Commentary: Macau's casino revenues should be wisely spent

By Chang Chuan-fong
Column: China Crosswinds

Published: May 23, 2007

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Macau, China — The inflow of foreign capital to Macau -- notably investments in casinos -- has greatly aided the growth of its gambling industry and provided a strong boost to its economy. Other factors have also contributed, such as property investments that allow potential investors to immigrate to the territory and the easing of travel restrictions on Chinese mainland tourists. However, revenues from the string of newly constructed casinos retain the prime spot in Macau's current economic prosperity.

Macau's casino ownership and operations, centralized until 1934, were later monopolized by the Sociedade de Turismo e Diversoes de Macau for 39 years. In 2002, the Macau government ended the monopoly and granted six casino operating licenses through a bidding process open to foreign investors. Some of the investors holding these exclusive licenses later sold sub-concessions to other potential investors and recovered their original cost within a relatively short span of time.

The Macau government, having observed the potential revenues from the sub-letting process, has now started taxing it. As a result, the first quarter of 2007 produced tax revenues totaling the estimated tax revenues projected for the entire year. The Macau government owes much of this fortune to its gambling policy, which opened the doors to wealthy foreign investors like Sheldon Adelson, Steve Wynn and MGM. With gambling revenues contributing nearly 30 percent of Macau's GDP and the industry employing close to 10,000 local residents, the government needs to make this opportunity a sustainable one that benefits its growth both in terms of financial and social stability.

However, the casino and gambling industry, often described as a source of instability, is not susceptible to technological advancement or productive growth. Macau's gambling business is dependent on the prosperity of other Asian economies, especially those of Hong Kong and mainland China. Local residents reflecting on the impact of these money-spinners say that, though other industries in Macau are in dire need of suitable labor, young people first seek jobs in the casinos. This is due to the high pay that these establishments offer for jobs that require only short-term training rather than years of education and practice.

The Macanese in general worry that their young people are being lured by money and that the quality of their society, culture and ethics are deteriorating. Many feel that, as workers in casinos earn more than schoolteachers, the demand for education and teachers will diminish in time. This is evident in the lowering of standards for recruiting schoolteachers due to the acute shortage of qualified staff, which is predicted to significantly lower the quality of education.

To alleviate this situation, the Macau government should appropriate tax income from the casinos for subsidies to teachers as well as investments in activities that support social and ethical values, local art and culture and quality education. It should also build more parks that display local art and sculptures and support associations that encourage young people to take up sports, arts and culture.

Revenues invested in the cultural and moral welfare of the people will result in a sustainable and harmonious society. A money-centered culture is a danger to the foundations of a strong and ethical society. Macau has found a winning formula for its economic prosperity. However, only its spending habits will determine how prosperous this "Monte Carlo of the Orient" will turn out to be.

(Dr. Chang Chuan-fong is Asia director of the International Educational Foundation and former associate professor in the Department of Education at Minghsin University of Science and Technology, Taiwan. @Copyright Chang Chuan-fong.)