U/S LAVIN DISCUSSES MACAU DEVELOPMENT WITH ACTING

UNCLAS HONG KONG 000013 SIPDIS SENSITIVE SIPDIS STATE FOR EAP/CM STATE FOR EB/TPP STATE PASS USTR STRATFORD/WINTERS/CELICO USDOC ITA LAVIN/MACQUEEN TREASURY FOR LEVY/GLASER/SHARMA E.O. 12958: N/A TAGS: ECON ELAB ETRD MC SUBJECT: U/S LAVIN DISCUSSES MACAU DEVELOPMENT WITH ACTING CHIEF EXECUTIVE CHAN ¶1. (SBU) SUMMARY: Department of Commerce Under Secretary for International Trade Franklin L. Lavin met with Macau's Acting Chief Executive Florinda Chan on December 9. Chief Executive Edmund Ho was reportedly attending an economic conference in Guangzhou. Lavin and Chan discussed the liberalization of Macau's gaming sector, the growth in tourism and gambling, financial sector regulation, and the sanctioning of Banco Delta Asia. END SUMMARY. ¶2. (SBU) Lavin congratulated Chan on the liberalization of Macau's gaming sector, which allows U.S. firms to enter the market and has led to explosive growth in tourism, gaming, hospitality, and retail. Chan welcomed increasing U.S. investment and tourism; she noted that Macau's 2006 GDP is expected to show double digit increases. Many analysts forecast 15% growth over 2005 figures, totaling approximately 100 billion patacas (US$13 billion). The Macau Special Administrative Region government (MSARG) budget also will increase from 25 billion patacas (US$3.2 billion) in 2006 to 30 billion patacas (US$3.8 billion) in 2007. This rapid growth is forcing Macau to import approximately 50,000 day laborers from mainland China as Macau's indigenous labor force only totals 220,000. Small entrepreneurs are learning to cope with both labor shortages and increasing property rents. (Septel will describe Macau's economic growth and development in greater detail). ¶3. (SBU) Lavin asked Chan to describe MSARG's efforts to regulate the financial sector - specifically the casino industry - and how Macau benchmarks these efforts. Chan replied that MSARG is finalizing legislation and training law enforcement authorities to upgrade regulatory capabilities. In March 2006, the MSARG passed both anti-money laundering and anti-terrorism finance legislation, which is being implemented. The MSARG established a Financial Intelligence Unit in 2006, participates as a member of the Asia Pacific Group, and maintains a cooperative relationship with mainland China and Hong Kong monetary authorities. Chan added that Lavin's visit coincided with a mutual review of Macau by the Asia Pacific Group. ¶4. (SBU) Lavin queried Chan for Macau's reaction to the sanctions imposed by the U.S. on Banco Delta Asia (BDA). Chan replied that the MSARG continues its close cooperation with the United States, Hong Kong and mainland China. She stated that Macau is under great pressure - "not just economic" - to resolve the BDA situation. ¶5. (SBU) Lavin stated that increasing amounts of money will soon pass through Macau, some of which will be dirty money. He noted that money launderers will seek to exploit Macau, particularly if neighboring jurisdictions have tougher financial oversight regimes than does Macau. He added that U.S. financial enterprises and casinos operate under national and international regulatory controls, which may be helpful to the MSARG. Chan added that U.S. institutions in Macau have to follow Macau law. ¶6. (U) This report was cleared by U/S Lavin's staff. Sakaue