Experts: Gaming hub Macao needs to diversify its economy

The clock ticks on the Macao's first gaming licence renewal since market liberalisation in 2001. Yet, it is high time the government to diversify the economy, a local lawmaker said.

Macao unveiled the final version of its first five-year development plan in September, after almost one year of preparation. The former Portuguese enclave formally embraced a long-term policy to diversify its gambling-focused economy, by accelerating growth of its convention and exhibition industry, cultural and creative industries, Chinese medicine and trade in services.

Antonio Ng Kuok-cheong, a local legislator, noted economy diversification in Macao is not something “as new as the five-year plan”.

A golden opportunity, however, arises as several gambling concessions will come up for renewal beginning in 2016. One of the main criteria for the assessment of casino operators will be their development of non-gambling facilities.

The licenses are government's “high stake” to call for not only non-gaming elements, but also conventions and exhibitions, cultural and creative, as well as Chinese medicine collaborations in the casino and hotel establishment.

The six operators are all eyeing the license renewal, an eagerness that can be seen from their exponential investment despite the falling gaming revenue and volatile economy, said Ng.

He urged the government to grab this chance and encourage the casino operators to include the elements of events, creative and Chinese medicine sectors in their resort hotels.

“Expecting lesser gaming table and more non-gaming elements, operators can offer more spaces with lower rents to local creative and cultural units and companies,” Ng suggested. “For Chinese medicine, health tourism is also a plausible investment goal.”

It will not be the first time that the SAR authority uses casino concession to boost another industry. Las Vegas Sands won its license in 2002 for its pledge to develop the convention sector in Macao, an edge the company has on its Venetians on the Vegas Strip, according to the local lawmaker.

“They invested in event industry even before the government did so,” Ng added. “It is a spin-off from the gaming industry. Any operators here with luxury resorts and hotels wanted a share of this big market.”

Boasting more than 35 casinos, Macao has surpassed Las Vegas to claim the status as the world's No 1 gambling city. However, at a meeting with Macao's chief executive, Fernando Chui Sai-on, in 2013, President Xi Jinping urged the world's top gambling hub to accelerate diversification away from the casino industry.

In fact, local government has been long growing uneasy about Macao's outsize reliance on the gambling industry.

“The SAR government never wants to make gaming the only industry in Macao,” said Agnes Lam Iok-fong, president of Macao Civic Power, a local political commentary group. Also an assistant professor from the department of communications at the University of Macao, she said the former chief executive Edmund Ho Hau-wah aimed to use the gaming as a “dragon-head industry” to “lead the body”.

“After the handover, the plan was that the tourists and gaming revenue would help boost cultural and creative, as well as other industries in the city,” said Lam. “Without a complete plan, the government spent a rather long time to explore the possibilities.”

As Macao government formally pledged to diversify its economy, Alexandre Ma Iao-lai, president of the Macao Chamber of Commerce, said the government has weathered many challenges and the diversified economy is dawning.

Addressing a reception prior to China's 67th National Day last week, he remarked that the six casino operators have massively invested in non-gaming elements and collaborated with small-and-medium enterprises to realise diversified economy, under the Chinese government support.

Yet human resources still remain the challenges in diversifying the mono-economy in the SAR, said Lam, adding that there was a shortage of international marketing expertise and contacts with international buyers in terms of events and creative industries.

Davis Fong Ka-chio, Director of Institute for the Study of Commercial Gaming, also worried about the dearth of human resources. Due to the shortage, the government should properly weigh which industry was worth developing, he said.

“The goal of Macao's development is a ‘happy and peaceful livelihood'. We shouldn't diversify the economy for the sake of diversifying it,” said Fong. He said the diversified economy is about building up a “portfolio management, rather than three pillar industries”.

“The government is looking to diversify the economy to avoid the pitfalls that can come with putting too many eggs in one basket,” he said. “It is all about a sustainable, healthy development.”

Nonetheless, many are still looking forward to more plans and policies by 2020. “Gaming revenue has long been easy-money, so we have spent decades to nail down a plan of economy diversification,” Lam said. “But once you start, you cannot stop it.”