Coleman Bazelon, the head at the Brattle Group. Mr Bazelon says the report “shows the economic activity spurred and supported by the commercial casino industry has a ripple effect throughout the nation’s greater economy”.

113 Gaming

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

May

6th – 8th

iGaming Asia Congress

Grand Hyatt, City of Dreams, Macau 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 16th – 19 th

ENADA Spring

Rimini Expo Centre Rimini Fiera Via Emilia, 155, 47921 Rimini - Italy (39) 0541 744 214 (39) 0541 744 454 en.enadaprimavera.it g.zoni@riminifiera.it 29 th – 31st

2012 Macao International Environmental Co-operation Exhibition and Forum (MIECF)

Venue: The Venetian Macao-Resort-Hotel Organiser: Macao Trade and Investment Promotion Institute (IPIM) Address: World Trade Centre Building, 1st & 4th Floors, 918, Avenida da Amizade, Macao Tel: (853) 2871 0300 Fax: (853) 2859 0309 Website: www.ipim.gov.mo E-mail: ipim@ipim.gov.mo April Date: Event:

19 th – 20 th

Mobile Payments & NFC World Summit 2012

Venue: Eaton Smart Hong Kong Organiser: Symphony Global Pte Ltd Address: 10 Anson Road, #26-04 International Plaza, Singapore 079903 Tel: (65) 6474 1471 Fax: (65) 6725 8438 Website: www.symphonyglobal.com E-mail: enquiry@symphonyglobal.com Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:

113

24th – 26th

Anti-Corruption China Summit

Andaz Shanghai 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: 24th – 26th Global iGaming Summit and Expo Event: Venue: San Francisco, CA (TBA) Organiser: Clarion Gaming Address: Earls Court Exhibition Centre, London SW5 9TA, UK Tel: (44) 0 20 7370 8579 Website: http://www.gigse.com/ E-mail: yeemay.huang@clariongaming.com

Date: Event: Venue:

1st – 3rd

UAE Ministry of Foreign Trade Annual Investment Meeting

Dubai International Convention & Exhibition Centre (UAE) Organiser: Annual Investment Meeting Organizing Committee Address: P.O.Box 10161 Dubai, UAE Tel: (971) 4 39 23232 Fax: (971) 4 39 23332 Website: www.aimcongress.com E-mail: info@aimcongress.com Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:

10 th – 12th

GTI Asia Taipei Expo

Taipei World Trade Center, Taiwan Haw Ji Co., Ltd 2F, No. 17, PaoChing St., SongShan Dist., Taipei City 10585, Taiwan (886) 2 27607407 (886) 2 27 42 0522 www.gtiexpo.com.tw gametime@taiwanslot.com.tw

Date: 22nd – 24th Event: G2E Asia Venue: The Venetian Macao-Resort-Hotel Organiser: Reed Expo Address: 39/F Hopewell Centre, 183 Queen’s Road East, Wan Chai, Hong Kong Tel: (852) 2824 0330 Website: www.g2easia.com E-mail: info@g2easia.com Date: Event: Venue: Organiser: Address: Tel: Fax: Website: E-mail:

29 th – 31st

5th Annual Retail Asia Congress

TBC 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

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

27th – 28th

SAGSE Gaming Panama

ATLAPA Convention Center Beacon Events Av. Alvear 1883 Loc. 21, (C1129AAA) Cdad. Aut. de Buenos Aires, Argentina. (54) 11 4805 4623 (54) 11 4805 4791 http://www.sagsepanama.com/ jlgallinger@monografie.com

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

MARCH 2012

114

Hospitality

Finishing line

With six months until the opening of the Sheraton Macao Hotel, staff recruitment is under way and final preparations are being made BY SARA FARR

rom running marathons to running hotels, Josef Dolp is used to competing under pressure. Mr Dolp, the managing director of the Sheraton Macao Hotel since last August, says there is a lot to look forward to when the

hotel opens on September 15. The road to opening the Sheraton chain’s, and Macau’s, biggest hotel has not been an easy one, with construction of the Sands Cotai Central development having been suspended in 2008 because

of the global financial crisis. “We had a fresh restart and we started from scratch one year ago,” Mr Dolp says. “Of course, there are a lot of things that you need to do and plan, but everything is running smoothly.”

GOING THE DISTANCE A

s the managing director of the Sheraton Macao Hotel, Josef Dolp oversees all aspects of the hotel’s operations and planning. Mr Dolp, a native of Austria, has been in the hospitality industry for 26 years, 16 of them with Starwood Hotels and Resorts Worldwide Inc. His career in the hospitality business began in Germany, where he worked for five years in a five-star resort. In 1996 he joined the Sheraton Langkawi Beach Resort in Malaysia as executive assistant manager. He was promoted to general manager of the Lai Lai Sheraton Taipei in 1999. He subsequently became general manager of the Sheraton Xian, before returning for a second stint as general manager of the Sheraton Taipei after a multi-million-dollar renovation of the hotel. Before coming to Macau, he was Starwood’s area managing director for Taiwan, where he oversaw the Sheraton Taipei, Westin Taipei, Four Points by Sheraton Chung Ho, W Taipei, Sheraton Hsinchu and Le Méridien Taipei. Although based in Asia, Mr Dolp maintains strong links to the European tourist market. He was the chairman of the European Chamber of Commerce Taipei’s travel and tourism committee from 2007 until 2010. Mr Dolp does not just run hotels. He is also a marathon runner and was once a ski instructor.

