(Photo by Tim Ireland/Xinhua)

Opinion – Diversification redux

The theme of diversification has a long tradition in economics or, more particularly, economic policy debates. It was concerned mainly with the development of the newly independent countries that came to be in the second half of the last century. 

Many of those economies were reliant on the extensive production of just a few goods, most often in the primary sector. Such dependence was an obstacle to their development and modernization. They were too sensitive to price oscillations in the world markets and not resilient enough in the case of external crisis.  

The topic, adapted to the local circumstances, gained prominence in the city political debate in the nineties. By then, gambling was already – as it had been for a long time – the driving sector of the territory. The industrial activities were losing relevance as the involvement of China in the world economy grew. 

Further, the leading industrial activities, textiles, and clothing, had their death announced with the prospect of China joining the WTO and the expiring of the Multifiber international agreement. What would then happen if the leading sector, soon to become the lone sector, would fail?

Cotai development is born from those concerns. The objective twofold. First, it was to create a logistics center on this side of the delta. It would integrate the airport, the Ka Ho port, and (never built) railway connections to the mainland. Second, to develop new residential areas.

Economic growth and diversification could not be achieved without significant population inflows. The possibility of extending the territory under local administration to Hengqin Island (Ilha da Montanha, in Portuguese) was also the object of speculation at the time.

In hindsight, how convenient, yet somehow ironic, that the unfinished and mostly empty Cotai was there for grabbing when the issue was, as you guessed right, the expansion of the casino sector!

For its long pedigree in the public agenda, however, few things can be more vexing than the issue of diversification. In the case of Macau, that issue means essentially to diversify away from gambling.

For the last three decades, at least, we never really stopped talking about it. Over the years, many alternatives came forward, sometimes based on more wishful thinking than substance.

Meanwhile, gambling kept strengthening its position at the heart of the economy. Why that has always been the case would be a good starting point to frame the issue anew.