2016-10-31

GAMBLING AS DEVELOPMENT IN GOA AND MACAU


By Jukka Jouhki and Kenneth Bo Nielsen (guest author)

The meaning of 'development' has been significantly transformed during the past decades of global neoliberal restructuring. As the political scientist Kanchan Chandra wrote recently with reference to India:
Before liberalisation, the term 'development' usually meant large state-led infrastructure or public works projects. Private sector activity was not considered 'developmental.' In the postliberalisation economy, the term 'development' has become a shorthand for a package of vaguely defined terms including 'urbanisation,' 'industrialisation,' and 'infrastructure creation' in which it is assumed that the private sector will take the lead.
What Chandra observes in India is of course not particular to that country, and it shows very clearly how almost anything that involves economic activity spearheaded by private capital can be subsumed under the label 'development' – including, perhaps surprisingly, gambling.

In this article we look at how gambling is being promoted as a driver of economic development in two small former Portuguese enclaves – Goa and Macau – in two of the world's most important emerging economies, namely India and China.

Goa and Macau were for centuries part of the Portuguese Estado da India, the Portuguese state of India. In 1961 the Indian army kicked out the Portuguese and Goa joined the Indian Union; sovereignty over Macau was, in contrast, transferred to China in 1999 under more peaceful circumstances, leaving Macau to operate with a high degree of autonomy.

As part of a (crumbling) sea-based Portuguese empire it was maritime trade – and not least a short-lived but very lucrative opium commerce – that for centuries connected these two trading stations. Apart from this shared colonial history, what unites them today is their reliance on gambling as a way of developing their respective tourism-based economies.

There are several more or less well-developed arguments for why casinos are good for economic development. They create jobs; they generate tax revenues that can be used to fund, for example, public education and health; and they boost local retail sales. These arguments are often heard when casinos are justified in the small state of Goa, known as the Las Vegas of India.
 
Goa, 'Las Vegas of India'. Source. 

The first casino in Goa opened in the late 1990s and the state is one of only three places in India where legal casinos operate. The others are the remote hill state of Sikkim and the small Union territory of Daman & Diu, the latter also a former Portuguese enclave. But, Goa is the only place where ‘live gaming’ – with a real person dealing you the cards or spinning the roulette – takes place on the handful of Goa’s floating casinos that are located offshore on the Mandovi River where it runs through the capital city of Panjim. In addition, Goa has several casinos located on land.

Most of the customers are domestic Indian tourists, and the casinos generate significant annual revenue for the state coffers. The exact figures appear to be uncertain and estimates range from anywhere between USD 30 million to 100 million per year. Although this amounts to no more than one to five percent of the annual state budget, it is a sum that the state cannot currently do without:

Goa's Chief Minister Laxmikant Parsekar defening Goa's casinos. Source: Calvin Ayre.com.

Over the past years the Goan economy has been badly hit by a total ban on mining, something which has hurt the state finances. And even though mining recently resumed, the sharp fall in the global price of iron ore means that mining no longer generates the kind of revenue that it did six or seven years ago. Not only do the casinos generate revenue and taxes, they also attract large numbers of domestic tourists who may spend lavishly also outside the casino – on food, drinks, accommodation, shopping, and more.

The gaming industry is enthusiastic about the future of casino gaming in Goa. With the Indian middle class growing, and with gaming only being legal in very few places, Goa looks set to remain the no. 1 holiday destination for Indians with money to spend. Thus, Jaydev Mody, the chairman of Delta Corp which operates two offshore casinos, recently said that it was possible to ‘create a destination just like Singapore or Macau’ in Goa. All one had to do was to create resorts and casinos and fill them up, he told the BBC.

But, there is also strong local opposition to the casinos which many see as a social evil and a bad influence on Goan society. In Panjim, many taxi drivers can tell you heart breaking stories of how they have taken devastated gamers from the floating casinos to the airport after they have gambled away their entire fortune in just a few hours. Gambling addiction is reportedly on the rise, and many want the casinos to either relocate out of the Mandovi and into the deep sea, or to shut down completely. But that is unlikely to happen. The current Chief Minister of the state, Laxmikant Parsekar, who had for many years stated that he is against casinos in Goa, has now – just like his predecessor in office – swung around to 'acknowledge' that the state depends on the casinos for employment and revenue. 
 
