Cities 61 (2017) 96–108

Contents lists available at ScienceDirect

Cities

journal homepage: www.elsevier.com/locate/cities

Viewpoint

Explaining urban economic governance: The City of Macao

Li Sheng
Department of Government and Public Administration, University of Macau, Humanities and Social Sciences Building, University of Macau, Macao

a r t i c l e i n f o a b s t r a c t

Article history: This paper traces the root causes of the Macao Special Administrative Region (SAR) government's inability to reg-
Received 15 February 2016 ulate the city's major economic issues. This regulatory deficiency can be partly attributed to the city's 500 years of
Received in revised form 13 August 2016 Portuguese colonial rule, although some of the problems have been caused by the casino boom, which began with
Accepted 14 August 2016
the liberalization of Macao's gaming industry, and the government's failure to cope with ensuing dramatic chang-
Available online 28 August 2016
es. From a historical and institutional perspective, the author illustrates and analyzes the dynamic relationship
Keywords:
between economic regulation and urban politics on a rapidly growing urban island facing various governance
Urban island challenges.
Gaming liberalization © 2016 Elsevier Ltd. All rights reserved.
Junket system
Social externalities
Economic diversification

1. Introduction
Macao has undergone an economic miracle due to its double digit
GDP growth rate since its sovereignty was returned to China in 1999.
The city's GDP per capita rose from US$14,258 in 2002 to US$89,333
in 2014, and the urban island has become one of the richest economies
in the world (Macao Statistics and Census Services, 2002, 2014). The
city's post-colonial economic boom is largely due to the liberalization
of its gaming policies with respect to foreign investors in 2002 and to
China's Free Individual Travel (FIT) policy that was initiated in 2003
(Sheng & Tsui, 2009b). While transforming Macao into a wealthy and
modern metropolis, these stimulus-oriented policies also made its
mono-economic structure and overreliance on casinos more pro-
nounced (Tables 1, 2).
To reduce the mono-structure and resulting economic risks, the gov-
ernment of Macao has undertaken a series of measures to diversify the
city's urban economy. As early as the founding of the SAR in 1999, policy
makers designed subsidies and incentive schemes aimed at developing
the city into a conference and entertainment tourism destination. Since
the liberalization of gaming policies and especially following the global
financial crisis, casino concessionaires have been urged and then for-
mally required to invest in the city's non-gaming tourism infrastructure
(Li, Gu, & Siu, 2010). In fact, gaming concessionaires have established a
number of conference venues as well as quite a few family-friendly
amusement facilities. However, all these efforts seem to have been inef-
fective, and Macao's overdependence has worsened, overshadowing all
other parts of the economy. While the city's gaming revenue accounted
for 20–25% of Macao's GDP during the 1990s, this share increased to 64%
E-mail address: edmundsheng@umac.mo.
by 2015. In fact, over 80% of Macao's public revenue came from its casi-
nos (Macao Statistics and Census Services, 1999, 2015).
The liberalization of Macao's gaming industry and the resulting for-
eign investment may be considered a dialectical process that has had
consequences for Macao's public administration. Casino liberalization
and modernization not only changed Macao's economic landscape but
also forced the SAR government to take on multiple roles to regulate
the urban economy. While the gaming sector is by far the most impor-
tant engine of growth, Macao's urban economy is also compromised
by its over-reliance on this industry. Macao must address a number of
challenges, particularly its overdependence on the junket system and
high rollers, its overreliance on Chinese gamblers, its lack of a skilled
labor force, and the ineffective government regulation of its economic
activities. While the previous Portuguese government was reluctant to
intervene in urban economic issues, the SAR government is required
by both the host community and the Chinese central government to ac-
tively fulfill its responsibilities in fostering economic growth, diversify-
ing the urban economy and improving the city's global competitiveness.
Two hypotheses are established in this research: 1) the regulatory
capacity of Macao's government is inhibited by certain institutional
flaws inherited from the former Portuguese Macao government, and
2) Macao's urban island culture causes the SAR government's inability
to pursue the institutional reforms that would allow it to tackle the
problems induced by the post-colonial casino boom. Two objectives
are pursued: 1) the city's regulation of economic matters is analyzed
from a historical and evolutionary perspective, and 2) the factors that
have caused Macao's changing economic governance are analyzed
using a holistic approach. In particular, formal and informal institutions
that hinder the city's growth and harmony have been identified.
Though it is the world's largest casino city, Macao remains a remote
urban island in global terms due to its tiny size, small population and

http://dx.doi.org/10.1016/j.cities.2016.08.011
0264-2751/© 2016 Elsevier Ltd. All rights reserved.
 L. Sheng / Cities 61 (2017) 96–108 97

Table 1
Number of casinos in Macao, 2004–2014.
Source: Macao Statistics and Census Services (2004–2014).

Concessionaries 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

SJM 13 15 17 18 19 20 20 20 20 20 20
Galaxy Casino 1 1 5 5 5 5 5 6 6 6 6
Venetian Macao 1 1 1 2 3 3 3 3 4 4 4
Wynn Resorts (Macao) 1 1 1 1 1 1 1 1 1
Melco PBL Gaming (Macao) 1 3 3 3 3 3 3 3
MGM 1 1 1 1 1 1 1 1
Total 15 17 24 28 31 33 33 34 35 35 35

strategic insignificance. However, this case study identifies various pat-
terns of socioeconomic development that seem to be relevant to a num-
ber of urban islands and coastal cities around the world. The research
findings related to the gaming sector may also inspire tourist cities
that are pursuing casino legalization to promote economic growth by
deepening their understanding of the economic, social and political ex-
ternalities accompanying a casino boom. Urban decision-makers in
Macao may hopefully draw some implications from this research to
solve their social dilemma in the face of an economic miracle and devel-
op effective policy tools and regulatory institutions to cope with the
city's ongoing challenges. Hopefully, the research findings will inspire
other similar cities to effectively reform their social-political structure
to match the processes of modernization and globalization.
2. Colonial governance in economic affairs
2.1. Evolution of the urban economy prior to handover
Since its founding as a Portuguese colony in 1557, Macao's territory
has been continuously expanded in a process of land reclamation from
the sea. In the late 15th century, the urban island of Macao had a record-
ed area of only 2.78 km2. With the annexation of Taipa and Coloane
Islands in the mid-19th century, the Portuguese enclave on Chinese ter-
ritory increased to 10.28 km2. During that period, the city became an
economic hub and power center for Westerners in Asia, and it had a re-
corded population of 40,000 people from all over the world (Liu, 2000).
The Opium Wars, however, marked the rise of Hong Kong as the Euro-
pean center for Chinese trade, causing a full economic recession in
neighboring Macao. To offset the decline in revenues in the face of
Hong Kong's competition and dominance in Chinese commerce, the
Portuguese authority in Macao legalized casino gambling in 1847,
transforming the city into a center of all types of illegal businesses
(Mann, 2014).
Aside from the gaming industry, certain traditional manufacturing
industries, particularly fireworks and incense, flourished in the city
throughout the 19th century and the first half of the 20th century. In
the 1950s, the textile industry rapidly expanded, driven by an influx
of foreign investment that had been drawn to the city's low taxation
policies. Modern light industries transformed the city into an export-
oriented manufacturing hub, and urban infrastructure was improved
in this process of industrialization and modernization. By the end of
the 1970s, the textile and garment sectors accounted for 90% of the city's
entire visible exports, and these sectors dominated Macao's
manufacturing industry until the end of the 1980s (Edmonds, 1993).
Casinos, which had dominated Macao's urban economy since the
mid-19th century, underwent a dramatic change in the early 1960s.
Sociedade de Turismo e Diversoes de Macao (STDM) won a monopoly
over Macao's gaming industry in 1962 and modernized the city's tradi-
tional casinos, introducing a number of Western games, facilities and
services. In particular, a branch of STDM, Shun Tak, introduced the
region's first hydrofoil in 1964, allowing travel between Hong and
Macao in under an hour. The region's modernized and well-connected
sea transit system has been effective at fostering Macao's casino boom
with tourist arrivals increasing quickly following these improvements
(Barden & Runnacles, 2007).
The once flourishing manufacturing industry declined in the 1990s
due to external factors. Macao's privileged quota of exports to Europe
was largely reduced in the face of globalization. Concurrently, industri-
alists gradually moved their factories from the city to mainland China,
where labor costs were much lower (Sheng & Tsui, 2009a). This dein-
dustrialization process was accompanied by the rise of various gam-
bling-related businesses. Hotels, restaurants, retail shops, and the
financial and real estate services experienced a boom, and the service
sector assumed an increasingly important role in the urban economy.
Notably, the gaming sector is considered a part of “recreational, cultural,
and other services,” which is under the umbrella of “service industry” in
Macao's national accounting and official statistical system. In fact, with
two-thirds of Macao's GDP and 25% of its total employment in 2015,
Macao's service industry is dominated by the gaming sector (Macao
Statistics and Census Services, 2015).

Table 2
Major economic indicators of Macao: 2002–2014.
Source: Macao Statistics and Census Services (2002–2014).

