Inside Asian Gaming

INSIDE ASIAN GAMING | January 2010 36 Feature W hen China’s President Hu Jintao visited Macau in December to mark the 10th anniversary of the Macau Special Administrative Region, he had a warning as well as the now familiar praise for the territory. President Hu said Macau needed to diversify its economy, not just provide more of the same. ButwithMacau’s casino industrymarking yet another record year with gross gaming receipts of MOP119 billion (US$14.9 billion) in 2009, according to preliminary reports, does economic diversification really matter? No one expects a Ferrari to double as an off-road vehicle, so why would anyone realistically expect the world’s largest grossing gaming jurisdiction to be good at exporting, say, high tech components? Actually, there may be economic as well as political benefits from diversification. One of the current difficulties is that gaming revenue in Macau keeps roaring ahead of China’s underlying GDP growth. That may be why China’s leaders have been regularly applying the brakes to Macau’s gaming sector by restricting Macau travel permits issued to its citizens under the Individual Visit Scheme. Macau casino revenue in December, for example, grew 48% year on year, and that was a quiet month compared to November’s 59% increase. In the end, because of a combination of the lingering effects of global recession and China’s visa restrictions in the first half of the year, the annual growth for Macau gaming gross in 2009 averaged out at a 9.4% increase year on year. That compares favourably with the 8.4% GDP growth in 2009 for China as a whole, forecast by the World Bank. But if the world economy continues to recover, further feeding China’s export markets, and the credit lines extended to VIP gamblers from the Mainland stay open, then Beijing will certainly have to once again apply the brakes to Macau’s gaming industry during 2010. Gross gaming revenue is not, of course, the same as Gross Domestic Product, which is calculated net of imports. Macau consistently runs a big balance of payments deficit on its import/export book. Consequently, in 2008, the last year for which a breakdown of GDP by industrial activity is available, the gaming sector accounted for only 37% of Macau’s GDP, according to the city’s Statistics and Census Service (DSEC). Most of the city’s other industries, however, rely heavily on gaming, including the banking, insurance and real estate industries (which account Cultural Revolution President Hu’s call for Macau to broaden its economy has some logic, but is easier said than done