RoyalDolp Rowe Josef MARCH 2012

115 The Sheraton occupies two towers at Sands Cotai Central and will open in two phases. About 2,000 rooms will be made available in September and another 2,000 next February. The facilities will include a spa with 15 treatment rooms, three outdoor swimming pools and three restaurants, including the Xin seafood hotpot restaurant, to be inaugurated next month. Opening the hotel poses challenges, all of which are welcome, Mr Dolp says. Right now Sheraton Macao has 150 employees, including managers. It had a recruitment fair scheduled for early this month with a view to taking on around 1,000 more. The Sheraton needs various kinds of staff. “Key management-level [employees] are already hired and here to set up the logistics and the planning,” he says. The hotel aims to recruit as many local people as possible. Mr Dolp says the Sheraton chain’s owner, Starwood Hotels and Resorts Worldwide Inc., always likes to recruit locally. “If you open up a hotel, you are part of the local community and it is very important to also develop that local talent.” In Macau, Starwood already manages the Westin Resort Macau. Around the world, it has over 1,000 hotels and resorts in 100 countries. The Sheraton Macao Hotel will share services such as security with the owner of the development, Sands China Ltd.

SHERATON PICKS UP MOMENTUM IN THE MAINLAND S

heraton Hotels & Resorts will be opening 20 new hotels this year. Most will be located in the mainland, driven by strong demand in second and third tier cities, its parent company Starwood Hotels & Resorts Worldwide, Inc. announced last month. Twelve new Sheraton hotels will open across the mainland in 2012, with the hotel chain reaching a total of nearly 80 hotels there by 2015. “Sheraton has successfully leveraged its first-mover advantage in China,” says Hoyt Harper, global brand leader for Sheraton Hotels & Resorts. “We are also reaping the rewards of our multi-billion dollar investment to enhance the Sheraton brand over the past several years, an effort that has resulted in recordhigh guest satisfaction scores and phenomenal global growth.”

Logistical dream The Sheraton will be important for Macau, Mr Dolp says, because the city’s biggest hotel will boost the meetings, incentives, conventions and exhibitions (MICE) industry. The MICE industry is a “special industry, which can only go to so many places where there is room

The Sheraton will be important for Macau, managing director Josef Dolp says, because the city’s biggest hotel will boost the MICE industry

available,” he says. “This is a niche where there is not much opportunity somewhere else, and this will drive business – not casino business but different business – to Macau, duly because there are so many rooms available.” The Sheraton will have 4,000 rooms in one complex, giving Macau an advantage over cities such as Kuala Lumpur and Singapore, where “accommodation is scattered around the city, causing logistical nightmares,” Mr Dolp says. The hotel will also have over 20,000 square metres of meeting space. The future of the MICE industry here is hard to predict, but Mr Dolp agrees with experts who argue that it will eventually change the average length of stay of visitors. “It’s not something you will see overnight,” he says. “The MICE business takes a while to

be established in the market and there will be some short-term and long-term directions.” In the meantime, the Sheraton is aiming to attract the kinds of visitors that already come to Macau, predominantly visitors from the mainland. “I don’t think if you look at the demographic, the percentage will change because of us,” Mr Dolp says. One advantage his hotel has is that the Sheraton chain is well known in the mainland. “So the Chinese consumer knows our brand very well,” he says. “We have a good footprint in India, which is also a good future market, and I think we will leverage on our connection in India and Southeast Asia and Japan,” Mr Dolp says. Put simply, the plan is to exploit familiarity with Sheratons elsewhere to bring in plenty of business for the Sheraton Macao Hotel. MARCH 2012

116

Hospitality

NEW ALL-TIME HIGH FOR TOURS

For the whole year of 2011, visitors on package tours reached 7.3 million, up by 27.2 percent year-on-year. This is a new yearly record, significantly surpassing the previous 5.75 million set in 2010. Almost three quarters came from the mainland. The visitors on package tours surged by 51.5 percent year-on-year to 795,000 in December last year.

VISITORS SPENDING MORE

The total spending of visitors excluding gaming expenses reached MOP13.4 billion (US$1.68 billion) in the fourth quarter of last year, up notably by 25 percent compared with a year earlier. Attributable to the increase in visitor arrivals and in per-capita spending, total spending of visitors for the whole year of 2011 soared by 20 percent year-on-year to MOP45.3 billion. In the fourth quarter of last year, per-capita spending of visitors was MOP1,820, an increase of 8 percent compared with a year earlier. Analyzed by place of residence, per-capita spending of mainland visitors was the highest, at MOP2,325.

LENGTH OF STAY DOWN

Visitor numbers increased by 19 percent in January to 2.5 million over the same month last year, partially due to the Chinese New Year holidays. However, the average length of stay decreased by 0.2 days to 0.9 days. Data from the Statistics and Census Service shows that same-day visitors accounted for 56 percent of the total arrivals. The average length of stay for overnight visitors stood at 1.8 days. Visitors from the mainland increased by 22.5 percent year-on-year to 1.5 million, accounting for 61 percent of the total. The majority were from Guangdong (777,600).

