Hengqin Island Next To Macau Looks Too Big To Fail

A long iron shot away from Macau, Hengqin island is a pet project of China President Xi Jinping that’s supposed to help drive Macau’s diversification in several ways. The island, three times the size of Macau, offers space that can expand Macau’s appeal as a tourist destination, broaden its economic horizons, relieve its housing shortage, and connect Macau more closely with its neighbors and the broader world. These issues matter more as Macau’s gaming revenue and tourist appeal tumble, dragging the city's economy down. But to make Hengqin and Macau work together effectively, authorities on both sides of the border need to make some changes.

As reported in Inside Asian Gaming, even before Las Vegas Sands opened Venetian Macao in 2007 and transformed the Cotai landfill between Macau’s outer islands of Taipa and Coloane into the centerpiece of the world’s most lucrative casino destination, LVS Chairman Sheldon Adelson cast an eye on Hengqin. The 41 square mile (106.5 square kilometer) island, then with perhaps 7,000 inhabitants, linked to Cotai via Lotus Bridge could serve as the backyard for land scarce Macau, with hotel rooms and other non-gaming facilities to supplement and support the kind of broad based tourism industry that thrives in Las Vegas. LVS wanted to lease the island, but mainland authorities, perhaps prompted by the interest from LVS, cooked up their own plans.

In late 2008, China’s State Council approved Hengqin as an experimental New Area, aiming to increase foreign trade and investment, plus “strengthen the cooperation with Hong Kong and Macau in service industry and high and new technology.” On a visit weeks later, then-Vice President Xi Jinping announced Hengqin’s development aims would include Macau’s “diversified economic growth.” Xi ‘s December 2012 visit to Hengqin was his first trip outside greater Beijing as China Communist Party Secretary, the precursor to becoming China’s president, emphasizing commitment to the project at the very highest level.

Hengqin’s political blessing is backed by some US$12 billion in infrastructure funding, a powerful incentive for private investment. Big names from Macau, the mainland and beyond have piled in. Many investments are linked to Macau tourism, ranging from casino operator Galaxy Entertainment Group’s tropical island style (non-gaming) resort to Chimelong’s Ocean Kingdom theme park, the first of nine attractions the mainland family entertainment developer plans for the island. GW Investment Consulting CEO Matthew Ossolinski tells potential Hengqin investors to imagine Orlando and Las Vegas combined.

For Hengqin to diversify Macau’s leisure and entertainment product in ways that aren’t possible for Macau alone, there needs to be greater connectivity across the border. Mainland China visitors to Hengqin still need a visa to enter Macau – and if they have it, they can only use it once – and foreigners in Macau need a China visa to enter Hengqin. The University of Macau campus on Hengqin has an open border with Macau but is sealed off from the rest of Hengqin. The authorities need to find creative ways to allow two way traffic of visitors between Hengqin and Macau to nurture the world center of leisure and tourism that officials always say they want Macau to be. US$12 billion certainly shows a desire to make Hengqin succeed, and the tourism component is a key plank, but Macau operators have repeatedly demonstrated it’s far easier to spend money than to take effective steps to broaden tourist appeal.