BET­TING ON THE CASINO CAP­I­TAL OF THE WORLD

The rise, fall and rise again of Ma­cau is a parable of mod­ern China and glob­al­i­sa­tion, says WIL­LIAM VLCEK

The New European - - Expertise -

Ma­cau is China’s an­swer to Las Ve­gas. But the for­mer Por­tuguese colony has long sur­passed the City of Lights as the world’s casino cap­i­tal, with rev­enue from gam­bling re­ceipts ex­ceed­ing the en­tire state of Nevada back in 2010. As well as draw­ing in the pun­ters, it has the glit­ter­ing ar­chi­tec­ture to match.

The story of Ma­cau is one of glob­al­i­sa­tion and the rise of China. It is a glob­al­i­sa­tion story be­cause of the role played by for­eign multi­na­tional casino com­pa­nies. And it is a story of the rise of China be­cause it has been the eco­nomic pros­per­ity of its cit­i­zens that has al­lowed them in great num­bers to travel, see the world, and gam­ble.

Ma­cau re­turned to Chi­nese rule in 1999 as a spe­cial ad­min­is­tra­tive re­gion, which means it has dif­fer­ent laws to the main­land. It is the only part of Greater China (which in­cludes China, Hong Kong and Ma­cau) where gam­bling is le­gal, mak­ing it the coun­try’s sole gam­bling des­ti­na­tion.

In the years be­fore the 1999 han­dover, the en­vi­ron­ment in Ma­cau was fraught, with or­gan­ised crime a vi­o­lent pres­ence com­pet­ing for ac­cess to the sub-con­tracted VIP gam­ing rooms. These VIP rooms, which host high stake games in a pri­vate set­ting, are an­other dy­namic be­hind Ma­cau’s suc­cess. They made the Ma­cau gam­bling ex­pe­ri­ence dif­fer­ent from that of other casino des­ti­na­tions.

Ma­cau’s fo­cus on high-spend­ing cus­tomers, with pri­vate rooms and spe­cial priv­i­leges – rather than mass mar­ket gam­blers – is the source of much of the casi­nos’ rev­enue.

Casi­nos were orig­i­nally built around VIP rooms. These were sub-con­tracted to gam­bling pro­mot­ers who shared in the prof­its from bring­ing in wealthy gam­blers. These high rollers made up 66% of to­tal casino rev­enues in 2013.

Casino op­er­a­tions gen­er­ate sub­stan­tial tax rev­enue for the govern­ment: in 2001 it was 40% of all tax rev­enue col­lected in Ma­cau. Ten years later, govern­ment in­come from casino gam­ing taxes amounted to 81% of all tax rev­enue col­lected. This mas­sive change is the re­sult of the de­ci­sion to open up the casino in­dus­try and in­vite for­eign firms to com­pete for a casino li­cence.

Un­til 2001, only one com­pany was li­censed to op­er­ate casi­nos and for four decades this was mo­nop­o­lised by a com­pany called So­ciedade de Turismo e Diver­sões de Ma­cau, SA (STDM). From 2002, casino li­cences were awarded to sev­eral for­eign multi­na­tional firms and joint ven­tures. This in­cluded big firms from Aus­tralia, Hong Kong and the US, with recog­nis­able names from Ve­gas, such as Las Ve­gas Sands, MGM, Gal­axy and Wynn Re­sorts.

They in­vested heav­ily in big new casino re­sort com­plexes, with lux­ury ho­tels and high-end shop­ping malls. Given Ma­cau’s tiny size – it orig­i­nally con­sisted of a main­land penin­sula and two small is­lands mea­sur­ing 11.6 square kilo­me­tres in 1912 – land recla­ma­tion projects were nec­es­sary to host the bur­geon­ing in­dus­try. By 2010, the ter­ri­tory mea­sured 29.7 square kilo­me­tres, in­clud­ing six square kilo­me­tres of new land con­nect­ing the

small is­lands of Coloane to Taipa, which plays host to the big casino com­plexes.

These new casi­nos have pro­vided some em­ploy­ment op­por­tu­ni­ties for lo­cal cit­i­zens, but the greater im­pact for the econ­omy has been the tourist vis­i­tor num­bers and the tax rev­enue gen­er­ated. Af­ter a decade of ever-in­creas­ing growth in gam­ing rev­enue with the open­ing of new casi­nos, tax rev­enue from the sec­tor peaked in 2014 and then de­clined af­ter China’s pres­i­dent, Xi Jin­ping in­sti­tuted a wide­spread anti-cor­rup­tion cam­paign.

The VIP gam­ing rooms in Ma­cau be­came seen by the govern­ment in Bei­jing as a mas­sive leak­age of cap­i­tal from the Chi­nese econ­omy. A large part of the big money be­ing gam­bled by these VIPS was seen as the pro­ceeds of cor­rup­tion and bribery on the main­land.

In 2014, gam­ing tax rev­enue pro­vided 84% of the Ma­cau govern­ment’s to­tal rev­enue; by 2017 it had de­clined to 79%. But these per­cent­ages con­ceal the de­cline in the ac­tual amount avail­able to the govern­ment, from $20.1 bil­lion in 2014 to $15.7 bil­lion in 2017. This is be­cause a num­ber of Chi­nese elites es­chewed Ma­cau’s casi­nos to avoid scru­tiny dur­ing Xi’s cor­rup­tion crack­down.

Casino rev­enue now ap­pears to have sta­bilised, helped by a move in Ma­cau away from re­ly­ing on the VIP sec­tor and to­wards mass mar­ket en­ter­tain­ment. The govern­ment has also en­cour­aged di­ver­si­fi­ca­tion be­yond the casino gam­ing room and, like Las Ve­gas, it is look­ing to at­tract ex­hi­bi­tions and events to be held there.

The new bridge con­nect­ing Ma­cau with Hong Kong should sup­port in­creas­ing tourist vis­its by eas­ing travel to the ter­ri­tory, fur­ther supporting di­ver­si­fi­ca­tion. But Ma­cau must in­creas­ingly con­tend with neigh­bour­ing ri­vals. The anti-cor­rup­tion cam­paign en­cour­aged Chi­nese gam­blers to visit other Asian casino des­ti­na­tions, in­clud­ing new re­sorts in Sin­ga­pore and Manila in the Philippines.

Mod­ern Ma­cau is built on China’s rise and the in­creased wealth of its cit­i­zens that this has brought. Ma­cau’s con­tin­ued suc­cess is con­tin­gent on its abil­ity to at­tract the mass-mar­ket gam­bler, along with other tourists, as a va­ca­tion des­ti­na­tion. As China’s mid­dle class con­tin­ues to grow, it should guar­an­tee a steady sup­ply for years to come.

Wil­liam Vlcek is a se­nior lec­turer in global po­lit­i­cal econ­omy at the Univer­sity of St An­drews; this ar­ti­cle also ap­pears at the­con­ver­sa­tion.com

Photo: Getty Im­ages

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