Brendan McGetrick
Recent works and current obsessions

Money Macau: The upside of the downturn

One of the most dispiriting aspects of the International Financial Crisis is the insufficiency of its depiction in the news. Perhaps because no one knows its full scope or duration, a global calamity is portrayed as a bunch of disconnected panics spread across various trades and territories. As fretful observers, we get neither a sense of why these things happen or what might happen next. Those who feel direct effects become illustrations, evidence for a prosecution that will never take place. In recent months Macau has taken a position of prominence within the lengthening list of negative case studies. A spate of stories describe a city that had it all and went too far, a powerhouse now having trouble keeping the lights on. They appear in the news and just as quickly disappear – “Macau Mothballed” (Financial Times, 11.11.08), “From Boom to Gloom” (Washington Post, 16.12.08) – a city’s traumas reduced to few downward projections and bad betting metaphors quickly absorbed into the toxic sludge that seeps from the business section onto the front page each day.

At the center of the story are a pair of larger than life tycoons – Stanley Ho, described by the New York Times as “a swashbuckling entrepreneur and state-sponsored gambling impresario” and Sheldon Adelson, the chief executive of Las Vegas Sands Corp. (LVS) and self-described “richest Jew in the world”. Both men have left indelible marks on Macau, and their current predicaments reveal the dangers inherent in unleashing the force of free market irrationality on an unprepared public.

In 2002, Adelson became one of the first foreign operators to gain a casino license in Macau, ending a gaming monopoly that Ho had held for forty years. In Macau Stanley Ho is a legend — the man whose wealth helped build the city’s roads, bridges and a 338-meter-tall landmark tower, as well as the city’s ferry terminal and its international airport. Prior to the introduction of outside operators, Ho’s entertainment and tourism empire was responsible for about one-third of Macau’s gross domestic product and half of the government’s annual budget.

In May, 2004, the first gamblers entered Adelson’s inaugural development, the Sands Macau. Drawn partly by false newspaper reports of free $25 chips for the first bettors, a mob estimated at 20,000 trampled barriers and ripped doors off their hinges in a rush to get inside. The Sands construction costs were two hundred and sixty-five million dollars, and Adelson made back his initial investment in a year.

Connie Bruck of the New Yorker sums up what happened next:

In December, 2004, he took Las Vegas Sands public and became a multibillionaire, overnight. The following year, Macau drew 10.5 million mainland Chinese visitors, a hundred and forty-seven per cent more than three years earlier—reflecting an easing of travel restrictions and an increase in the number of newly wealthy Chinese. By the end of 2006, Macau had become the top gambling center in the world, with gaming revenues exceeding $6.9 billion, a quarter of a billion dollars more than those on the Las Vegas Strip… According to the Times, in the two years after Adelson’s company went public he earned roughly a million dollars an hour.

In 2007, Macau’s gambling revenues climbed to $10.3 billion. That year Adelson opened the $2.4-billion Venetian Macau, a replica of his Venice-inspired Vegas casino, but triple the size. In an act of imperial overreach that would eventually trigger a lawsuit from Sands Corp. shareholders, Adelson added to an expansion program that already included projects in Singapore, Pennsylvania and Las Vegas, a plan for a $12-billion development on a parcel of reclaimed land he dubbed “The Cotai Strip”. LVS purchased several lots near the Venetian at cut rates, struck an agreement with the local government to bypass its foreign labor import restrictions, and began releasing PR visions of “the Las Vegas Strip of Asia”.

Meanwhile, Stanley Ho’s business began to contract. Having established an empire in isolation based on no frills gambling, Ho was unable to match the Vegas casinos’ emphasis on entertainment and leisure. In 2004 Ho’s company Sociedade de Jogos de Macau (SJM) had revenues of $4.4 billion, 85% of the total for Macau’s gambling industry. By 2007 Macau’s gambling revenues had doubled, but SJM’s declined. He was dismissed by outside observers, but even as his competitors advanced, Ho expressed no concerns. “Let me put it this way,” he told Macau Closer magazine in 2007, “We are the only gaming concessionaire which is rooted in Macau. Being a local enterprise, all the money I made I put it back and invest it in Macau. But the Americans, they make a lot of money, and it all goes back to Las Vegas.”

