A wake-up call for Macau to diversify

PUBLISHED : Sunday, 29 July, 2012, 12:00am
UPDATED : Sunday, 29 July, 2012, 12:00am


Macau needs law and order in its gaming industry, and not just because a recent outbreak of murderous violence has made it jittery, as we report today. The city's people depend on government cash handouts for all, and extra subsidies for the needy - financed by gaming taxes - for a share in the casino-led economic boom, and to combat its side effects: a wealth gap, inflation and high housing prices. Ultimately people would be better off if they were not dependent for a measure of social equity on redistribution of wealth at the pleasure of the state. This would require the government to use its gaming windfall to develop a broader strategy that created more economic activity, skills and jobs. Casino-tax revenue is thus both today's lifeline and tomorrow's security.

So the authorities should be concerned about an outbreak of violence evoking memories of the assassinations, car bombings and knifings of the late 1990s as gangs battled for control of the highly lucrative VIP gambling rooms. In just two weeks, one of the city's most colourful gaming bosses was maimed in a brazen gang attack inside his own property and three casino patrons were murdered. That does nothing to inspire long-term confidence in the industry.

The outbreak of violence coincides with a significant slowing of growth in the casino business, linked to an economic slowdown and tightened liquidity on the mainland. This has put pressure on VIP junket operators, who bring rich mainlanders to the casino tables, and forced some to be more aggressive about collecting gambling debts that are normally pursued discreetly in the mainland.

Their actions have understandably given rise to fears of another round of violence. It is in everyone's interests for Macau to put its house in order. Mainland authorities, for example, would not welcome a gambling-related scandal involving prominent people in the sensitive period leading up to a once-in-a-decade leadership change.

The current slowdown, like the one during the global financial crisis, is a reminder that Macau must redouble its efforts to diversify its economic base. The violence underscores the need for this. It is not as if it lacks the cash to invest, on top of handouts. As we also report today, the government was running a budget surplus at the end of May of 35.2 billion patacas, just shy of the 36 billion it anticipated for the entire year. Its coffers were further swollen by 18.4 billion patacas still unspent of the 19.8 billion patacas earmarked for public investment this year.

Focusing on education and tourism infrastructure would improve skills and create jobs. Education has more to offer young people in the longer term than low-skilled casino jobs and handouts. Tourism and education could form the basis of a fairer and more stable economy.