DOUBLE HAPPINESS Hotels set new monthly and yearly records for guests Hotels and guest-houses established both a new monthly record and a yearly record. In December, local hotels and guest-houses welcomed 820,000 guests, an increase of 12.7 percent year-on-year and a new all time high, with the majority coming from the mainland (54.9 percent of total) and Hong Kong (17.8 percent). The previous record was set in August last year, when the city received 810,000 guests. MARCH 2012

Meanwhile, the total number of guests increased by 11.0 percent year-on-year to 8.61 million for overall 2011. The previous record was established just the year before, when 7.75 million guests checked-in at the cityâ&#x20AC;&#x2122;s hotels and guest-houses. At the end of last year, Macau had over 22,000 available guest rooms, with that of five-star hotels accounting for 63.5 percent of the total.

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

Message in the music “DON’T WORRY, BE HAPPY” IS MORE THAN A LATE-1980s POP TUNE, IT IS THE KEY TO BOOSTING STAFF LOYALTY. A SMILE CAN BE MORE VALUABLE THAN MONEY his is not the story of Bobby McFerrin, the singer who made “Don’t Worry, Be Happy” an international smash and who, by the way, is visiting Macau early this month. Instead, this column is about happiness in the workplace. More specifically, it is about the unhappiness impacting Macau’s hospitality workforce. That hospitality employees are not satisfied is a fact. But what is less well known is that unhappiness is spreading wings and is starting to impact on other social and economic fields, resulting in a wave of unwanted results. You do not need to be a rocket scientist to sense the unhappiness. Take a stroll through the city’s hotels to corroborate my argument. First, here are the facts. The majority of hotel employees in Macau are well paid. In some cases, they even earn more than what they really deserve, due to the city’s choking labour shortage. But although hotels pay their staff high salaries, they fail to provide them with proper training. On the other hand, workers are not loyal. They change jobs as often as they change underwear. On top of this, local authorities fail to understand they hold the key to solving most of these problems by simply changing the rules on labour imports.

Change, no change A couple of weeks ago, a top manager in a hotel complained to me about the lack of loyalty among workers. “We have a serious problem. It is not only at our hotel. It is everywhere in town. Employees are not loyal to their companies,” he said. I turned the tables on him, asking him to provide one reason for employees to stay loyal. He could not name one, admitting benefits were more or less standard right across the industry. Here is the eye-opener. Not one hospitality worker in Macau is loyal to their employer because no company really cares about him or her. That includes making the time to listen to them and act on their feedback. Instead, workers in Macau are treated like commodities. And, like any other commodity, they go for the best price, not the best buyer. The question is how to solve this problem. Hotel directors and managers need to understand that changing the status quo is their responsibility. If their employees move to other companies for a few more patacas, the chance is that they were unhappy with the previous firm and management. They probably were not given the chance to voice their discontent. One thing I can confirm is that in my entire career as a hospitality consultant, I have never once seen a worker quit because they were overly happy at work. They leave because they are dejected and have no reason to stay. The odd thing is that Macau’s hotel managers continue with the same human resource management practices but they expect the outcome to be different. That is insane.

If no changes are made to the training provided, if management does not change the way it relates to staff, if career paths are not clarified, how can anyone expect employees to become happier at work and, consequently, more loyal.

Black sheep Rule No.1 for retaining staff: keep them happy. Cultivate their passion. Develop their sense of belonging. Give them intangible reasons to stay, not just money and fringe benefits. Of course, this is neither the easy path nor a quick fix. It takes time and effort but some results will emerge in a short period of time. It also takes hoteliers out of their comfort zone. It is an ongoing challenge that combines managerial and interpersonal skills, attitude, aptitude, intensity and, moreover, true leadership. One method to boost employee happiness is to identify the black sheep in the herd. In your analysis, include those employees who, while competent, present disruptive attitudes and interpersonal skills. These are staff who get the job done but have a detrimental effect on the team and work environment. While problematic, they typically have tremendous potential and can be valuable. They might possess special skills that are an asset to the business. How do you manage them? Do you keep them, while complaining about their bad attitude and negative impact on the team? Do you kick them out but lose the value they offer? Is there a third way? Each case is unique but managers should not shy away from their responsibilities. In part, an employee’s bad behaviour is a result of their manager’s sub-par performance. Why not lead by example? Why not become more proactive and create an environment that minimises the potential for discontent? It can be done. It requires true leadership, which is not commonly found among people in Macau with “hotel manager” printed on their name card. MARCH 2012

Arts & Culture

118

Words of discomfort

Macau has no commercial publishing houses. Books are published here mostly by public institutions and private associations, and for non-profit purposes BY LUCIANA LEITÃO

he Central Library has records for 48 publishers in Macau. Among them are public institutions such as the University of Macau, the Macao Foundation, the Cultural Affairs Bureau and the Government Printing Bureau. Several private associations also publish books, but no company seems to do it commercially. There is little information about the industry. There is no data publicly available about the number of titles published each year or about the revenue generated by the sale of books published here. The city’s biggest private publisher is probably Diário de Macau - Empresa

MARCH 2012

Jornalística e Editorial Lda, the company that publishes the Chinese-language Macau Daily News, the daily newspaper with the largest circulation. The company has published more than 200 books since 1983, with subjects ranging from politics to history and culture. The head of book publishing at Diário de Macau, Liu Zi Heng, says its purpose is not commercial and that it does not really make a profit. The purpose is to “to promote literature and culture.” Diário de Macau does not publish just any old books. Mostly it compiles opinion articles written by Macau Daily

News columnists. It publishes, on average, 700 copies of each title and sells them in local bookshops. The authors normally receive no royalties. “They usually don’t sign any contract. Maybe after we publish their books, they might get 100 or 200 copies,” says Ms Liu. She adds locals do not usually read books published here, but prefer titles from Taiwan, Hong Kong and Singapore. “That’s why [book publishing] is not profitable,” she says. “People in Macau don’t read books very often. They read newspapers. There are still some difficulties in promoting

119 book readership, and schools don’t recommend local writers.”