Indicators 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Nominal GDP (billion MOPa) 54.8 62.3 80.3 92.1 113.7 141,9 161.6 170.2 226.9 293.7 343.5 410.0 443.3
Real GDP growth rate (%) 8.9 12.6 26.9 8.5 14.5 14.5 3.4 1.7 27.5 21.3 9.2 10.7 -0.4
Per capita GDP (nominal value in 124,800 137,508 166,252 180,868 204,034 269,350 262,645 317,575 422,657 534,734 603,641 691,578 713,514
MOP)
Unemployment rate (%) 6.3 6.0 4.8 4.1 3.8 3.1 3.0 3.5 2.8 2.6 2.0 1.8 1.7
Gaming revenue (million MOP) 23,496 30,311 43,510.9 47,133.7 57,521.3 83,847 109,826 120,383 189,588 269,058 305,235 361,866 352,714
Gaming tax as percentage of total 67.1 72.1 76.6 72.7 n.a. 59.4 69.4 65.4 77.7 81.0 78.2 76.4 87.6
government revenue
Number of gaming tables 339 424 1,092 1,388 2,762 4,375 4,017 4,770 4,791 5,302 5,485 5,750 5,711
Number of slot machines 808 814 2,254 3,421 6,546 13,267 11,856 14,363 14,050 16,056 16,585 13,106 13,018
Number of casinos 11 11 15 17 24 28 31 33 33 34 35 35 35
Number of hotel rooms 8,954 9,185 9,168 10,832 12,978 16,148 17,533 19,259 20,091 22,356 26,069 27,764 27,904
Tourist arrivals ('000) 11,530.8 11,887.9 16,672.6 18,711.2 21,998.1 26,993.1 22,933.2 21,752.8 24,965.4 28,002.3 28,082.3 29,324.8 31,525.6
a
1 US$ for approximately 8 MOP (pataca).
98 L. Sheng / Cities 61 (2017) 96–108
2.2. Laissez-faire economic governance
Following Great Britain's victory in the Opium War against China,
the city of Macao was officially annexed by Portugal in 1845. The colo-
nial government followed laissez-fair policies, restraining from inter-
ventions in economic activities and pursuing free mobility of goods,
services, capital and people. In particular, low tariffs were imposed
and prescribed by law to facilitate free trade (Liu, 2000). Despite having
the ideal institutional framework for a free market economic system,
Macao's urban economy was much less impressive than that of its
neighbor, Hong Kong, and was not even comparable to that of the main-
land China's Canton. With the Asian Financial Crisis and pre-handover
public order disturbances in the 1990s, the entire urban island was
full of shabby building blocks and half-built construction projects, and
the streets were almost empty except for the casinos and the downtown
areas.
The colonial government of Macao was both bureaucratic and non-
transparent. Corruption, inefficiency and complicated administrative
procedures deterred foreign investors from undertaking reasonable in-
vestment projects in the city (Yee, 2001). Generally, the Portuguese au-
thority in Macao did not concern itself with the city's socioeconomic
development, and consequently, it showed minimal interest in econom-
ic planning. Throughout most of the colonial period, the Portuguese au-
thority did not effectively take responsibility for building up
infrastructure, regulating financial sectors, or promoting trade and in-
vestment. Then, following the 1974 revolution in Portugal, the Portu-
guese government decided not to maintain its colonial empire. In
addition, Macao was considered unprofitable, and Portugal repeatedly
expressed its desire to off-load Macao to China. Interestingly, China re-
fused to take on responsibility for Macao, creating uncertainty about
the city's future (Cremer, 1986). Therefore, the Portuguese authority
in Macao seemed to be reluctant to conduct any planning and expended
only minimal efforts to administer the colony.
The signing of the Sino-Portuguese joint communiqué on Macao's
future in 1987 marked a change in the city's economic governance.
The colonial authority began to conduct active industrial policies, and
Macao's manufacturing sector experienced a boom over the following
decade (Harkness, 2014). In fact, the arrangements stipulated in the
communiqué largely satisfied the needs and wants of both Portugal
and the Macanese, and the Portuguese were motivated to contribute
to the city's pre-handover development. On the one hand, Portugal
and Macao would benefit from the city's long-run prosperity. On the
other hand, a booming Macao might give Portugal's six-century contro-
versial colonial history a happy ending, enhancing its international
image. While Decree No. 49/85/M, enacted in 1985, lay the legal founda-
tion for promoting modern industries and economic diversity, the colo-
nial government also provided a number of monetary incentives to
foster local industrial development (Li et al., 2010). Furthermore, the
Portuguese authority also established various institutions to coordinate
and promote industrial development, particularly the Macao Productiv-
ity and Technology Transfer Centre, founded in 1995.
Because the colonial government generally followed laissez-faire
policies, there seemed to be no clear boundary between government
and market when STDM boss Staley Ho was granted the exclusive li-
cense to run casinos in the city. STDM not only stimulated the urban
economy and contributed enormously to government fiscal revenue
but also fulfilled its reinvestment and social obligations. In fact, STDM's
social obligations were a requirement of its gaming license, and these
promises have been successfully kept and even enriched in the current
concessionaire contract of Sociedade de Jogos de Macao (SJM), STDM's
successor. The social obligations stipulated in the licensing contract in-
cluded contributing a certain percentage of casino revenue to the
Macao Foundation and the Macao Tourism Development Foundation
and investing in Macao's infrastructure, particularly the city’s transpor-
tation network (Eadington, 2009). Additionally, gaming license holders
have often made donations to the city's education, science, culture and
charity programs through their respective corporate responsibility
schemes. These contributions have also included sponsoring Macao-re-
lated entities in other countries and regions, particularly China. In fact,
profitable casinos in colonial Macao were the major source of perfor-
mance legitimacy due to the gaming taxes that they paid to the govern-
ment and redistributed to Macao's society (Yee, 2001). By the end of the
1990s, nearly half of public revenue was generated by the submission of
STDM's gaming tax to Macao's Treasury. More importantly, Stanley Ho
also filled the communication gap between the separate Portuguese
and Chinese communities in the city, playing an important role in
both economic matters and social-political life (Fong, Fong, & Li,
2011). In particular, the continental Portuguese who ruled the colony
came and went based on a rotation, and they thus came to rely on the
cooperation of Stanley Ho to help them deal with their majority Chinese
population and their huge communist neighbor.
Although the Portuguese colonialists actively participated in the
city's economic governance in the pre-handover period, they were gen-
erally considered inefficient at regulating economic issues. Compared to
neighboring Hong Kong, the city's infrastructure was backward and its
overall educational level was rather low. Additionally, the Chinese
elite took up important government posts before the handover in
Hong Kong, but Macao's public administration continued to be domi-
nated by the Portuguese until the last minute of the handover. This de-
ficiency in governance caused an economic downturn and gangster
wars in casinos shortly before the handover. The city seemed to be fall-
ing into chaos due to its de facto power vacuum (BBC news, 1999).
2.3. Regulating the junket system
As early as the late 16th century, gambling was practiced in Macao,
mainly on wooden tables laid out across streets. By the mid-19th centu-
ry, there were over 200 Chinese roulette stalls, attracting thousands of
construction workers, domestics and harbor coolies. There were neither
fancy casinos nor high rollers (Chan, 2010). To simplify the administra-
tion of the gambling industry, the Portuguese colonial government
established a gaming licensing scheme that helped collect a gaming
tax from a few gaming stalls. The number of licenses was restricted to
guarantee time for effective money collection (Godinho, 2012).
In the 1930s, the Hou Heng Company won an exclusive gaming li-
cense that allowed them to monopolize all types of games. The firm
transformed traditional gambling houses and stalls into modern casinos
and provided guests with complementary services, such as tea, fruits,
and cigarettes; Cantonese opera shows were also organized. The city
of Macao was declared to be a casino city by the Portuguese central gov-
ernment in early 1960s, and low taxation and even duty-free privileges
were officially prescribed to attract tourists. Furthermore, the Macao
government organized public bidding for gaming concessions in 1962.
The newly formed STDM, owned by Stanley Ho and another Hong
Kong tycoon, won the exclusive gaming license and replaced Hou
Heng to become the monopoly over Macao's gaming businesses.
STDM not only promised a significant portion of its gaming revenue to
the government but also took responsibility for building up Macao's
physical infrastructure and social welfare (Carvalho, 2015).
The colonial government focused on the gaming sector's franchise
and revenue while ignoring the necessity of regulating this particular
industry in an efficient and lawful manner. In fact, STDM – and not the
Portuguese authority – was in charge of regulatory and controlling is-
sues, including auditing and revenue calculation (Eadington & Siu,
2007). This strange arrangement made the whole system rather
opaque. More importantly, conflicts between STDM and the govern-
ment were rarely solved through law and regulations; in most cases,
they were handled via negotiation and bargaining. This paradox of the
colonial government entrusting regulation to the party that needed to
be regulated may be explained by better understanding the colonial
government's position. The government was largely satisfied with and
dependent on the considerable tax revenue contributed by STDM.
 L. Sheng / Cities 61 (2017) 96–108
Additionally, the government was reluctant to intervene in complicated
matters among the Chinese. In fact, each and every problem seemed to
be solved by STDM using money (Godinho, 2013a). This practice actual-
ly reflected the deeply rooted informal and consensus politics in the city
and also demonstrated that Macao was an urban island where personal
intimacy was more significant for social harmony than the rule of law.
Although the gaming sector was liberalized in 1847, it was charac-
terized by an absence of appropriate regulatory authority until recently.
The regulation of the sector, particularly with regard to its junket sys-
tem, was neither poorly designed nor ineffectively enforced. Macao is
unique among casino cities in that it is not casinos but casino operators
who are licensed. As a result, the exclusive concessionaire is eligible to
manage all casinos and affiliated facilities. More importantly, a conces-
sionaire can easily pair with different unlicensed entities to establish
profit-sharing schemes by jointly conducting gaming businesses
(Godinho, 2007). In fact, STDM contracted out most of its VIP rooms
(specifically designed for high-spending gamblers) to companies and
individuals. The junket system, which regulates interactions between
the concessionaire and contractors (junket operators), emerged and
evolved to be the major force in Macao's gaming sector.
Macao's junket system has been operated in a non-transparent man-
ner through a number of informal institutions. STDM has outsourced
most of its VIP rooms to junket operators who have been well connect-
ed, luring high-spending gamblers to play in STDM-owned VIP rooms.
Junket operators made an agreement with STDM using a compensation
scheme that established a certain percentage of the turnover of chips as
their commissions. As the license holder was not allowed to issue credit
to gamblers, junket operators instead extended credit to their patrons,
which substantially stimulated the total turnover and consequently
the profit of the casinos. Notably, junket operators often contracted
their businesses further to junket representatives using a gross gaming
revenue sharing scheme (Wang & Eadington, 2008). These representa-
tives then utilized networks in different regions to recruit high-spend-
ing gamblers to come to junket operators' VIP rooms in Macao.
Junket operators are not licensed in Macao, and junket representa-
tives do not even need to be officially registered. These people are orga-
nized through the recommendation of families and friends, and there
may be several thousand of these junket associates. A junket operator
is assumed to have considerable wealth and a large social network.
They are also required to underwrite a certain amount of chips as the
precondition for signing an agreement with the license holder. During
the casino boom, some junket representatives who accumulated a
huge amount of commissions became junket operators, and the junket
system expanded quickly. In 2013, the junket system accounted for
over 70% of total casino revenue, dominating Macao's casino sector
