Macau is one of the most unique success stories of the 21st century. What used to be a simple fishing village and trading port has been transformed into one of the world’s top destinations.
|Macau continues to grow its spectacular skyline defined by an astronomical level of luxury and
class, an example of which is Melco Crown Entertainment’s City of Dreams. The City of Dreams
is just one of Macau’s widening array of integrated hotels and casinos.
As China and Japan celebrate their 40th anniversary of normalized relations in 2012, the former Portuguese colony of Macau — now one of China’s special administrative regions (SAR) — is positioning itself to be a regional tourism center for both the gaming and non-gaming sectors. It also aims to broaden its business portfolio in other industries while continuing to capitalize on its primary sector today: gaming and hospitality.
From sleepy port city to pulsing success story has taken Macau only a little more than a decade. With a population of just about 500,000, Macau’s gross domestic product (GDP) has grown nearly 8 times since 2001: from $1.75 billion by the end of 2001, to nearly $10.5 billion by the end of 2011.
Overall retail sales volume for Macau has also seen exponential growth in recent years. From 2010 to 2011, it increased by 44.2 percent mainly because of the influx of visitors from mainland China.
Much of this growth can be attributed to Macau’s pro-business environment. “Ever since China’s resumption of the exercise of sovereignty over Macau in 1999, Macau enjoys wide-ranging and close relationships with most global economies,” says Sou Tim Peng, director of the government’s Macau SAR Economic Services.
“Pursuant to its free port policy and market economy system, Macau SAR applies no restrictions on the flow of goods,” he continues. “Low taxation, unrestricted financial movement, social stability and relatively low operating and labor costs provide Macau with a good environment that attracts investors. Additionally, its strategic location, together with a well-established legal system, gives Macau a competitive edge.”
|Jackson Chang, president of Macau
Trade and Investment Promotion
Macau as the global gaming epicenter
Much of Macau’s development can be credited to its tourism and gaming industries; both have systematically driven Macau’s economy in recent years. The gaming industry alone represents 40.2 percent of Macau’s GDP, while the tourism industry attracted 28 million visitors into Macau in 2011 alone — 12 percent higher than visitor rates in 2010.
Previously dominated by “the King of Gambling,” Stanley Ho of SJM/STDM, Macau’s gaming industry today is divided among six major gaming concessions and sub-concession holders: Sociedade de Jogos de Macau (SJM), MGM Paradise Limited, Galaxy Entertainment, Las Vegas Sands Corp., Wynn Resorts and Melco Crown Entertainment. Gross gaming revenues alone raked in about $33.6 billion in 2011.
The greater part of gaming profits in Macau is brought in by its VIP junket system. Under this structure, independent companies and agents bring in high-end players to place their bets in outsourced VIP rooms in the major casinos. In 2011 this specialty within the gaming sector resulted in about 75 percent of total profits.
“Today, VIP rooms are doing very well for both the industry and Macau. As one of the driving forces in the gaming industry in Macau, we expect further growth and substantial profits in the VIP sector overall,” comments Kenny Leong, CEO of Asia Entertainment and Resources, one of the biggest players in this profitable niche sector.
With Macau now the world’s new gaming epicenter, beating out Las Vegas and newcomer Singapore, its government is expecting more investment to come, attracted by the dynamic gaming industry. Expectations are high as companies are expecting further growth in the influx of visitors and players from mainland China, Japan and around the world.
Macau’s growth is attracting new investments not only into classic casino gaming and related tourism, but also into the automated slotmachine type gaming sector. “We are introducing our best products into Macau, the most exciting and entertaining ones for the end user,” says Kurt Gissane, managing director of Asia-Pacific for leading slots producer Bally Technologies. “In our games we constantly strive to make them better, more exciting and more localized. Even such a simple detail as including Chinese translations makes a big difference in giving Macau’s visitors a better experience.”
As well, maintaining Macau’s reputation for fair odds will be a key component of its continued success. “It’s important to place integrity above all other considerations, and preserve a strong relationship with all levels of the field – casinos, suppliers and end users,” explains Larry Xiao, general manager of the electronic gaming equipment tester GLI Asia. “Reliability and accountability lie at the core not just of our company but also the entire gaming industry in Macau. It’s important that there is a high level of trust throughout the marketplace.”
An increased level of government support is also being made available to non-gaming industries. “The Macau SAR government has increased its efforts to promote a more diversified development in Macau’s economy,” says Ma Iao Lai, president of the Macau Chamber of Commerce. “Recent probusiness policies have contributed to the growth of sectors such as Macau’s convention and exhibition industry, logistics, environmental protection and the culture and creative industries.
“We are very confident that our recent agreements with certain regions in China, such as the Guangdong- Macau Cooperation Framework agreement and the Hengqin Overall Development Plan, will greatly support Macau’s goal of bettering regional cooperation and effectively promote Macau’s developing diversified business portfolio,” he adds.
“Macau serves as a potentially strong platform for both Japanese and international businesses looking into both China and Southeast Asia,” says Jackson Chang, president of the Macau Trade and Investment Promotion Institute. “For companies looking into China, Macau has strengthened its relationship with the mainland through the Closer Economic Partnership Arrangement (CEPA). Macau’s infrastructure is also well prepared for the future, especially with the upcoming Hong Kong- Zhuhai-Macau Bridge, and the new railway link being developed between Guangzhou and Zhuhai. These projects will all greatly contribute to Macau’s overall growth and global competitiveness.
“In the next few years, with our strong infrastructure and political support, we expect that the economy can only keep growing strongly,” he concludes. “This should serve as a strong invitation to Japanese business and the international market to come into Macau and position investments here.”