In August of 2008 LVS overtook SJM in market share, but this momentary victory marks the end of Adelson’s triumphant run. Sands, like many gaming developers, is funded by debt and by August its credit lines were already shut down. Macau was also experiencing a rapid decline in visitors due a policy shift in Beijing that made it more difficult for mainland Chinese residents to visit Macau. In September, LVS announced it was suspending its Cotai Strip projects and laying off as many as 11,000 employees. The majority of the dismissed workers were foreign, but around 2,000 were from Macau, and the announcement triggered a passionate response from locals, many of whom feel their city is being irrevocably altered by forces that owe it no allegiance. Larry So, a professor at Macau Polytechnic Institute, expressed the zeitgeist in a local magazine, saying that Macau’s foreign operators “are keeping the goose that lays the golden egg, but they are not feeding it.”

A cadre of local politicans – led in part by Angela Leong, Stanley Ho’s fourth wife – seized the populist mood and began calling for the government to force all gaming concessionaries to reduce the number of foreign workers. In October the Department of Labor Affairs announced a new package of restrictions stipulating that applications for non-local construction workers would no longer be accepted. Quotas were cut in half for non-local workers in cleaning, security and building administration sectors. In December, the government began withdrawing work permits and issuing 10 day exit orders to foreign workers. Starting in January, new applications to hire non-local workers for supervisory positions with gaming operators will no longer be accepted. The goal is to have all such positions filled by locals by the end of the year.

All of the above can be gleaned from news accounts in the Macanese and international media. It amounts to a familiar picture of expansionism, panic, and protectionism: Macau’s skyward trajectory violently blocked by forces originating in far-away places, its people left to fend for themselves. But what it omits is the less dramatic possibility that Macau the boomtown may have to suffer in order for Macau the city to survive. In half a decade, a sleepy seaside town has been transformed into the world’s gambling capital. Its syncretic local culture, a Canto-Portugese stew quietly simmering for over 400 years, is very poorly integrated into the city’s new image. For many locals, the boom released levels of competition and materialism that are unfamiliar and unattractive. A stop in progress offers a chance to reconnect with the past and reflect on what sort of place their home is becoming.

“As for the local residents,” I was told when I visited just before Christmas, “most of us were not ready for such a big change. We prefer to live at a very slow pace, enjoying our lives. Somehow we do not like to be living in a commercial world.” This sense of ambivalence pervades the city and, for the moment at least, softens the impact of its economic turmoil. When I mentioned recent reports of a crash in real estate prices, I was told by a hotel administrator named Mrs. Kong that this was necessary, because the cost of houses had risen beyond the grasp of most local people. The expulsion of expats, she added, was “good news… because the price of everyday supermarket goods has started to return to the levels of about two years ago.” When I mentioned the disappearance of jobs in the gaming industry, I was told by a professor at Macau University that this too was a positive sign. “In Macau, all development has been focused on gaming,” he said. “The other industries are repressed.” This sentiment was echoed by Dan Cheong, an architect originally from Macau now living in Beijing. “The gambling jobs pay too well and no other jobs can compete. No one wants to a teacher anymore. No one wants to sell things anymore. No one wants to be an intellectual or a politician.” When I mentioned the dramatic drop in tourists, I was told by Erik Kuong, a program manager at the Macao Cultural Center, that most of his friends felt relieved “because they can take a rest. We can go slower. There are less Chinese tourists, so we have more room.” It is not the tail of woe I’d come to expect, but I heard it consistently: in the midst of a downturn, things are looking up.

Originally published in Domus 922 (February 2009)