Trumping the competition

The level of development in Macau is unprecedented and tourist arrivals are expected to top 42 million by the end of the decade.

Making the most of the cards you’ve been dealt is the ace up Macau’s sleeve. Despite covering only 11 square miles – less that one-sixth the size of Washington DC – and with no natural resources, Macau has managed to find its niche in the global market to become the glittering jewel in Asia’s gaming crown.

Since the Special Administrative Region’s 1999 return to Chinese sovereignty, Macau’s government has devoted its efforts to perfecting the region’s business environment. The 2002 liberalization of its gaming industry opened the doors to competition, expansion and mass tourism, as well as billions of dollars in foreign direct investment from across the globe.

“Macau has seen rapid economic growth in recent years,” comments Chief Executive of Macau SAR Edmund Ho. “Building on this momentum, the Macau SAR government strives to enhance the unique advantages of integrated tourism and economic and trade platforms, thereby spurring the development of other related services,” he adds. “Under the circumstances of accelerating globalization and our country’s fast-rising international status, this is the strategy through which Macau can gradually move towards a diversified economy and achieve sustainable development.”

Gaming here can be traced back to the 16th century and has always played a significant role in the Macanese economy and culture. Today it continues to be the economic backbone of the region. Fulfilling the Chinese penchant for Lady Luck, the only legalized gaming spot in China has now become the largest venue in the world, exceeding $7 billion in revenue last year and trumping Las Vegas’s revenues of $6.6 billion with almost half the number of casinos. This figure is expected to rise to $13 billion by 2010, according to the CIMB Group.

A report last year by Deloitte suggests the potential growth in demand is stratospheric. Macau’s key catchment area is southern China, in which lie some of the nation’s most affluent provinces and a rapidly growing middle class – more than 90 million people live within a four-hour drive of the gaming tables. Deloitte’s analysis also indicates that the number of people able to afford a trip to Macau’s casinos could rise by around 55 percent by 2010. The Macau government is predicting 42 million visitors by the end of the decade, having received 22 million in 2006 and 27 million in 2007.

Chief Executive of Macau SAR

Macau is only just getting started. The gaming sector has ignited growth in other sectors in the region, such as tourism, real estate and service industries. Due to the booming gaming and tourism sector, as well as a substantial surge in investment, GDP rose by 27.3 percent in real terms for the whole of 2007, according to Macau’s statistics and census service, Direcção dos Serviços de Estatísticas e Censos. In only a few years, Macau has attracted billions of dollars from foreign investors and developers who are building incredible hospitality and gaming venues. The majority of these initial projects are in the peninsula and most have already recouped much of their investment. Confidence in Macau’s future has generated a second wave of growth with developers, hotels and casinos establishing themselves on the Cotai Strip – an area that will play a key role in adding diversity to the region’s appeal. Many of the new developments are creating a more attractive atmosphere for families and will also help to increase hotel occupancy rates. At the beginning of 2007, the average length of stay in Macau was 1.5 days. By the end of 2007 it was 1.8. The goal is to reach 3.0.

As the MICE (Meetings, Incentives, Conventions and Exhibitions) industry grows in Macau, the SAR provides many multinational companies with the ability to establish themselves in China without going to the mainland, where visas can sometimes prove difficult to obtain. The city’s location also plays a significant role in its economic growth: it is only one hour by ferry from Hong Kong, or a fifteen-minute helicopter ride. “Following improvements in hardware and software, Macau’s convention and exhibition industry is showing considerable development potential. The government and the business community will continue to develop the convention and exhibition industry into another engine of growth,” says Ho.

As well as transforming the region into a business platform, the government’s determination to promote the development of Macau’s cultural industry by encouraging SMEs to “explore new cultural projects” by helping them train staff and offering improved tax incentives, as well as subsidized interest rates, in a bid to reduce their operational costs.

“This year, we will strengthen cooperation with the mainland, particularly in the Pan-Pearl River Delta region,” Ho adds. “In addition, we will fully support the work of the Permanent Secretariat to the Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries, and so ensure it serves as an economic and trade platform. We will expand cooperation with the EU and increase economic and trade links with ASEAN countries. Regarding regional cooperation, the government strongly encourages SMEs in Macau and the mainland to form partnerships and jointly explore the international market to break fresh ground in economic development.” The chief executive has also declared that the government is determined to “vigorously fight” money laundering in order to ensure the financial sector’s stability.

Ho affirmed his government is “committed to improving residents’ quality of life and ensuring a fair share of the fruits of development.” The government will spend 11.18 billion patacas ($1.4 billion) on education, health and welfare this year, which accounts for 27 percent of the total budget.

Furthermore, the government plans to build 19,000 public housing flats in phases until 2012 and to speed up the construction of rental housing for residents in urgent need of accommodation. As well as upgrading transport options, a 20-year urbanization plan has been announced that includes a massive and much needed land reclamation program.