While optimists believe the local business environment can start showing positive signs again as soon as the end of summer following the current community COVID-19 outbreak, it is difficult for the local economic recovery to be kept on track with no adjustment in the anti-pandemic efforts

In the alley leading to the city’s landmark Ruins of St. Paul’s, which is best known as “the food souvenir street”, scores of people were seen queuing on a sunny afternoon in late June. They were not looking for a wide array of products at Rua de São Paulo, where most of the shops were closed; they were waiting to have their nose or throat swabbed at a nearby nucleic acid test station amid the latest hike of COVID-19 cases. 

More than two years since the coronavirus pandemic started, the city is now embracing its worst community outbreak, with hundreds of new cases reported in less than two weeks. Unlike many other places across the globe that remain business as usual with thousands of daily infections, Macau strictly follows the “dynamic zero-COVID” strategy of Mainland China. This has brought the city to a standstill once again with the suspension of many commercial and social activities like the district of Rua de São Paulo. When will all of this come to an end? Observers warn there won’t be any significant economic recovery when the pandemic situation continues to fluctuate nor when there are not any changes to the current anti-pandemic efforts. 

By the press time of this magazine, Macau has reported hundreds of COVID-19 cases—the majority being asymptomatic —since June 18, prompting the authorities to immediately carry out three rounds of citywide COVID testing drives and impose stricter border restrictions. While the administration has not put forward a citywide lockdown, it has also ordered the shutdown of all entertainment, leisure and sports venues in Macau except casinos, as well as the suspension of dine-in service of restaurants and eateries, starting from June 24 until further notice. Government offices and banks have also been partially closed and providing limited service since June 20, while the overall frequency of buses, the main mode of public transportation, has been reduced by 20 per cent.

 ‘Dead city’

These all constitute “a dead city” in the words of Ms Lei, a person-in-charge of a food souvenir shop near the Ruins of St. Paul’s. “It’s just 2020 all over again,” she says, referring to the shutdown of many business activities and bleak business climate in Macau at the beginning of this world’s public health crisis. “We basically have not had any customers since [this new outbreak] — our daily turnover is zero, if not just less than MOP100 [US$12.5],” she states. 

“We could have closed doors like others. But we still have rents and wages for staff to pay, and we have already prepared products to sell in anticipation of the summer holiday,” she continues. “We originally expected a gradual recovery of the business environment following some cases [across the mainland] earlier this year, but this outbreak has made this impossible.”

Latest government figures show Macau received some 3.08 million visitors in the first five months of this year, down by 9.3 per cent from a year earlier. With the newest travel restrictions imposed by the authorities—for instance, those visiting the nearby mainland city, Zhuhai, from Macau have to undergo seven days of quarantine and three days of home monitoring—the daily visitation figure to the city has dropped to below the level of 1,000 since June 18, from a daily range of about 20,000 travellers. 

Unlike Ms Lei, quite a few merchants were closed in the meantime, given the lack of travellers, suspension orders, and advice from the authorities that urge the public to stay home if possible to reduce the risks of transmission. A visit by Macau Business on a weekday afternoon in late June in the downtown of Macau peninsula found that among 114 street-level shops in Travessa da Sé and Rua de São Paulo polled, only 32 shops were opened, or just 28 per cent of the total, while the situation was slightly better at Travessa dos Anjos— 20 out of 49 shops were opened, or more than 40 per cent of the total. For those that opened their doors, some shortened their operating hours, while some restaurants offered discounts for takeaways to entice customers amid the lack of dine-in guests.

“The biggest problem for many small-and-medium-sized enterprises now is that they are running out of liquidity, and more merchants might wind down in this new wave of pandemic development,” says Lei Cheok Kuan, a local business chamber leader

August hopes

“Local small-and-medium-sized enterprises [SMEs] always cooperate with the anti-pandemic efforts by the government: quite many merchants in the downtown have temporarily closed to minimise the risks of infection spread, “says Lei Cheok Kuan, chairperson of the Industry and Commerce Federation of Macau Central and Southern District that covers merchants in the city’s downtown. Describing the latest outbreak as “more severe than what Macau has experienced before, he says: “The pandemic has lasted for a long time and businesses have depleted their arsenal to maintain the operation. The biggest problem for many small-and-medium-sized enterprises now is that they are running out of liquidity, and more merchants might wind down in this new wave of pandemic development.”

Before this surge of local cases, a survey by the Federal General Commercial Association of Macau Small and Medium Enterprises earlier this year found that over 85 per cent of the 504 SMEs had seen their turnover halved since the start of the pandemic, while 31.5 per cent had laid off staff to reduce their financial pressure. In addition, nearly 10 per cent of them have expressed the intention of closing down their operations in the future.

Andy Wu Keng Kuong, chairperson of the Macau Travel Industry Council, acknowledges this latest outbreak has dealt a new blow to the tourism sector, which has been struggling in the past two years and more. “The scale of this local community outbreak is unprecedented in Macau, severely affecting the morale of the sector that was expecting a considerable [business volume] in the summer season,” he says. 