(Siu Lam, 2013). This opaque junket system is also closely related to var-
ious illegal activities, particularly underground banks and triad battles.
However, the Macao government is reluctant to pursue in-depth re-
form, as the urban economy relies too heavily on this business.
In fact, there was no legal contract between Stanley Ho and the jun-
ket operators and representatives, as the gaming concessionaire
retained the exclusive right to the lucrative casino business, while his
junket associates had no official status. As a result, the junket system
was regulated by a number of informal institutions, creating many
gray areas between law and custom. For example, loan sharking was il-
legal, but without sufficient government oversight, informal credits
were granted that amounted to billions. Additionally, tax evasion con-
tinued to be a serious and ever-increasing problem, as it was extremely
difficult for the government to calculate the true turnover volume in the
casinos, particularly in the VIP rooms (Godinho, 2006). Furthermore, as
junket associates were connected to the underground economy, orga-
nized crime was often involved in fighting for high-value guests and
quick profits.
Although the Portuguese government passed laws and regulations
on gaming management, their enforcement was ineffective due to the
largely decentralized management structure within STDM. Facing
99
thousands of unlicensed and even anonymous junket associates orga-
nized by all sorts of strange, informal contracts and deeply embedded
criminal elements within the VIP rooms, the best path for the colonial
government seemed to be allowing STDM to continue to handle the is-
sues informally (Siu & Eadington, 2009). As a result, STDM gained a spe-
cial status as simultaneously both regulator and regulated, although the
colonial government officially reserved the right of ultimate interpreta-
tion. As an authoritative patriarch, Stanley Ho managed the casinos, su-
pervised the junket associates and intervened in business disputes.
3. Economic policies in the face of the post-colonial casino boom
3.1. Gaming liberalization and its impacts
Because of the lack of success in the Portuguese colony, particularly
in terms of the economic recession and public disorder before the hand-
over in 1999, the newly founded Macao SAR government announced
that the revitalization of the urban economy would be the highest prior-
ity in its new policies. Exploiting the comparative advantages of the tiny
island, the leadership mainly focused on policies conducive to Macao's
tourism and gaming development. Numerous delegations were sent to
Las Vegas to learn from the experiences of that casino city in growing in-
tegrated casino resorts with all types of leisure, entertainment and
meeting, incentive tour, convention and exhibition (MICE) facilities
and services (Sheng, 2011a). In fact, Macao has followed the model of
Las Vegas since its gaming liberalization by developing access to inter-
national capital and operators.
Casinos had emerged in Macao even before the founding of the Por-
tuguese colonial government. However, the city's gambling industry
only began to take off and become a major attraction for gamblers in
the Greater China region after Stanley Ho won his exclusive license in
1962. Although Ho created a huge casino empire in the city, his monop-
oly also constrained modernization and the dynamics of the sector due
to a lack of competition (Godinho, 2014). STDM casinos were generally
small and poorly decorated with a very limited choice of Las Vegas-style
entertainment. Services were rather substandard, and dealers were no-
torious for pressing customers for tips. More seriously, triad battles,
human trafficking, loan sharks, and organized crime of various forms
substantially damaged the city's image.
Supported by both the Beijing government and local leadership,
Macao's gaming sector experienced a dramatic institutional change in
2002 as multiple foreign players entered this profitable industry. Taking
advantage of the fact that STDM's gaming license expired at the end of
2001, the SAR government issued three new licenses through a bidding
process, introducing a competitive mechanism into the sector. In 2001,
the “Legal Framework for the Operations of Casino Games of Fortune”
and Administrative Regulation No. 26/2001, “Stipulating the Open Bid-
ding for the Operation of Casino Games of Fortune and the Eligibility
and Financial Capability of the Companies that participated in the Ten-
dering Process,” were enacted. The SAR government formed the “Gam-
ing Concessions Committee” the same year to organize the tendering
process (Siu, 2007). Over 20 bidding proposals had been submitted
from all over the world, and the Las Vegas-based Wynn Resort, the
Hong Kong-based Galaxy Entertainment, and Stanley Ho's new SJM
were granted permission to operate casinos in Macao in February
2002. This gaming liberalization program transformed the city's gaming
sector from a monopoly into multiple franchises. The competition
among the new concessionaires stimulated the growth of the industry:
casino facilities were upgraded, best managerial practices were
adopted, new markets were explored, and the overall service level
greatly improved (Siu, 2006).
Following the liberalization of its gaming policies, Macao's urban
economy began to take off. Introducing competition into the previously
monopolized gaming sector helped improve the industry's overall phys-
ical capacity and service quality. Furthermore, transnational gaming en-
terprises transplanted Las Vegas-style mega- and all-inclusive casino
100 L. Sheng / Cities 61 (2017) 96–108
resorts, making economies of scale possible. Integrated casino resorts
established by US investors also introduced Las Vegas-style personal
management, organization, control and marketing, largely increasing the
gaming sector's efficiency and profitability (Zeng, Prentice, & King, 2014).
In addition, US-based license holders also brought US architectural innova-
tions and design creativity, constructing a series of landmarks in the city.
Without a clear market strategy, a high level of service quality and a
spirit of competition, the survival of Macao's casinos would have been
highly questionable in the ever-changing global gaming economy.
Since the liberalization of gaming policies, local casinos have been
forced to upgrade their gaming facilities, to employ experienced foreign
managers, and to improve customer service. For example, Stanley Ho
and his family have invested over US$10bn in building new casinos
and renovating old ones (Sheng, 2014). Traditional architecture has
been largely replaced by new Las Vegas-style buildings, and new Amer-
ican-style games have also been introduced. Ho's son Lawrence Ho and
his daughter Pansy Ho created casino joint ventures with US and Austra-
lian tycoons, respectively, and they are managed entirely according to
international standards. Indeed, stylish new casino resorts equipped
with world-class facilities, employees with modern management skills
and high-tech security mechanisms are widespread across the city.
Moreover, opening the gaming industry to international capital has
broadened the scope of Macao's tourism and gaming industry. Prior to
2004, there were neither integrated casino resorts nor large-scale
MICE facilities in the city. Rarely were any mega-events organized in
Macao. Opening the previously monopolized gaming sector to transna-
tional gaming companies with rich experience with MICE, recreation,
and entertainment businesses was a strategic move on the part of the
SAR government to transform Macao into the Las Vegas of the Orient,
attracting business and longer-staying visitors, in addition to gamblers
(Ong, Ryan, & McIntosh, 2014). Transnational gaming companies with
Macao's casino concession heavily invested in hotels, MICE centers,
shopping malls and service apartments, which substantially enriched
Macao's tourism products. In fact, the new gaming policies have led di-
versified tourists from originating from many places and backgrounds
to visit the city.
Gaming liberalization also inspired non-gaming industries to pursue
greater openness in their respective sectors, causing a massive influx of
international investment into a number of economic sectors in the city.
In particular, the hotel, retail, construction and housing sectors experi-
ence rapid expansion due to the infusion of international capital. Com-
munication, personal finance, and rentals also benefited from the
casino boom. Direct, indirect and induced effects of the casino boom
made the city one of the world's fastest growing economies. In 2007,
Macao surpassed Las Vegas to become the world's largest casino city
in terms of casino revenue. In 2014, Macao's gaming revenue was
seven times that of Las Vegas (Sheng & Zhao, 2016).
The liberalization of the city's gaming policies has not only brought
about progress but also has led to certain unfavorable side effects. The
casino boom has dramatically changed the city's economic structure. Al-
though the world economy is moving toward a service industry-domi-
nated economic structure, Macao's economic transformation has some
unique characteristics. In the process of imitating Las Vegas-style inte-
grated casino resorts to revitalize the urban economy, the city's gaming
sector was largely modernized, whereas development in other sectors
has continued to lag. Before Macao's handover to China, the city also
depended largely on its manufacturing sector, particularly on textile
and garment exports, which employed thousands of unskilled and
low-paid workers. The colonial government initiated a series of polices
to upgrade Macao's manufacturing industry, and it even intended to
support the formation of a few large-scale local industrial firms
(Sheng, 2011b). However, this sector suffered from a series of setbacks,
particularly the phasing out of Macao's export quota protection and
from competition from the neighboring Canton region of China, which
has enjoyed much cheaper labor, causing a dramatic decline in the
manufacturing industry in recent years.
The financial strength of transnational gaming companies has put
enormous pressure on the city's industrial operations, particularly on
Macao's small- and medium-sized enterprises (SMEs). While casinos
have received preferential treatment, traditional businesses, especially
in the manufacturing sector, seem to have been abandoned. SMEs are
incapable of competing with transnational gaming companies, who
have better work environments and social networks, offer attractive
compensation packages and enjoy preferential policies (Sheng,
2011c). The availability of skilled workers, which the government had
identified before the change in gaming policies as a major barrier to eco-
nomic growth, has become a serious problem since gaming liberaliza-
tion. It is notable that the lack of skilled labor is partly due to an
underdeveloped education and vocational training system, which can
be attributed to the colonial government's neglect and the SAR
government's inability to govern. Macao's manufacturing sector has
been losing its traditional competitive advantages as stagnating indus-
tries have suffered from rising domestic wages accompanying the
newly successful gambling sector. The increasing labor costs driven by
the casino boom combined with low technology levels have accelerated
the decline of Macao s manufacturing industry. The underdevelopment
of technology is largely due to an absence of an industrial development
policy under both the colonial and SAR governments.
One reason behind the decline of local SMEs may be the government
s lack of a balanced economic development plan. Another reason may
be the inherent weakness of local SMEs in terms of financing, manage-
ment and human resource development when facing the competition
of giant gaming companies. The number of bankruptcies of local firms
increased by 30 times over the 1991–2014 period, displaying a clear
“Dutch disease” phenomenon (Sheng & Zhao, 2016). The core “Dutch
disease” model was developed by Corden and Neary (1982) to describe
the causes and structural effects of boom-induced growth. In their orig-
inal model, there was one non-traded goods sector and one traded
goods sectors, one booming and the other lagging. The booming sector
in the case of the Netherlands was natural gas, while the lagging sector
was manufacturing. A resource boom would therefore affect this econ-
omy in two ways. First, it would increase the demand for labor, making
production shift from the lagging sector toward the booming sector.
This shift in labor from the lagging sector to the booming sector is called
direct-deindustrialization. In the next stage, the “spending effect” oc-
curs as extra revenue flows in during the resource boom and increases
the demand for labor in non-tradable industries, shifting more labor
away from the lagging sector. This effect during the second stage is
called indirect-deindustrialization. However, if the natural resources
