28 JOSÉ I. DUARTE ECONOMIST, MACAU BUSINESS SENIOR ANALYST -
jid@macaubusiness.com
Hopeful of change A
nother year has passed with another outstanding display of economic growth by Macau. Unemployment was virtually zero and fears of in ation have abated somewhat. We may be tempted to conclude that all is well in our
SAR. Yet, one cannot avoid observing that most of the results achieved were driven by factors over which we have very little control. We caught, or were caught by, the crest of a wave that appears to have no end in sight. Continuous growth in gross gambling revenue seems to
make our economy insensitive to whatever happens abroad. But what fortune gives, fortune can take away. We must peer into the future and make timely decisions that allow us to better cope with challenges when times eventually change. Still, one cannot avoid the feeling that those things over
which we do have a degree of control are being allowed to drift. Decisions are either postponed or avoided, and objectives are poorly de ned or imprecisely framed. Drifting along subjects the fabric of society and the
economy to erosion, making it less resilient when the tide changes or the currents slow.
Policy vacuum Let us look at the economy. The one sector upon which almost everything else depends is doing very well, thank you. The ow of visitors is steady. The ow of money seems in nite. However, the taps to both are outside our jurisdiction and are themselves subject to forces, economic and political, upon which we have a weak in uence. That implies two main pillars should underpin economic
policies: a clear understanding about the expected and desirable development of the gaming sector, and a coherent approach to developing a legal and policy framework that favours economic diversi cation. There are mounting worries on both fronts. Signi cant decisions have been made on the future of the
gambling sector. Most notably the policy to limit the number of live gaming tables until next year to a maximum of 5,500 and to restrict their growth thereafter to 3 percent a year for the next decade. Aside from the abundance of adjectives used to describe these targets – adequate, sustainable, harmonious growth – no substantive explanation on how they were calculated was provided. They seem arbitrary. We could easily imagine other gures
and rates of growth that could also be described as “adequate” or “sustainable”. The table cap also seems totally out of sync with reality.
It appears that we believe money alone will always fi ll in the gaps. Sooner or later, fortune will test that belief
JANUARY 2012
THE CITY’S ECONOMY IS INCREASINGLY DEPENDENT ON GAMBLING DUE TO SHORT-SIGHTED POLITICS AND A LAISSEZ-FAIRE APPROACH
What are the assumptions behind these targets? What
population, visitor and demand trends were taken into account to de ne them? What considerations in terms of their impact on the labour market, transportation, housing needs, infrastructure development were used? One can only guess. The same kind of uncertainty hangs over assigning land
in Cotai for new casino resorts. By the way, are they all viable within the existing limits on development? The same question could be applied to the criteria that will eventually be used to share the available gaming tables between casino operators. There is a sense of arbitrariness and vagueness in these
policies that is the contrary to good governance and fostering economic con dence.
Cushion erosion The excessive and growing dependence on the gambling sector, no matter how well it may serve the public nances in the short term, can also become a curse if, for some unexpected or uncontrollable reason, the tide changes. The argument for diversi cation is often based solely on
social or ethical considerations. In many regards, a society less heavily dependent on gaming might be a desirable goal in itself. That is another discussion. From a longer-term economic perspective, a more
diversi ed economy is a worthy goal. That objective, continuously repeated by of cials, seems increasingly hard to achieve. A lack of policies to guide timely housing and urban development led to skyrocketing real estate prices. Labour policies that were incoherent and unstable led to imbalances in the labour market. Both labour shortages and rental costs have exacted a toll on family-owned rms, and small- and medium-sized enterprises, and are serious obstacles for start-ups. Even if those sizeable barriers could be overcome, there
are too few people interested in engaging in these types of business. Anyone who knows a thing or two currently looks for a job in the gambling industry and expects a salary that is beyond most smaller companies. Smaller rms impart a great deal of resilience to an
economy and to a society. As the autonomy and initiative of the government has progressively declined, it seems that the social structures that could provide a buffer during dif cult times are being weakened by the day. Throwing money around is unlikely to solve the problem. It is also questionable whether the co-development of
Hengqin Island with Guangdong will solve the problem. As much as it seems to make sense from the perspective of of cials in Zhuhai, in Macau, the project is trapped in vagueness by the “wait-and-see” approach favoured by our of cials. It appears that we believe money alone will always ll in the
gaps. Sooner or later, fortune will test that belief. Not all is gloomy. A new year is setting in and with it comes
a renewal of hope. Happy New Year!
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