VZCZCXRO6106
PP RUEHCN RUEHGH RUEHVC
DE RUEHHK #1801/01 1900040
ZNR UUUUU ZZH
P 090040Z JUL 07
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC PRIORITY 2213
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 03 HONG KONG 001801 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/CM 
STATE PASS TO HUD SECRETARY JACKSON 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PREL PTER EINV KIPR HK CH MC SENV
SUBJECT: MACAU SCENESETTER FOR HUD SECRETARY JACKSON 
 
¶1. (SBU) Summary:  The U.S. Consulate General Hong Kong 
warmly welcomes your visit to Macau next week.  U.S. 
interests in Macau have increased tremendously since 2002, 
when Macau liberalized its gaming market.  The U.S. is now 
one of the largest investors, behind only Hong Kong and 
mainland China.  Major U.S. casino and resort operators, such 
as Wynn, MGM, and Sands, are opening casinos, hotels and 
convention facilities at a rapid pace.  This U.S. financial 
presence has also caused the American citizen population in 
Macau to double in the past two years. The Macau Special 
Administrative Region (MSAR) is now depending on gaming to 
grow the economy, fill government coffers, and create jobs. 
This rapid development is driving social change and straining 
the MSAR's political, bureaucratic, and regulatory systems. 
Major U.S. interests in Macau include the expansion of 
democracy and the protection of human rights; urging the 
Macau Special Administrative Region Government (MSARG) to 
address trafficking in persons; continued vigilance against 
money laundering and other illicit financial activities; 
responding to fallout from the Banco Delta Asia/North Korea 
issue; and ensuring the sustainable economic development of 
Macau within the "one country, two systems" model.  END 
SUMMARY. 
 
------------- 
Economic Boom 
------------- 
 
¶2. (SBU) Macau's rapid economic growth can be traced to the 
MSARG's 2002 decision to end the long-standing gaming 
monopoly of Stanley Ho's Sociedade de Jogos de Macau (SJM). 
Macau now effectively has six separate casino licensees - 
three concession holders (SJM, Galaxy and Wynn) and three 
sub-concession holders (MGM, Las Vegas Sands and PBL/Melco). 
At the end of 2006, SJM ran 17 of Macau's 24 casinos, Hong 
Kong's Galaxy Resorts had five gaming facilities, Las Vegas 
Sands had one casino (the largest in the world) and 
U.S.-based Wynn Resorts had one casino.  MGM and Pansy Ho 
(Stanley's daughter) are jointly building a casino on the 
Macau peninsula. 
 
¶3. (SBU) In March 2007, Macau's gaming revenues surpassed 
those of the Las Vegas Strip.   Mainland Chinese visitors 
comprise over 50% of visitors to Macau.   Gross gaming 
revenue in Macau for calendaryear 2007 is estimated to rise 
to approximately S$8.0 billion. 
 
--------------- 
The Cotai Strip 
--------------- 
 
¶4. (SBU) The Cotai Strip, a rcently-constructed landfill 
area between Macau'sColoane and Taipa islands, will soon 
become the enter of Macau's tourism industry.  Cotai is 
slaed to host 16 mega-resorts and have 60,000 hotel roms by 
2009, more than the 40,000 currently in Hong Kong and the 
11,000 currently in Macau.  Las Vegas Sands owns phase one of 
the Cotai Strip and plans US$11 billion in investments there. 
 Its first resort, the Venetian Macau will open in the fall 
at a cost of US$2.3 billion.  The Venetian Macau will house 
3,000 hotel rooms, a 1.2 million square-foot exhibition and 
convention center, and one million square feet of retail 
space, making it the largest shopping mall in Asia.  Twelve 
major international hotel groups plan to operate hotels and 
casinos in the Cotai Strip.  The Conrad (Hilton), Four 
Seasons, Galaxy, Holiday Inn, Inter-Continental, Raffles, St. 
Regis, Shangri-La, Sheraton, Starwood, Traders and the 
Venetian will all open facilities in the next few years. 
 
¶5. (SBU) Macau hopes to diversify beyond gambling by branding 
itself as a regional convention and exhibition center.   When 
Macau's new casinos, hotels and convention centers open, it 
should have 71,000 hotel rooms, enabling it to handle 38 
million visitors annually.  To make this growth sustainable, 
the MSARG will need to make important policy decisions 
concerning transportation, health care, migration/labor, 
energy, and the environment. 
 
---------------- 
Banco Delta Asia 
---------------- 
 
¶6. (SBU) The Banco Delta Asia case -- wherein the U.S. 
Treasury determined that a weakly regulated local bank had 
been exploited by North Korea -- exposed Macau's financial 
and regulatory systems' vulnerabilities to money laundering 
by criminals and rogue regimes alike.  If Macau is to 
successfully upgrade its banking and financial services 
sector, it will have to ensure that its legislation and 
 
HONG KONG 00001801  002 OF 003 
 
 
supervisory personnel are robust enough to prevent similar 
future abuses of the territory and its institutions. 
 
