Any attempt to diversify the economy is conditioned by the lack of land, qualified staff and infrastructure. The diagnosis is made but few want to see it.
MB June 2020 Special Report | Diversification now or never
There are few topics as consensual among experts, as when asking for explanations for the fact that economic diversification today has little more than an irrelevant role in the global context of the local economy.
Last year Professor Li Sheng, Associate Dean of Faculty of Social Sciences, University of Macau, published a study in which he summarized dozens of publications, namely in Chinese, on thise topic and ranked three types of problems.
“First, we have a lack of land,” he stated. “Gaming concessionaires, public facilities, public services and residents’ housing are tightly concentrated in an area of just over 30 km2. Thus, the reserve of available land is very limited. Economic diversification requires a satisfactory resolution of the land issue.”
Second, continues the Professor, Department of Government and Public Administration, “the lack of human resources.” As he explains, “adequate diversification is very demanding in terms of highly qualified labor; however, the brain drain has been severe.” Edmund Li Sheng understands “the number of staff with higher education qualifications locally trained is not enough to meet the needs arising from the socio-economic development of Macau. In general terms, the supply of human resources in Macau is extremely insufficient, and there are still few staff with higher academic qualifications.”
Finally, Mr Sheng concludes, “the lack of infrastructure. Modern manufacturing industries and smart industries have very different needs from the services and gaming sector, in terms of electricity, water and transport and logistics.” To achieve that, “they need well-organized, fundamental and detailed actions at planning, investment, execution and supervision.”
In addition to these factors, the professor at the University of Macau also adds others he found in his huge research: spatial limits in terms of land and water, weak domestic demand, the recovery of the gambling sector, increased competition from the surrounding regions , as well as the development of tourist activities limited by the supply of hotels (Investigações Relacionadas com a Diversificação Adequada da Economia de Macau — O Status Quo, 2019).
Of the various problems mentioned, there are some that, in theory, are easier to solve than others.
For many landfills that take place, there will always be a shortage of land in Macau. When asked recently about his view of economic diversification, Lei Wai Nong, the Secretary for Economy and Finance, leaves no doubt: “Physical space has been the main challenge. We can’t expect much diversification with such a small area.”
On the other side, if we look at what has been the metro or what is being the Islands District Medical Complex or in the new prison in Coloane, carrying out infrastructure is a headache.
Human resources would therefore be the easiest target, not least because there is a consensus that it will not be possible to carry out economic diversification without more qualified human resources from abroad.
“In view of this situation, it is necessary to introduce qualified staff and intelligence to diversify the economy of Macau. For qualified staff to enter and remain, it is necessary to break the constant limitations of the framework of the regimes and policies in force,” defends Professor Li Sheng, aware of the pressures that exist locally to close this entrance.
A very telling example: even when it is the People’s Republic of China itself that is asking for “more openness” in the context of economic diversification, as did the former Director of the Liaison Group, the appointed deputy and former election official from the previous Chief Executive, Vong Hin Fai, chooses the satisfaction of the population as a strategic target, from an economic point of view, once is “essential for harmony and stability”.
In other words, when it comes to economic diversification, Member Vong Hin Fai is more concerned with “protecting local employment” and does not understand that “more openness” necessarily means opening the doors: “The interests between the import of critical mass are always contradictory and the aspirations of the local population,” he acknowledged in statements to the Portuguese-language newspaper Plataforma.
“Diversification needs to move away from low-value-added industries, like construction, trade and retail, and restaurants. All these rely on low-wage and low-skilled workers, and the persistent availability of low wage work in nearby count ries results in low productivity work and helps firms to extract large rents,” answers to Macau Business José Alves, Dean and Professor of the Faculty of Business, City University of Macau. “My view is that diversification is possible only if the city develops high-quality human capabilities to create new high-value sectors.”
“Given Macau has a land area of just 30.8 km2, with much of the land being occupied by gambling operators, where and how to develop the platform for diversifying its economic structure will be a challenge for the Macau government,” sentences the team of researchers led by Fei Choi, School of Business, Sun Yat-sen University.
“We need to be very clear and precise”
“First of all, we need to be very clear and precise about what ‘diversification of the local economy’ means,” state to Macau Business Leona Li, Assistant Professor in Business Economics, Faculty of Business Administration, University of Macau.
“For different people, it may stand for the balanced development of a large range of industries, it could be the diversification within the board tourism sector between gaming and non-gaming elements, and it could also be a restructuring between giant enterprises and small-and-medium size businesses, etc,” explains Professor Leona Li.
“One may argue that Macau indeed might not have achieved what it should be on all of these dimensions. But the eventual importance and evaluation criteria on these different aspects of diversification are likely to be different – some are more feasible and rewarding and some may not be. It would be helpful for the society to reach a consensus on the core objective and optimal path to diversify our economy,” concludes Ms Li.