Impossible dream

“The distribution channel is not that supportive. A lot of bookstores don’t consider local writers as worthy of selling,” says Joe Tang, an up-and-coming writer

Diário de Macau publishes only Chinese-language works. It translates none of its books into English or Portuguese because to do so would push up costs, Ms Liu says. “We would need a team to translate. It’s difficult for us to do it. Also, we only publish books written by our own contributors, for their interest, and to realise their dream [of becoming published authors]. We are not a professional publisher.” Only a few outside writers have ever tried to get their works published by Diário de Macau and most have failed. One exception was the author of a book about the Xinhai Revolution, published last year to mark the centenary of the uprising that overthrew China’s last imperial dynasty. Diário de Macau also holds a novel-writing competition every three years and the winner gets the chance to publish their work. Ms Liu says that as far as she is aware, apart from her company and one or two bookshops, only public institutions and non-profit private associations do publishing work. Joe Tang is an up-and-coming writer. He won the Macau Literature Award twice, in 2003 and 2005. The award is sponsored by the Macao Foundation and Macau Pen Club, a local literary association created by Chinese-speaking journalists. Mr Tang has also won the Macau Medium-Length Fiction Award, presented by the Macao Foundation, Macau Pen Club and Diário de Macau. “There are not many publishers in Macau. The biggest ones are probably the Macao Foundation and Diário de Macau, and they are not very active,” says Mr Tang. “There are no commercial publishing houses.” Mr Tang says a writer aiming to be published has three choices: to publish their own edition, paying the printing and publishing costs out of their own pocket; to win a literary contest; or to exploit any connections they might have with a private association. Mr Tang, who is also an editor at New Generation Magazine, has already published some novels in the journal run by the Macau Pen Club. He also had a novel published by Diário de Macau. He continues to write. “In reality, it is not difficult to be

WRITING IN TONGUES I

f Chinese-language book publishers struggle to find enough readers in Macau, it is even harder for publishers of books in Portuguese or English. Apart from institutional publishers such as the Portuguese Oriental Institute, the only active private publishing house regularly putting out books in Portuguese is Livros do Meio. Livros do Meio was established more than 10 years ago. It has now published over 20 titles. The head of Livros do Meio, Carlos Morais José, says the publishing house still has only a small list, and says this is because the market for Portuguese-language publications in Macau is too small to be commercially viable. “We have had difficulties in finding support in publishing, but since last year the Macau government has changed its attitude,” Mr Morais José says. Recently Livros do Meio was given sponsorship by the Macao Foundation to publish the complete works of Confucius in Portuguese. “I want to translate into Portuguese the fundamental books of Chinese culture. Up to now, I’ve had no support from the government, only private entities,” says Mr Morais José, who is also of the publisher the Portugueselanguage newspaper Hoje Macau. The Association of Stories in Macau has published about 70 books since it was established in 2005 – around 10 per year. “We mainly publish bilingual parallel-text books – mostly EnglishChinese but some in Portuguese as well,” says Kit Kellen, who has coordinated the publication of several books for the association. Printing between 200 and 1,000 copies of each book, the group focuses on poetry, but also publishes novels and shorter works of fiction, among other genres. Mr Kellen also complains about the hardships of being a publisher in Macau. “There is not enough government or other public support,” he says. MARCH 2012

120

Arts & Culture published. I can pay by myself. Due to technological advances, the costs are low. But what is the point?” To be read is Mr Tang’s ultimate goal. But that does not seem to happen in Macau. “The distribution channel is not that supportive. A lot of bookstores don’t consider local writers as worthy of selling.”

Your homework

Among local publishers are several private associations. Most seek government support to print what they want to publish, which usually has limited, if any, commercial potential. Publishing by institutions of higher education follows a similar pattern

There is no official incentive to read Macau authors. Mr Tang suggests making reading local authors part of the education curriculum. He says reading habits need to be nurtured among the city’s youth. He estimates that less than 20 percent of Macau students buy more than one book per year. To Mr Tang’s knowledge there are no professional writers in Macau making a living from the books they write. A columnist for the Macau Daily News and another editor at New Generation Magazine, Lei Chin Pang, agrees with Mr Tang. “In Macau, the major problem is that we don’t have a market and we have no commercial publishers. Many of the literary works are published by Diário de Macau. They just see it as some kind of responsibility to keep literature written by Macau people alive,” Mr Lei says. “People working there have responsibilities in the newspaper. Publishing books is extra workload for them. They don’t have the resources for distribution or promotion.” Diário de Macau has published two books by Mr Lei. One is about cinema and the second about travel. Both are compilations of articles for the Macau Daily News. He received no extra money for the books. “When I wrote those articles for the newspaper, I was paid already. For those who write novels, they don’t get paid at all.” Mr Lei laments the lack of proper distribution and promotion of works of literature. He says greater advantage could be taken of the proximity of the mainland and Hong Kong. “It’s not impossible [to be a fulltime writer] if you try to explore the market outside Macau. The mainland, for instance, is a very big market.”

