Macau's casino slump is an opportunity to retool the economy

Sonny Lo calls on the government to improve transport services, resurrect municipal councils, and work with business to seek out new avenues of growth, supported by proper skills training

PUBLISHED : Friday, 04 September, 2015, 11:10am
UPDATED : Friday, 04 September, 2015, 11:14am

The ongoing decline in casino revenues in Macau points not only to the need for the special administrative region's recently announced austerity measures in all government departments, but also the imperative of diversifying its economy.

By the end of this year, the government will have to handle the review of the casino industry with great care and sensitivity by instilling a sense of confidence among operators, and pre-empting any political protests that may erupt in the midst of a regional economic downturn.

The government has already mentioned the need for consolidation in the casino industry, which could be seen as a signal to operators to slow expansion. Indeed, the recent closure of some VIP rooms means local and overseas operators will have to be realistic. An overly optimistic outlook will likely spell disaster in a small economy that has been heavily dependent on the casino sector to drive the development of other sectors such as retail, catering and hotels.

If government austerity measures prove insufficient, we could expect cuts in subsidies dished out to ordinary citizens, which would demoralise society.

There is no sign of a let-up in the mainland's anti-corruption campaign, nor are mainland high-rollers returning in numbers comparable to a few years ago. The nadir for casinos may not have been reached yet.

The lack of unique industries, other than casinos, means the elite must think hard about what sort of Macau they would like to see in the midst of China's 'One Belt, One Road' policy

It is imperative, therefore, for the government to deal with some issues. First, the bureaucracy is small and has limited capacity. It must enhance transport services by reorganising tour bus routes and services, to link all heritage sites with casinos.

Second, the government must realise that stronger accountability to the public will lead to much better services. Municipal councils, abolished shortly after the handover, should be resurrected so elected members can hold the government accountable on a range of issues, particularly transport, infrastructure projects and the environment.

The light rail system has been hotly debated but the controversial route plan illustrates a gap between the government and its citizens. If this communication gap is not closed, an economic crisis would probably spark political protests, as shown by the sudden demonstrations last year by 20,000 citizens against the proposal for lavish retirement packages for top officials.

Third, the government must work with the business sector and universities to map out a long-term strategy to diversify Macau's economic sectors. The training of people must dovetail with the needs of economic diversification, especially in new sectors associated with the ecological park and the Chinese medicine hub in Hengqin .

The lack of unique industries, other than casinos, means the elite must think hard about what sort of Macau they would like to see in the midst of China's "One Belt, One Road" policy. Can Macau become an export hub for China's rapidly developing automobile industry, for instance?

Fourth, Macau people will need to be trained in a variety of skills to reduce government reliance on foreign workers. The Talents Development Committee must ensure tertiary institutions cater to strategic requirements. In the past, some of Macau's young people have complained about how difficult it is to find jobs that match their skills after university.

The crisis in Macau's casino economy is an opportunity for the government, business and tertiary institutions to map out a strategy for genuine economic diversification. If they don't, the unrelenting dependency on casinos will plunge Macau into a crisis of governance.

Professor Sonny Lo is head of the department of social sciences at the Hong Kong Institute of Education