OPINION – Spring in autumn! Macau’s new political and economic cycle

By José Luis de Sales Marques

Autumn is always the most pleasant season of the year for Macau. The weather is excellent, and there are plenty of cultural and entertaining activities to uplift the soul and please the senses. For some reason, autumn is the season of both the International Music Festival and the Macau Grand Prix. In a peculiar way, autumn is spring for Macau, and this rhythm aligns well with our relaxed lifestyle.

It is in this spring-like environment that former top judge Sam Hou Fai was elected as the region’s new Chief Executive (CE), with support from nearly the entirety of the electoral committee. Mr. Sam Hou Fai, whose previous role required him to maintain a low profile with few social appearances outside strict official duties, has managed to present himself to the people of Macau as an intuitive bilingual communicator, a receptive listener across diverse sectors and communities, and someone keen to stay attuned to public sentiment. This approach has raised expectations for the new cycle that will unfold under his leadership. How that cycle will actually develop depends not only on his vision and capable administration but also on the broader political and economic environments, both national and international, that surround the region.

Macau’s traditional vulnerability to external shocks became evident during the recent Covid years, impacting GDP, fiscal revenue, and the well-being of everyone. Furthermore, the plans of the current government, led by CE Ho Iat Seng and inaugurated in December 2019, were recalibrated to prioritise health-related matters and inject various forms of quantitative easing into the struggling economy. Nevertheless, public investment proceeded, and the newly opened “Macau bridge” stands as a testament to the resilience of infrastructure development in the region. Additionally, public tenders for the new gaming licences went ahead as scheduled, with ten-year licences awarded to the current operators. These new contracts introduce obligations beyond gaming by expanding corporate social responsibility into new areas. Operators are now committed to investing in arts, culture, and creative industries, as well as revitalising community areas across the city and islands, following what might be called a hybrid model of public-private partnerships.

Under this model, gaming operators are expected to participate in urban renewal by revitalising old neighbourhoods, with the goal of making these areas more attractive for cultural tourism. Although results are still in development, first impressions suggest that the PPP (public-private partnership) arrangement may be lacking a crucial element: the more significant input or participation of community-based grassroots organisations. These neighbourhood organisations could bring authenticity to these initiatives, enhancing each district’s unique identity and features, thereby maximising their potential to attract visitors interested in distinctive experiences in Macau while balancing the interests of both tourists and the community.

It is worth noting that these associations, which serve as pillars of traditional Macau and provide vital tangible and intangible services in areas such as culture, entertainment, health, solidarity, education, and sports, are facing a critical funding shortage. Public funds have yet to return to pre-Covid levels, and economic declines in certain local districts—due to rapidly changing consumption patterns and decreasing income from sectors like restaurants, shops, and real estate—mean traditional private benefactors have less cash to support local events.

Thus, the MSAR that Mr. Sam Hou Fai will lead from 20 December is a region where gaming and visitor arrivals are recovering swiftly, reaching nearly 2019 levels, yet where non-gaming sectors still struggle with fast-changing market conditions and weakened demand. These structural shifts are partly driven by the increased spending of Macau residents in Zhuhai and nearby cities—a result of accelerated integration policies associated with the Greater Bay Area’s development. These cities offer better value for money and a wider variety of dining, entertainment, and shopping options than Macau. Consequently, spending by visitors has become increasingly vital to the survival of many businesses, a trend reflected in the seasonal peaks in demand and in the business expectation surveys published by the Government Statistics and Census Service.

Based on observation, two trends are seemingly taking shape in Macau’s old districts. On one hand, long-standing businesses—mainly restaurants and traditional cafés—are being replaced by mainland-style restaurants. On the other, stylish cafés are springing up everywhere, infusing modernity and fashion into these historic areas. Many shops are regularly changing hands, indicating either that their business models are not genuinely successful or that investors view these small businesses as temporary ventures until more promising opportunities arise.

One of the first and most pressing issues the new government will face is how to address the crisis affecting these “non-gaming, non-tourist” areas, which are increasingly struggling

Whatever the case, old districts are following patterns of gentrification. While not inherently negative, this process risks eroding some of their historic identity. One of the first and most pressing issues the new government will face is how to address the crisis affecting these “non-gaming, non-tourist” areas, which are increasingly struggling. Offering consumer incentives, such as coupons, seems impractical and untimely. Allowing these areas to languish could lead to unwanted tensions—a risk best avoided. A more viable approach may be to offer subsidised training for management and staff, help finance facility improvements, promote these neighbourhoods as cultural tourism districts, and encourage owners to innovate and adapt to a shifting market environment. While this is not a magical formula, it may be the only feasible way to enhance Macau’s appeal to tourists without losing its unique identity and to empower local residents and grassroots associations in the process.

However, the real challenge for the new executive will be to lead the 1+4 strategy, promulgated in November 2023 as “The Development Plan for Moderate Economic Diversification of the MSAR (2024-2028),” to achieve its goals: building Macau into a world tourism and leisure centre and developing its priority industries of traditional Chinese medicine and big health, modern finance, high technology, exhibitions and conventions, as well as culture and sports. The actions and industrial policies associated with the economic diversification plans are being developed in Macau and in the “Guangdong-Macau In-depth Cooperation Zone in Hengqin,” as well as across other cities in the Greater Bay Area, integrating Macau’s development with national growth. Some encouraging developments have occurred over this year.

In 2023, Macau was awarded the title of Asia’s best convention city, and the opening of the Medical Centre of Peking Union College Hospital (PUMCH) is a significant step forward for the region’s health infrastructure—great news for MICE and big health! While investing for the future is the only way to create the institutional conditions for economic diversification, the market conditions depend on private initiative on both the supply and demand sides. However, it is still the main industry that could potentially address economic issues in the short term, offering the kind of additional demand that could benefit old and traditional districts with some effort in product development. In this regard, recent announcements by relevant authorities targeting two million international visitors for 2024 should prompt serious reflection on the diversification of tourist markets. Indeed, these two million visitors represent only around 6–7 per cent of total arrivals, suggesting significant potential for growth to over ten per cent in coming years, provided that appropriate promotion is carried out.

For this purpose, recent Chinese policies on visa-free entry to the country, as well as the diverse attractions in neighbouring districts of the Greater Bay Area, could encourage visitors to explore Macau and its surroundings in a relaxed, cultural, and environmentally friendly manner, immersing themselves in the universe of southern China and Lingnan culture, leaving them with fond memories for a lifetime. Furthermore, there is untapped potential not only among Portuguese-speaking countries but also in the vast opportunities within the BRICS+ bloc as a tourist generator. This reality, though not new, has gained new prominence in recent months, which Macau should not ignore—with the added advantage that the entire visitor experience could be conducted in RMB!