Brakes on the casinos gives Macau a breather
Macau Chief Executive Edmund Ho Hau-wah's decision last week to put the brakes on casino development was a surprisingly well-kept secret. Before he stood in front of the city's legislature to drop the biggest bombshell since liberalising the gaming market in 2002, not one of the gaming concessionaires was given a heads-up.
Not that they were upset. Mr Ho has declared that the current six gaming concession-holders will have their positions enshrined in law, and no new ones will be awarded 'for the foreseeable future' - that is, don't expect anything from his successor. Moreover, the 'Big Six' are going to be saved from their own devices and barred from building on any more land, or putting in more tables and slot machines than the government thinks is sustainable. And, as for their love-hate relationship with the junket operators, who control more than three-quarters of all casino volumes, Mr Ho has indicated that he will probably step in as referee by capping the junkets' commissions and restricting their licences.
What is there not to like about this? All the operators need do is build what the government wants, and count their money as visitor numbers - and gaming volumes - continue to rocket. They can more accurately predict where the market will shift, they need not worry about profit margins being squeezed to absurd levels by the junkets, and they can focus on competing on quality rather than quantity.
This is, however, assuming one big thing: that the government knows how much is too much, now and in perpetuity. The timing of this decision was good: too much capacity is coming online in Cotai over the next two years, and too many casinos are building massive VIP gaming areas when they should be focusing on building and marketing their non-gaming facilities. But, at what point will the government decide to loosen the strings again? Unlike Singapore, this government has not made a name for itself as a master planner.
To be sure, the real reason for this tightening is not because too many children are postponing careers as doctors or lawyers to make some quick money as croupiers, nor is it due to much-touted 'social tensions' among a workforce that long ago exceeded full employment. It is because the government itself cannot keep up with the demands being placed on it by breakneck growth. The building of transport infrastructure is way behind; the property market has been in limbo for more than a year pending a blueprint to protect heritage sites; and, despite the 5,000-pataca gift Mr Ho gave to every Macanese just before he announced the casino restrictions, he must shore up the city's medical, social and welfare institutions. Money is not the issue - time and civil-service skill sets are.
Mr Ho retires next year, so it will be up to his successor to make sure Macau delivers on its promise to create the entertainment capital of Asia. The next leader has been given a breather. Beijing might not be so supportive if he is still behind when Cotai has 30,000 rooms in 2010.
Anthony Lawrance is a Macau-based publisher
