Developing the basics
Issue 37 - Dec/Jan 08

Mega projects and megabucks are peals you hear from the PR loudspeakers coming out of Macau, but some people are questioning the whether physical, human and even financial infrastructure can support the claims. With the former secretary for public works currently on trial for corruption, even more questions are being raised.

Cocktail party gossip about both public and corporate projects in the former Portuguese colonial backwater turned global gaming hotspot abound, and will be discussed to the extent to which we are legally and safely able to do in a few paragraphs time. But leaving the eyebrow raising theories aside for a minute, let’s step back and look at the economic fundamentals of modern
day Macau as objectively as possible.

Ever since The Government of the People’s Republic of China resumed sovereignty over Macau on 20 December 1999, similar to Hong Kong the successful implementation of “One Country, Two Systems” safeguards the
stable development of the Macau Special Administrative Region, maintaining its open economic system, rule of law and free port status.

Since the liberalisation of the gaming industry in 2002, Macau’s economy, not to mention its fame and land mass, have been experiencing robust growth. The fluttering gaming and tourism sector have attracted large inflows of foreign direct investment (FDI) and large infrastructure investment projects. The annual average
GDP growth rose to the double digits (16.6 percent) in 2006 with GDP per capita income rising to US$28,436.

According to government figures in-fact, the real GDP growth for Q2 of 2007 reached 31.9 percent, which is the fastest pace since the second half of 2004.
According to the MSAR Government Annual yearbook for 2006, to satisfy the needs created by Macau’s rapid urban development, the SAR Government has drawn up a long-term plan for major infrastructure, traffic and transportation and other urban development projects. The Lands, Public Works and Transport Bureau (DSSOPT) is a technical body that advises the Government on ways to enhance the use and management of land, urban planning, traffic, infrastructure construction, basic services and ground transportation. It is supervised by the Secretary for Transport and Public Works.

In 2005, the bureau’s Urban Planning Department followed up and implemented
the following urban development and planning works that included numerous
small scale projects such as footpath redevelopment and greening projects as
well as large scale planning such as the sewage network on Taipa, home to the
Cotai strip where many of the new casino resorts are located.

The Office for Infrastructure Development was established in 2000, with the
aims of promoting and coordinating the modernisation and development of
major infrastructure construction projects. This work includes giving support to
construction projects in progress, as well as large-scale public or private development projects that are already parts of the cotaiProgramme.

The government believe their array of large-scale infrastructure and other projects
will help Macau to develop as an integrated tourism centre with gaming,
culture, leisure, entertainment, convention and exhibition all under one roof.

investment opportunities
So far so good. The recent efforts to improve the investment environment is clearly appreciated by both local and international companies looking to take advantage
of the open market with advantages of “low operational costs, low taxation, improved infrastructure, extensive international links, a stable banking system and high mobility.” However the government claim that: “Goods, capital, foreign exchange and people flow freely in and out of Macau” could be interpreted in a couple of ways. Especially for one developer who reportedly imported the large numbers of staff to satisfy their needs after opening, completely ignoring any visa requirements and the time it would take to get them.

The annual average GDP growth rose to the double digits (16.6 percent) in 2006

This is not the only area in which the public infrastructure seems to be lagging behind the needs of the booming convention and exhibition, retail, and gaming
sectors. According to a source responsible for tendering for one of the new developments, scores of development planning approvals are currently being handled by an office staffed by a total of three people.

Dan Tagliere, CEO, MacauLand Holdings says that his successful residential project, the Manhattan, did not face these difficulties. When developing his project,
the first foreign group to get licensed and do so wholly by themselves, he found the “whole process extremely easy and straight forward”, though having freehold
rights to the land was an important asset. Keen to get started on a second project he imagines that with the greater number of developments and building activity
the offices required to give approvals may be overwhelmed.

Lately in fact the office of three has probably been busier than usual, since many believe the current hold ups in planning approvals is not just caused by the pace of new investments. People in the know assume the hold ups are being caused by the officials requiring that permissions and tenders granted under former Secretary for Land Transport and Works Ao Man Long be revisited. Ao Man Long was arrested last year and at time of going to print his trial for 76 offences including money laundering, corruption and abuse of office was ongoing.The offices of the DSSOPT and the GRI declined to comment on anything relating to
public works and infrastructure, disturbingly the reason given was that this was outside their area of responsibility.

