Housing galore

Joey Lao Chi Ngai, Director of the Macau Economic Association

When was the Macau Economic Association started and what was its main purpose?
The association started in 1989 as a non-profit organisation and a social think tank for the society and the government. It’s a research based academic association, especially [focused] on economic issues, with local researchers and with some regional cooperation, but always with Macau issues in mind. I joined the association many years ago and I have also acted as the Chairman of the Executive Board for almost nine years.

What are the main issues the organisation has been examining recently?
Every year we look for hot issues or socio-economic problems, and plan a study team to look at them and try to provide information or solutions to the government. Sometimes the government solicits studies. One of the important issues recently is, of course, regional economic cooperation with mainland China and in the Greater Bay Area. That would be the main issue our association is delving into now, and our study’s results should be out in October.

The Greater Bay Area and One Belt, One Road (OBOR) initiatives have been greatly discussed recently, but information on specific initiatives has yet to come to light. What are the advantages for Macau in being involved?
First we should define things more clearly that OBOR would be an initiative and not a policy. The Greater Bay Area Guangdong-Macau and Hong Kong project also shouldn’t be defined as an initiative but a planning [process] with policy coming after the planning [stage]. There will be a blueprint for this plan in the future, led by the Chinese central government, with the Macau and Hong Kong governments also participating in the planning and contributing to the process.

How could Macau use its capital reserves to contribute to the future plans for the region?
Per capita, of course, Macau could be defined as being a rich city, but in terms of the total monetary amount of government reserves, compared to that of the Chinese central government, Hong Kong and Guangdong, it is not that large. One of the special advantages Macau has in the development of the Greater Bay Area or OBOR is its historical connection with Portuguese-speaking countries, it’s our special strength but it’s not the only one.
We should consider the Greater Bay Area as one region where we all use our special strengths without directly competing or fighting each other. An area where we have to help each other and create a synergy effect. Not like in the past where we all compete and we all lose. If we consider the area as a whole and recognise the advantages of the other regions in something like industry, then we avoid excessive competition.
Our casinos and the development of Macau as a World Centre of Tourism and Leisure here are the specific features of our business sector and we will focus on them. Having the same type of development in Guangdong cities would harm our core development.
Then we have to consider the Greater Bay Area as also part of OBOR, as a platform that can help this national initiative.

Could the Greater Bay Area become one of the world’s major economic centres?
It could be in the future.

The government has repeatedly mentioned economic diversification as one of its main objectives. How do you think true economic diversification can be effectively reached?
It’s difficult and in the past years we’ve experienced how hard it is to diversify our economic industries. However no one, neither the Chinese central government nor the MSAR government, wants pure and whole economic diversification. What we want is a reasonable degree of diversification. Complete diversification wouldn’t be impossible, but in the short and middle terms of our development, it’s hard to see. We have to face those facts.
The policy address of the local and central government also addressed that we need a reasonable degree of diversification, although this ‘reasonable degree’ has no clear measurement.
The latest data shows that for the gross domestic product structure of 2015, gaming related activities accounted for about 48 per cent. I believe that share remained stable in 2016 and this year, as you can see, the gaming industry has recovered quite well in the past few months and still counts for a great portion of our economy. There might even be a slight increase in that percentage.

How vulnerable is the Macau economy at the moment, due to its large dependence on gaming and tourism?
I think now it’s less vulnerable when compared to five or ten years ago. If you look at the figures and the real economic situation we have actually diversified a lot in the past years. Just a few years ago, aside from the gaming industries, you can see the development of retail, hospitality, food & beverage, MICE [meetings, incentives, conventions and exhibitions]. When you look at it, the MICE industry started from zero and now we’re building a better sector that has been growing steadily. If you look at the rate of development, some of the businesses are doing a lot better than the gaming business in terms of growth rates. It’s just that their share in the overall economy is relatively smaller when compared to gaming. Other sectors in Macau are also growing and evolving.

Does this reduce the city’s exposure to impacts of stricter policies by the central government on allowed visitation from the Mainland or in regards to capital flows?
Macau’s economy is better than before, but we can’t survive without favourable policies from the Chinese central government. We’re a tiny independent economy with very special features. We have no natural resources and, like other tiny economies, we highly rely on the outside.