begin to run out or if there is a decline in prices, the manufacturing in-
dustry does not recover its strength as quickly or as easily as it dissipat-
ed because there is less technological growth in the booming sector
than in the non-booming tradable sector. Therefore, the risk of an eco-
nomic downturn is ever present even given the presence of rich natural
resources (Sheng, 2011d).
A tourist city develops due to its unique historical heritage, special
natural landscape, or otherwise convenient geographical location, simi-
lar to an extractive resource economy with regard to its resource,
whether it is oil, gas or minerals. On one hand, both types of economies
have a certain market power because of a lack of substitutes. On the
other hand, for a number of tourist cities, especially those with large,
fully comprehensive resorts developed/owned by multinational enter-
prises, their tourist sector is only marginally integrated into the rest of
the urban economy, much like the extractive sectors only with minimal
links to other sectors in an extractive resource economy. Moreover, al-
though the tourism sector may employ many more laborers than the re-
source sector, as determined by its inherent nature, a high-quality
managerial staff is essential but often difficult to be found in both
cases. Due to the similarities between these two sectors, an increasing
number of tourism researchers are applying the “Dutch disease” con-
cept to tourism studies (Sheng, 2011d). Copeland (1991) finds that for-
eign capital inflow raises land and housing costs, making local
 L. Sheng / Cities 61 (2017) 96–108
businesses, particularly small- and medium-sized enterprises that often
do not own real properties, very difficult to run profitably because of
high rental costs. More importantly, multinational tourism firms with
abundant resources compete with local businesses for skilled workers
and experienced managers, creating an overall increase in wage levels.
Consequently, the booming tourism sector expands at the cost of
other sectors, depriving them of further opportunities to develop.
These sectors either go into decline or go extinct. The mono-structure
and overdependence on the tourism sector becomes even more serious.
The number of firm bankruptcies can be considered an indirect indi-
cator of the “crowding out of local enterprises” (Sheng, 2013). The
“Dutch Disease” may be a convincing explanation of the decline of
Macao s SMEs, and other factors particular to Macao aggravate the situ-
ation, such as the high cost of land due to its tiny area, the shortage of
labor due to the small local population, and structural obsolescence. Ad-
ditionally, the fact that both the colonial and SAR government have
lacked suitable, forward-looking policies for balanced development cer-
tainly makes the matter worse. Since the liberalization of the gambling
industry, the number of SMEs has been shrinking and the manufactur-
ing industry dwindling. Thus, there is very little local industrial produc-
tion activity remaining. However, “Dutch Disease” can only partially
explain the decline of Macao's manufacturing industry, as regional and
global production and trade dynamics have also played an important
role. As shown in Table 3a, Macao's manufacturing industry as a per-
centage of GDP shrunk from 14.9% in 1991 to 7.18% in 2002 because a
large portion of Macao's factories moved to mainland China for cheaper
land and labor. That means that the light industry sector had already de-
clined in the 1990s before the revitalized gaming sector dominated
Macao's economy. After the liberalization of the gaming industry, the
deindustrialization accelerated, with manufacturing industry as a per-
centage of GDP declining from 6.15% in 2003 to 0.45% in 2014, as
shown in Table 3b. The decline is actually more serious in this period
than during the previous period. More importantly, the decline in this
period is constant, while in the previous period, increases and decreases
could still be observed. Some events may also contribute to the acceler-
ation of deindustrialization, such as China's accession to WTO and the
removal of Macao's privileged quota to export to the European Union
in the face of trade liberalization in textiles in 2005. Conducting an Ordi-
nary Least Square (OLS) analysis reveals that a statistically significant
relationship between deindustrialization and Macao's tourism and
gaming development can be rejected before gaming liberalization,
while it is statistically evident after the liberalization of Macao's casino
policies (Sheng & Tsui, 2010).
We may conclude that deindustrialization in the pre-liberalization
period is not a product of local economic policy but instead of regional
and global trade dynamics. The post-liberalization deindustrialization,
on the other hand, represents a typical case of “Dutch Disease” that hol-
lows out the manufacturing sector. The latter seems to be more serious
with respect to its magnitude and irreversibility. Although Macao
imported a great number of skilled manufacturing workers from main-
land China to reduce labor costs and improve productivity and the gov-
ernment has indeed made efforts to let the city maintain some
industrial factories, all these efforts cannot substantially offset the enor-
mous effects of global trade dynamics and gaming liberalization.
Table 3
Manufacturing industry as a percentage of GDP.
Source: Macao Statistics and Census Services 1991–2014.
a. Prior gaming liberalization 1991–2002 (%)
1991 1992 1993 1994 1995 1996
14.9 11.9 9.59 8.74 8.08 8.35
b. After gaming liberalization 2003–2014 (%)
2003 2004 2005 2006 2007 2008
6.15 4.32 3.94 2.86 1.97 1.47
101
As part of the economic boom, a number of social externalities have
arisen that have negatively affected Macao's well-being and have fueled
discontent among local residents. The existence and magnitude of these
social externalities have been examined in Sheng and Tsui (2009a) to
determine whether they are statistically correlated with the casino
boom. Indicators of these externalities have been tested with respect
to incoming tourist numbers. Data used were taken from the Macao
Yearbook of Statistics (2000–2007). Leakage, defined as the hidden
loss of tourism revenue, was measured in terms of imports; inflation
was measured in terms of the consumer price index (CPI); the asset
bubble was measured in terms of real estate transaction amounts;
“Dutch Disease” was measured in terms of manufacturing workers as
a share of total employment; the crowding out of local businesses was
measured in terms of the number of bankruptcies; the impact on public
order was measured in terms of the number of criminal cases; noise pol-
lution was measured in terms of noise complaints raised by the environ-
mental commission; air quality was measured in terms of the number of
mortalities due to pollution-related respiratory diseases; and pressure
on local transportation was measured in terms of the number of traffic
accidents. From the OLS estimations, statistically significant relation-
ships (p b 0.1) could be found between the number of tourist arrivals
and leakages, the asset bubble, “Dutch Disease”, the crowding out of
local businesses, noise pollution, air pollution, and pressure on local
transportation.
Baker (1992) noted that conflicts of interest and personalized poli-
tics are inevitable in small economies, as blurring boundaries between
official and personal roles is the only practical way of doing business
in small settings. In other words, the elite can easily manipulate and mo-
bilize the masses and corruption seems to be inevitable. Indeed, corrup-
tion scandals have troubled the Macao SAR throughout its short history.
The exposure of the corruption case of former Policy Secretary for Trans-
port and Public Construction Ao Man Long, which involved approxi-
mately US$100 million, confirmed a suspicion that had been widely
rumored. At first glance, the case seemed to be a triumph for Macao's
stated wish to keep business and government clean. However, locals be-
lieve that the case has only lifted the corner of a carpet that continues to
hide all types of malfeasance. Across the local media, the trial has raised
questions. Why is Ao the only former minister to be caught? Is Ao's
heavy sentence the result of a political trade-off; is he merely the fall-
guy? How is it possible that he could have acted so blatantly for so
long without the knowledge of other members of the government?
Why were there so many witnesses – and other suspects – unavailable
in court? Few in Macao seem to believe that corruption began and
ended with one man (England, 2008). A similar suspicious case that out-
raged the public involved government overspending of more than 50%
on facilities that were designed for the 4th East Asian Games. Groups
and businessmen who are close to the government always seem to be
selected to run government projects, and the government is also often
accused of favoring foreign investors who are suspected of bribing gov-
ernment officers (Sheng & Tsui, 2009b).
The corruption seems to have escalated with the rise in gaming rev-
enue since the casino boom. Indeed, the corrupt informal politics with
its facade of formal democratic institutions has created the grounds
for large scale corruption. Macao's former chief persecutor, Ho Chio
1997 1998 1999 2000 2001 2002
8.58 9.81 9.79 10.08 8.32 7.18
2009 2010 2011 2012 2013 2014
0.84 0.71 0.69 0.6 0.47 0.45
102 L. Sheng / Cities 61 (2017) 96–108
Meng, was arrested in 2016 on suspicion of fraud, unlawful economic
advantage, abuse of power and forgery. Specifically, he was accused of
pocketing 44 million patacas in kickbacks from public works contracts
worth 162 million patacas. The irony is that Ho Chio Meng convicted
former Secretary for Transport and Public Works Ao Men Long for cor-
ruption. The latter was sentenced to a 27-year term in jail. However,
now Ho himself is being held in the same prison annex as Ao. Even
more ironically, Ho was considered a possible candidate for chief exec-
utive because of his “clean” image (SCMP, 2016).
As Macao has become one of China's SAR and the world's largest ca-
sino city, corruption cases have often been characterized by a complicat-
ed triangular relationship of local elites, the Chinese authorities and
powerful multinational enterprises. Ng Lap Seng, a well-respected bil-
lionaire in Macao with top-level connections to Beijing and Washington,
has been accused of engaging in a conspiracy to obstruct and make false
statements to US customs officials. Ng was part of the 100-strong Bei-
jing-appointed committee – chaired by then Vice-Premier Qian Qichen
– that oversaw the Macao handover to Chinese rule in December 1999.
A year earlier, his name was linked to the scandal surrounding Asian
funding for US President Bill Clinton's Democratic Party. During the in-
vestigation of Ng, a more striking scandal arose as the U.S. attorney in
Manhattan announced charges against the president of the UN General
Assembly, John Ashe, who was accused of taking $1.3 million in bribes,
and Francis Lorenzo, the ambassador to the UN for the Dominican Re-
public, who was accused of helping Ng pay bribes to Ashe and others.
The complaint described in detail a series of payments to Ashe that
were intended to gain UN support for a multibillion-dollar project in
Macao (Hurtado & Farrell, 2015).
The dissatisfaction of locals who did not directly benefit from tour-
ism but who were directly affected by the various externalities has grad-
ually deepened and been naturally directed toward the government.
Hearing the growing outcry, the Macao SAR government has responded
with piecemeal, ad hoc, and unplanned welfare measures, such as pub-
lic subsidies and more direct cash handouts. Although some of these
measures did alleviate some of the pain of the changes, the fundamental
governance problems remain unsolved. Indeed, social externalities have
continued to grow despite various government policies (Lo and Chong,
2016). In 2014, a “golden handshake” bill granting generous retirement
benefits to top government officials brought thousands into the streets
and resulted in Macao's largest street protest since the handover, in-
volving an estimated 20,000 people. The protesters complained that
the compensation package was far more generous than was acceptable
and was passed without appropriate consultation and gauging of public
opinion. Through their actions, the protesters demonstrated to the lead-
ing politicians that they did not represent the interests of Macao's citi-
zens and that the Legislative Assembly did not take its responsibility
to supervise the government seriously. The protest escalated as more
than 7000 protesters besieged the Legislative Assembly to demand
that the government withdraw the bill. The legislators subsequently
were forced to cancel the vote (Kwong, 2014).
Dahl and Tufte (1973) found that political conflicts are less likely to
occur on small islands, but when they arise, group conflicts can be ex-
pected to be more personal, more explosive, and more polarized in
