Inside Asian Gaming

inside asian gaming August 2014 8 “Each [Cotai] Phase 2 project could start with only 100-150 tables in both the first and the second year versus our base [estimate] of 300 tables, implying a 10% to 16% reduction in Phase 2 valuation.” Even that base estimate of 300 tables is far short of the 500- 700 tables requested at each project by the operators, though the government’s 3% cap on the annual growth of tables through 2022 precludes the granting of those requests in full. Morgan Stanley’s view is echoed by David Bain of brokerage Sterne Agee, who in a note in late June highlighted the tight labor market as a continual concern for the sector. The government has so far insisted that natural growth of the labor force amounting to 20,000 new local and non-local employees a year will meet the needs of the new Cotai developments. The government’s Policy Research Office estimates the city will require 40,000-45,000 new workers across all sectors by 2016. Through the first quarter of this year, Macau’s total labor force has increased 16.8% in the past three years to 384,200. Of the new workers, 17,100 were locals, a number just shy of the Morgan Stanley estimate of 18,516 new local employees required to staff the second wave of Cotai over the next three years. Davis Fong Ka Chio, director of the Institute for the Study of Commercial Gaming at the University of Macau, agrees with the government view that the labor issue is “not as serious as one imagines”. A member of a government-led committee advising on the city’s economic and human resources policies, he says, “My estimate is that the new resorts opening in Cotai will need 60,000 workers in total in the next few years, an amount that the natural growth of our labor force can supply including immigrants and thousands of new graduates from the universities each year.” The Morgan Stanley forecast does not account for thousands of foreigners who become Macau “locals” each year by obtaining residency. According to the Macau Identification Services Bureau, 21,316 people became non-permanent residents over the past three years, most of them from mainland China. Among the 13,620 mainland immigrants in the 2011-2013 period, more than two-thirds were between 21 and 50 years old. Labor leaders such as Ieong Man Teng, president of a group called Forefront of Macau Gaming, acknowledge the supply of local workers “may not be enough” if the new projects get all the tables they have applied for. But their response has been to pressure the government by mobilizing street protests—two in the last year involving thousands of participants—against the “relentless expansion” of gaming and the possibility of dealer positions being opened to non-residents. Says Mr Ieong, “The only solution to this problem is for the government to strictly fulfill its pledge of capping the growth of the number of tables.” It’s a position that counts heavily with a political leadership that desires above all to avoid any overt displays of popular discontent. As Mr Bain has noted, “While certain options have been presented internally within the Macau Government to relax certain labor restrictions—namely to allow for non-Macau residents to hold certain positions that can only currently be assumed by Macau residents, such as dealers—pushback from locals has prevented any true political progress to date.” SCREWING DOWN THE CAP In the wake of last year’s protests, Macau Chief Executive Fernando Chui Sai On pledged dealer positions would remain off-limit to non- residents “as long as I am still in office”. Mr Chui’s first five-year term will end in December, but he is almost certain to be handed a second term by a pro-Beijing electoral committee that is controlled by the city’s leading business and commercial interests. “[The ban on non-resident dealers] is not about protecting certain “[The ban on non-resident dealers] is not about protecting certain types of people but rather about safeguarding social stability. It is about providing opportunities to Macau residents— particularly the middle- aged and the low-skilled— to obtain a more stable and higher-paying job.” Kwan Tsui Hang vice president, Macau Federation of Trade Unions Feature