Asian business icon Dr Allan Zeman is heavily involved in the gaming, construction, shipping, fashion and film industries and on the board of multiple companies across Asia. He tells IAG what Macau must do to become a truly world class destination.
IAG: Let’s start with the crackdown on corruption that has impacted the Macau gaming industry so heavily. The word crackdown implies temporary – something that starts and then ends – but will there be an end?
Allan Zeman: I think the crackdown, if that’s what you want to call it, will not end. The crackdown will continue. I think that the system before in China was such that although it was illegal, it was the norm. China is still a developing society and I’ve seen it happen in other countries too. I’ve seen it happen in many Southeast Asian countries and it still exists in many of them.
When President Xi Jinping came into power, he realized that social media was changing perceptions. In the old days, nobody knew. But once you start to see government leaders going out to cut a ribbon at some event and wearing a high priced watch, on their salaries, people start to say, “Hey, where do these guys get the money?”
Corruption was becoming rampant to the point where it was part of society because the GDP of China was growing 13, 14, 15% and there was a lot of different kinds of money in the economy to make up that number. The government realized that this would destroy the Communist Party – destroy China as a whole – because more millennials were becoming much more aware thanks to social media. There was a change taking place.
The government was clever enough to realize that they had to clean up or change the perception. Xi Jinping arrested Bo Xilai first and then Zhou Yongkang – they are a few great examples of leaders who in the past were untouchable. But it worked. People started saying, “Wow, this guy is serious.” Suddenly through those examples, all the corruption started to change and a lot of that money that found its way to Macau suddenly dried up because no one wanted to be seen to be here spending money.
Even if it was legitimately made in the past through property development and that kind of thing – maybe favors were granted because you knew certain officials – if you made a fortune in the real estate market you didn’t want to show your money because if someone looked into how it was all made, maybe there were grey areas.
I believe that the change taking place has really helped Macau and China tremendously in the long term. I mean, China’s rule of law works, you can think of doing business and attract companies with confidence, you can sue someone now under the rule of law and all of that is making China much stronger.
Macau itself has also grown up too. There has been a slowdown but even with the slowdown life is good. Think of it like winning the lottery – you don’t win the lottery every time you buy a ticket. The operators won the lottery for a large number of years here. Now with the slowdown the market has normalized. Macau has had to readjust to the new norm and the numbers are not what they were but they are still very good. They are still better than Las Vegas.
IAG: I think everyone would have taken these numbers if you had offered them 10 years ago and said this was what you would make in 2016.
AZ: Absolutely. There are no businesses in the world that for this kind of investment make that kind of return. So there is nothing wrong, you just got spoiled before both with retail and with gaming because there was easy money in the system.
IAG: The problem for the operators though is that then they made all those second round commitments?
AZ: That’s the problem. The crackdown came at the wrong time because they had already committed to these new mega-resorts. They thought they had died and gone to heaven and that this would continue, so they put back a lot of the profits they had made. That’s the problem we face in these next few years with the mega-resorts opening and the slowdown in visas and tourists coming to Macau. This is a time that the operators will really have to perform. They have to go back to work through service, events and different kinds of attractions to make Macau a better place. There are a large number of rooms coming on stream so rather than everyone fighting each other, the strong will survive as in any business.
IAG: We’ve seen Korea enjoy a wonderful surge on the back of creative industries, which was government lead, but the problem in Macau is that our government is perhaps not as inspirational as the Korean Government. I also know that there is a great resistance to change in Macau. How, as businessmen in Macau, do we get the government to create a master vision?
AZ: The important thing – and I understand exactly what you’re saying – is getting together with some of the people and working out a plan. They always say a picture is worth a thousand words so developing a plan of what Macau will look like in five years from now and 10 years from now.
It’s like I did with Ocean Park in Hong Kong – it was an old park that was falling apart and the government asked me to assist. I took a traditional park and thought world class – how it could be upgraded. So what I did was put together a video of what the future park could look like because I needed to get money and approval. So at the end of the day, by putting that together, I was able to convince the government, “Let me have the money, let me do this.” And I wasn’t wrong.
I agree with you that the Macau government perhaps doesn’t have a vision, perhaps they come from a different generation. And it’s not just in Macau – traditional people everywhere hate change. It’s different today. Millennials love change. There is a divide between the older generation and the younger generation. The older generation criticizes the young generation for being lazy but they’re not. I love young people. They’re very, very energetic – they just have a different mentality. It’s a sharing economy, it’s Uber … it’s a totally different world that the parents don’t understand.
IAG: And it’s a competitive world out there.
AZ: AZ: It’s a very, very competitive world so you have to be world class. You have to think, “How can I be different and how can I change?” because otherwise Macau will just sit as it is.
IAG: So how do you then get the government to welcome change?
AZ: Hopefully you get more good young people into government. Slowly, that will change. I talk at the Macau University and there are a lot of creative young people in Macau – very different to the old Macau where it was a sleepy place. It was very nice, Portuguese, everything was lovely, you had a nice life and you relaxed. It was fun. But today you have this new generation of operators and license holders that are throwing big money at it and you’ve got the divide between the locals and the newcomers. But the young generation are changing things.
IAG: The Hong Kong-Macau-Zhuhai Bridge should make travel from Hong Kong to Macau easier but Macau already has a number of infrastructure issues with the roads and the light rail. That raises questions about the entry point into Macau. It’s all very good to drive here in 20 minutes from Hong Kong airport but it would defeat the purpose if the boundary crossing facility is a carpark. What are your thoughts?
AZ: It is really, really important that the government makes it user-friendly and easy. They’ve spent all this money on the bridge but if you take the car, drive across the bridge and then face a line-up and hassles, you won’t do it. At the end of the day it will defeat the whole purpose.
We have to move with the IT industry now. You should be able to just wave your phone. In China today we don’t use cash anymore, you use the wallet off the phone or QR codes. Everything is changing. The government needs to upgrade the system, think ahead and make it easy. It should be easy to get in and it should be easy to leave.
Also, through technology and big data you should be able to see how many people are coming, how many slow down – these are things you have to control or Macau will become a parking lot. You can’t do that.
With data today, things are different but the government needs to realize that. The young people are further ahead today than the old people because they grew up with it while government people are still doing everything by hand. These are the problems Macau will face.
IAG: And the airport here in Macau?
AZ: The airport in Macau … I sit on the board of the Airport Authority in Hong Kong so I know about that. Hong Kong airport is maxed out right now which is why we’re building a third runway and a new terminal. The airport in Macau could become or should become a domestic airport where you have China and other cities around south-east Asia flying in. We should look at the options.
You look at every city right now, most of them are short on space and an airport is very important to a city. It’s the heart of a city. Obviously you’re not going to have US flights landing in Macau but there are certain kinds of flights from fourth tier, third tier and second tier cities that can come to Macau. With the bridge it can work both ways, they can integrate together. I don’t really see it as a problem because the airport in Macau is not too big and can’t handle that many flights so I don’t worry about it. I think that between Hong Kong and Macau, once the bridge gets built, they can work that out.