With casino revenues falling, it's time for Macau to diversify its economy

Gaming industry analysts bet heavily against the house last month and got it right, with gross revenue at Macau's casinos plunging 23.2 per cent year-on-year, the fifth straight monthly decline and the largest since the city began collecting data in 2005. But it was not unexpected. The downturn in mainland tourism to Hong Kong and Macau attributed to pro-democracy street protests in Hong Kong was a twist of the knife for an industry already reeling from other disincentives to gambling - President Xi Jinping's crackdown on corruption and over-the-top official lifestyles, and a smoking ban on gaming floors. Administrative measures to strengthen the mainland's campaign to root out and deter graft also do nothing to raise spirits in Macau.

The share prices of casino operators fell on the latest revenue figures, but not as much as the double-digit percentage falls on January 12, 2009, during the global financial crisis. Ironically, Xi had a hand in that, too. During a visit to Macau as vice-president, he dashed hopes that he would announce a relaxation of curbs on travel there, imposed to stop civil servants gambling. Instead he called for diversification of the gambling-led economy and pledged support for sectors including finance, infrastructure, economic integration with Guangdong and small and medium-size businesses.

That call remains valid today, despite a rise in gross domestic product from 170 billion patacas a year to 413 billion, a rise in the monthly median wage from 8,500 patacas to 13,000 patacas, and generous annual government cash handouts to eligible residents. Such windfalls only put off a day of reckoning for Macau, beset as it is by unaffordable housing and an overdependence on casinos. Thanks to gambling revenues, however, the government has ample resources for public investment in infrastructure, housing and transport, and development of higher education as a magnet for regional scholarship and research. The casino downturn is a reminder that it needs to be invested wisely.