Diversification the name of the new game in Macau
Region is striving to add new strands to its economic mix, including non-gaming tourism and tech innovation. Start-up Immo is part of a new movement
Manuel Coreia Da Silva’s Macau-based start-up Immo can be called “timely” for two reasons.
The first is that the company is developing an app to help tourists fill their free time, guiding visitors who may not be from China’s upper crust to fill their days in interesting and exciting ways in a city geared toward entertaining big fish.
The second is that Immo is benefiting from a new effort by Macau to diversify its economy away from the casinos and gaming that have defined the city.
Since 2014, when China began a corruption crackdown that stymied the supply of highflying VIP gamblers to Macau, the “Las Vegas of the East” has suffered serious blows to its gaming industry. In the second quarter of 2015, its GDP was contracting at a year-on-year rate of 26.4%.
The city learned a hard lesson: Macau needs to diversify its economy, and fast.
Part of the Macanese government’s effort focuses on diversifying into non-gaming tourism, building theme parks and looking to sporting events. In that sense, Da Silva’s start-up fits right in.
But concerns that an overly tourism-dependent economy will remain volatile also has Macau aspiring to develop other industries as well, including its innovation and high-tech sectors.
Earlier this month, Da Silva’s start-up was one of 20 to gather for a government-sponsored competition, StartUP Macau, aimed at encouraging young entrepreneurs in the territory. While it was an exciting first step, the event also proved that Macau has a long way to go.
“I think it has to do with the lack of diversification of the local economy, so investors are not used to these kinds of challenges and we don’t have as much entrepreneurship as I think we should,” Da Silva said.
Bringing in the big guns
To help guide Macau forward, it called on help from its former colonizer, Portugal.
It was Portugal that first legalized gambling in Macau, prior to handing the territory over to China in 1999 as it became less useful as a trade outpost.
Today, however, Portugal is starting to see Macau in a different light. Former colonies, where Portuguese is still spoken, may be an opportunity for Portugal to engage.
Just as the StartUP Macau conference was underway, China signed an MOU to boost trade with Portuguese-speaking countries, putting Portugal in the prime position to act as a partner.
Portuguese Prime Minister António Costa told the Asia Times that he viewed Macau’s diversification and the strengthened ties between China and Portuguese-speaking Countries as part and parcel of the same process.
“Macau is a very important door to the Portuguese-speaking world for China, and for the Portuguese-speaking world to the Chinese market”
“China is betting on diversification of the Macanese economy to move away from the traditional gaming industry and the other industries that it has developed so far to be able to strengthen its relationship with the Portuguese-speaking world,” he said.
“Macau is a very important door to the Portuguese-speaking world for China, and for the Portuguese-speaking world to the Chinese market. So it’s also an opportunity for Portuguese-speaking countries,” he added.
Macau is welcoming the help from Portugal (a co-sponsor of the StartUP conference), which has recently revved up its reputation as an innovation economy, steering policy in ways that boost entrepreneurship and research.
A long way to go
Even with blessings from China and help from Portugal, Macau has a long way to go before it can claim any sort of innovation mantle.
Last year, Portugal was 30th on Bloomberg’s rank of most innovative countries. Macau wasn’t even on the list of 50. Where Portugal spent 1.33% of its GDP on research in development in 2013, according to the World Bank — a strong indicator of innovation success — Macau spent just 0.05%.
Worse, innovation requires strong education, but Macau has a notoriously high drop-out rate. Only 66% of high school students get their diploma, possibly because the dominant gaming industry doesn’t require much schooling.
Still, there are some reasons for optimism.
“Macau is a vibrant city with an exceptional workforce, progressive and developing universities, a high-standard of living, low taxes and a business-friendly environment,” noted Antonio Trindade, President and CEO of CESL Asia, another of the event’s organizers.
Grant R. Bowie, CEO of MGM China holdings, who served as a judge at StartUP Macau, emphasized the importance of helping Macau’s young companies break out of their local bubble.
“Macau is a vibrant city with an exceptional workforce, progressive and developing universities, a high-standard of living, low taxes and a business-friendly environment”
“Macau has obviously been very fortunate that we’ve got a lot of natural opportunities being connected to China, but at the end of the day, success in the future is going to be determined by how we take those opportunities and convert them into businesses that we can make successful,” he said.
One of the competing entrepreneurs, Daniel Wong Iam Hong, hopes the efforts to jump-start innovation don’t end any time soon.
“We got a lot of very useful opinions from very experienced entrepreneurs, but this was the only one chance, and I think we need more of them,” he said.
The Asia Times was the Media Sponsor for StartUP Macau.