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Macau Las Vegas of the east

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The gambling floor of a casino in Macau.
The gambling floor of a casino in Macau.

Pallavi Aiyar

In 2006, Macau overtook the Las Vegas strip in gambling revenues when its 24 casinos raked in $6.9 billion. Between 2002 and 2006 some $25 billion in foreign investment streamed into Macau. The foreign direct investment into India in 2005 was $5.5 billion.

NO MATTER how late in the night Macau's skies are never dark, lit up around the clock by the bright lights of the city's casinos. Amid the whirring of roulette tables, the clatter of dice, and the clamour of construction that together form the aural backdrop of the city, one fact is apparent above all else: Macau is booming.

Eight years after the city reverted to China following centuries of Portuguese rule, Macau's fortunes have taken a sharp spike upwards transforming what was a little-known, sleepy town an hour west of Hong Kong, into one of Asia's premier destinations with all the glitz of Las Vegas and even more cash.

Soaring revenues

In 2006, Macau overtook the Las Vegas strip on gambling revenues and emerged as the world's number one gaming market when its 24 casinos raked in $6.9 billion, a 22 per cent increase over the previous year. Macau's revenues from gambling and gaming have, in fact, tripled in the last six years.

The vertiginous statistics don't stop here. Between 2002 and 2006 some $25 billion in foreign investment streamed into Macau. Just by way of comparison, the foreign direct investment into India in 2005 was $5.5 billion. The gulf is even more flabbergasting when one keeps in mind the fact that Macau is all of 25 sq km in size, with a population of just over 500,000 people.

According to Joao Antunes, Director of the Macau Government Tourism Office (MGTO), there are two main reasons for Macau's boom, one internal and the other external.

On the internal front he identifies the decision to break up the gambling monopoly that had been held by the politically connected Hong Kong tycoon Stanley Ho since 1962 as critical. Among external factors he points to the opening up of Macau to China's tourist market.

In 2002, the Macau Government invited bids from casino developers around the world, and eventually granted three licences: one to Mr. Stanley Ho himself, another to the Hong Kong-based Galaxy group, and a third to Las Vegas' Wynn Resorts.

These three groups were in turn entitled to issue sub-licences. Thus the Las Vegas Sands Corporation opened up a casino in Macau as far back as 2004 on a sub-licence from Galaxy. The Sands was the first Western-style casino focussing on the mass market to set up shop in Macau and it ushered in a revolution.

According to Prentice Salter, the former Director of non-gaming operations for the Sands Macau, the Sands Corporation made back its initial investment of $300 million in its Macau casino within a year.

Encouraged by the Sands' success, a veritable who's who of casino magnates has been beating a path to Macau's shores. In 2006, Vegas developer Steve Wynn opened a $1.2 billion Wynn casino on the Macau waterfront. MGM, another big Las Vegas operator, has almost completed its own vast new casino in conjunction with its local partner, Pansy Ho.

Not to be outdone by the boys from Vegas, Mr. Stanley Ho also recently unveiled a new $300 million casino, the Grand Lisboa. Mr. Stanley Ho's latest casino is a giant artichoke-like structure that rests on a light-bending mirrored egg and promises to become the iconic landmark on the peninsula when it is completed sometime in 2008.

Most ambitious of all, however, is the Venetian, a $2 billion Las Vegas Sands project that will include a 3,000-suite hotel, 15,000-seat arena, a convention centre, and a shopping mall featuring 350 luxury stores spread over 90,000 square metres.

The Venetian, set to open later this year, is located on the Cotai Strip a piece of reclaimed land that connects Taipa and Coloane, Macau's two outlying islands.

Today's Cotai is a gargantuan construction site with tank-like earth-moving machines sending up viscous clouds of dust into the air and impossibly long cranes lined up against the horizon like a herd of mechanical giraffes. It's difficult to conceive of either the fact that six years ago all of this was submerged under water or that in a few years from now it will emerge as the primary pleasure dome of Asia.

Almost $12 billion are being spent on developing the Cotai strip, which when complete, will boast of 20-odd casinos and luxury hotels including names such as the Shangri-La, Sheraton, and St. Regis.

The new, world-class casinos sprouting up in Macau are bringing in their wake legions of tourists from across the region but most especially from the rest of China. The number of visitors to Macau grew from 10 million in 2003 to around 22 million in 2006. More than 50 per cent of these were from the other parts of China.

In the early years after the handover of Macau to China, only residents from six cities were permitted by Beijing to visit Macau on individual visas. Today, the number of these cities has expanded to 49 and almost 260 million Chinese have easy access to Macau's casinos.

The reasons for Macau's growth are obvious, smiles Mr. Antunes. Macau is the only legal gambling destination in all of China and the Chinese are known as inveterate gamblers around the world.

Mr. Salter adds: "From Vegas to Reno, the casinos around the world are packed with Chinese and now they [the Chinese] have Macau at their own doorstep. It's a no-brainer that they will come." About 420,000 people from other parts of China, in fact, visited Macau in the single week from March 17, a national holiday in China to celebrate the Chinese New Year.

Problems too

But not everyone is happy with this influx. Migrants from outside Macau have driven down wages causing pressure on jobs and keeping ethnic tensions on the simmer. Demonstrations by disgruntled local workers have become a common sight. There are also those who worry that Macau is in danger of becoming a society of croupiers. Virtually all the young people in the city are absorbed into the casino trade. Father Peter Chung of the Macau Catholic Church talks of teachers, firemen, and clerks in his diocese having quit their jobs to take up more lucrative work as casino staff. He adds that a significant portion of Macau society, including senior citizens, is getting hooked on gambling with detrimental effects for the family.

Organised crime also continues to flourish in Macau, interlinked with the casinos. The city has long been a hotbed of triad (Chinese mafia) activity and a major centre for money laundering. It's easy for corrupt officials and businessmen from around the region to fly into Macau, "win" big bucks and suddenly be the happy possessors of wads of white money.

Mr. Antunes admits that triads remain active in Macau but he stresses that casinos are advantageous to Macau society as a whole, given the revenue they provide to the government for implementing a wide-ranging array of socially beneficial policies.

Casinos pay close to 40 per cent of their earnings in tax, which accounts for 70 per cent of the local government's budget. It is revenue from the casinos that has thus enabled the Macau authorities to adopt a 15-year free schooling policy for all local children from this year on. Casino tax money has also been poured into restoring the city's historic architecture with its unique blend of Portuguese and Chinese styles. In addition, infrastructure projects such as a new ferry terminal to Hong Kong and a light rail system are being invested in.

Casinos are Macau's cash cows and the only cloud in the sky is competition from some upcoming casino regions in the neighbourhood. Mr. Salter, who now heads a casino development consultancy, is himself currently working on casino projects in Singapore, Mongolia, and even Goa.

But judging from the list of investors betting on Macau's growth this remains a distant cloud and odds are Macau's position as casino capital will remain firm for a long time to come.


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