every part of the society. This is exactly what happened on Macao. In
the May protest of 2007, thousands of jobless local workers became vi-
olent. They blamed the Chief Executive Edmund Ho of “betraying neigh-
bors' interests to foreign capitalists and guest workers” and attacked
Ho's family members when they gathered to mourn Ho's brother.
When the current Chief Executive Chui Sai An approved the “Golden
Handshake” bill in 2014, 20,000 people in Macao demonstrated against
him personally, drawing pictures of him as a pig making himself rich,
and demanding that he resign. Veenendaal (2015) found that due to
the increased social intimacy of small settings, political decision making
unavoidably interferes with interpersonal relationships. The fact
that people in Macao from different social classes often blame the
Chief Executives personally and become violent demonstrates that
interpersonal conflicts can be more emotional and enduring than ri-
valries over political ideas. In fact, a series of protests on Macao all
seemed directly aimed at its top leaders because the demonstrators
knew the leading politicians personally. They expected that the politi-
cians would take care of their “neighbors”, but when they did not, the
masses became extremely angry.
3.2. Regulating gaming operations
One of the results of the liberalization of the gaming industry has
been a gap between accelerating market development and the existing
regulatory mechanisms. The way to regulate the emerging hybrid mar-
ket, which has some fundamental institutional and structural dispar-
ities, is certainly a new challenge for the gaming authorities. They
need to be innovative and adaptive in tackling the new issues arising
from the transition of Macao's gaming industry.
3.2.1. The arrival of new competitors with demands for regulatory
reshaping
Market competition can often become a force behind improvements
in an economic sector's management and regulations in general. In
Macao, the liberalization of the gaming industry has opened the door
to world-class foreign gaming operators, and more importantly, inter-
national regulations. Although the arrival of the new concessionary op-
erators has undermined the powerful role of STDM, it can still exert
substantial influence on the development of the industry (Sheng,
2011e). The SAR government's re-institutionalization of the gaming in-
dustry from a monopoly to an oligopoly necessitated an inevitable
change from a culturally dependent regulation model to a more formal-
ly regulated business model.
The competition between old and new operators gives rise to new
problems in the area of regulation. Prior to liberalization, junket opera-
tors generated the largest portion of Macao's gross gaming revenue, and
the tripartite splintering of the gaming licenses in 2002 did not change
that situation as subsequent subdivisions from the three gaming con-
cessionaires continued to operate under the local VIP system. The new-
comers found it difficult to rely on market systems that were cloned
from their parent companies in Las Vegas when working within the
sets of formal rules and informal constraints in Macao's local context
(Sheng, 2012). The large American gambling companies licensed in Ne-
vada were required to operate their businesses in a manner consistent
with the rules and regulations of Nevada. Macao's revamped gaming in-
dustry caused concerns among some of the foreign governments in-
volved, such as the U.S. and Australian governments, with respect to
issues such as cross-border organized crime and the proliferation of
money laundering activities (Lin, 2012). Some comprehensive reviews
and investigations were therefore undertaken by the Nevada and New
Jersey governments, which clearly signaled that the traditional Macao
casino operation model used by the local operators was not compatible
with the North American model and was unacceptable to other regula-
tory bodies outside Macao. It took almost three years for MGM to settle
outstanding issues and meet all the legal requirements of the various
U.S. gaming control authorities before it eventually announced its joint
venture agreement with Pansy Ho, who obtained a sub-concession
from Stanley Ho's SJM in June 2004 (Godinho, 2013a, 2013b).
Although the grand and clean images of new foreign-funded casinos
with more investment in the slot business and the introduction of the
FIT scheme have greatly boosted the revenue of Macao's gaming sector
by attracting more mass-market players since 2002, the data show that
VIP Baccarat remained the dominant source of income for the local gam-
ing industry. Accordingly, improving the existing mass-market business
neither mitigated the unpleasant effects of the VIP system nor really
cured the problems associated with casino gambling (Zeng & Prentice,
2014). As a result, although foreign investors have poured billions of
dollars into building luxurious casinos, Macao's reputation as the
“Vegas of the Orient” remains one step away and still depends on its
 L. Sheng / Cities 61 (2017) 96–108
willingness to embrace transparency and the rule of law. The evolution
of legislative and regulatory mechanisms in the gaming industry has in-
evitably become a heated topic of debate.
The junket system, which is still in operation in local casino VIP
rooms, has become the primary area in need of reform. Junket operators
who allow players to gamble without disclosing their identities to au-
thorities (a practice that facilitates, if not encourages, money launder-
ing) have allegedly worked closely with organized crime groups in
mainland China to identify customers and collect debts. They are not
subject to licensing or supervision of the Finance Department or the Ju-
diciary Police (Wang, 2014). Because the junket operators' transactions
with their unidentified clients are not properly recorded, it is difficult for
the authorities to monitor their activities, even if they are illegal. Follow-
ing the liberalization of the gaming industry, foreign investors, who
were accustomed to a different regulation model, urged the authorities
in Macao to place tighter regulations on the junket system. In August
2003, it was reported that Wynn threatened to pull out of its investment
in Macao entirely if the necessary regulatory changes were not imple-
mented and that it refused to begin the construction of its multi-hun-
dred-million-dollar casino complex until the new casino credit law
was implemented in 2004 (Godinho, 2006).
On the one hand, the presence of strong international competitors
has compelled the gaming industry's operators to pursue economies
of scale and a more efficient, stronger and healthier structure for the
gaming industry. On the other hand, oversupply could create more
problems, actually harming the healthy and sustainable development
of the industry in Macao. In the process of becoming “Asia's Las Vegas”
and a mega-gaming hub, Macao has tripled the total number of its casi-
nos, while the number of gaming tables and the number of slot ma-
chines have increased by approximately 13 times and 16 times,
respectively. The rapid expansion of the gaming industry has led to
fierce competition and conflicts among casino competitors. Some finan-
ciers are concerned that in the short term, Macao may add too many
gambling sites, resulting in excess casinos (Yeung, Lee, & Kee, 2008).
In fact, a “cut-throat” fight for customers has already emerged in
which casinos offer higher and higher commissions to junket operators
to bring high rollers to their casinos instead of their rivals. Stanley Ho
once sharply criticized Sands Macao for raising the commissions it
paid to junket operators. As a result of this increase, many of Stanley
Ho's VIP halls were having difficulty maintaining their business. In his
response, Sheldon Adelson, the Las Vegas casino mogul, warned all
other gaming operators in Macao that competition had just begun and
would only intensify. Before the liberalization of the gaming industry,
junket agents earned an estimated 0.75% commission on the value of
the chips purchased by their gamblers. Heavy competition has raised
the overall percentage to 1.25. As a result, the junket system can earn
twice as much as gaming concessionaires (Wang & Eadington, 2008).
Although VIP rooms are profitable, casino concessionaires never neglect
the mass market in which they earn a greater percentage for them-
selves, and they try every possible tactic to lure as many gamblers to
their fancy casinos as possible. In short, the overwhelmingly rapid ex-
pansion of the gaming industry has made it imperative that the govern-
ment of Macao improve its legal and regulatory framework and
management to lead growth onto a healthy and sustainable road and
to capitalize on the potential of current and future development.
3.2.2. Regulatory reform and the fragility of the legislation
In view of imminent developments, the management and regulatory
structure of Macao's gaming industry in the early 21st century had to be
improved to make it compatible with new competitive realities. To ef-
fectively monitor its casinos, the SAR government has implemented a
process of recentralization and tightened the regulations and laws
concerning the operation of casinos and VIP rooms as well as the role
of the junket operators. In response to the mounting concerns over
the deficiencies of the regulatory system, the SAR government
introduced a new regulation on March 20, 2002, titled “Administrative
103
Regulation No. 6/2002,” outlining the qualifications and rules for
conducting agency business for games of chance in casinos (Wang,
2014). The Gaming Inspection and Coordination Bureau (DICJ),
established in 2003, was another effort to create an institution responsi-
ble for defining, monitoring, regulating and executing economic policies
regarding gambling operations in casinos. Finally, the Macao SAR gov-
ernment made efforts to formalize the structure and practices of the
junket system. In addition to requiring all middlemen and management
companies to register with the relevant authority, the government also
placed license application requirements on junket operators with tight-
ened procedures and strenuous background checks to ensure that the
operation would be well regulated. The gaming business operators
were also required to adopt the appropriate accounting, internal con-
trols and auditing procedures, as well as report cash transactions to
minimize dishonest behaviors among customers and employees
(Godinho, 2014). All these changes were products of the government's
efforts to regulate casino junket operators and make them consistent
with global gaming market's practices.
In 2008, the SAR government changed its customary laissez-faire
image in its regulatory role and intervened in the market following
Beijing's explicit instruction to control the growth of the gaming indus-
try. On April 22, 2008, Chief Executive Edmund Ho announced that the
number of gaming licenses and the total number of gaming tables
would be frozen and that no new casinos would be constructed to pre-
vent further overheating of Macao's economy. Later, at the request of
the industry, the government also put a cap on commissions (Sheng &
Tsui, 2009b). Although the promulgation of the new regulations
marks a progressive change in Macao's regulatory system, there is still
no satisfactorily comprehensive, transparent and effective regulatory
system in place. The limited supervision and regulation of casinos and
particularly of junket operators remain a serious weakness in the indus-
try, inviting more problems. There is a dearth of legal definitions with
regard to certain aspects of the gaming industry, both directly and indi-
rectly related to it (Siu Lam, 2013). Issues related to gaming chips, gam-
ing areas, crimes associated with gaming, the main personnel working
in casinos and special gaming taxes have remained legislatively unre-
solved for years.
Additionally, the lawmaking process often lags behind and is reac-
tionary in nature, and even the revised regulations are rather porous.
The SAR government eventually revised the Gaming Law to legalize
the existence of sub-concessions in 2010 despite their actual existence
and operation for the previous eight years. Although the government
has required junket operators to register and has developed some regu-
lations, its efforts to regulate them have been aimed at limiting compe-
tition rather than combating illicit activities. Junket operations are still
not governed by the Anti-laundering Money Law. The Financial Intelli-
gence Office has little knowledge of junket operators' suspected trans-
actions (Godinho, 2014). Given the new gaming industry
environment, requirements to be a junket operator have not yet been
clearly stipulated, and differentiations also should be made based on
their relevance and size.
One of the major reasons behind the unsatisfactory legal provisions
in this area is the SAR government's limited experience in dealing with
modern regulatory practices, despite its willingness to shift from cus-
