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FREDERIK PRETORIUS

The New Macau Concept: From Gaming to Total Economic Development

In late 2004, Macau, a gaming and tourism Mecca in Asia, caught the attention of investors and casino operators around the world. From a wider perspective, the city’s new casinos and resort projects are expected to bring about a significant spillover effect on the entire economy and society. This technical note presents insights into the history and development of this rapidly emerging gaming market, and analyses the economic opportunities arising from such development. Drawing on the experience of Las Vegas, this technical note also examines how Macau could create a new concept of gaming packaged in destination entertainment, and what changes are expected in its gaming industry, economic and real estate development.

Background

History

The fascinating identity of Macau is reflected in its unique historical position in South East Asian economic development over the last five centuries. Macau took its name from A-Ma-Gau (Bay of A-Ma), which in turn was named for A-Ma, the goddess of seafarers. In the 16th century, Portuguese seafarers arrived at Macau, and were attracted by its strategic position midway on the lucrative trading route between India’s west coast, Malacca and Japan. They entered into a lease arrangement with China to settle on the peninsula. Macau then became a Portuguese colony in 1553. It was not only the first European settlement in China, but also one of the first trade centres in the Far East (if not the first).

Macau’s golden age came to an abrupt end in the 1630s when Japan was closed to foreign trade, the Dutch took Malacca by force and the port of Guangzhou was closed to the Portuguese. In 1872, Macau’s economic woes were eased by the introduction of licensed gambling. The arrival of successive waves of Chinese refugees boosted the tiny enclave’s population and economic growth. Silk, opium, dried fish, fireworks, plastic flowers, toys, textiles and gambling had been sources of income for Macau throughout its history.
In 1984, Britain and China signed the Hong Kong Joint Declaration to return the former British colony to Chinese rule. China then negotiated a similar agreement with Portugal. Pursuant to an agreement signed by China and Portugal on April 13th 1987, Macau was reunified with China, and became the Macau Special Administrative Region (SAR) on December 20th 1999. China promised that, under its “one country, two systems” formula, China’s socialist economic system would not be practised in Macau, and that Macau could enjoy a high degree of autonomy in all matters except foreign and defence affairs. It could keep its former laws and economic system for a period of 50 years from the handover.

Geography and Population

Macau was a tiny jurisdiction made up of two islands and a compact peninsula dangling off the Guangdong mainland into the South China Sea. Hong Kong is just 60 km away across the Pearl River Delta, and Guangzhou is 145 km to the north. The Macau peninsula together with its two islands, Taipa and Coloane, added up to a measly 27.3 sq km, which equalled one-fortieth of Hong Kong and one twenty-third of Singapore’s land area. Development had overtaken the peninsula and Taipa, but Coloane remained relatively underdeveloped (see Exhibit 1A and 1B).

In June 2004, Macau had a resident population of about 454,000. The geographical distribution was skewed, as over 90% of the population resided in the peninsula. However, there had been a significant increase in the size of the population in Taipa from the 1990s to 2004. Population density in Macau was around 16,428 per sq. km in 2003, and the northern part of the peninsula of Macau was regarded as one of the most densely populated areas in the world. Macau’s population had undergone rapid demographic growth since the 1990s, and increased at an annual rate of around 4%. According to the 2001 census, 95% of Macau residents were of Chinese nationality, 2% were Portuguese and Filipinos accounted for 1%. Due to immigration and a decline in the household size, the total number of households had increased by 38% over the preceding decade to more than 134,000 in 2004. The average household size was 3.18 according to the household budget survey of 2002-03. Exhibit2A and 2B present the employment statistics and average household income data.

Most of Macau’s urban development was clustered around the peninsula’s centre, which was quite hilly. All land in Macau belongs to the Government and land tenure, barring a few exceptions, is on a leasehold basis and is classified into six categories by usage: agriculture, warehouse, commercial (office and retail), residential, industrial and others. Land reclamation at the foot of the peninsula had increased Macau’s acreage by about 20%. Two bridges, Nobre de Carvalho Bridge and Friendship Bridge (Ponte da Amizade), linked the peninsula to Taipa, while the Taipa-Coloane Causeway linked Taipa with Coloane. The Lotus Flower Bridge connected Taipa to the Chinese Mainland and met the Guangzhou-Zhuhai highway. Major hotels were located on Taipa and the peninsula.

Significant physical infrastructure developments had occurred in the last decade, from 1995 to 2005. The newest road bridge between Taipa and the peninsula, the Sai Van Bridge, was about to commence full operation, and was expected to improve traffic flows greatly. The Macau international airport was opened on Taipa Island in December 1995 amidst high hopes of a tourism-led boom. However, the airport remained under-utilised as of 2004, despite continued rumours of budget airline start-ups negotiating rights to operate to important Asian centres from Macau. There were few direct flights from Europe, but because of the weak manufacturing and commercial base in Macau, they mostly brought in transit traffic. The airport had limited flights to several Asian cities including Bangkok, Singapore, Seoul, Taipei and Manila as well as Chinese destinations such as Beijing, Shanghai, Fuzhou and more. Macau was connected to Hong Kong by more than 150 sea crossings every day. There were various ferry crossings or buses from Macau to Shenzhen Special Economic Zone, Zhuhai Special Economic Zone and Guangzhou.
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