MACAU SENIOR OFFICIALS DISCUSS ECONOMIC

UNCLAS HONG KONG 003661

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: CH ECON ELTN HK MC EINV
SUBJECT: MACAU SENIOR OFFICIALS DISCUSS ECONOMIC
DEVELOPMENT PLANS


1. (U) Summary. Macau Chief Executive Edmund Ho and the
PRC's Ministry of Foreign Affairs Commissioner in Macau Wan
Yongxiang told CG James Cunningham that Macau would sustain
at least a 10 percent GDP growth rate through 2006.
Looking toward Macau's development plans during the next
five years (2006 - 2010),Macau would focus on developing
its transportation infrastructure and its gaming,
convention and tourism industries. Both Ho and Wan
expressed concerns that labor force constraints would pose
significant challenges during this period. Cunningham
stated U.S. business interests would contribute to the
development of Macau's economy and be a positive force
during Macau's adjustment period. He encouraged both Ho
and Wan to take advantage of U.S. companies' expertise in
the transportation and services industries as Macau
continues to develop. End Summary.


2. (U) Ho told the CG that during the first half of 2006,
Macau's GDP grew by 17.6 percent, led by strong growth in
its export and tourism industries. Ho expects that the
rate of growth would slow during the second half of 2006,
and forecast an overall 2006 growth figure of 11 percent.
Ho then outlined Macau's development plans for 2006 - 2010.
Transportation infrastructure development would be central
to Macau's growth. Macau's government will decide in early
2007 whether to build a light rail system, which would then
take three to four years to construct, said Ho. Macau
would continue to encourage international investment to
develop the reclaimed land between Macau's two offshore
islands, Taipa and Coloane (the "Cotai" area) as a resort,
convention and gaming center over the next 5 years.
Guangzhou, Shenzhen and Macau would also cooperate in the
construction of a regional rapid rail system. Ho stated
that the rail system would provide passengers a fast,
comfortable 30-minute ride from Guangzhou to Macau and
would also connect Shenzhen and Macau via Guangzhou. Macau
is positioning itself to be the preferred tourist
destination in the Pearl River Delta, where mainland
tourists can enjoy upscale dining, entertainment and
gaming, Ho claimed.


3. (U) Wan also told the CG that Macau's GDP grew 17.6
percent during the first half of 2006, but forecast a
higher annual growth rate than Ho, at approximately 15
percent. Wan cited several reasons for Macau's continued
impressive growth, including support from the PRC central
government, continued implementation of China's opening-up
policy, tourism rights for mainland residents to travel to
Macau and the introduction of foreign direct investment
(Wynn's Macau Resort being a prime example). Wan stated
that Macau's overall goal is to develop into a more
diversified economy. He noted that the Wynn Macau Resort,
which celebrated its grand opening on September 5, was the
second large-scale U.S. gaming operation to open in Macau.
(In 2004, the Sands Casino became the first U.S. gaming
operator to open in Macau.) The introduction of additional
gaming operators into Macau would lead to a bigger,
stronger gaming industry, which in turn would spur
additional growth in related industries such as the
convention and resort industries, Wan stated. Macau
desires to grow into an international tourist and
convention destination, where both international and local
gaming operators must operate within the law.


4. (U) Ho and Wan acknowledged that Macau would face
challenges created by the interaction of Macau's small
labor pool with increased economic development and business
growth. Wan stated that due to the limited labor pool,
higher paying casinos will have an adverse impact on the
labor forces in other sectors. Macau will also have to
deal with the dominance of the gaming industry in its
economy and a growing income gap between those who are
benefiting from Macau's economic development and those who
are not.

Cunningham