Macau: The Future Entertainment Capital of the World?

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Case Details:

Case Code : ECON024
Case Length : 19 Pages
Period : 1999-2007
Pub. Date : 2007
Teaching Note :Not Available
Organization : --
Industry : Miscellaneous
Countries : Macau SAR, China

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Introduction Contd...

By the time these projects reached completion, Macau was expected to be transformed into a world-class gaming and entertainment hotspot. In 2003, China eased travel restrictions on Chinese wishing to travel to Macau. This contributed significantly to the growth of the gaming industry in 2003-04, and Macau's economy as a whole grew by 28%.

Meanwhile, around this time, several neighboring countries, including Singapore, announced plans to liberalize their gaming sectors and to build huge gaming resorts (Refer Exhibit II for some gaming centers around the world). Analysts said that as some of these places were better connected, Macau could face some serious competition in the future. Also, there was concern that with new competition and with the new casinos that were to open in 2008-09, Macau's gaming industry could face oversupply leading to a decline in profit margins. However, others felt that Macau's proximity to China and its affordability would ensure that the Chinese, who formed most of the visitors to Macau's casinos, would not shift loyalties and would continue to provide strong demand.

Some analysts felt that the gaming industry was becoming excessively dominant in Macau's economy. The overemphasis on the tourism and gaming industry could hurt small and medium enterprises (SMEs), they said. The SME sector was already suffering from a shortage of labor as locals found employment in the gaming industry much more lucrative.

Background Note

Macau has historically been a part of China since ancient times. During the reign of the Qin Dynasty (from 221 to 206 B.C.), Macau was part of the Guangdong province. Since then, all subsequent dynasties have considered Macau as part of their kingdom.

The Portuguese first arrived on the Chinese coast in 1513, and by 1553, they had begun establishing onshore trading depots in Macau, with the permission of the Chinese government. Macau soon became an important link in Portugal's trade with India, southern China, Japan, and Southeast Asia.

In 1573, the Chinese government started collecting land rent from the Portuguese people living in Macau, and in 1582, the Portuguese started to make annual payments after entering into a land lease agreement with Xiangshan County. In the mid-16^th century, the Portuguese government established an "autonomous" body in Macau, with a supreme administrative officer in charge...

Excerpts >>