----------------- 
Human Trafficking 
----------------- 
 
¶7. (SBU) The MSARG was ranked "Tier 2 Watch List" in the 
State Department's 2007 Trafficking in Persons Report, as it 
was in the 2006 report.  The State Department's 
anti-trafficking office (G/TIP) accepted the Consulate's 
recommendation that Macau remain Tier 2 Watch List, but 
stressed the need for the Macau government to take steps to 
avert a Tier 3 ranking in 2008.  G/TIP's judgment reflected 
the Macau government's failure to acknowledge a trafficking 
in persons problem or take any noticeable measure -- even 
simple first steps -- to combat trafficking.  In recent 
weeks, however, the MSARG has committed to take steps to 
combat this crime. 
 
---------- 
Corruption 
---------- 
 
¶8. (SBU)  The massive infusion of money into Macau may create 
opportunities for financial malfeasance. In December 2006, 
Transportation and Public Works Minister Ao Man-long was 
arrested for accepting bribes.  Hong Kong's Independent 
Commission Against Corruption (ICAC) reportedly uncovered 
that Ao was moving large amounts of funds through Hong Kong 
and handed that information over to Beijing and Macau.  Ao's 
arrest shows that mainland China's anti-corruption drive also 
extends into the MSAR.  Macau's Commission Against Corruption 
functions independently, reports directly to the Chief 
Executive and is charged with investigating acts of 
corruption and fraud.  Moving forward, the question is how 
Macau's political culture and legal system will adapt to the 
new economic environment and curb both official and 
private-sector corruption. 
 
------------------------ 
Economic/Social Concerns 
------------------------ 
 
¶9. (SBU) Concerns exist that rapid economic growth will tax 
the capabilities of Macau society and the MSARG to adapt to 
and absorb change.  Some have questioned whether the MSARG 
has the expertise and wherewithal to promote rapid economic 
growth and development, while at the same time promoting 
necessary reforms and governing in a transparent manner. 
Observers worry that some MSARG officials are making 
decisions in the interest of promoting rapid growth, while 
ignoring important regulations regarding public tender 
procedures, licensing requirements, environmental impact, and 
zoning or building limitations. 
 
¶10. (SBU) Many young Macanese have forsaken or altered their 
education for relatively well-paid jobs in casinos.  Not only 
has this trend reduced the talent pool for the MSARG and 
local small/medium private enterprises, it also has created a 
growing wealth gap.  Housing prices  have increased 
significantly.  These sorts of dislocations have led to more 
vocal public protests in Macau, particularly among the less 
skilled, middle-aged people who have not received the 
benefits of Macau's transformation and are less able to adapt 
to the new economic realities.  Recent economic growth 
already has outstripped the supply of both skilled and 
unskilled labor.  Nonetheless, some sectors of the Macanese 
public strongly oppose the importation of labor.  For the 
past two years, clashes have broken out with police during 
the annual May 1 (International Labor Day) activities, with 
labor and immigration issues contributing to the anger of the 
demonstrators. 
 
--------------------------------- 
Health Care & Infectious Diseases 
--------------------------------- 
 
¶11. (SBU) Macau's health care system is coping with the 
territory's quick economic expansion, rapid population 
growth, and large influx of tourists.  While existing health 
care facilities are able to provide preventive care to local 
residents, health care officials acknowledge that Macau's 
crisis response capabilities must be expanded quickly, 
particularly due to the threat of Avian Influenza and other 
emerging infectious diseases.  Macau lacks the technical 
expertise of Hong Kong and largely depends on it for 
information on emerging infectious diseases and how to 
develop response strategies.  Macau plans to follow Hong 
 
HONG KONG 00001801  003 OF 003 
 
 
Kong's lead in responding to an Avian Influenza (AI) or any 
other pandemic.  Macau also needs to build up its emergency 
response capabilities, particularly in the Cotai region. 
Tuberculosis, HIV/AIDS and dengue fever remain immediate 
public health concerns. 
 
----------- 
Environment 
----------- 
 
¶12. (SBU) Macau's air quality is worsening due to 
manufacturing in Guangdong province, emissions from the 
transportation sector and localized diesel electricity 
production.  Macau's drinking water supply is almost 
completely dependent on tributaries of the Pearl River, which 
face problems with pollution and excessive salinity.  The 
Macau Environmental Council (EC), a government body charged 
with monitoring the condition of the environment, has neither 
regulatory nor law enforcement powers.  The Macau Special 
Administrative Region Government (MSARG) recognizes the need 
to create a body with true regulatory and enforcement 
capabilities, but appears to lack the technical expertise and 
political will to do so, possibly out of fear that it could 
slow down short-term growth. 
 
-------------------------------------------- 
Transportation & Other Infrastructure Issues 
-------------------------------------------- 
 
¶13. (SBU) The MSAR must expand its transportation 
infrastructure.  Plans are afoot for an inner-city light 
train system, a regional rapid rail system, the expansion of 
the airport, helicopter and ferry terminals, as the gaming 
and entertainment industries are drawing in more tourists and 
workers to Macau.  The MSARG will have to focus intensely on 
the territory's infrastructure needs just to keep up with 
estimated future growth.  Macau receives its water and 
electricity from the mainland; the area of Guangdong adjacent 
to Macau also is growing rapidly, raising concerns about 
maintaining steady supplies of these resources. 
Cunningham