Macao's Economic Development Enters a New Era
- Liberalisation of the Gaming Industry Results in Three Concessionaires

The three winners are Sociedade de Jogos de Macau, Wynn Resorts and Galaxy Casino. The Government’s Casino Tender Commission concluded that the blueprints proposed by the three winners are in line with Macao Government’s plan to develop a comprehensive, gaming-led industrial infrastructure, where the service sector functions as the mainstay and in conjunction with other industries. The Chairman of the Committee, Government Secretary for Economy and Finance, Mr. Francis Tam Pak Yuen, indicated that when reviewing all the bidders’ proposals, the Commission considered firstly the respective bidders’ business vision and secondly their experience and strength. Mr. Tam said he was convinced that the best possible candidates had been chosen to ensure economic development and structural reform.

Three Companies Win The Bidding for Three Gaming Concessions
The three concessionaires are no ordinary businessmen. The Sociedade de Jogos de Macau (SJM) is a subsidiary of the Sociedade de Turismo e Diversaes de Macau (STDM), which had held Macao’s casino monopoly franchise for the past forty years. STDM operated a total of 11 casinos with 12,400 staff on its payroll. Its steady clientele built in the past 40 years made it an obvious choice for the Casino Tender Commission, considering that the company has a proven record of generating a steady flow of public revenue.

The biggest shareholder of Sociedade de Jogos de Macau, Dr. Stanley Ho Hung-sun, is popularly known by the Chinese as Macao’s gaming king. Dr. Ho stated at a press conference that he welcomes the two newcomers and that he is looking forward to sound competition, which he believes is conducive to a sustainable and healthy development of the gaming industry and the long-term well-being of Macao.

The Sociedade de Jogos de Macau has pledged to invest MOP 4.75 billion to build new hotels, a so-called Fisherman’s Wharf, as well as to renovate the old quarters of Macao’s Inner Harbour in the next three to five years.

New Thinking for Development
The second winner is Wynn Resorts (Macau). According to Mr. Tam, the shareholders of the new company have the determination to develop Macao into a holiday attraction and an international conference and exhibition centre. The company has great experience in this area. Steve Wynn, the controlling shareholder, is an outstanding American businessman. He has almost single-handedly turned Las Vegas from a city of only gambling-related tourism into a famous city of family-orientated entertainment. Macao is looking forward to enjoying the same type of change. Besides this, the projects promised by Wynn Resorts are extremely innovative. They have been well received by the public. Mr. Tam said, these projects are vital to the gross revenue growth of casinos and the development of tourism.

Mr. Wynn is known as one of the west coast of American’s top gaming magnates. The Mirage Resort, which he established in 1989, is a theme park with exotic tropical sceneries that has become a model for other hotel-resorts to follow. Mr. Wynn said at a press conference that in making an investment in Macao, Wynn Resorts has the whole Asian market in mind. As a newcomer, we need to find our way forward. Mr. Wynn, known for his innovative marketing spirit, also said that since Macao is part of China, his company will not simply copy Las Vegas. Instead his new hotels, casinos and shows will all be very Chinese and very Macao. He described his investment projects as unprecedented, something that will surely bring pleasant surprises to tourists.

According to Mr. Wynn, Hong Kong and Macao are the most dynamic tourist destinations in southern China, and both have great potential. According to the American gaming mogul, the Disneyland development in Hong Kong will not compete with Macao’s gaming industry. Rather the two are complementary. Mr. Wynn also said that competition from new casinos elsewhere in Asia Pacific is not necessarily a bad thing for the gambling industry in Macao. The key is sound competition and good management, he said. The Wynn Group has pledged to invest at least MOP 4 billion in Macao.

The most important shareholders of the third winner, Galaxy Casino, are the Lui Cho Wo family from Hong Kong and The Venetian from the United States. The hotels run by The Venetian in Las Vegas draw their inspiration from the famous Italian sea port of Venice. Moreover, highly respected for its international conferences and exhibitions, The Venetian has rich business experience and an extensive network in the area of conference and convention tourism. The Lui family has vast financial resources and runs top hotels in America and China. All this will help Macao develop into an international conference centre. Galaxy Casino plans to invest MOP 8.8 billion to build a resort on Taipa Island, comprising of a convention and exhibition centre, a casino and a resort. The company plans to turn Macao into the Las Vegas of Asia.

Mr. Tam stressed that with the participation of The Venetian, Galaxy Casino has great potential to attract visitors by holding large-scale meetings and fairs. They have great experience in this field.

