Beijing’s main representative in Macau said the benefits to the local economy created by the city’s gaming industry must not be surrendered in pursuit of economic diversification.
Macau should pursue an “adequate” economic diversification, said Li Gang (pictured), director of the Central People’s Government Liaison Office in Macau. His comments came during a group meeting with Macau deputies to the National People’s Congress in Beijing on Thursday, reported the Macao Post Daily.
According to the newspaper, Li Gang described the gaming sector as Macau’s leading industry. As such, he added, it should not be “sacrificed” in the drive for economic diversification.
Macau’s casino gross gaming revenue in February fell by 48.6 percent year-on-year to MOP19.5 billion (US$2.4 billion). It was the first time in four years Macau’s monthly gaming revenue tally stood below MOP20 billion, according to official data. It also extended to nine months the period of consecutive monthly year-on-year decline in Macau gaming revenue.
In early February, Li Gang said the city’s casino industry had entered “an interim development period”, and that there were various reasons for the casino revenue fall, not only the anti-graft campaign in mainland China.
However, on Thursday the official admitted that the central government’s anti-corruption drive had deterred some government officials from visiting Macau.
Li Gang also said he expected Macau’s economic diversification to take between 20 and 30 years to achieve, according to the newspaper.
No let up
China’s Premier Li Keqiang said on Thursday – in his annual work report to the National People’s Congress in Beijing – that there would be no let up in the anti-graft drive by the central authorities. The campaign has been linked by some analysts with the reduction in conspicuous spending at Macau’s VIP baccarat tables.
“Our tough stance on corruption is here to stay; our tolerance for corruption is zero, and anyone guilty of corruption will be dealt with seriously. We will see to it that every instance of corruption, should it be committed higher up or lower down, is severely punished,” Li Keqiang said.
Cameron McKnight, Rich Cummings and Tiffany Lee of Wells Fargo Securities LLC said in a note on the Macau casino industry carrying a Friday dateline: “We believe the anti-corruption campaign will remain a headwind, and that it is part of a longer term process to strengthen the Chinese economy, rather than a short-term mechanism.”
The Wells Fargo analysts added that the anti-corruption drive “will continue to affect high-end player sentiment and spending habits” in 2015.
On Thursday, Japanese brokerage Nomura said it was not expecting a policy shift in Beijing. “In our view, the decline in premium gaming revenues is exactly the ‘clean up illicit gaming’ goal of the Beijing government, so we see little reason to expect them to alter their policies,” said analysts Harry Curtis, Kelvin Wong and Brian Dobson.
The Nomura team stated that Beijing’s stance means that Macau casino operators would have to invest more in entertainment options “in order to be considered for extensions in their concessions”. The six current operators will see their permissions expire between 2020 and 2022.
“This focus could be problematic for companies that have little unutilised land. Also, other than convention, arenas, and theme park amenities, operators have yet to develop interesting new non-casino amenities that Beijing and Macau are looking for,” added the Nomura analysts.
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