Macau must bet on tourism to diversify economy – The Economic Journal


"Macau is by nature a tourist center, so thinking that you can diversify your economy to something unrelated to tourism is too ambitious and may not even be a realistic thing," said Andrew Fennell.

In an interview with Lusa at the Fitch Ratings offices in Hong Kong, Fennell explained that "Government plans to diversify the economy under the existing conditions is the Mecca of gambling, the largest gambling center in the world, attract many tourists, and the efforts they've made are to stay longer, do more than just play, they're related activities. "

Casinos, he added, share the same view, "and as part of this effort they dedicate more space to areas not related to gambling, so we are seeing progress, but the reality is that 50% of GDP results from gambling, and tourism is really the only possible bet. "

The trend of reducing the component of the big players to an increase in the proportion of revenues from players with lower bets "is one of the points where you can say that diversification is happening," said the analyst, noting that "there are ten years the panorama was predominantly dominated by VIP players, but now there are more players in mass, and the flow of these tourists has been very strong, and this is part of the will to bet more on the mass market. "

The importance of diversifying the economy is, however, undervalued by Andrew Fennell, who recalls Macao's very positive rating at AA level: "Macau has a very high rating and the fact that it does not have a diversified economy did not prevent us from raising the rating a year and a half ago; one of the things that can make our opinion about credit quality diversify is an effort that has been made for a long time, but it is very difficult, there have been incremental steps, but diversifying the economy is a difficult and very long process. "

"Macao" has a budget surplus and is one of the strongest economies among the 118 that Fitch analyzes globally, "stresses the analyst, stressing that this territory" has no debt, which is always a determining factor for the ratings, and continues to accumulate reserves for government coffers with very strong budget balances. "

Asked about the impact that trade tensions between China and the United States can have on the Macau gaming industry, Fennell admits that, "from a geopolitical point of view the issue is very interesting," but adds that the impact, the is only indirect.

"One can think of scenarios with a direct impact on casino activity, because they are Americans and Macao is part of China, one can even think of devastating scenarios for the industry, but for us the scenario is more benign because if the commercial war has an impact on China, it will be in slowing economic growth, which may affect many people who thought of going on holiday to Macao and are therefore no longer going to impact, will be indirect in the revenue of the game in Macau " , explains the analyst.

On extending gambling licenses to some operators and harmonizing the termination of contracts for 2022, Andrew Fennell says it was a good decision of the Government because it ended the "uncertainty that had been six months ago about the end of the concessions."

The government's decision, he concluded, "makes sense in the context whereby policymakers can negotiate with everyone at the same time instead of being separately and at different times."



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