A public duty The Macau government is undoubtedly the city’s biggest publisher. The Cultural MARCH 2012

121 Affairs Bureau alone has published about 20 books in the past two years, distributing, on average, 1,000 copies of each. The bureau says it publishes a variety of books, ranging from literature to history. It also publishes art exhibition catalogues and the like. It says it publishes many titles each year to encourage reading. It also aims to facilitate book publication here and to promote literature, especially literature related to Macau. The books the Cultural Affairs Bureau publishes are sold in local bookshops and some specific publications are sold in gift shops at heritage sites, museums or art galleries. The bureau offers copies of what it publishes to the University of Macau library and to the Central Library, and to relevant government departments, other academic institutions and private associations. “We send some major publications to the world’s largest libraries, universities and scholars. Moreover, we also sell books in Portuguese and English outside the region,” the bureau says.

Private matters Among the publishers registered in the

Central Library are several private associations. Most seek government support to print what they want to publish, which usually has limited, if any, commercial potential. Publishing by institutions of higher education follows a similar pattern. Maggie Choi Un Ieng, president of the Macau Critics Society of Performing Arts, tells a fairly typical story. “We have published a book on ethics about performing arts critics in Macau,” Ms Choi says. “The authors are the members of our association.” The biggest problem was finding a place to sell the book’s 1,000 copies. The association tried to sell them in commercial bookstores, charging MOP80 (US$10) per copy, but people kept saying it was too expensive. There was another problem: “The bookstores ask for commissions, so we couldn’t put too many books inside.” The association also offered copies to some libraries, schools and art groups. Ms Choi is now planning a second book, also about art critics. She believes her association can increase its publishing activity. She says distribution is the most difficult task.

MAGIC NUMBER M

acau’s commercial publishing industry may still be in its infancy, but the city has been using the International Standard Book Number (ISBN) system for over a decade. An ISBN is a unique code for the identification of a book, and is used whenever information on a book needs to be recorded or communicated. The ISBN system has been adopted by over 160 countries. In Macau, the Central Library has been in charge of giving out ISBN numbers to publications since 2000. Requests for numbers have been increasing fast. Last year, it handed out 525, 36 percent more than the year before. Over 4,700 local publications have been given an ISBN number so far. The Macau Polytechnic Institute library is responsible for handling the applications for ISBN numbers by its members, sending them to the Central Library. It allotted 27 in 2010 and 31 last year to academic and professional books.

MARCH 2012

122

Arts & Culture

Spot the difference

Auction houses outfox Chinese antiquity fakers BY BY PETER BRIEGER*

icolas Chow places a magnifying glass against a Ming Dynasty vase to inspect the potter’s 600-year old workmanship. Mr Chow, the international head of Chinese ceramics and works of art at auction giant Sotheby’s, points out layers of uneven bubbles invisible to the naked eye along the early 15th century blue and white porcelain. The distinctive markings are just one telltale sign that experts rely on to determine if a piece is a multi-million dollar original or worthless fake. “That happens in the firing process – they did not have an even temperature in [kilns] during the 15th century,” Mr Chow says of the piece, which fetched nearly US$22 million (MOP176 million) at auction in Hong Kong late last year, setting a world record price for Ming Dynasty porcelain. “The feel of the glaze is also incredibly important. Just running your hands over it will give you the answer. “Potters in the old days would do lots and lots of these, one after the other. They breathed it, they lived it. It’s very difficult for fakers to recreate ... But there is still a degree of fear in the market.” The demand for Chinese antiquities has exploded, helping propel Hong Kong to third spot in the global auction market behind London and New York as collectors slap down eye-popping sums for a piece of the country’s history. Helping drive the boom is a growing class of super-rich Chinese looking for opportunities to exploit their net worth while also “reclaiming” parts of Chinese history from Western collectors. Some Macau casino tycoons like Steve Wynn and Stanley Ho Hung Sun have also been among the buyers.

Beware of fakes Auction houses Sotheby’s and Christie’s together raised over US$460 million from sales of Chinese antiquities and art MARCH 2012

works last year, but the market has also generated a slew of fakes from con-men hoping to make big bucks. “There are many fakes on the market, and there are probably more now because the price of these antiquities have increased dramatically,” Tang Hoi-chiu, chief curator of Hong Kong’s Museum of Art, told AFP. “There are some very good copies out there.” The problem was highlighted again in January when questions arose about the authenticity of a jade dressing table and stool from the Han dynasty, which had fetched about US$35 million at a mainland Chinese auction. Experts are now publicly questioning the piece since Chinese were believed to have sat on the floor, not stools or chairs, during the ancient period which ran from about 206 BC to AD220, the South China Morning Post reported. Facts and figures about the black market in antiquities are difficult to come by, although many fakes are produced in the mainland, says Rosemary Scott, international academic director to Christie’s Asian art departments. Ms Scott has seen fakes many times larger than they should be and other amateur mistakes that can make determining authenticity a 30-second operation. “Some are absolutely dreadful and some are very good,” she says. “In one case, a person presented me with [a piece] that was taller than me when it’s only supposed to be a foot tall.” But other items can take weeks or longer to determine if they’re genuine, demanding a rigorous checklist, she says. Auction houses use various means including carbon dating to pinpoint a piece’s age, but that requires taking a value-denting sample and threatens to make an item less appealing to keeneyed collectors. “You have to decide if it’s worth it because [carbon dating] could make the

piece less aesthetically pleasing or just plain disfiguring,” Ms Scott says.

