CONSUL GENERAL'S FAREWELL CALL ON MACAU SECRETARY

C O N F I D E N T I A L SECTION 01 OF 02 HONG KONG 001281

SIPDIS

E.O. 12958: DECL: 07/14/2014
TAGS: PGOV PREL ECON EINV CH HK MC
SUBJECT: CONSUL GENERAL'S FAREWELL CALL ON MACAU SECRETARY
FOR ECONOMY AND FINANCE FRANCIS TAM

REF: HONG KONG 1246

Classified By: CONSUL GENERAL JOE DONOVAN FOR REASONS 1.4(B) AND (D)

1.(C) Summary. In the Consul General's farewell call on
Macau Secretary for Economy and Finance Francis Tam July 13,
Tam expressed appreciation for the role of U.S. foreign
investment in Macau's economy and said that despite the drop
in gaming revenues, Macau expects to have a balanced budget
this year. Macau has maintained a low (3.5 percent)
unemployment rate largely by sending roughly 20,000 foreign
workers home as construction projects have been suspended or
canceled. Beijing's decision to permit the University of
Macau to construct a new campus on Guangdong Province's
Hengqin island was a "breakthrough." Acknowledging earlier
widespread speculation that he would run for Chief Executive
to replace outgoing CE Edmund Ho, Tam wryly noted that his
choice not to run (against Fernando Chui) "was more than a
personal decision." One major challenge Chui will face is
inevitable comparisons Macau residents will make with
outgoing CE Edmund Ho. Looking to the future, Tam said Macau
must further develop its convention, exhibition and cultural
tourism while avoiding pressure to diversify into areas where
it has no expertise. End summary.

Despite Downturn, Macau Finances in Good Shape
-------------- -

2.(C) In the Consul General's farewell call on Macau
Secretary for Economy and Finance Francis Tam Pak Yuen on
July 13, the CG complimented Tam and the Macau Special
Administrative Region Government (MSARG) for policies that
have led to dramatic economic growth and progress over the
past several years and expressed appreciation for Tam's work
in strengthening U.S.-Macau economic ties. Tam thanked the
CG for his support. Turning to the important role of foreign
investment in Macau's economy, he said that with the support
of U.S. companies, "Macau has been doing very well." Despite
the global economic downturn, Macau is "still doing ok," with
an unemployment rate of around 3.5 percent. Tam admitted
that one of the reasons unemployment has remained low is the
MSARG's policy of protecting local workers by sending foreign
workers home. On the fiscal side, although gaming revenues
have dropped by 12 percent in the first six months of 2009
over the same period last year, Tam expects Macau will have a
balanced budget for the year, and for the next several years
"will still be ok." (Note: Thanks to a flood of
gaming-related income and limited spending capacity, Macau's
tax revenues have been double its expenditures for the past
two years. Plans to spend more on infrastructure and social
services in 2009 are only slowly being implemented. End
note.)

3.(C) In response to the CG's observation that some U.S.
casino operators in Macau are struggling, Tam said he hoped
that as the global economy improves, "people like (Las Vegas
Sands Chairman) Sheldon Adelson will be able to raise
additional funds in the capital markets." (Note:
International press is reporting that Las Vegas Sands is
planning to restart two stalled projects in Macau and is
exploring options to raise several billion U.S. dollars,
possibly through an initial public offering in Hong Kong or
sale of some of the company's Macau assets. End note.) He
noted that Macau companies had "only" cut about 20,000 of the
roughly 100,000 foreign workers employed in the territory.
About 15,000 of that number were involved in construction
projects which were shelved or postponed.

University of Macau's Hengqin Expansion a Breakthrough
-------------- --------------


4. (C) Tam described as a "breakthrough" China's recent
decision to allow Macau to lease 1.1 square kilometers of
land on adjacent Hengqin Island in Zhuhai to build a new
campus for the University of Macau (reftel). Tam opined that
it would have been much more difficult if Macau had attempted
to get permission from the central government to develop a
for-profit project on Hengqin. He stressed that Macau needs
more land, and "a university is something everyone can
support."

Mum on Future Plans; CE Ho A Tough Act To Follow
-------------- ---


5. (C) Tam, 60, said he did not know what his future plans
would be following the conclusion of Chief Executive Edmund
Ho's second and final five-year term of office in December.
Any future government position would depend on the next CE,
almost certainly former Secretary for Social Affairs and
Culture Fernando Chui. Acknowledging the CG's observation

HONG KONG 00001281 002 OF 002


that many people in Macau had earlier speculated he might run
for Chief Executive to replace Ho, Tam shrugged, wryly noting
that the choice not to run "was more than a personal
decision." Asked what Tam felt would be the toughest
challenges facing Chui, Tam acknowledged that CE Ho would be
a tough act to follow. He expressed the hope that Macau
residents guard against any quick comparisons between Chui
and outgoing CE Edmund Ho, whom he described as having a very
strong character. Much will depend, Tam noted, on who Chui
selects to head Macau's cabinet agencies. He doubted the
presumptive CE would name his cabinet before elections for
Macau's Legislative Assembly on September 20. Assuming the
Chief Executive transition process proceeds as expected, Chui
will be "elected" by a 300-member selection committee on July
26, approved by Beijing thereafter, and will take office
December 20.

Macau Should Focus on Improving Tourism Sectors
-------------- --


6. (C) Asked what Macau can do to diversify its economy, Tam
said that as a small economy heavily dependent on gaming and
tourism Macau has little flexibility. It must be realistic
and work to do well what it can do. This, Tam said, means
further developing convention, exhibition and cultural
tourism. It does not mean trying to return to textiles,
which long ago left Macau for lower cost locations in the
mainland and elsewhere, or trying to develop high technology,
Tam continued. While various members of the community are
always pressing for Macau to diversify, Tam recognized this
is not a simple thing to do.
DONOVAN