Diversification also needs human resources. How can Macau have the necessary human resources if not by resorting to skilled and unskilled non-resident labour?
This issue is a dilemma for almost all developed countries or cities. In reality, and especially for Macau, the expansion of the local economy must be supported with huge amounts of imported labourers. Without foreign labour it’s impossible to expand the economy. This is the reality in Macau and we have to face it, since what we’re doing in terms of tourism services implies labour-intensive business.
We can’t replace labour with robots, we still need to face humans. Before we didn’t need that much labour, but once our economy expanded we had to import foreign labour to support this expansion, there was no other alternative.
However when we import foreign labourers, there is no doubt there is harm to local labour. We need to find the equilibrium, with the government being in charge of tightening or loosening foreign labour policies.
When the government tightens regulations, businessmen will complain, when it loosens them allowing more foreign labourers to come in, businessmen are happy but local permanent residents will complain. It is a real dilemma and you see the same problem in Singapore and Hong Kong. The only way is to find a balance and help the upward mobility of local workers.
In the past, some entrepreneurs would recruit top management foreign workers, with even the middle management being foreigners, with Macau employees being at the bottom. Having local residents as slaves to top foreign management is not the purpose of economic development. Economic development has to help improve our living standards, to make local residents better off.

Can this issue be resolved just through education?
I think this is something that changes everyday. It takes time to analyse statistics. There is a Chinese saying that says ‘Changing is always faster than planning’. We need to see if there’s a trend and if that gap will be even larger in the next two years and try to plan accordingly.

Do you believe government policies to improve the offer of affordable housing for local residents will help curb the current issues of housing in Macau?
It’s a very complicated issue. I can only say that in the future I can see the supply of housing in Macau will increase a lot in 2018 or 2019, especially in the new land reclamation Zone A, the largest reclaimed land plot, where 28,000 public housing units and 4,000 private units will be developed, so 32,000 housing units available on the market. That’s a huge amount in only one area, with the Macau government also planning for other areas. I agree that housing prices in Macau have been increasing and they’re very high at the moment, making it very hard for young people to afford housing. However, Macau is not the only city facing this issue. In Hong Kong it is even worse. In Guangzhou, Shenzhen or Zhuhai the prices of course will be relatively lower than Macau, but you have to look at their average earnings, at the earnings of young graduates and if they can afford housing.
It’s a very hard social issue to solve and the only way to do it is to build more public housing to balance the market while helping the little people.

The Macau government opened a tender for the Macau Master Plan, which will provide the guidelines for the city’s development. With the city seemingly having some urban planning issues, should there have been a better plan for the city in the past?
Macau had a general plan at the beginning, but things just developed too fast with the old plan not being quite suitable. Even a general plan needs to be adapted very frequently, just like our law. We have to revise and revise.

What role do you think Hengqin will play in Macau’s future development?
Hengqin is a very important place for Macau-Guangdong regional cooperation. It is a very important island for Macau. It’s still an on-going development and has seen a huge amount of investment. In my personal view I can see that in a few years the Hengqin area will offer a huge supply of apartments and buildings to local residents. However, there will be a huge supply of housing in the area, which can be seen just by looking at its developing skyline. I doubt there will be enough demand to catch up with the supply in the short term.

Could the issue of supply not catching up with demand in the short-term also be applied to recent projects like the Taipa Ferry terminal or Hong Kong-Zhuhai-Macau Bridge?
Yes, I believe so. We’ve done two research projects on the bridge and its social impact in the past, but things are different now. It also depends on the policies to be implemented, such as the traffic and tariffs on the bridge. These policies for the bridge would then impact the economic sectors such as logistics, the airport business and the flow of tourism visitors.

Do you believe these projects will lead to a larger increase in annual visitation to Macau?
I think visitation will be more stable. It won’t be like in the past, with 20 per cent yearly increases, it will be stable at a 5 per cent or 10 per cent increase. The central government has policies to stabilise it.