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Wed, Sep 01, 2004 - Page 12 News List

Casino growth worries Macau

ECONOMIC CONCERNS The gambling industry's growth boosted GDP by 25 percent in the first quarter, but some warn that Macau must diversify its economy


On the western edge of Macau, along the slither of polluted water that separates it from China, restaurateur Effic Chen serves the handful of customers who still visit her San Hip Seng Seafood Restaurant.

Business has dropped "enormously," said Chen, in the two years since the local casino, a dingy gambling den built into an old Chinese junk, moved to the other side of the peninsula to be closer to a glitzy new American casino.

The 24-hour floating casino brought a constant flow of customers to Chen's restaurant and the many other bars, eateries and stores in the neighborhood. Now they are either boarded up or eerily quiet.

"We used to be full all the time," Chen sighed. "Now look," she said,pointing to the empty tables.

The slump in Chen's tiny neighborhood of the largely autonomous enclave of China is symptomatic of a recent economic shift in Macau that saw casino growth boost GDP by 25 percent in the first quarter.

It is one of many clouds behind the city's economic miracle that political leader Edmund Ho, who was re-elected for a second term in office Sunday, can't afford to ignore.

"We are relying too much on one industry and that reliance is only going to increase," warned Sanjay Nadkarni, a researcher at Macau's Institute of Tourism Studies. "We are creating a monoculture built around a business that is, essentially, non-productive."

Macau is mutating into the entertainment center of China: Some 25 billion patacas (US$3.2 billion) has been pledged to build 30 new casinos and hotels in the next five years and business in the existing 13 is booming thanks to a doubling of mainland Chinese tourists this year following newly relaxed travel rules in China.

Leading the revolution are American casino operators from Las Vegas who are bringing glitz and a business model that places casinos within huge hotel and entertainment complexes, far different to the city's traditional gambling dens.

But away from the neon and green baize, analysts and politicians warn of dire economic and social consequences.

"What happened to the floating casino is happening all over the city," said lawmaker Au Kam Sam, a teacher and one of just two lawmakers on the city's 30-seat legislature who opposed expansion of the casino industry.

"The old casinos used to bring business to their neighborhoods because all they provided were gaming tables -- no food or drink.

"The new American casinos, however, will provide everything: there will be no need for other service providers nearby. So, small shops and business will now go bust."

Macau's casinos presently account for 80 percent of economic activity here; the rest is based in textiles. Gambling levies last year paid for 77 percent of the government's budget. Next year it will pay it all and provide a surplus to boot.

Nadkarni fears for such a lopsided economy.

"There is a lack of investment in intellectual capital," he said. "Tertiary colleges have closed regular courses to train croupiers and dealers for the casinos.

"It will produce a workforce geared only to serve the casino industry. What happens if the bottom falls out of gambling?"

Although Ho's Beijing-backed government is planning a free trade zone at the city's border with China, observers say little is being done to counterbalance a possible casino crash.

"It could happen very easily if Thailand or Singapore opens good quality casinos. The people here know they need to [broaden the economic base] but nothing serious is being done about it," warned one economist.

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