tomary regulations to more explicit codified forms. When under Portu-
guese rule, it was clear that the colonial government had little interest in
regulating the gaming industry other than collecting the appropriate
amount of taxes. The new SAR government officials clearly lacked the
training and experience as well as the assistance of professional exper-
tise from the local community (Sheng, 2011b). Constrained by the
government's inexperience and time pressure, the current legal provi-
sion is far from complete and even farther from perfect.
This complicated situation has also made it difficult for the regulato-
ry bodies, limited by experience and capabilities, to fulfill their
monitoring and supervisory responsibilities. First, enforcement of the
law is largely restricted by legislative ambiguities and a shortage of
104 L. Sheng / Cities 61 (2017) 96–108
operational details, as discussed above. A thorough revision and the
completion of related legislation are required before the industry can
be effectively regulated and monitored. The usual scenario is thousands
of junket operators at the lower levels of the complicated “casino oper-
ator/private-VIP-room contractors/junket operators” hierarchy in its
lawless system with its hidden interests (Rose, 2013). It would be too
costly for the inspection process to include every tiny detail and practice
in the system, even without the practical difficulties. At the same time,
although the SAR government has tried to promote an image of Macao
as a law-abiding and fiscally responsible destination by stressing its
commitment to the multilateral efforts to ensure transparent financial
services, the massive flows of money through its financial sector and
the relatively weak controls over financial transactions make Macao
continue to be a good choice for those seeking to launder illicit funds.
Second, while formal rules can be changed overnight by policy, in-
formal rules/codes governing conduct change very slowly. The revised
regulations leave some room to accommodate the actual situation,
hence minimizing possible shock to the existing casinos. Given the
SAR government's intention to acquire international acceptance and le-
gitimacy for its gaming industry, to elevate it to a level consistent with
international regulatory standards, the long-established informal inter-
relationship between the past gaming monopoly, the VIP-room opera-
tors, and their associated junket operators can hardly be immediately
standardized simply by rewriting regulations. Therefore, it is not sur-
prising that the new credit law passed in 2004 remains sufficiently am-
biguous to both accommodate the existence of the informal
relationships prevailing for some operators, such as SJM and Galaxy
for whom meeting the international standards is not an issue, and also
capable of addressing the concerns of operators such as Wynn, Las
Vegas Sands, MGM Mirage, PBL and SJM for whom this is a serious
issue (Wang, 2014). It is predicted that this phenomenon of two distinct
VIP markets co-existing in Macao's gaming industry will last for at least
another decade. Accordingly, the transition to a truly well-regulated
market is unlikely to conclude for some time.
3.3. Diversifying the economy and upgrading industries
Since its return to Chinese sovereignty in 1999, the Macao SAR gov-
ernment has changed its attitude toward economic development and
started to play an active role by initiating favorable policies to increase
Macao's attractiveness to investors and to facilitate technology trans-
fers. The government has used international institutions to accommo-
date the demands of international capital and the broader
international neoliberal economic regime. From economic downturn
to recovery to rapid growth, the government has had to tackle some im-
portant issues, such as the lack of state-of-the-art infrastructure, severe
land shortages and labor shortages. The primary goal of gaming-related
public policies has been to serve the economic interests of the territory
by providing a steady source of revenue flow. The boom in gaming sub-
stantially benefited public finance, allowing the government to invest
generously in public infrastructure, upgrade its administrative capacity
and maintain a low level of taxation. Gaming revenues were
redistributed to various local economic sectors according to policy pri-
orities. Since 2003, the measures to rejuvenate Macao's economic struc-
ture have included generous tax cuts, loans to the business sector, and a
special credit-guarantee program for SMEs (Sheng, 2012).
The SAR government has explicitly stated that the rapid growth of
the gambling industry is only the preliminary stage of Macao's econom-
ic growth and that it accounts for only part of the city's development
blueprint. Due to its small size, Macao is essentially a one-day-trip des-
tination for tourists. The liberalization of the gaming industry has been
part of the attempt to turn Macao into a world tourist destination by
transforming the casinos into larger, more wholesome Las Vegas-style
integrated resorts that are capable of attracting conventions and tourists
who will shop, eat, and enjoy cultural activities apart from gambling for
a greater length of time. Therefore, the SAR government has made
efforts to enrich Macao's tourism resources, diversify its tourism prod-
ucts and optimize the structure of the tourist industry. In the attempt
to build Macao into a world-class cultural tourism destination, the gov-
ernment has made an effort to project Macao's image as a UNESCO her-
itage site by preserving cultural sites that are a unique blend of
Portuguese and Chinese influences and revitalizing Macao's dilapidated
old urban district (Vong, 2004).
In order to sustain its restructured economy, Macao also needs a
well-structured workforce. The service industry primarily requires a
well-educated workforce with high professional standards, which
Macao is initially unable to provide on its own. The contraction of the
labor-intensive manufacturing sector has inevitably resulted in large
numbers of unemployed, low-skilled workers; at the same time, there
is a shortage of skilled workers. These impacts of major economic
restructuring pose new challenges for the government. It has to im-
prove employment conditions substantially. In response, the SAR gov-
ernment has launched a series of generous and intensive programs to
train the workforce to meet new demands. In 2007, the government
established a human resources management office to collect manpower
data and process applications from companies looking to import labor
(Sou & McCartney, 2015). The government also improved its labor-im-
portation policy to help SMEs tackle the manpower shortage by
streamlining administrative procedures.
Despite the SAR government's efforts to promote economic diversi-
fication, Macao's economy has become increasingly mono-structured,
perhaps as a consequence of the exponential growth of the gambling
and related sectors, which has driven the strong growth of Macao's
GDP and government revenue over the past 15 years. The mono-struc-
tured economy is a cause for concern in itself. In 2008, the global finan-
cial crisis plunged Macao's gaming industry into sudden decline. In the
aftermath of the financial crisis, gross gaming revenues decreased for
seven consecutive months, from December 2008 to June 2009. There
was almost a palpable fear regarding how the city would retain its pros-
perity at that time. Moreover, although Macao continues to be Asia's
gaming leader, the competition from new gaming destinations in the re-
gion will challenge Macao's status and could destabilize its economic
growth. At the same time, the central government showed concern
over Macao's overgrown gaming industry and slow progress in eco-
nomic diversification (Sheng & Zhao, 2016). The local community has
also realized that the economy has grown unsustainably fast and that
too little attention has been paid to Macao's need to diversify its econo-
my by moving from the present closed system dominated by some
mega-gaming operators to a much preferred open environment that fa-
vors the emergence and growth of various new industries (Loi & Pearce,
2012).
The high risk associated with the over-dependence on gaming has
led Macao to focus on the high-yield tourism sector of MICE with the
hope of correcting the effects of the gambling industry's overexpansion.
Therefore, one of the government's economic priorities is to spur the de-
velopment of the convention and exhibition industry. To achieve that,
the government established a committee to oversee the development
of the convention and exhibition industry and launched the “Strategic
MICE Market Stimulation Program” in 2005 to attract more internation-
al MICE events. Moreover, the government has offered assistance and
support for large international meetings and events to be held in
Macao. It also gives subsidies on hosting various types of exhibitions
and on developing the business travel market. Macao's new role as a
convention and exhibition center has also been promoted at different
business or tourism conventions around the world (McCartney, 2014).
The annual Macao International Trade and Investment Fair (MIF), now
the largest international exhibition in Macao, serves to promote
two-way trade and investment and to broaden cooperation between
enterprises via exhibitions, forums, conventions, business matching,
and purchasing and negotiation activities. The Macao International
Environmental Co-operation Forum and Exhibition (MIECF) is another
regular major fair and has also become an important developmental
 L. Sheng / Cities 61 (2017) 96–108
platform for green industries in South China and the Pan-Pearl River
Delta region since 2008. In 2013, a total of 1030 events (964 meetings
and 66 exhibitions) were held in Macao, occupying a total area of
833,000 m2 and attracting 2,034,000 visitors thanks to all of these ef-
forts (Macao Statistics and Census Services, 2013).
Limited transportation links are a constraint to developing Macao
into a mega-event city. The SAR government is putting forth some effort
to overcome the problem. Light rail construction has been accelerated
most recently and is planned to open in 2019 to establish a vital connec-
tion to mainland China's high speed rail system. The Pearl River Delta
Bridge connecting Macao to Hong Kong and Zhuhai will help promote
the regional integration of the MICE industry, thus allowing Macao to
welcome more international convention and exhibition trade visitors
and bring about new openings for the local MICE industry. These pro-
jects should help compensate for the limited capacity of Macao's small
airport, which lacks the space to be developed into an aviation center.
However, the airport has still made an effort to develop itself into a
hub of budget and regional airlines, and it has tried to optimize its ca-
pacity given its small space. Most recently, the SAR government has ac-
celerated the process of economic diversification. In addition to
following the Las Vegas family-friendly, diversified model with world
class MICE facilities, other ideas are being pursued as well, such as cre-
ating a center for offshore companies, building a trading platform for
Chinese herbal medicines and even nurturing local creative industries
(Sheng & Zhao, 2016).
China's anti-graft movement, initiated in 2013, has negatively affect-
ed Macao casinos' VIP businesses and thus the overall performance of
Macao's economy, forcing the city to develop new growth engines. In
2015, a major junket operator in Macao, Dore Holdings, allegedly had
between HK$200 million ($25 million) and HK$2 billion stolen by a for-
mer employee. Investors in Dore, which operates VIP rooms in the
Wynn Macao, staged public protests, demanding the return of their in-
vestments. This resulted in the emergence of new guidelines to monitor
gaming promoters or junket operators. The guidelines include require-
ments for the operators to disclose more information, including the
names of its administrators, shareholders, principal employees and
other related parties. The government also assigns gaming promoters'
principal employees to ensure that the positions are held by qualified
people because they handle financial operations (Macao Daily Times,
2015). These temporary guidelines are expected to be turned into ad-
ministrative regulations or laws if they are proven effective. This exacer-
bates the problems with the junket operations that have been under
pressure since the Mainland's anti-corruption drive reached Macao. Se-
crecy and anonymity are decisive factors for high-spending gamblers in
selecting destinations. As a result of this growing government pressure,
a number of these operators have closed down.
Many of the neon-lit stores in Macao actually allow Chinese gam-
blers to make fake purchases to skirt the rules regulating the amount
of cash they can take out of China. China's money export caps are
among the tools it uses to control its currency and economy, and au-