To Boost the Development of Other Industries
The three winners can form a perfect trio by bringing together Wynn Resort’s innovative spirit, The Venetian’s rich experience in running conventions and exhibitions, and the local appeal of the Sociedade de Jogos de Macau. The liberalisation of the industry ushered in a new stage for the gaming industry, based on new management models and a new business philosophy. All this will increase the competitiveness of the service industry and make Macao’s overall economy more prospective. The three winners are obliged to investment in accordance with their respective franchise contracts. The influx of nearly MOP20 billion means better access to financing, increased demand for real-estate and a prosperous development of tourism and the service industry. Consequently, Macao’s economy is now well positioned to enter a period of rapid expansion.

On the other hand, the Macao Government is determined to prevent the emergence of any possible sign of an overheating in the economy, ensuring that there will be no bubble economy. The Government will give priority to finding ways for industries other than casinos to benefit from the liberalisation of the gaming industry, base on the premise that Macao’s economic development ought to benefit society at large.

Liberalization of the Gaming Industry Augurs Well
for Future Prospects of Macao's Business Sectors

Mr Alex Lao, Chairman of the Federation of Tourism Agencies in Macao and President of Multinational Travel (Holdings) Group, said that Macao will be more attractive to tourists with its liberalized gaming industry, more entertainment facilities and close proximity to Hong Kong and the Pearl River Delta.

Macao recorded 9.1 million and 10.2 million visitor arrivals in 2000 and 2001, respectively. The Special Administrative Region Government is determined to develop Macao into a world-class international tourism destination. This has greatly encouraged Macao's tourism and travel industry to draw up new blueprints for future development projects.

Encouraging Tourists to stay longer in Macao
Mr. Lao stressed that "the two new comers to the gaming industry are large strong American and Hong Kong-owned companies. Their arrival here will foster a new competitive culture. Since China has joined the WTO, people on the mainland need to understand international commercial culture and operations. Macao can serve as a window to the outside world. In addition to that, mainland companies can also come to Macao to participate in conventions and exhibitions." Mr. Lao believes that thanks to improvements in the mainland's transportation network, Macao's travel agencies will be able to attract tourists from as far away as the densely populated Yangtze River Delta.

Currently, visitors stay in Macao, on average, just 1.3 days. The SAR Government and the business community are doing their best to persuade tourists to stay longer. Mr. Lao pointed out that "the combination of the quiet charm of Macao, Disneyland in Hong Kong and the natural beauty of the Pearl River Delta is very attractive to tourists from Europe and America, as well as overseas Chinese from South East Asia. About 13 million tourists visit Hong Kong a year, and in average, they stay there three nights. We wish to improve co-operation with Hong Kong, so some of their tourists may well come to Macao and spend further two days here."

Mr. Lao is confident that with more sight-seeing sites and more entertainment facilities in the future, tourists from Taiwan will not just transit through Macao as many of them are doing now. Rather they will come to Macao for a vacation. “A recent survey shows only one tenth of the 23 million of Taiwan’s residents have ever been to Macao. There is a great potential if flights between Taiwan and Macao can be as frequent as shuttle flights between Europe and America," Mr. Lao said.

Mr. Lao admits that competition in the future will be fiercer since more travel agencies are expected to operate in Macao. That's why he plans to extend operations of his branch to the United States.

The Choi Heong Yuen Bakery to apply for ISO certification
The “Choi Heong Yuen” Bakery is a household name in Macao that has a proud 60 years history. The bakery's famous biscuits are a "must" for many Hong Kong tourists to buy. Since taking over the family business, Mr. Alan Wong has done a remarkably impressive job. He has built on past achievements, combining them with modern management. Mr. Wong told Macao Image that “in the past, 90 per cent of our customers were from Hong Kong. Now we see an ever increasing number of customers from the mainland and South East Asia.”

His bakery's turnover depends directly on the number of tourists visiting Macao. According to Mr. Wong, “sweets and biscuits are local delicacies. Many tourists buy them as souvenirs for family and friends, so visiting gift shops and bakeries became part of their schedule.”

Mr. Wong also said that “we are improving our packaging and quality so as to compete in overseas markets.” Foreign markets account for 30 per cent of the bakery's turnover. Its exports rose 20 per cent last year, despite the global economic down turn. Now Mr. Wong's products reach markets as far as the United States, Canada as well as the rest of South East Asia.

The three new concessionaires of the gaming industry have all pledged to set up large entertainment facilities. Mr. Wong said he will investigate a suitable place to open a new store. He is confident that more people will get to know his bakery since more tourists are expected to visit Macao. He is now planning to double the size of his plant and to apply for ISO certification so as to meet the bigger demand and higher quality standards.

Real Estate Sector Bottoming Out
Macao's long-suffering real-estate industry seems finally to be bottoming out, thanks to a string of favourable factors such as record-low mortgage rates, one-off taxation on the purchase of properties on Taipa Island, a four per cent interest subsidy granted by the SAR Government, and a new stamp tax system. The number of vacant residential and commercial units has recently fallen from about 40,000 to 20,000 units.