Hard task The art expert says she runs pieces through a slew of criteria before making a determination and often brings in colleagues to gauge their opinion.

123

Nicolas Chow, from Sotheby’s, inspects a 600-year old vase

Sotheby’s and Christie’s together raised over US$460 million from sales of Chinese antiquities and art works last year, but the market has also generated a slew of fakes from con-men hoping to make big bucks

“Does it have the right shape?” she says. “Is it the right texture, the right colour, was it painted with the right kind of brush?” And when a piece fetches a giant price tag, auction houses are sure to be flooded with offers of similar antiquities, though most don’t pass muster. “Within a few weeks, we are being offered copies of that piece,” says Pola Antebi, head of Chinese ceramics and works of art at Christie’s Hong Kong. “The turnaround is pretty scary.” Complicating matters, some Chinese emperors ordered underlings to recreate works from earlier periods, which do not count as fakes, while there are also genuine pieces that have been retouched over the centuries. “That is a restoration issue, it is not an authenticity issue. But collectors prefer untouched, so something has not been altered in any way,” Ms Antebi says, adding that retouching can slash a piece’s value by half or more. Most genuine works come from established collectors, but ordinary people also tap auction houses to authenticate pieces that may have been in their families for years, or ones they bought without first confirming their credentials. “People’s expectations of the value are quite high. So when you tell them [the piece] is not going to pay for school fees or their retirement, it’s terribly difficult,” Ms Antebi says, adding that she delivers the news “as politely as possible.” In other cases, phoney collectors “just ask too many questions” when they are told a piece is not genuine, suggesting they are trying to learn how to make a more convincing fake that will evade detection, Ms Scott says. Auction houses have even pulled items displayed in pre-sale catalogues when doubts about their authenticity lingered. “Our reputation is paramount – it’s what we stand by,” Ms Scott says. For Mr Chow at Sotheby’s, spotting fakes means taking stock of every minute detail, although experts are not keen to reveal all their secrets for fear they could fall into the wrong hands. “But after some time you just get a feel,” he says. “If you lift 50 similar Ming vases and know this one is not the right weight, then you know something is wrong – it’s like your bag with and without a laptop,” he adds. “I’m not saying fakers can’t get one thing right, but to get it all right is really difficult.” * AFP NEWS AGENCY MARCH 2012

124 124

Moments

THANK YOU, MEDIA FRIENDS! Media spring lunches are a long-held tradition in Macau following the Chinese New Year celebrations, and this year was no different. Several companies and government bodies hosted media gatherings with senior executives of Macau’s media organisations as well as front-line reporters, to celebrate the Year of the Dragon and extend their gratitude for their support in 2011. As usual, most of the gatherings also included lucky draws, with the winners getting prizes ranging from cell phone covers to free five-star hotel accommodations and even cash prizes. Chief executive Fernando Chui Sai On also hosted a banquet for the local media

The management of Hutchinson Macau celebrates the Year of the Dragon with the media

Felix Fan Xiaojun, executive director of Macao Water, talks to reporters during the company’s media spring lunch

CEM’s spring lunch

Galaxy Entertainment Group Ltd.’s vice-chairman Francis Lui Yiu Tung toasts with representatives of the media Past contestant of TV reality show “China’s Got Talent” An Dong performs at MGM Macau’s Media Gala 2012

Group photo at Sociedade de Jogos de Macau S.A.’s media spring lunch MARCH 2012

Mask changing performance during the Mandarin Oriental media spring dinner

125 PETER SINGER PROFESSOR OF BIOETHICS, PRINCETON UNIVERSITY

The ethics of Internet piracy WE NEED TO FIND A WAY TO MAXIMISE THE TRULY AMAZING POTENTIAL OF THE INTERNET, WHILE PROPERLY REWARDING CREATORS ast year, I told a colleague that I would include Internet ethics in a course that I was teaching. She suggested that I read a recently published anthology on computer ethics – and attached the entire volume to the email. Should I have refused to read a pirated book? Was I receiving stolen goods, as advocates of stricter laws against Internet piracy claim? If I steal someone’s book the old-fashioned way, I have the book and the original owner no longer does. I am better off but she is worse off. When people use pirated books, the publisher and the author often are worse off – they lose earnings from selling the book. But, if my colleague had not sent me the book, I would have borrowed the copy in my university’s library. I saved myself the time needed to do that and it seems that no one was worse off. (Curiously, given the book’s subject matter, it is not for sale in digital form). In fact, others benefited from my choice as well: the book remained on the library shelf, available to other users. On the other hand, if the book had not been on the shelf and those other users had asked library staff to recall or reserve it, the library might have noted the demand for the book and ordered a second copy. But there is only a small probability that my use of the book would have persuaded the library to buy another copy. And, in any case, we are now a long way from the standard cases of stealing. I asked the 300 students in my ethics class which of them had not downloaded something from the Internet, knowing or suspecting that they were violating copyright. Only five or six hands went up. Many of the rest thought that what they had done was wrong but said that “everyone does it.” Others said that they would not have bought the music or book anyway, so they were not harming anyone. It did not seem that any of them were prepared to stop.