For some developers government uncertainty is the least of their problems, with staffing and funding being greater concerns. Financial institutions that made home loans at sub-prime rates in the USA have caused ripples to be felt as far away as the Cotai strip. At least three high-profile projects have reportedly have had their funding affected through direct and indirect backing from these groups.
In recent years, the Macau SAR Government has made a great deal of efforts to
improve the investment environment. In his 2008 policy address, Chief Executive of Macau SAR Edmund Ho Hau Wah reiterated the government’s plan to pursue its policy of economic diversity.

Governments and businesses are aware of a number of shortcomings within the existing physical infrastructure in particular. Transport infrastructure is one of the biggest impediments to growth. While arrivals are growing at a rate of around 20 percent per year and this growth is expected to continue with the number of special events planned well into 2008, getting people in and out of the SAR is providing some challenges. For the recent exhibition tennis match between Pete Sampras and Roger Federer there were reports in the South China Morning Post that ferries were fully booked up to 24 hours either side of the event.

This problem has been noted by the SAR Government new Secretary for Transport and Public Works Lau Si Io who, on behalf of the Macau SAR Government, signed the new concession contract for operating maritime passenger services between Taipa Ferry Terminal, Macau and Hong Kong with COTAI Waterjets(Macau)
limited on 29 October. According to the contract, COTAI Waterjets (Macau) Limited is obligated to provide at least 30 sailings every day between Hong Kong and
Macau before the end of 2007, and at least 80 sailings every day before the end of September 2008. While the new terminal has capacity to take boats of up to 1200
passengers, the existing terminal is only equipped for 400-seater boats, and it still won’t be fully operational until 2009. The SAR Government may conduct an interim
review of the concession contract in 2012, to cope with the needs of maritime passenger services at that time. In the meantime online sources say that Stanley
Ho’s SJM have, through his fourth wife Legislator Leong On Kei, asked why the contract was granted to this new “inexperienced” operator.

Stanley Ho’s Shun Tak Holdings has the largest fleet of high speed passenger ferries in Asia operating in a transportation network within the Pearl River Delta
around Macau and has dominated the market for some time. Whereas Cotai Waterjets is partly owned by rival Las Vegas Sands.

Taxis are another area that could do with some improvement. According to the Macau Daily news one hundred and fifty taxi licences are set to be issued
before the end of 2007, after the additional 50 granted at the beginning of 2007 were deemed insufficient to meet public needs. Anyone who has been to Macau and experienced the taxi situation first hand might wonder why the Civic and Municipal Affairs Bureau (IACM) didn’t just double the 850 strong fleet. Fortunately the MSAR Government continues to study the feasibility of introducing a light rapid transit system.

Despite being a relatively small economy, Macau sees a role for itself as a regional business service platform for business communities in Europe, Portuguese-speaking countries and Mainland China to initiate economic and business negotiations. The emergence of the exhibition and conference market is positive and if the supporting infrastructure including transportation, services and mobility can keep up then the event booked for this year are going to come back. The number of venues, for example, has doubled over the last year, with convention and exhibition space tripled to 140,000 sqm after the opening of The Venetian Convention and Exhibitions Centre.

The Macau SAR Government’s support to the convention and exhibition industry not only upholds its affirmation to pursue economic diversification, the burgeoning of Macau’s C&E sector will allow participants and buyers to gather and see for themselves the opportunities that abound in this vibrant city, and establish Macau’s role as a meeting point of entrepreneurs from across the world.

The stated strategic goal of the current administrative policies was to comprehensively improve the overall quality of life of Macau’s citizens. According to the Yearbook this objective guided all its efforts in the areas of urban development, urban renewal, public construction works, transport planning and education about environmental protection. However they acknowledge that this rapid economic development has also heightened other shortcomings such as its shortage of land. Teething problems are to be expected. And for a city that’s been built on changing fortunes, questionable deals and yet preservation of cultural identity who’s to say that the dice wont keep rolling in its favour. RFP

NOMINATE NOW

Subscribe Now

Sign Up for Ezine

Past Issues