According to Mr. Ung Choi Kun, Executive Deputy Chairman of the Association of Property Agents and Realty Developers of Macao and Chairman of Kun Cheong Holdings Ltd., the massive development projects announced by the winners of the three new casino-operating concessions and the buoyant development of tourism have all filled the property market with great optimism. However, the Government and the business community still need to strengthen their joint efforts to turn this welcome stimulus into actual results.

The real-estate industry constitutes one of the four economic pillars of Macao. But due to a limited market capacity, only small and medium enterprises act as property agents or property management companies. That's why graduates from colleges and universities seem to be rather reluctant to join the trade. Mr. Ung pointed out that in the short-term future property agents will not only have local clients but also foreign customers since more foreign companies will move to Macao in the wake of the liberalization of the gaming industry. This will require real-estate professionals to improve their basic legal knowledge and foreign language skills in order to be able to better serve their clients. The real-estate industry hopes that the Government can convince local colleges and universities to launch special property sales and management training courses.

Mr. Ung emphasised that “the Government has accepted our suggestion for a simplified procedures for purchasing a property. The Government set up an inter-departmental working group last year to study ways to simplify property-transfer procedures. In its 2002 Policy Action Plan, the Government has pledged to launch a so-called ‘One-stop’ service. We are confident these moves will encourage foreign investors to purchase property in Macao.”

Macao's Catering Industry to Develop Into Two Segments
The catering industry plays an important part in Macao’s tourism industry. Unique and tasty delicacies may encourage tourists to spend more money and extend their stay here.

The Association of Macao Restaurant Merchants has held food festivals for the past two years. Mr. Andrew Chan, who chairs the Association, told Macao Image that “food festivals have become a hot topic among both residents and tourists. They have become a "must" for many tourists, and they give visitors the impression that Macao is a highly enjoyable place where one can easily find wonderful western and oriental cuisine.” Mr. Chan vowed that his federation will continue holding food festivals in order to turn Macao into an ever more colourful and attractive destination.

Mr. Chan also said that it was one of his federation's top priorities to provide vocational training to the staff in the catering industry.

Mr. Chan also pointed out that the liberalization of the gaming industry will certainly bring more opportunities to the catering industry. But most of the family-run eateries in Macao are ill equipped to adapt themselves to the new circumstances. Mr. Chan explained that “the catering industry will split into two segments, that is high-end expensive restaurants and low-end restaurants. The high-end restaurants will be located in casinos operated by the two new-comers to the gaming industry. The latter will be for travel groups. Those in between will need to highlight their quality service and special dishes to attract customers.” Mr. Chan thinks that the latter type of restaurants should be concentrated in so-called ‘Food streets’, which could then become an ensemble of eateries in the same fashion as Lan Kwai Fong in Hong Kong. ‘Food streets’ could become a great attraction for the indepedent traveller.

Macao's financial market is relatively small. However, the banking industry is looking forward to a new inflow of foreign capital and the launch of new entertainment projects to offset the negative impacts on corporate financing brought by the global economic slowdown in 2001.

The Financial Sector Stands to Benefit from Liberalization of Gaming Industry
Mr. Stanley Au Chong Kit, Chairman of Delta Asia Financial Group, told Macao Image that “the financial sector can benefit both directly and indirectly from the opening-up of the gaming industry. Whether the various investment plans announced by the new casino concessionaires will be implemented or not directly determines the demand for project finance. Whether the investments pledged will actually get off the ground depends on whether the respective investors can see good prospects of returns. So the Government must keep a level-playing field for the three competitors in the gaming industry.”

On the other hand, a greater inflow of tourists means a larger demand for tourism products and services. The expected expansion of the local market will bring more foreign capital into Macao. All this can increase the demand for corporate finance, benefiting indirectly the local financial sector. Mr. Au suggests that “the SAR government must harmonise its accounting standards with international ones and further improve efficiency in order to foster a better business environment.”

Macao's different business sectors all appear to be very upbeat about new prospects to be opened up by the liberalization of the gaming industry.

Macao's Century Old Gaming Industry

The liberalisation of the gaming industry had been researched and prepared for over a year since Macao’s handover. Three new concessionaires were chosen through fair, equitable and open bidding. The winners are Sociedade de Jogos de Macau, Wynn Resorts (Macau) and Galaxy Casino. This ended Macao’s four-decade old gaming industry monopoly. With three players competing against each other, Macao’s economic development has entered a new stage. The liberalisation of the gaming industry will have a profound impact on Macao’s entire community since the most important social and economic resources of the Special Administrative Region are bound to be re-allocated.

