MACAU (AFP) — Macau's chief executive Edmund Ho on Tuesday resisted calls to cut taxes for the crucial but stuttering gaming sector and insisted the city was in a strong position to face the global financial crisis.
In his annual policy address, Ho sought to allay fears that the city would suffer as casino operators struggle to fund aggressive expansion plans because of the credit crunch.
"As to the expectation that Macau will be going through a difficult time next year, the government has already made sufficient preparation in terms of policy and financial resources," he told legislators.
"We will be responsible and will not underestimate the difficulties, and we hope we will overcome these challenges with the people in Macau."
He offered extra loans for small and medium-sized businesses and 10.2 billion patacas (1.3 billion US) on new infrastructure projects, including improvements at heritage sites, as well as new public housing and railways.
But he stopped short of cutting the tax rate for casino revenues -- currently around 39 percent -- which has swelled the city's coffers in recent years on the back of the booming gaming industry.
"A tax cut for the gaming business has never been in our consideration," he told reporters after his speech.
Instead, he said the government would focus on using its revenue from gaming to boost other parts of the tourism sector, adding he wanted to attract more visitors from southeast Asia.
Macau's gross domestic product grew by an impressive 26 percent in the first half of 2008.
But gaming revenues fell 10 percent in the third quarter after four years of spectacular growth due to visa restrictions on visitors from the Chinese mainland, where gambling is illegal.
Chinese authorities have strengthened the visitor limitations in the past few months on worries about the outflow of cash to US companies, problem gambling and money laundering.
This has combined with dismal credit conditions in the United States, where many operators are trying to finance enormous plans for expansion in the southern Chinese city, to put Ho under pressure to offer tax breaks.
However, the government's financial position remains strong on the back of a 101 percent increase in casino revenues between 2004 -- when the first foreign resort was opened -- and 2007.
Some foreign operators are beginning to struggle, including US-based Las Vegas Sands, which last year opened the gargantuan Venetian casino in Macau, costing 2.4 billion US dollars.
Its US-listed share price has fallen from around 148 dollars last October to just 8 dollars this week on worries about its heavy debt levels.
On Tuesday, Sands said in a statement it was halting part of its huge development in Macau due to trouble accessing credit, although it said it was in the process of raising 2 billion US dollars in new funding.
Ho told reporters Sands had not approached the government for any financial support.
Macau -- formerly a Portuguese colony and now a special administrative region of China -- has attracted a flood of foreign investment since it liberalised its gaming market, ending local tycoon Stanley Ho's monopoly.
Despite the tax income from 10.5 billion US dollars in gaming revenues last year, many citizens complain they have not benefited from the boom.
Edmund Ho earlier this year announced a moratorium on new casinos, amid worries that expansion in the city of 550,000 people was putting too much pressure on its infrastructure and widening the wealth gap.
He said Tuesday the government would strengthen its monitoring of the gambling industry "to ensure its health and sustainability."
Doubts linger about whether Ho, who is due to step down next year, has the political clout to cut taxes or reverse a string of tougher restrictions on mainland gamblers.
Ho conceded to reporters that the visa policies had affected gaming revenues, but said the impact was small and he had no plans to ask China to relax its restrictions.
Jonathan Galaviz, a leisure industry consultant at Nevada-based Globalysis, said revenue was likely to "significantly moderate" in 2009, and that Macau must protect its tourism and gaming sector.
"Macau's tourism industry remains a vital component of Macau's economic future and the casino gaming industry is at the very core of that sector's future success."
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