The handover of Macau back to China in 1999 set the scene for both the end of the gambling monopoly in Macau and thence the biggest economic explosion in history.
When the government of Macau ended the monopoly of gambling by the Sociedade de Turismo e Diversoes de Macau in 2002 one of the concessions granted was to a subsidiary of that same organization however several western concerns were licensed to operate within Macau and that merely lit the touchpaper on an explosion of economic expansion the likes of which have rarely been seen before. Two years in the making the arrival of Macau on the international scene was to change the world of gambling forever.
The Rise & Rise Of Macau
• Gambling monopoly ended in 2002
• Massive foreign investment started in 2006
• Investigation into gambling news scares off high rollers
The Special Administrative Region status that both Macau and its neighbor Hong Kong enjoy gave vast levels of autonomy to the regions in question and that included the policies towards gambling that had always set Macau apart during the days of its Portuguese colonial past. The tourists were already coming across the water from Hong Kong but the reunification with China under a “one-country-two-systems” deal to last at least fifty years, brought in the Chinese market.
The massive Chinese gambling market is difficult to over-estimate with up to perhaps a billion dollars wagered yearly in this gaming paradise just on the doorstep of a population denied the right to gamble at home. Of course illegal gambling in China has been estimated at a billion yuan annually, so Chinese gambling laws are debatably successful, but despite this the well off in China like nothing more than to visit the gleaming spires of steel and glass in Macau and bet.
With a house profit of perhaps some 2.5% on offer it is unsurprising that those so licensed set about creating some truly impressive structures and facilities to take full advantage of this lucrative market and the operators of these casinos were to be the familiar names that have dominated the gambling industry in US for so many years now. The size of the constructions was mammoth, the investments huge but with the potential pay-offs so huge, who could resist?
Western Entities Go East
The Las Vegas Sands Corporation, the Galaxy Entertainment Group, and a partnership between MGM Mirage and Pansy Ho hiu-king, plus the partnership twixt Melco and PBL. The first resort opened in 2007, and soon there was an expansion across what became known as the Cotai Strip a name that spawned a comment to the effect that Macau was no longer the Las Vegas of the east, but that Las Vegas was the Macau of the west. Resorts with 3000 suits, or containing three whole separate hotels were constructed, just in time for the 2007-2008 economic crisis.
The stall in construction that this time of flux put in place only temporarily halted progress but it did highlight the sort of spikes in unemployment that could be expected should expansion cease entirely. Unemployment in Macau runs at under 2%, but jumped as construction projects were halted, suspended or abandoned by jittery investors as world wide markets crashed and financial world proved to be no less of a casino than a casino.
Since then projects have got back underway and unemployment has fallen, Macau is looking forward to a future of massive gambling centers dominating it for quite some time to come, with even the new University to be built facing these massive structures. The future then for people who like to bet on sports in Macau is looking up, up at the huge new construction projects that are planned for this still expanding destination with huge hotels and lavish large casino gaming floors.
Just for example the Venetian cost nearly $3bn to build but has been attracting visitors ever since it opened and with floorspace that could accommodate a hundred Boeing 747s and 3000 suites on a quiet day visitor numbers range between sixty and seventy thousand. Those are vast figures and the taxes levied by the state run into the hundreds of millions which is why the gambling continues. To stamp it out in Macau would merely make it move abroad, and China isn’t so silly to push away this cash cow.
Downturn Prompted By Anti-Corruption Crisis
Naturally there are some issues with criminal involvement, especially in the sort of short term credit provision that secured by the health and well-being of one’s kneecaps, plus, of course the spectre of money laundering that has always, rightly and indeed wrongly, been associated with the gambling industry. Criminal gangs, the Triads and indeed mere dodgy dealing businessmen have all been accused of involvement and more recently there have been anti-corruption investigations into several land deals involving casinos.
Steve Wynn might have won the license to build a casino on the outskirts of Boston but his proposed project to spend $4bn on a resort casino in Macau has hit a bit of a bump in the road after a $50 million payment was made to a Macau company with close links to a top official and to members of a prominent Beijing family. An anti-corruption task force is now looking into the matter, despite this being dismissed as payment to relinquish claim on the land purchased.
Investigations are becoming a bit of theme for Macau with President Xi Jinping the latest to press for a shedding of light on the activities within Macau, The effect of which has been to scare off a lot of trade as high-rollers go somewhere less inquisitive about the providence of their cash. This has led to a stock value fall of some 32% on average amongst casino shares and perhaps just the vaguest hint that investors should keep their funds mobile gambling that sometimes it’s better to be liquid.
Whilst this is probably only a temporary set back, (no investigation lasts forever) for as long as the Chinese authorities insist on peering into the gloom, those high rollers, the life-blood of Macau might well stay away. The sustained clamp down might at present be causing a contraction in the natural market so close at hand but it is unlikely that this will stifle the future of this gambling playground on China’s doorstep for very long.