thorities believe the ruse facilitated by pawn shops surrounding
Macao casinos is also used by corrupt officials and business people to
send ill-gotten cash out of the mainland. The use of China's state-backed
Union Pay card, which has a virtual monopoly in China, has been a con-
venient way for people to move money out of the country. Typically, a
customer in Macao can go to one of nearly 200 pawn shops that sell
watches or jewelry and swipe their card to obtain cash without buying
anything. No one knows for certain how much Chinese money is being
channeled illegally into Macao; it is estimated that a total of HK$1.57
trillion a year was transferred via Macao through various channels
(Godinho, 2013b).
Underground banking is rampant in Guangdong. Macao's neighbor-
ing province. These crimes have been exacerbated by VIP gambling in
Macao, and they are usually organized and run by families or groups
and function like a company. The core members are typically family
members or familiar countrymen from the same hometown. There is
105
usually a clear division of responsibilities and a connection to Macao.
Underground banks usually charge 0.3 to 0.5 per cent of the cash flow
to gain illegally. As the amounts involved are usually huge, it’s a highly
profitable business (Kuai, 2016). Recent crackdowns on underground
banking are likely to impact Macao's gaming industry by tightening jun-
ket liquidity, as Macao junket agents often use the underground bank-
ing system to transfer money out of China to fund VIP players in
Macao casinos. The heightening scrutiny of China's underground bank-
ing system and cross-border money transfers are presumed to have im-
pacted junket agents' ability to move money into and out of Macao
(Godinho, 2014). In addition, Beijing's tightening of the financial screws
could impact the growing trend of Macao's junket operators signing
deals with casinos in other Asian jurisdictions. As Macao's VIP business
has tumbled, junkets have increasingly steered their VIP clients to casi-
nos in countries such as Australia, Cambodia and the Philippines.
Politically speaking, Macao is a place that exhibits and spreads pro-
paganda regarding China's openness and shows how capitalism and de-
mocracy can coexist with socialism. This is conducive to a possible
future reunification with Taiwan. In this way, Macao's prosperity has
significant political meaning and consequently political benefit for
China. Thus, in the beginning, the Chinese government kept its promise
of non-interference or minimal intervention in Macao, as illustrated in
the “One Country, Two Systems” and “Macao People Govern Macao” slo-
gans. However, things have begun to change recently as corrupt main-
land Chinese government officers embezzled public resources and
gambled in Macao. In fact, pathological gambling has been identified
as a cause of China's serious social problems. Foreign casinos have
gained increasing influence in the territory, and the impression that
“foreign casinos in Chinese territory earn Chinese money by
demoralizing Chinese people and corrupting Chinese government offi-
cers” has angered many mainland Chinese. It seems that the Beijing gov-
ernment has begun to show its displeasure with Macao's leadership,
and a series of policies have been established that have negatively af-
fected Macao's profitable casino business and reflect the Beijing
government's changing attitudes. In fact, the central government be-
lieves that its anti-corruption movement will positively affect Macao
in the long run in that economic diversity and macroeconomic stability
will be achieved despite the short-run economic downturn (Li, Liu, &
Sheng, 2016). The central government also wants the Macao SAR gov-
ernment to actively intervene in the gaming industry and ward off
any political lobbying by the rival casino capitalists. Unlike the colonial
state, which forged an unholy alliance with the casino elites, the postco-
lonial government needs to enhance its relative autonomy vis-à-vis the
casino capitalists and rebuild its authority, legitimacy and control over
the gaming industry (Lo, 2009).
4. Concluding remarks
Macao was an archaic colony under Portuguese administration. Al-
though the legitimacy of the Portuguese administration remained
weak, the governance system improved with the proliferation of casinos
and the expansion of the tourism industry in the first half of the 1990s.
These changes provided crucial sources of revenue for the government
and society. Immediately after the handover, the SAR government
sought to build its own legitimacy by focusing on economic growth.
The Macao SAR government achieved impressive successes in economic
development, winning the hearts and minds of Macao's citizens.
When the Macao SAR government deregulated the gambling indus-
try, it expected that it would open a Pandora's Box. Although casino cap-
italism served to legitimize Macao's government during the economic
boom from 2004 to mid-2008, it began to have the opposite effect dur-
ing the global and regional economic crisis in late 2008. Rapid casino-
driven economic development had a “spillover effect” on the local econ-
omy, society and politics; the overemphasis on gambling-related sec-
tors and the potential threat of overdevelopment ultimately led to an
106 L. Sheng / Cities 61 (2017) 96–108
unfortunate paradox wherein the hand that fed was also the hand that
killed (Sheng, in press).
Because of its class characteristics, the government was prone to act
in the interests of the business sector, and even the proactive develop-
ment of the casino industry can be said to have been driven partly by
this reason. The economic boom that occurred after Macao's return to
Chinese sovereignty relieved the government of the need to implement
bureaucratic and social reforms. However, the downward trend in the
economic growth in recent years has helped reveal the growing conflict
between rapid economic development that maintains the capitalist sub-
state's legitimacy and the need to preserve social harmony. It has also
revealed deep-seated and complicated systemic flaws that have
inhibited the effectiveness and capability of Macao's government.
The 1999 handover and the liberalization of the gaming industry in
2002 changed the overall social-political ecosystem of Macao and erod-
ed the pillars supporting the old governance model. This transformation
marked a significant departure from the city's earlier isolation as well as
from the old political and economic arrangements that used to contrib-
ute to Macao's unique system of governance in the past. In addition to
the steady growth in financial reserves, the internationalization of the
gaming industry brought world-class standards and regulations to this
enclave, a change that uncovered the government's unexpectedly
weak control over the gaming sector. Moreover, the resulting unbal-
anced economic structure is at odds with the long run sustainable de-
velopment of the local economy. Partly urged by the central
government, efforts from the SAR government to address these prob-
lems can be observed as it moves toward greater economic diversifica-
tion and begins to play a more active role in economic development.
With abundant financial resources, the SAR government has the ca-
pacity to reform the structure for the better and to capitalize on its
unique historical legacy. In this regard, the government's performance
remains unsatisfactory. Structural flaws left by the colonial government
still inhibit Macao's ability to improve the SAR's governability, and little
has changed in that regard. Sometimes old problems have even been
amplified by governmental structures that are interlocked and interwo-
ven with the vested interests of social elites. Nevertheless, the liberaliza-
tion of the gaming industry following the handover has helped
strengthen a sense of belonging in the local community among the cit-
izens, which has further cultivated a mass subject political culture
marked by a stronger willingness to participate in local politics and a de-
mand for more transparent government.
Globalization has had a profound influence on the formation of cities
and regions in both the developed and developing worlds. Macao is no
exception as it is becoming increasingly integrated into a global system.
Accordingly, Macao's political and economic system must be reformed
and improved to remain competitive. In fact, international institutions
can provide new symbolic and material resources to diversify the econ-
omy and reform the public sector. The large U.S. gambling companies
can be examples to follow for good governance, transparency and the
international rule of law. The more internationalized Macao has be-
come, the greater the pressure has been to adhere to broadly accepted
international standards and to pursue the same ideals, such as the rule
of law, transparency and accountability. In short, the old practices of
conducting business and government affairs in Macao cannot remain
unchanged forever, and indeed, they should be replaced by newly
evolving systems that can embrace the new realities.
Since the handover, economic growth has seemed to be the sole ob-
jective of the SAR government. While it is important to recognize the in-
creasing contribution of the gaming industry, economic growth will
certainly not guarantee the successful transformation of Macao's socie-
ty. This growth is inevitably accompanied by significant negative effects
on the society, economy and politics of Macao. Moreover, Macao has al-
ready reached the saturation point of development. The city is simply
overcrowded and there is insufficient urban space to accommodate
more growth. There will be little room for development in the social, po-
litical and economic spheres without the injection of breakthroughs or
new ideas. Gradually grasping that reality, Macao's government has
eventually come to realize that it is certainly not optimal/mature to con-
sider development only in terms of GDP or growth figures when the
majority of residents suffer in many other aspects of the growth.
With a view toward the city's long run prosperity, the SAR govern-
ment needs to reconsider the city's development direction and decide
how far and fast the gaming sector should be allowed to grow, taking
a broader socio-economic perspective. Theoretically, Macao should not
pursue purely aggressive gaming development with the aim of higher
and higher profit while negatively affecting the majority and the non-
beneficiary group's quality of life. It should adopt a moderate strategy
that aims at balanced growth while caring for the overall welfare of
the territory. This moderate and balanced approach is wise given that
any additional revenue generated by the gaming industry comes at
the expense of the society at large.
Without the appropriate political and social reforms, developing
Macao into a Las Vegas-style gaming destination does not seem to be
in the best interests of its citizens in the long run. Therefore, the govern-
ment must adjust to meet Macao's future social demands. An overhaul
of the governance framework is also badly needed to establish a new so-
cial order/equilibrium. At the policy-making level, wider community
participation should be sought in decision-making regarding political,
economic and social issues. The dilemma that the Macao SAR govern-
ment is currently facing reflects the city's “growing pains” and the chal-
lenging problems associated with modernization, urbanization and
globalization.
The evolution of governance in the Macao SAR reflects an urban is-
land undergoing a post-colonial transformation. Although the city has
a number of Western-style formal institutions, the ethics and culture
within the administrative system remain largely traditional, conserva-
tive and informal. Behind the seemingly democratic polity lies a more
traditional practice of informal politics with nepotism, autocracy and a
strong undemocratic inertia. In particular, nepotism causes the phe-
nomenon in which businessmen who are closely connected to top gov-
ernment officials are favored in running public projects. In fact, the SAR
government cannot avoid using uneconomic measures to regulate eco-
nomic issues, making the business environment rather less fair and
open. It also demonstrates that the SAR government, already in its 4th
term, is still immature and weak, incapable of implementing any rea-
sonable reform to improve governance capability.
Ideally, the political systems of urban islands should be character-
ized by competition for political positions and the enfranchisement of
virtually all adult citizens. In reality, however, informal and consensus
politics, which undermine the twin dimensions of contestation and in-
clusiveness, dominate urban island culture. This is exactly the case in
Macao. Informal communications between business elites and the
Macao SAR government often precede legitimate public policy decisions
made by formal institutions. In fact, the dominance of the informal po-
litical practice largely occurs because of the deficiency of Macao's formal
