Baby steps

The Chinese President recently visited the city for the third time in the past decade and reiterated that the city needs to continue to work on its appropriate economic diversification, which is making progress but slowly.

Ten years ago, in his first visit to the city as a state leader, Chinese President Xi Jinping, then Vice-President, announced that Hengqin Island, adjacent to Macau, would be developed to accommodate the economic diversification of the territory. 

Five years ago, the President visited the gambling enclave again amid the crux of his anti-corruption campaign that has severely impacted the city’s economy, urging Macau to remain vigilant against unexpected development and to further diversify its economy. 

In his latest visit to the SAR last month, Mr. Xi underscored again the city has to further expedite the healthy and sustainable development of the economy, as well as selecting key projects and directions to facilitate economic diversification. 

Albeit the reiterating pledges from the top leader, the progress of economic diversification here has remained slow — but observers believe the support from the central government in the cooperation between Guangdong and Macau could provide momentum for the gambling enclave to move forward. 

The “Analysis Report of Statistical Indicator System for Moderate Economic Diversification of Macau 2018” released recently by the authorities show the gaming industry accounted for 50.52 percent of the city’s gross domestic product (GDP) in 2018, up by nearly 1.5 percentage points from 2017 and 3.86 percentage points two years earlier. 

The Statistics and Census Service (DSEC) justified the share of casinos in the economy went up in the past two years because the gaming industry regained momentum from the downward adjustment period in 2014-2016 period. The latest figure was still lower than 63.1 percent recorded in 2013, it added. 

The administration also noted the entropy index of economic diversity — the higher the index the less sectoral concentration in an economy, while the lower the index the more the concentration — amounted to 1.83 in 2018, down from 1.86 and 1.92 respectively in 2017 and 2016. The index showed “a higher sectoral concentration in the economy [in 2018] compared to 2016,” DSEC added. 

Healthy scenario 

The Secretariat for Economy and Finance also emphasised that “the basis of the appropriate economic diversifications of Macau has been formed” with the non-gaming sector accounting for nearly half of the city’s GDP. 

“It’s definitely not a smooth path concerning the appropriate economic diversification of Macau; however, with the strong support from the central government, the collaboration among all residents in Macau and the relentless endeavours over the years, the diversification here has started to yield outcomes,” the secretariat claimed. 

Acknowledging the declining gaming revenue playing a role in the fluctuations of the entropy index in the past few years, Zeng Zhonglu, a professor at the Centre for Gaming and Tourism Studies of Macau Polytechnic Institute, pinpoints the non-gaming sectors have also grown steadily over the same time period. 

The diversification report noted that while the revenue of the gaming sector surged 30.6 percent between 2015 and 2018, the revenue of the non-gaming sectors — including construction, hotel, retail, food and beverage, real estate and finance, and others — also managed to grow 6.8 percent. The hotel sector in particular expanded 43.2 percent over the same time period while the finance sector jumped 29.2 percent. 

Concerning the emerging industries of the city — MICE, finance, traditional Chinese medicine and cultural creative sector — the value added of these activities surged 36.5 percent in the 2015-2018 period, especially a 158-percent rise in the MICE sector, the report said. 

“It will not be an ideal situation if the non-gaming proportion of the economy only increases due to the decline in gaming revenue,” said Prof Zeng. “But it is a healthy scenario now in Macau: the gaming industry grows steadily while the non-gaming sectors also expand.” 

Lack of space 

Given the government’s committed efforts in pushing forward the non-gaming development, as well as a general slowdown in the local gaming segment compared to a few years ago, the scholar believes the non-gaming industries will gain more momentum for growth in the future. “But there is a lack of land resources in Macau, which will be a hurdle for the non-gaming development,” he added. 

Legislator and scholar Joey Lao Chi Ngai also noted albeit some outcomes in the local economic diversifications, the progress “is still rather slow” and the industrial structure of Macau “is still relatively concentrated”. 

But he believes the support from the central government — including the development of Hengqin, the demarcation of 85 square kilometres of territorial waters for the city, and the yuan clearing business — could help facilitate the process. “These could add new momentum and new spaces to Macau, thus further advancing its diversifications,” said Mr. Lao, who is also the president of the Macau Association of Economic Sciences. 

Prior to Mr. Xi’s visit to the city last month to attend the celebration activities for the 20th anniversary of the establishment of the Macau SAR, news agency Reuters reported that the President would announce a raft of new policies aimed at diversifying the city’s casino-dependent economy into a financial centre. 

The measures include the establishment of a yuan-denominated stock exchange and the acceleration of a yuan settlement centre that was already in progress. The report also said Macau would be allocated more land on Hengqin for development in areas such as education and healthcare. 

New era of cooperation 

But the President did not unveil any new measures during his three-day stay here, only emphasising that all walks from the community should work together to elevate the city’s development into a new stage. 

Commenting on the lack of new measures unveiled by Mr. Xi, Chan Chi Fong, vice president of local think tank Macau Development Strategy Research Centre, noted “Macau is not a kid anymore”, and does not require “gifts” from the central government all the time. 

“President Xi came to Macau this time and laid down hopes for us, which could be directions for the city’s development,” he said. For instance, he noticed the mindsets of the nearby Hengqin and Zhuhai authorities have slightly changed in recent times prior to the visit of the President. “They all show now they are willing to fully cooperate with the development of Macau,” he noted. 

