Macau Business Editorial | August 2023| By José Carlos Matias – Director
Now, more than half a year since Macau’s reopening, the outlines of a “new normal” are coming into focus. Gross gaming revenue has been hovering around MOP 15–16 billion per month since May, with July recording the city’s best post-pandemic performance yet at MOP 16.6 billion.
Assuming that such monthly average does persist through the remainder of the year, not only will it comfortably exceed the government’s full-year MOP 130 billion forecast, it may also mean authorities can stop dipping into the city’s rainy-day fund. What a difference a year makes, considering last summer’s uphill battle under strict zero-COVID restrictions.
Quarterly results indicate operators now mostly find themselves on steady positive EBITDA ground or even returning to profit. It’s a sunny recovery to bask in, having endured three challenging years of massive losses. Now these concessionaires are facing a new kind of challenge related to drafting and getting the government’s green light for their blueprints for economic diversification in line with the terms of their new 10-year concession contracts.
What we’re witnessing is in fact a new dynamic in the government–operator relationship, one that sees concessionaires required to perform tasks formerly in the domain of government departments. Yet this has not been as smooth as public statements would have us believe. Even if this “tall order” was already in the cards given the extensive non-gaming requirements outlined in the recent public tender, filling it successfully – as plans turn to implementation – will require a flexible approach that avoids casting too wide a net.
Therein lies the heart of the issue: the roles of the government and gaming operators in the drive for moderate economic diversification.
Moving forward from the visionary, top-down design of the “1+4” formula, a realistic, pragmatic, adaptable approach will be key to avoiding the disappointment of a capability–expectations gap.
What might we reasonably expect in terms of outcomes in the short, medium and long term?
The newly launched consultation paper on the much-expected blueprint “Development Plan for Appropriate Economic Diversification of the Macau Special Administrative Region (2024-2028)” elaborates on the existing strategy and sets a number of key targets for the upcoming five-year period.
A realistic, pragmatic, adaptable approach will be key to avoiding the disappointment of a capability–expectations gap
Experts have pointed out that we must first focus on the start of the formula – the “1+” stands for “Tourism+” – and capitalize fully on this strategy’s potential. This approach is already taking shape and is expected to yield sound results in the short term. Integrating the other “4” components into the existing infrastructure and human capital will follow on from these efforts.
“Vertical” diversification within city’s core industries (gaming/tourism) has been a recurring topic over the years. Now, the long-awaited momentum needed to achieve that reform at the highest level is finally building. As we’ve emphasized before, human resources, customer service and infrastructure have critical parts to play. On the transportation front, the authorities’ failure to address the city’s taxi woes in recent months is regrettable, especially with the SAR welcoming the return of mass tourism. Swift action is needed, but how exactly might the issues be resolved? Through a rapid and significant increase in the number of taxi licences, the introduction of Uber-like (or Didi-like) ride-sharing platforms, and enhanced oversight. There are abundant possibilities for improvement, provided these concerns do not continue to fall on deaf ears.
For “horizontal” diversification in sectors other than tourism, attracting fresh foreign direct investment in the designated areas of high-tech, modern finance and big health is the way forward and certainly also the authorities’ aim. That entails ambitious efforts to lure world-class players in these fields and then retain them with a compelling business environment case. Would Macau be punching above its weight? One can argue it’s an ambition that is simply essential to making any strides, and that the effective upgrade of the city’s economic structure hinges on it. Meanwhile it pays to bear in mind that the “horizontal” approach to diversification is more of a long-term endeavour.
Transparency
The controversy over the MOP 42-million plan to build a new Chinese deity statue in Coloane reminds us that expectations of transparency might still be a bridge too far in some cases. The government’s decision to halt the controversial project in response to resident opposition was the right move, as well as the explanations eventually provided by authorities and commitment to heed citizens’ views. However, questions linger over why the whole MOP 1.4-billion multi-functional youth activity compound plan was introduced in July without a public consultation.
Understandably, this case has struck a chord with local citizens, who rightly expect both transparency and accountability. One hopes a valuable lesson was learned.
