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Friday, May 11, 2007

Melbourne to Macau: Gambling, Packer and Ho, ho, ho

Gambling, whatever form it takes - whether high-stakes baccarat in high rollers' rooms in casinos with international patronage or card games on blankets in the bush where Aboriginal men and women gamble social security benefits - brings with it three things: corruption, crime and calamity.

It depends on your point of view whether you see such social detriment being outweighed by social benefit. Jeff Kennett, former Premier of Victoria, justified the social benefit in The Age this week.

Perhaps Jeff ought to enter into discussion with the citizens of Macau and explain the social benefit of gambling to them. True, gambling seems to be the whole reason for the continuing existence of Macau. The former Portuguese colony, now handed over to China, was coveted by Europeans as a significant and strategic port. Whatever may have been significant in the European discovery and annexing of Macau, gambling is the significant factor now. And it is causing problems.

Macau has overtaken Las Vegas to become the world's gambling capital and is enjoying rapid growth, but violent clashes on international Labour Day indicate that the small southern Chinese city is socially ill. Read more here.

Macau now has 22 casinos which generated total gambling revenues of 56.2 billion patacas (US$ 7.2 billion) in 2006. In contrast, Las Vegas generated US$ 6.6 billion last year.

And an Australian is getting on the bandwagon.

Jamie Packer is Australia's richest man with a net worth of $5.5 billion. The Packer family has long interest and dominance in the Australian media. In recent years, however, Packer interests have entered the Casino business. The gambling business interest has increased over the years. The Packers have gone from being a media company with some gambling interests to a gambling company with media interests to the latest move which splits the business interests completely. This will expedite gambling (or - the word in gloss and spin circles - gaming) investments particularly those with the Ho family, who until 2002 held a 40 year gambling monopoly on Macau, and their company, Melco, with whom Packer is in partnership in opening Macau's 26th casino.

Crown Casino in Melbourne significantly impacts the city's economy, as Jeff Kennett says. Crown Macau, it is expected, will significantly impact Macau. The Crown will be Macau's 26th casino but will be Macau's very first six star hotel.

If, dear Reader, you are a concerned and ethical investor, you might like to note the financial institutions with whom the joint venturers are in cahoots:

And, where does all this leave the mug punter - high roller or day tripper?

At Crown in Melbourne, there are reports that Crown could face fines of up to $1 million following an "underhanded" rule change that could increase its take from some gamblers by 40 per cent.

Meanwhile in Macau, because of an increase in gaming tables it is expected that revenue returning to gamblers will head downward. Up the tables and down the pay back. Mmmm....

Forbes says that in a recent research report, Morgan Stanley predicted that the average daily turnover per VIP gaming table would drop 22% to about $27,823 this year and dive another 50% to $13,608 a day in 2010. The average chip turnover per mass gaming table will plunge 21.7% this year to $3,266 a day and hit $1,912 in 2010, Morgan Stanley said. Mmmm....

And the locals....

Migrant workers (in Australia they are frequently referred to as "guest workers"), mainly from the PRC and Southeast Asia, made up approximately 10.3 percent of the work force. In May several thousand workers and union members marched in demand of more effective measures to prevent the hiring of illegal workers and to limit the number of imported workers (see section 6.b.). They often received less than local residents for performing the same job, lived in controlled dormitories, worked 10 to 12 hours per day, and owed large sums of money to labor-importing companies for purchasing their jobs. They had no collective bargaining rights and no legal recourse in the case of unfair dismissal. Country Reports on Human Rights Practices - 2006 : U.S. Department of State [Miss Eagle wonders how many work at casinos and will work at the Ho-Packer casinos?)

Ekklesia reports that the locals hit the streets again:

Thousands of people in the former Portuguese enclave in China took to the streets on 1 May 2007 to expressed dissatisfaction at poor governance in the city, citing corruption. They also noted unhappiness at sharp increases of imported labour and hikes in property prices. During the May Day clashes, 10 protesters were arrested and police fired shots into the air as a warning, accidentally injuring a passer-by.

Jamie Packer and Lawrence Ho might be happy. Their respective gambling addicted governments might be happy. Clearly not everyone is - neither in Macau nor Melbourne.