Yang Chuan, Hengqin New Area Administrative Committee Director, said in a public occasion in December, that Hengqin would work hand-in-hand with the city to explore a policy regime and system that is open to Macau, so that a business environment beneficial to the enterprises from two places could be set up. 

“After 10 years of hard work, the cooperation between Hengqin and Macau has overcome the early stage of learning curve, and it is now heading towards a new stage of comprehensive and in-depth cooperation,” Mr. Yang stressed. 

Innovative regime 

In the keynote speech on December 20, the Chinese President did underscore Macau should get a grasp of the opportunities arising from the “Belt and Road” initiative and the Guangdong-Hong Kong-Macau Greater Bay Area. “At this moment, it’s important to ensure the joint development of Hengqin between Zhuhai and Macau in a bid to provide more room and add new momentum to the long-term development of Macau,” Mr. Xi said at the time. 

Although the development of Hengqin has been the subject of discussion for nearly a decade, there are still material outcomes of how this island could help the diversification of the city, besides zoning land parcels for the new campus of the University of Macau and commercial projects backed by Macau capital. 

Hong Kong-listed food and beverage operator Future Bright Holdings, linked to Macau businessman and legislator Chan Chak Mo, recently sold its land parcel in Hengqin previously destined for an international food plaza project. Though the group did not specify reasons for the sale of the land, Mr. Chan previously stated that Hengqin at the moment did not have proper conditions for investments and the policies on the island should be amended to accelerate the development of the island. 

Lok Wai Kin, a law professor at the University of Macau, also recently stated that there should be “innovations” concerning the administrative and legal rules and regimes of Hengqin in multiple areas. “And the in-depth cooperation between Macau and Hengqin requires the support from the central government,” he noted. 

Hong Kong newspaper Ming Pao recently reported think tanks in the Mainland have studied over one hundred sets of rules involving the areas of cooperation between Macau and Hengqin, and have proposed how to improve the rules to facilitate the development of island for the diversification of Macau. More measures would be gradually announced in the near future, the report said.  Indeed, just three days after taking office as the city’s new Chief Executive on December 20, Ho Iat Seng immediately led a government delegation — including all the government secretaries except Secretary for Security Wong Sio Chak — to visit Guangzhou and Zhuhai in nearby Guangdong province for two days. 

The visit was to enhance the cooperation between Guangdong and Macau and deepen the joint development on Hengqin, in accordance with the vision laid down by Mr. Xi, for the long-term development of the city, Mr. Ho noted. 

Over 2,110 Macau firms in Hengqin 

The total number of Macau-backed companies in nearby Hengqin now totals over 2,110 with an accumulated investment volume of US$18.83 billion (MOP150.64 billion), according to the Hengqin New Area Administrative Committee. 

Figures from the Hengqin authorities show the total number of Macau-backed firms reached 2,116 as of mid-December 2019, representing an increase of 745 firms — or 52.7 percent — from the end of 2018. The administration noted the number of Macau firms in the nearby island a decade ago was only five. 

With a total of 53,000 firms in Hengqin at the moment, Macau firms accounted for about 4 percent, while the Macau-backed projects represented about 57 percent of the new land supply on the island, the administration remarked. 

The accumulated investments of US$18.83 billion from Macau in Hengqin now focus on areas of leasing, commercial services, retail and wholesale, research and development, it added. 

Non-gaming receipts of gaming operators remain at 10 pct 

The share of non-gaming receipts in the total income of gaming operators remained at about 10 percent by 2018, but represented about 90 percent of floor space in gaming projects, a government study shows. 

According to the “Analysis Report of Statistical Indicator System for Moderate Economic Diversification of Macau 2018”, the total receipts of the six gaming concessionaires and sub-concessionaires amounted to MOP335.34 billion (US$41.92 billion) in 2018, of which 90.03 percent came from gaming activities — or MOP 301.91 billion — and 9.97 percent — MOP33.43 billion — from non-gaming activities. 

Compared to 2017, gaming receipts increased by 13.7 percent year-on-year in 2018, whereas non-gaming receipts rose by 13.3 percent, resulting in a drop of 0.03 percentage points in the proportion of non-gaming receipts in total receipts of gaming operators.    

Among all the non-gaming activities, accommodation translated to 42 percent of the total non-gaming receipts — or MOP14.04 billion — of gaming operators in 2018, while retail activities and catering represented 24.62 percent and 24.15 percent respectively. The revenue of entertainment offerings only reached MOP877 million in 2018, or a mere 2.62 percent of the non-gaming revenue, the report said. 

The external companies operating in product sales and providing services on the premises of gaming operators totalled 701 in 2018, up by 1.6 percent from the previous year and 8.3 percent from two years earlier. The total revenue of those companies hit MOP47.35 billion in 2018, surging 22.4 percent from 2017 and 49.1 percent from 2016.    

In addition, the total floor area of the premises of gaming operators reached nearly 59.92 million square feet in 2018, of which 10.21 percent — or 6.12 million square feet — were zoned for gaming activities, and 89.79 percent — or 53.8 million square feet — for non-gaming activities.