The Megaupload case The case for enforcing copyright laws was strengthened by the details that emerged following the arrest in New Zealand in January of Kim Dotcom (born Kim Schmitz), founder of the Web

If I steal someone’s book the oldfashioned way, I have the book and the original owner no longer does. I am better off but she is worse off. When people use pirated books, the publisher and the author often are worse off – they lose earnings from selling the book

site Megaupload (now closed down by the FBI). Megaupload allowed its 180 million registered users to upload and download movies, television shows and music, and some of the money earned by Mr Dotcom (from advertising and subscriptions) was on display at his mansion near Auckland, where he kept his Rolls-Royce and other exotic cars. Mr Dotcom’s lawyer claims that Megaupload was merely providing storage for its subscribers’ files, and had no control over what they were storing. But Megaupload offered cash rewards to users who uploaded files that proved popular with other users. In January, the United States considered legislation that aimed at stopping Internet piracy. The bills had been written at the urging of Hollywood studios and the publishing and recording industries, which claim that violations of copyright on the Internet cost the US 100,000 jobs. Opponents said the proposed law would reach far beyond sites like Megaupload, making Google and YouTube liable for copyright infringement – and allowing the government to block (without court authorization) access to Web sites that it deemed to be facilitating copyright infringement.

Rewarding creators For the moment, Internet activists, together with Google, Facebook and other major online players, have carried the day, persuading the U.S. Congress to shelve its anti-piracy legislation. But the fight will continue: in January, the European Union and 22 member states signed the Anti-Counterfeiting Trade Agreement, which establishes international standards and a new organization to enforce intellectual-property rights. The agreement has already been signed by Australia, Canada, Japan, Morocco, New Zealand, Singapore and the United States. Now it must be ratified by, among others, the European Parliament. I am an author, as well as a reader. One marvel of the Internet is that some of my older works, long out of print, are now far more widely available than they ever were before – in pirated versions. Of course, I am more fortunate than many authors or creative artists, because my academic salary means that I am not forced to rely on royalties to feed my family. Nevertheless, it isn’t hard to find better purposes for my royalty earnings than Mr Dotcom’s environmentally damaging lifestyle. We need to find a way to maximise the truly amazing potential of the Internet, while properly rewarding creators. Australia, Canada, Israel, New Zealand and many European countries now have a public lending right, designed to compensate authors and publishers for the loss of sales caused by the presence of their books in public libraries. We need something similar for the Internet. A user fee could pay for it and, if the fee were low enough, the incentive to use pirated copies would diminish. Couple that with law enforcement against the mega-abusing Web sites and the problem might be soluble. Otherwise, most creative people will need to earn a living doing something else and we will all be the losers. MARCH 2012

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COCK-A-DOODLE-DO

TEACHER’S PET

The Philippine Amusement and Gaming Corp., Pagcor for short, took the full glare of the media spotlight last month. Executives from the stateowned casino operator and gaming industry regulator were accused by Wynn Resorts Ltd. of accepting US$110,000 (MOP880,000) in improper payments from Japanese businessman Kazuo Okada. Mr Okada’s Universal Entertainment Corp. is building a casino at Entertainment City Manila. The news almost overshadowed the big news that Pagcor wants to televise cockfights in its casinos. Frozen Spy knows the Philippines is eager to start pocketing some real cash from gambling while it waits for Entertainment City Manila to get going. But animal welfare campaigners are unlikely to think that kind of gambling is a feather in Pagcor’s cap.

For many businessmen new to Macau, it is hard to understand the way the government works, especially when they look around to our regional neighbours. To make matters clearer, Frozen Spy has come up with a little fable.

HEAD IN THE CLOUDS Macau International Airport Co. Ltd. issued an interesting press release last month stating that the airport had “set a new monthly record” for passenger traffic in January. The company said the number of people handled reached 350,000 – 18 percent more than a year before. Many news media simply regurgitated the press release and reported the “new record”. Frozen Spy went to the trouble of going to the Macau International Airport website and doublechecking the data. January’s figure is a far from being a new record. The highest monthly figure was more than 500,000, reached in April 2007. January just past was not even the airport’s busiest January. That was in 2008, when almost 421,000 passengers moved through the airport. In fact, the airport handled even more passengers last December than it did in January. Frozen Spy finds the airport operator’s overstatement a bit much.

MARCH 2012

The kids filed into class on Monday morning. They were very excited. Their homework had been to sell something and now it was time for show and tell. Little Guangdong provincial government went first. “I sold cookies and I made RMB300,” he said proudly. “My sales approach was to appeal to the customers’ civic spirit and I give credit to that approach for my obvious success.” “Very good”, said the teacher. Little Hong Kong SAR government went next. “I sold magazines,” he said. “I made HK$450 and I explained to everyone that magazines would keep them informed about current affairs.” “Very good,” said the teacher. Then little Macau SAR government took its turn. The teacher held her breath. Macau SAR government walked to the front of the class and dumped a box full of cash on the teacher’s desk. “MOP2,467,” he said. “MOP2,467,” the teacher cried. “What in the world were you selling?” “Toothbrushes,” said Macau SAR government. “Toothbrushes,” the teacher exclaimed. “How could you possibly sell enough toothbrushes to make that much money?” “I found the busiest corner in town. I set up a dip-and-chip stand and I gave everybody who walked by a free sample,” Macau SAR government said. “They all said the same thing: ‘Hey, this tastes like crap!’ Then I would say: ‘It is crap. Want to buy a toothbrush?’ “I used the local method of giving people something awful, dressing it up so it looks good, telling them it’s free and then making them pay to get the bad taste out of their mouths.” Macau SAR government got a gold star for its effort. Bless its little heart.