institutions (Yu, 2007). Anckar (2010) argued that small islands make
citizens more capable of orienting themselves toward political life and
organization, and they also promote open channels of communication
between ordinary citizens and top leaders. Macao's limited size and
space have made personal interactions instead of formal rules and reg-
ulations the dominant means of communication between institutions
and social groups. This close connection has helped establish smooth so-
ciety-state relations since the handover by fostering informal interac-
tions between the SAR government and community leaders. However,
as the working relationships are based on cooptation and cooperation,
this type of harmony also limits the government cooptation autonomy
from powerful business elites with regard to decision making.
Macao continues to face the dilemma whereby informal practice has
helped maintain a superficial social harmony and smoothed out policy
implementation, while outdated and inefficient formal institutions/reg-
ulations and an overdependence on somewhat corrupt informal institu-
tions have begun to undermine the legitimacy of the SAR government.
 L. Sheng / Cities 61 (2017) 96–108
For these reasons, the governance capability has remained limited not
only throughout its long colonial history but also after almost 20 years
of the One Country Two Systems experiment following the handover.
The experiences on some urban islands demonstrate that micro-level
governance can be both powerful and democratic in function without
maintaining liberal democratic institutions. However, the case of
Macao demonstrates that although the dominance of informal politics
over formal politics within a democratic structure facilitates efficient
decision making and smooth policy implementation via consensus pol-
itics, it ultimately may cause social discontent and political instability
because of the strong inertia of informal politics and their vulnerability
to corruption.
With specific reference to Macao cooptation development paradox,
this research provides empirical support for the argument that the
transformation of traditional urban economic systems cannot match
the economic and political demands of advanced capitalism. This re-
search also provides a new perspective, at least in the context of
Macao, to look at the interaction between urban politics and economics.
This analysis demonstrates that the transformation of the urban econo-
my is not only shaped by prevailing economic policies but also by urban
political and social arrangements. The economic, social and cultural is-
sues in post-handover Macao can all be attributed to the defects of the
urban political structure. Moreover, the case study of the gambling in-
dustry shows that the government's policies on gambling and tourism
were not simply an issue of calculating economic benefits and losses.
Policy-making should always be conducted in broader economic, social
and political contexts.
References
Anckar, D. (2010). Small is democratic, but who is small? Arts and Social Sciences Journal, 2.
Baker, R. (1992). Scale and administrative performance: The governance of small and mi-
crostates. In R. Baker (Ed.), Public administration in small and island states (pp. 5–25).
West Hartford: Kumarian Press.
Barden, S. A., & Runnacles, T. V. (2007). Transport in a high-density urban environment:
The experience of Hong Kong. Transport Reviews, 6(3), 219–258.
BBC News (1999). Macau: The Portuguese legacy. December 15, 1999 http://news.bbc.co.
uk/2/hi/asia-pacific/555844.stm
Carvalho, R. (2015). Macau: The rise and fall of an empire. November 12, 2015 South China
Morning Post (http://multimedia.scmp.com/macau/).
Chan, B. (2010). Gamblers and tricksters: The forgotten gambling films of the 1970s.
Journal of Chinese Cinemas, 4(2), 89–104.
Copeland, B. R. (1991). Tourism, welfare and de-industrialization in a small open econo-
my. Economica, 58(232), 514–529.
Corden, W. M., & Neary, J. P. (1982). Booming sector and de-industrialisation in a small
open economy. The Economic Journal, 92(368), 825–848.
Cremer, R. D. (1986). A model for Macau? Asian Affairs: An American Review, 13(4), 41–55.
Dahl, R. A., & Tufte, E. R. (1973). Size and democracy. Redwood City: Stanford University
Press.
Eadington, W. R. (2009). Capital, rent-seeking, and risk taking in the casino industry and
the economy at large. International Gambling Studies, 9(3), 181–187.
Eadington, W. R., & Siu, R. C. S. (2007). Between law and custom: Examining the interac-
tion between legislative change and the evolution of Macao's gaming industry.
International Gambling Studies, 7(1), 1–28.
Edmonds, R. L. (1993). Macau: Past, present and future. Asian Affairs, 24(1), 3–15.
England, V. (2008). Casinos and greed spark Macau fears. BBC News (February, 5, 2008.
http://news.bbc.co.uk/2/hi/asia-pacific/7226149.stm).
Fong, D. K. C., Fong, H. N., & Li, S. Z. (2011). The social cost of gambling in Macao: Before
and after the liberalisation of the gaming industry. International Gambling Studies,
11(1), 43–56.
Godinho, J. (2006). Credit for gaming in Macau. Gaming Law Review, 10(4), 363–368.
Godinho, J. (2007). The regulation of gaming and betting contracts in the 1999 Macau
Civil Code. Gaming Law Review, 11(5), 572–579.
Godinho, J. (2012). A history of games of chance in Macau: Part I-introduction. Gaming
Law Review and Economics, 16(10), 552–556.
Godinho, J. (2013a). A history of games of chance in Macau: Part 2-the foundation of the
Macau gaming industry. Gaming Law Review and Economics, 17(2), 107–116.
Godinho, J. (2013b). The prevention of money laundering in Macau casinos. Gaming Law
Review and Economics, 17(4), 262–274.
Godinho, J. (2014). Casino gaming in Macau: Evolution, regulation and challenges. UNLV
Gaming Law Journal, 5(1), 7.
Harkness, D. (2014). Did Portugal benefit by handing Macao to China? Quora (https://
www.quora.com/Did-Portugal-benefit-by-handing-Macau-to-China).
Hurtado, P., & Farrell, G. (2015). UN corruption probe leads to ex-assembly president's arrest.
Bloomberg (October 7, 2015. http://www.bloomberg.com/news/articles/2015-10-
06/billionaire-ng-charged-by-u-s-in-united-nations-bribery-scheme).
107
Kuai, J. (2016). War on underground banking yielding results. Macau Business Daily
(January 11, 2016).
Kwong, Y. H. (2014). Protests against the welfare package for chief executives and
principal officials: Macao's political awakening. China Perspectives, 2014(4),
61–65.
Li, G. Q., Gu, X. H., & Siu, R. C. S. (2010). The impacts of gaming expansion on economic
growth: A theoretical reconsideration. Journal of Gambling Studies, 26(2), 269–285.
Li, T., Liu, B. L., & Sheng, L. (2016). Gambling and corruption: Evaluating the cross-border
effect of Chinese anti-corruption policies. UM working paper.
Lin, S. F. (2012). Analyzing problems in the development of Macao's gaming industry.
Guangdong Social Sciences, 2012(2), 213–220.
Liu, C. K. (2000). Some issues relating to the history of Macao. History and Geography
Studies of China's Border, 2000(2), 45–52.
Lo, S. (2009). Casino capitalism and its legitimacy impact on the politico-administrative
state in Macau. Journal of Current Chinese Affairs, 38(1), 19–47.
Lo, S. H., & Chong, K. M. (2016). Casino interests, Fujian Tongxianghui and electoral poli-
tics in Macao. Journal of Contemporary Asia, 46(2), 286–303.
Loi, K. I., & Pearce, P. L. (2012). Powerful stakeholders' views of entertainment in Macao's
future. Journal of Business Research, 65(1), 4–12.
Macao Daily Times (2015). VIP Room staff accused of fleeing with millions. (September 14,
2015).
Macao Statistics and Census Services (1991–2015). Yearbook of Statistics. (25 books in
total). http://www.dsec.gov.mo/Statistic.aspx?NodeGuid=d45bf8ce-2b35-45d9-
ab3a-ed645e8af4bb.
Mann, J. (2014). History of Macau as a Portuguese colony. In yesterday's shadow: The co-
lonial influence on China. July 11, 2014 https://yesterdaysshadow.wordpress.com
McCartney, G. (2014). With or without you? Building a case for further MICE (meetings,
incentive travel, conventions, exhibitions) development in Macao. Journal of
Convention & Event Tourism, 15(3), 173–197.
Ong, C. E., Ryan, C., & McIntosh, A. (2014). Power-knowledge and tour-guide training:
Capitalistic domination, utopian visions and the creation and negotiation of
UNESCO's homo turismos in Macao. Annals of Tourism Research, 48(2), 221–234.
Rose, N. (2013). Macau and China's gambling problem. Testimony before the U.S.-China
Economic and Security Review Commission, hearing on Macau and Hong Kong, June
27, 2013.
Sheng, L. (2011a). Foreign investors versus local businesses: An urban economics model
for tourist cities. International Journal of Tourism Research, 13(1), 32–40.
Sheng, L. (2011b). Foreign investment and urban development: A perspective from tour-
ist cities. Habitat International, 35(1), 111–117.
Sheng, L. (2011c). A political economy approach to foreign investment and local welfare.
The Social Sciences Journal, 48(1), 52–71.
Sheng, L. (2011d). Taxing tourism and subsidizing non-tourism: A welfare-enhancing so-
lution to ‘Dutch Disease’? Tourism Management, 32(5), 1223–1228.
Sheng, L. (2011e). Regional competition and sustainable development: A game theory
model for tourism destinations. European Planning Studies, 19(4), 669–681.
Sheng, L. (2012). Rethinking the impacts of foreign investors on urban development: The
city of Macao. Annals of Regional Science, 49(1), 73–86.
Sheng, L. (2013). Free capital mobility and sustainable community development: A theo-
retical framework. Habitat International, 40(4), 278–284.
Sheng, L. (2014). Effects of foreign expansion on local growth: The case of Macao.
European Planning Studies, 22(8), 1735–1743.
Sheng, L. (2016). Explaining the transformation of urban island politics: The case of
Macau. Island Studies Journal (in press).
Sheng, L., & Tsui, Y. M. (2009a). A general equilibrium approach to tourism and welfare:
The case of Macao. Habitat International, 33(4), 419–424.
Sheng, L., & Tsui, Y. M. (2009b). Casino booms and local politics: The city of Macao. Cities,
26(2), 67–73.
Sheng, L., & Tsui, Y. M. (2010). Foreign investment in tourism: The case of Macao as a
small tourism economy. Tourism Geographies, 12(2), 173–191.
Sheng, L., & Zhao, W. B. (2016). Strategic destination management in the face of foreign
competition: The case of Macao. Journal of Travel & Tourism Marketing, 33(2),
263–278.
Siu, R. C. S. (2006). Evolution of Macao's casino industry from monopoly to oligopoly: So-
cial and economic reconsideration. Journal of Economic Issues, 40(4), 967–990.
Siu, R. C. S. (2007). Formal rules, informal constraints, and industrial evolution: The case
of the junket operator regulation and the transition of Macao's casino business. UNLV
Gaming Research and Review Journal, 11(2), 49–62.
Siu, R. C. S., & Eadington, W. R. (2009). Table games or slots? Competition, evolution, and
game preference in Macao's casino market. Journal of Gambling Business and
Economics, 3(1), 41–63.
Siu Lam, C. (2013). Changes in the junket business in Macao after gaming liberalization.
International Gambling Studies, 13(3), 319–337.
Sou, K. I., & McCartney, G. (2015). An assessment of the human resources challenges of
Macao's meeting, incentive, convention, and exhibition (MICE) industry. Journal of
Human Resources in Hospitality & Tourism, 14(3), 244–266.
South China Morning Post SCMP (2016). Macau's former Chief Prosecutor Ho Chio-Meng
fails in release bid after corruption arrest. March 2, 2016 http://www.scmp.com/
news/hong-kong/law-crime/article/1919560/macaus-former-chief-prosecutor-ho-
chio-meng-fails-release
Veenendaal, W. P. (2015). Democracy in microstates: Why smallness does not produce a
democratic political system. Democratization, 22(1), 92–112.
Vong, F. (2004). Gambling attitudes and gambling behavior of residents of Macao: The
Monte Carlo of the Orient. Journal of Travel Research, 42(3), 271–278.
Wang, C. B. (2014). Licensing VIP-Room contractors or gaming promoters in Macao: The
status quo and improvement. UNLV Gaming Research & Review Journal, 18(2),
105–112.
108 L. Sheng / Cities 61 (2017) 96–108

Wang, W. Y., & Eadington, W. R. (2008). The VIP-Room contractual system and Macao's
traditional gaming industry. China: An International Journal, 6(2), 237–260.
Yee, H. (2001). Macau in transition: From colony to autonomous region. London: Palgrave
Macmillan.
Yeung, Y. M., Lee, J., & Kee, G. (2008). Hong Kong and Macao under Chinese sovereignty.
Eurasian Geography and Economics, 49(3), 304–325.
Yu, W. Y. (2007). Formal and informal politics in Macao Special Administrative Region
elections 2004–2005. Journal of Contemporary China, 52, 417–441.
Zeng, Z. L., & Prentice, C. (2014). A patron, a referral and why in Macau casinos: The case
of mainland Chinese gamblers. International Journal of Hospitality Management, 36(2),
167–175.
Zeng, Z. L., Prentice, C., & King, B. E. (2014). To gamble or not? Perceptions of Macau
among mainland Chinese and Hong Kong visitors. International Journal of Tourism
Research, 16(2), 105–112.