A floating casino in Macau. Source: Jukka Jouhki.

For Macau, the liberalisation of the state monopoly on gambling in 2002 is perhaps the single most important event to ever have taken place, politically, culturally and economically. After 2002, international casino companies and millions of gambling tourists rushed to Macau. Now, every year more than 30 million tourists visit Macau, the size of only one third of Manhattan and with a population of just 500,000, to spend their money in casinos, and on shopping in the casino complexes. Most tourists come from mainland China where gambling – other than lottery – is forbidden by law, but where different forms of gambling have been part of everyday life for ages. It is the growth of the Chinese middle class that has enabled tourism and recreational consumption so that Macau, as Professor Tim Simpson from the University of Macau puts it, is 'a laboratory of capitalist consumption for China'.

While Goa may be the Las Vegas of India, Macau is 'Vegas on Steroids'. In terms of revenue Macau surpassed Las Vegas as the global Mecca of gambling already a decade ago, and today revenue stands at six times that of Las Vegas. An average tourist spends only a day or two in Macau, but easily spends a thousand euros in a casino, and another thousand euros on shopping and services. Through taxation, the government of Macau earns more than 10 billion euros annually, making Macau's GDP per capita the second largest in the world. 

In the ten years after the gambling monopoly ended, Macau's total GDP grew fivefold; and, unlike in Goa where the number of casinos are limited in number, gambling has considerably increased the quality of life of many Macanese citizens. Employment rates are high because gambling, tourism and construction demand a large workforce, and some of the profits from the industry do trickle down to benefit people at large through better schools, better health care, heritage conservation, and so on.

However, this reliance on a single industry makes Macau's economy very vulnerable to the fluctuations of global economy and especially to the slowdown of China, where the anti-corruption campaign has stopped many wealthy mainland businessmen from traveling to Macau to spend their money. Hence, for a few years now Macau’s economy has slumped. The recent slump notwithstanding, however, the gambling boom has changed Macau culturally, socially, environmentally, and even geographically. 

A gondola inside the Venetetian Macao, the biggest casino in the world. Source: Jukka Jouhki.

The cityscape has become a 'casinoscape', and the increasing demand for gambling outlets has made Macau expand its territory into the sea. For example, a strait between two Macanese islands was filled to form the Cotai Strip, a concentration of casinos; and a new airfield was constructed by filling a strip of sea east of Taipa island. Incidentally, Goa too is in the process of building its second international airport in an attempt to increase tourist arrivals.

Even without the tourists, Macau is the most densely populated area in the world – three times more than nearby Hong Kong. Thus, hosting an additional 30 million visitors every year is a big challenge to the local transport system, to city planning and, of course, to local politicians who have to figure out ways to redistribute the gambling revenue and restrain inflation. As Professor of Political Science Bill Chou from the University of Macao observes, 'right now the biggest problem of Macau is that the benefit of the economic development is highly concentrated in the hands of a very small number of business people and pro-government organizations.' 

For that (and other) reasons, the Macanese citizens themselves are not uniformly enthusiastic about their economy being so dependent on gambling and, like in Goa, people are sceptical about the money laundering and prostitution that tend to accompany gambling on a large scale. Thus, while gambling is certainly a popular Chinese timepass that produces the kind of 'social heat' that is conventionally seen as good for social relationships, the way the industry works in contemporary Macau has rendered it somewhat morally dubious.

Seen from Goa, what has happened in Macau will appear as either a dream come true, or as the realisation of one's worst nightmare, depending on perspective. While there is no denying the fact that gambling increases economic activity and creates jobs, the question is whether this outweighs the perceived negative social impact of the gambling industry and, not least, the very real democratic deficit that emerges when a powerful gaming lobby acquires the clout to define state policy and economic priorities. 



Sources and more information