ONE FOR THE BIRDS Although some are crying about the closure of the “Zaia” show at the Venetian Macao, not many know that Cotai gained a new non-gaming attraction: two bird-watching stations in the Cotai ecological reserve. Surprise number one is that, yes, there are more than just casinos in Cotai. Surprise number two is that there is a 55-hectare wetland ecological reserve near the Lotus Bridge. Established by the Environmental Protection Bureau, the two birdwatching stations offer the chance to have a closer look at Macau’s flora and fauna. Unfortunately, they are not open to the public all the time. According to the government, the aim is to prevent visitors disturbing our feathered friends living in the reserve. This seems to be the right approach. It allows the birds to enjoy the peace and quiet of the construction work in Cotai during the day and the restful neon-light shows at night. It also protects our children from the corrupting notion that eggs do not just come from the supermarket.

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HELLO? HELLO?

BSC (HONS) IN RETAIL THERAPY The local authorities have decided to offer a MOP2,000 (US$250) subsidy to all students in tertiary education holding a Macau identity card, no matter what their course or institution. The Learning Material Subsidy Scheme for Tertiary Students aims “to express the concern of the Macau SAR government for tertiary students and to support students in the purchase of reference and learning materials”. The scheme is expected to benefit 33,000 students, with the cost reaching about MOP66 million. This seems a great idea. But considering that the money is only now being offered, when the academic year for most students is already half finished, it is not as useful as it may have been. Most students have already bought their books. Not to worry. Since students get the cash directly and do not need to present any receipts, they can spend it on whatever they like. The debate among students is not whether to buy Friedman or Adam Smith; it is about the choice between a new handbag or a night out.

Telecommunications company CTM received a refresher in Murphy’s Law last month. The company had a big network failure that left thousands of subscribers without phone or Internet connections for six hours. By itself, that would have been bad enough. But the failure occurred exactly at the moment that the government invited bids to provide land-line services that will break CTM’s monopoly. After the CTM network crash, the popular pressure to allow competition is stronger than ever. CTM’s chief executive, Vandy Poon, may add his own amendment to Murphy’s Law: Anything that can go wrong, will go wrong – especially at the most inconvenient time possible.

GOVERNMENT BY OSTRICH In Hong Kong, a government report issued last month rang alarm bells. It seems the city is facing a labour shortage due to its ageing population. The government study forecasts a manpower shortfall of 14,000 by 2018, with the workforce growing too slowly to meet the city’s needs. In Macau, where unemployment is at record lows and suitable employees harder to find than ever, there are no such worries. Of course, that is only because the government does not bother to carry out similar forecasts. Some argue that information is power but the Macau government has a different attitude – that ignorance is bliss (and that we have the money to buy our way out of any trouble).

CULTURE OF IMPUNITY Our wonderful traffic police keep on surprising us. The ever-diligent officers ticketed the black car illegally parked at Avenida Dr Francisco Vieira Machado but forgot to do the same to several tourist buses parked in the same area. Frozen Spy wonders if this is because the government is so eager to promote economic diversity that our tenacious officers turn a blind eye to the buses taking tourists to the souvenir shops in the area? The same shops, by the way, that are suspected of selling over-priced items while paying nice commissions to tour guides that provide them with customers. Maybe. It is the only explanation why the buses are allowed to park on pedestrian crossings and in places where they hamper the flow of traffic. Similar scenes can be seen around the city, such as in the vicinity of the Tourism Activities Centre, where tourist buses are parked without a care. It would be nice to see secretary for security Cheong Kuoc Va get out of his office more often and check on what his officers are doing. One thing is obvious: they are not ensuring that tourist bus drivers follow the same rules as everyone else.

MARCH 2012

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Advertisers Index MARCH 2012

Aristocrat

Page 03

www.aristocratgaming.com

Bally Technologies

Page 09

www.ballytech.com

BMW

Page 07

www.bmw.com.mo

BNU

Page 23

www.bnu.com.mo

CEM

Page 86

www.cem-macau.com

Galaxy Entertainment Group

Page 11 and Page 21

www.galaxyentertainment.com

Goodwood Motors Ltd

www.rolls-roycemotorcars-hongkong.com.hk

Goldfish

Pages 15, 43 & 98

www.goldfishmacau.com

IGT

Page 05

www.igt.com

IPIM

Page 33

www.ipim.gov.mo

King Consulting Ltd.

Page 31

www.kings-consulting.com

Macau Business Daily

Pages 15 & 25

www.macaubusinessdaily.com

Macau Cultural Centre

Page IFC

www.ccm.org.mo

Macau Post Office

Page 121

www.macaupost.gov.mo

Macau Daily Times

Page 103

www.macaudailytimes.com.mo

Microgaming

Page 19

www.microgaming.com

MGM Macau

Page 02

www.mgmmacau.com

MGTO

Page IBC

www.macautourism.gov.mo

Morton’s The Steakhouse

Page 68

www.mortons.com

PokerStars Macau

Page 04

www.pokerstarsmacau.com

Project Asia Corporation

Page 18

Reed Exhibitions

Page 111

www.g2easia.com

Sands China

Pages 06 & 50-53

www.sandschinaltd.com

SJM

Page 40

www.sjmholdings.com

Waaa! Studio

Page 31

waaastudio.com

Zung Fu Motors – Mercedes

Page 01

www.zungfu.com.mo

To advertise call 28331258 or email us at pub@macaubusiness.com Go to www.macaubusiness.com/advertising for media kit MARCH 2012