Macau’s Dilemma?

Posted: July 10, 2010 in Uncategorized

 Includes our expert panelists commentary…

10 July 2010    Sat
 
 

Macau—a world-class gaming destination despite or because of its government?
(Extracts of Asian Gaming Intelligence newsletter, 9th July 2010)
 
 

 

The chances of Galaxy Entertainment Group completing its Cotai resort, known as Galaxy Macau, by its self-declared first quarter 2011 deadline appear to be receding
 

after the government slashed 1,000 non-resident workers from its Cotai workforce.

The government seems to have lost patience with Galaxy for allegedly not meeting its ‘one for one’ policy announced in April—i.e. one local construction worker for every non-resident used.
 
The non-resident workers sent away in the past few days represent about a third of the workers on the Galaxy Macau site.

Wong Chi Hong, Coordinator of the Human Resources Office, disclosed the news at the Legislative Assembly yesterday. But privately Galaxy had known for some weeks that it had a potential problem. That was why despite the fact that publicly it was sticking with its Q1 2011 opening date, behind the scenes its marketing team was advising third parties of possible ‘adjustments’ to the timetable. Galaxy declined to comment to Asian Gaming Intelligence on the developments.

Galaxy is not the only operator hit by the ‘one for one’ policy. In mid-May, Sands China, the local unit of Las Vegas Sands Corp, said it needed 10,500 building workers in order to recommence its USD4.2 billion Macau project known as Cotai plots five and six (but in reality a massive resort in its own right costing almost twice as much as The Venetian Macao).

…. It would be difficult to imagine such an attitude–especially among the Chinese, an ethnic group noted around the world for their industriousness–had it not been said in public with journalists present. It leads outside observers to wonder does Macau actually deserve a world class gaming industry? Or does it have one despite, rather than because of, the attitude of its people and government?

——

Commentary by Professional Ground:
We have reasons to believe that in the following months the Macau government would adopt a relatively harder stance with a twist in “cooling off” its gaming landscape, due to over churning of casino revenue from Southern China region.

* The Macau Human Resource Office is not  an ordinary governmental department that exists among the authority structure. It is indeed a “supervision body” (of Central government) set up to ensure Macau does not repeat the same mistakes in the past years before 2007. When there was practically lack of proper control over the influx of foreign labour and expats. So, this round of “one for one” policy is not to be taken lightly. It sends a clear signal to all gaming operators in Macau.

* This incident shows that influence from Central government remains “heavy handed’ despite the generally perceived notion that Macau government has the leverage (freedom) to make all policies based on its own judgment.

* So, does Central goverment concerns about the impact of this labour policy on the territory’s gaming landscape? The answer is not at all. Our assessment is that over the next 5 years Beijing will continue to add pressure on Macau, for the territory to be transformed into truly more tourism oriented and non-gaming services sector development. We expect more “fine-tuning” policies to be unleased over the horizon.

* The recent over-heating of VIP gaming churning revenue must have caused Beijing to be alarmed again. It is clearly the outcome of macro downsizing of property bubble in mainland China and hence, pushing hot speculative money from mainland into Macau’s junket rooms. Now it is the time for Central government to start cooling off this phenomenon as it was in the past. The cycle has come back again.

* Is there room for “negotiation” on the recent tough labour policy? Yes and No.

Provided that Macau players (gaming industry, casino operators, gaming control board, etc) are willing to trade off some undesirable current practices inherent in the gaming sector, such as overly reliance on VIP junkets hot syndicated money in-flow from mainland as major source of funds transaction.

Once Macau starts to move progressively in less reliance on casino activities, develops the right balance on infrastructure development instead of following the syndrome to pursue just another gaming mega resort, in return Beijing will amend its labour control policy (and others as well) to encourage such a change/transformation. 

* It is unfortunate for Galaxy Entertainment Group and Sands China to be caught in the gap at this juncture but it is an inevitable scenario, whenever the gaming revenue is overly churned and heated up.  Some cooling off is on the card.

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