Monday, June 11, 2018

And Now for Gambling Protectionism in Macau

I can't honestly say that I've seen it all yet during this time of economic turbulence as protectionist measures come from all angles thick and fast: North-North (e.g., US vs. EU); North-South (US vs. China); and South-South (China vs. India). While I usually root for the underdog--that is, LDCs--in these sorts of quarrels, I am forced to take the opposite side in this latest squabble.

The contours of this story are well-known. The recent boom in Asia propelled by the Chinese juggernaut has led to its special administrative region (SAR) of Macau overtaking Las Vegas in terms of gaming revenues. This boom in business has brought in a lot of Western casino operators to set up shop in Macau. At the same time, Stanley Ho, the man who held the territory's gaming concession during the British colonial era, has been understandably wary of the competition as the PRC allowed other casino operators to ply their trade in Macau. Bringing in Vegas-style glitz, Ho has been pressured by the competition to upgrade his gaming facilities to world-class standards.

Things are now coming to a head as a global slowdown takes place. You have all these new facilities vying for a smaller group of visitors. The Communist leadership cracking down on CPC officials siphoning state coffers to gamble in Macau isn't helping, either. Seeking to gain an advantage at an adverse time, Ho is resorting to an ugly but time-tested strategy: fanning the flames of xenophobia. Ultimately aimed at tilting political fortunes in his favor against the likes of the legendary Sheldon Anderson, Ho is busy hitting below the belt according to the Wall Street Journal:

The chief executive of Las Vegas Sands Corp. is worried that an apparent attempt to foment anti-American sentiment by a prominent Chinese rival could hurt his company's operations in Macau, China's gambling enclave.

In several addresses to business groups last month, casino operator and political figure Stanley Ho urged Macau to "unite against" the Venetian, the towering casino that Sands has built in Macau, according to several Chinese newspaper accounts. "We are Chinese. We should unite against foreign capital. We cannot keep silent. If not, the foreign capital will bully us," Mr. Ho said in a Feb. 9 speech, according to the accounts. Mr. Ho's spokeswoman, Janet Wong, didn't respond to requests for comment.

Sheldon Adelson, the Sands CEO, says he believes his company's growing presence in the market has unnerved Mr. Ho. Sands is depending on Macau to provide relief as U.S. consumers drastically cut spending at the company's Las Vegas properties. But new travel restrictions to Macau, imposed by the Chinese government, limit how often mainlanders can visit the city and have lowered gambling revenues there as well [This refers to Party officials gambling with state funds.]
Ho also has other business interests in the line of fire:
If Mr. Ho is trying to stir up nationalist feelings to help steer business from his rivals, it is unclear how much support, if any, he has in higher political circles. While he is a member of a top mainland Chinese political consultative body, it was with Beijing's blessing that the Macau government broke his monopoly on gambling in Macau earlier this decade.

Sands has made the biggest impact on Macau. It built the largest casino in the world there, the Venetian Macau. It began dredging land from the sea to build a sprawling new $12 billion resort complex -- now on hold as the company scrambles to cut costs -- and purchased its own fleet of high-speed ferries to shuttle gamblers from mainland China to Macau. The Sands ferries have challenged Mr. Ho's own ferry business.
Is there no honor among one-armed bandits?

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