The history of the gaming industry can be traced back to as early as the first half of the 19th century. The industry, one of the oldest in Macao, switched between monopoly and liberalisation several times over the course of some 100 years. In the middle of the 19th century, Macao’s Portuguese rulers issued licenses to build the first gambling houses in order to generate desperately needed public revenue that had been drying up after Britain’s seizure of Hong Kong, also in order to support the Portuguese colony of Timor. Later on, the colonial administration introduced a casino monopoly regime in an attempt to improve the supervision and control of the gaming industry, whose rather lawless situation had come under severe criticism by the Chinese community.

The gaming industry has weathered twists and turns and grown into Macao’s most important source of revenue. Every year from 1961, when the Sociedade de Turismo e Diversaes de Macau (STDM) was granted the casino monopoly, through to the 1990s, around half of Macao Government’s annual income was generated by STDM, which produced nearly one third of the annual gross domestic product. With a gross income of MOP 15.8 billion in 2000, STDM is described by financial analysts as one of the world’s most profitable companies.

The last few years saw Casinos in Macao generated annual gross profits ranging between MOP13 to MOP18 billion, paying between MOP4.2 to MOP5.9 billion in gross revenue tax into government’s coffers.

History of Macao Gaming Industry
* In 1864, Macao’s Portuguese administration publicly invited investors to launch gaming businesses, and started to levy gaming tax.

* In 1930, Macao’s Portuguese administration invited tenders for a casino monopoly, and the right awarded to the highest bidder. Hou Hing company won and launched the first casino monopoly in Macao’s history.

* 1937 saw the second tender. The Tai Hing company owned by Fu Deyin and Gao Kening won the monopoly. The company opened three casinos in the Central Hotel, Rua de Felicidade and Rua Cinco de Outubro, providing traditional Chinese gambling games .

* The third casino monopoly tender was launched in 1961. STDM owned by Stanley Ho and other investors paid MOP three million to win the franchise. STDM took over the casinos on January 1, 1962, ushering in the final period of a casino monopoly that was to last four decades. STDM introduced new gambling games from Europe and America, in addition to the traditional Chinese games, thereby improving and diversifying the gaming industry.

* In 2002, Macao SAR government announced the termination of the monopoly regime and decided to launch a public tender for three rival casino-operating concessions

Tourism Takes off in Macao

After 9.1 million visitor arrivals were recorded in 2000, a record 10 .2 million tourists visited Macao last year. The record high number of visitor arrivals in 2001 was particularly impressive, considering that the world's tourism industry as a whole was severely affected by the terrorist attacks in the United States on September 11, 2001. Apparently, many residents in neighbouring regions and countries abstained from long-distance travel preferring to travel to nearby Macao. As a result, the average room occupancy rate for Macao's hotel’s also went up.

However, irrespective of the overall encouraging developments as far as Macao's tourism and hospitality sectors are concerned, the MGTO says it still needs to further strengthen its efforts to encourage tourists to stay longer and to spend more during their visit to Macao.

Attracting more tourists to Macao
Hong Kong, the Chinese mainland and Taiwan are the three main sources of tourists visiting Macao. In early 2002, the mainland authorities eased restrictions on mainlanders travelling to Hong Kong and Macao. In due course once all the necessary administrative procedures have been completed, Macao can expect considerably more mainland tourists. That is why there is an urgent need for the tourism sector and related industries to improve their services so that tourists feel at home when visiting the Special Administrative Region.

Macao’s tourism sector also needs to co-operate closely with its counterpart on the mainland. Promotion campaigns are scheduled to be held in major mainland cities, so that mainlanders become more acquainted with Macao.The Tourism Unit affiliated to Macao’s Representative Office in Beijing has already started mutually beneficial operations. The arrangement is expected to serve as a bridge between the travel industries on the mainland and Macao.

A Budget of MOP 180 Million
In 2001, more than 1.4 million Taiwan visitors arrived in Macao, corresponding to a growth of some 10 per cent. Even more Taiwanese visitors are expected after the completion of the Mazu Cultural Village on Macao's Coloane Island, based on the fact that many Taiwan residents are devout followers of the popular sea goddess. In 2001, the Mazu Cultural and Tourism Festival in Macao was a resounding success, further similar activities are planned by the MGTO with the theme “Macao-City of Culture” to promote the cultural tourism of Macao.

The MGTO’s 2002 budget totals MOP186,392,800 and will be used more effectively to expand the source of visitors.

This year’s “Macao Tourism Awareness Campaign” will mainly target students, tourism industry personnel and certain local associations. The MGTO will hold a series of activities to increase the three groups’ knowledge of tourism in Macao. Activites to be held include a promotional film production contest, short-term training courses for tourism industry personnel, and the promotion of the image of pedicab drivers. The print and electronic media will also play an active role in the campaign.