Inside Asian Gaming

inside asian gaming November 2014 24 are very low and registering a company is easy. That, together with its high rankings in quality-of-life surveys, has attracted companies from neighboring nations to come set up shop in this tiny German- speaking country sandwiched between Switzerland and Austria. Liechtenstein is Europe’s fourth-smallest state. Its population is tiny—37,132 as of last year—but they’ve got 160 square kilometers of Alpine beauty to stretch their legs on. And the companies drawn to its favorable business environment have helped develop a prosperous, highly industrialized free-enterprise economy and robust financial- services sector. Macau’s already got the low taxes, but it’ll need more to convince successful companies to relocate. The government will have to get its hands on more land for a start, either via reclamation or negotiating with Zhuhai authorities on leasing more land on neighboring Hengqin island. It also bears mentioning that the bar should be set high when letting companies in, preferably stipulating they hire and train locals to perform skilled work. It won’t be an easy process, but if Liechtenstein’s example is any guide, it could prove worth it. Before the casino boom of the last decade, Macau had actively invited foreign companies to set up branches in the city in an effort to create jobs and fill vacant office space at a time of significant overcapacity. The Macau branches of the foreign companies, which largely hailed from Hong Kong, functioned as little more than shell offices—a few desks manned by low-level administrative staff without much work to do—essentially tax dodges for their parent companies back home. But when Macau’s office rents, and wages, took off with the massive expansion of gaming, in conjunction with complaints from Hong Kong’s tax authorities, these shell companies were driven to find cheaper havens elsewhere. LUXEMBOURG: THE VENEER of RESPECTABILITY Luxembourg’s population of 549,680 is similar to that of Macau, and they both handle huge sums of money, but Luxembourg does it with the gravitas expected of the world’s second-largest investment fund center (after the US). Luxembourg is also the most important private banking center in the Eurozone and Europe’s leading center for reinsurance companies. Until the 1960s, Luxembourg had actually focused on producing steel, then diversified into chemicals, rubber and other products. But it was financial services that really rocketed it onto the rich list. Now, the government has widened its focus to attract Internet companies, with Skype and Amazon among several tech giants that have shifted their regional headquarters there. Macau does have a small and vibrant financial-services sector, but it’s always been overshadowed by Hong Kong. Macau opened up its banking sector to international competition in 1992, and now there are 29 banks operating in the city, 10 locally incorporated and 19 branches of overseas banks. There is potential for the sector to grow as the economy develops, infrastructure improves and Macau becomes better integrated into the larger Pearl River Delta region. Macau’s financial sector suffered its highest-profile scandal in 2005 when US authorities froze the accounts of former North Korean leader Kim Jong-il at Banco Delta Asia, accusing the bank of engaging in money laundering and distribution of “superdollars” [very high- quality counterfeits] for the government of the reclusive Communist country. EVOLVING MACAU Luxembourg is the most important private banking center in the Eurozone and Europe’s leading center for reinsurance companies. The government has since widened its focus to attract Internet companies, with Skype and Amazon among several tech giants that have shifted their regional headquarters there. An audit by Ernst & Young commissioned by the Macau government found no evidence that the bank had facilitated money laundering, but the US Treasury Department still ordered all US banks and companies to sever ties with Banco Delta Asia. North Korea, in the meantime, simply dispersed its funds under aliases into several overseas accounts at different banks in Asia, Europe and Central America. And, lo and behold, in March 2010, Britain’s The Sunday Telegraph reported that Kim Jong-Il had moved $4 billion into secret accounts at banks in Luxembourg. The venerable Banque et Caisse d’Epargne de l’Etat , founded in 1856, is rated one of the safest banks in the world.