Inside Asian Gaming

December 2010 | INSIDE ASIAN GAMING 7 Cover Story In an interview with the Las Vegas Review-Journal in May 2006, when work on the US$2.4 billion Venetian Macao was already well under way, Mr Adelson described his original doubts. “At first, I thought it was political exile,” Mr Adelson recalled. “I thought Stanley Ho had some influence that he got me off the peninsula because that’s where he believes the centre of everything is. All I was hoping was that I could get a location in which I could really do something.” It’s possible to argue that without TheVenetianMacao’s presence, Cotai could never have taken off as an alternative gaming destination to the traditional downtown casino area on Macau peninsula, and SJM wouldn’t currently be sniffing around for a home there. It’s difficult to imagine City of Dreams having the pulling power by itself to bring in hundreds of thousands of tourists from China and around the world direct to Cotai. Now such is the draw of Cotai and such is the demand for land there that the government even allowed the selling off of a site there that had previously been reserved for an extension toMacaoUniversityof Science and Technology. That was much to the dismay of several lawmakers including Ng Kuok Cheong, who said in the Macau media in February 2007: “The purpose of use has been changed without any announcement or public consultation”. If anything, this example goes to show the depth of incoherence that exists in Macau’s strategic land use policies. And with another 865 acres of land due to be reclaimed from the sea in the next few years, the danger is that without some fresh coherence added to the planning issue, the same kind of mistakes will be made all over again. Added to the lack of coordination appears to be a dose of bad faith directed towards Sands China. The idea that LVS may ‘lose’Cotai 7 and 8—two parcels of land south east of the Four Seasons—tends to assume it was LVS’s in the first place. Technically, it was not. The reason that the company had spent upwards of US$150 million on preparing the ground for development is that Sands had previously been given the impression by Macau officials that the land was its to use. Under the old easygoing Macau, legal permissions on land were generally regarded by local developers and officials alike as a slightly tiresome technical footnote designed to provide lucrative employment for local lawyers. What really mattered under the old Macau was getting political support behind the scenes. When that was in place, all things were possible. The more things change With political support, all things may still be possible, even in the new Macau. The problem is it’s difficult to know whether the rules of ‘new’ Macau are simply the rules of ‘old’ Macau packaged more presentably and more slickly for the benefit of the outside world. That’s because no one—apparently not even the public servants that are supposed to administer the system—really seem to know what the ‘rules’ are. Some evidence in support of this argument emerged in 2007, when the government was planning to build a new prison on Coloane, the most southerly of Macau’s original two islands. The Land, Public Works and Transport Bureau, which in theory is in charge of land management and urban planning, admitted in the weekly Catholic newspaper O Clarim that it didn’t know anything about the project. The fact that Ao Man Long, a former director of the bureau eventually ended up behind bars at the old prison for soliciting and taking massive bribes on public works projects might possibly have vindicated thegovernment’s decision to keep the new building’s layout hush hush. It’s not the case that Macau has no planning ‘rules’ at all. It’s quite good at setting out and enforcing the contracts with the casino operators in terms of the proportions of gaming space, hotel capacity and convention space there should be at each property. The difficulty comes with the big picture stuff. These are the decisions that have strategic consequences and perhaps major cost implications for the operators over many months or even many years. The only person who can reasonably be assumed to have the big picture in planning for the gaming industry in Macau is the territory’s Chief Executive Chui Sai On. And he doesn’t appear overly anxious to share that information. Mr Chui’s role in Macau seems akin to Sylvester Stallone’s character in the 1995 Hollywood film Judge Dredd, about a comic book hero who enforces a semblance of order in an otherwise anarchic and post-apocalyptic world. “I am the law!” states Judge Dredd when a baddie questions his authority. In Macau, facts related to policy on new gaming development are in relatively short supply compared to speculation on that topic. What facts do we actually know about the Cotai land allocation situation in relation to gaming and tourism projects? Here are a few key ones: April 2009 —Stanley Ho, chairman of SJM, states he is interested in buying out LVS’s interest in Cotai 5 and 6. His move comes in the wake of the global financial crisis that led in November 2008 to LVS announcing it was suspending work on 5 and 6 due to funding issues. November 2009 —LVS announces it has received a final draft land concession for Cotai 5 and 6, with an initial land premium of MOP700 million (US$87.5 million) and a total land premium ultimately of MOP1.9 billion. The US$4.1 billion project will have 300,000 square feet of gaming space and 6,400 hotel rooms under the Sheraton, Traders, Shangri-La and St Regis brands. November 2009 —LVS raises US$2.5 billion by floating its local unit Sands China on the Hong Kong Stock Exchange. November 2009 —LVS says it has been given an extension on the August 2011 deadline originally agreed with the government for the construction of Cotai 3—known as the Far East Consortium site, next door to the Four Seasons. The site, originally slated to have a Holiday Inn, an InterContinental Hotel and an Emperor Sheldon Adelson—made the best of an unpromising Cotai site Macau’s Chief Executive— Judge Dredd in disguise?