Though some local tourism and hospitality representatives remark the present situation as “hopeless” with no travellers, Mr Wu only hopes the local outbreak can be contained as soon as possible. “Should there be no more new community cases in Macau in mid-July, the travel arrangements between the mainland and Macau can start to resume again by end-July or early August,” he says. “In the past, the two sides would only start lifting travel restrictions again after Macau reported no new cases for 14 consecutive days. Nonetheless, the incubation period for this new variant of coronavirus is much shorter than the previous ones, so the two sides can discuss that the travel arrangements can be restored after a shorter time period.”

“As Macau has to maintain the same border control policy with the mainland during the pandemic, the international competitiveness of the Macau MICE industry has been weakened,” says MICE representative Ho Hoi Meng

Less international appeal

Chief Executive Ho Iat Seng did not mince his words in a press conference about the local pandemic situation in late June, noting they pledged a dynamic zero-COVID policy so that the city could resume normal travel with the mainland again soon, which was of paramount importance for the local tourism and economy. He even went further and toed the line of the central government, saying “living with COVID” was “lying flat”, or known as tang pingin Chinese, a phenomenon criticised by state-run media outlets that describes the youth on the mainland adopting a resigned attitude to life.

The chairperson of the Macau Association of Convention, Exhibition & Tourism Sectors, Alan Ho Hoi Meng, acknowledges the rigid COVID-19 policies—namely, the travel restrictions for non-mainland markets—make the city lose some of its charm as a MICE (meetings, incentives, conferences & exhibitions) destination. “As Macau has to maintain the same border control policy with the mainland during the pandemic, the international competitiveness of the Macau MICE industry has been weakened,” he says, referring to the relocation of the 2022 edition of Global Gaming Expo (G2E) Asia. The gaming industry’s trade fair and conference, which was held annually between 2007 and 2019 in Macau, is going to take place in Singapore in August this year. At the expense of fewer international events, Mr Ho emphasises that the authorities should work on supporting the industry to attract more mainland events to be held in the city after this outbreak.

In regards to the impact of this latest upsurge of cases, he points out that the events scheduled between June and July have already been postponed or cancelled. “Due to the fluctuations of the pandemic development in the nearby regions [across different mainland cities] as well as difficulties for mainlanders to get business visas to visit Macau [for attending MICE events] in the first half of this year, a number of events were postponed to the second half of this year, which was originally expected to be a busy season for the industry,” he adds. 

The industry now only hopes that this coronavirus outbreak can be contained soon enough for the travel restrictions between Macau and the mainland to be lifted. “The volume of events this year can maintain last year’s level if the normal situation can be restored quickly,” he adds. Latest government figures show there were 97 MICE events in Macau in the first quarter of 2022, increasing by 42.6 per cent from a year earlier, while the number of visitors surged 19.7 per cent year-on-year to about 165,300.

“It’s difficult to see any substantial economic recovery should the pandemic situation continue to fluctuate and should there be no adjustment in the relevant measures,” says scholar Edmund Loi. “There should be a balance between fighting the coronavirus and facilitating economic development.”

Balance

While the MICE industry still holds hopes that this year’s result could be similar to 2021, the same cannot be said for the gaming industry and the overall economy. Before this outbreak, the gross gaming revenue plummeted 44 per cent year-on-year to just MOP23.79 billion in the first five months of this year, over the heightened supervision and Beijing’s strengthening efforts in clamping down on cross-border gambling aside from the COVID-19 factor. After this latest outbreak, gaming analyst Alidad Tash told Macau News Agency, Macau Business’s sister publication: “… it is far more likely for 2022 to perform closer to 2020 than 2021, i.e., a step backwards instead of forward.” The annual gross gaming revenue in 2020 and 2021 represented about 20 per cent and 30 per cent of the pre-pandemic level, respectively.

“The overall economic performance of this year will certainly be worse than last year,” says Edmund Loi Hoi Ngan, an associate professor of the Social, Economic and Public Policy Research Centre of Macau Polytechnic University, as the gross domestic product (GDP) of Macau has already slipped 8.9 per cent year-on-year in real terms in the first three months of 2022following a hike of 18 per cent in 2021. “Besides the impact from this outbreak, the stricter regulations stipulated in the revised gaming law [that was implemented in late June] and Beijing’s stance towards gaming also play a role[in a gloomier economic prospect],” he adds. 

“The pandemic has lasted for about three years, and I think this latest upset has changed many people’s expectation [of the future], impacting the morale of the public,” says Mr Loi. Emphasising the importance of the city’s efforts in fighting COVID-19, the academic admits the border restrictions over the past three years have rendered the city as “a lonely island”, but “we understand that the border restrictions are not solely decided by Macau”. 

“It’s difficult to see any substantial economic recovery should the pandemic situation continue to fluctuate and should there be no adjustment in the relevant measures,” he says. “There should be a balance between fighting the coronavirus and facilitating economic development.”

Another scholar, Samuel Tong Kai Chung, the president of the Macau Institute of Management, also remarks: “The domestic demand of Macau is not adequate to support the entire economy, which has to rely on external demand. So it’s difficult for the Macau tourism and economy to have any significant recovery over the pandemic and border restrictions.”

This balance is, perhaps, also what the authorities across the border are juggling with. The Chinese National Health Commission announced on June 28 that the quarantine time for overseas travellers entering Mainland China was reduced to 10 days—seven days in a hotel and three days of home monitoring—from 21 days previously. This new rule, which is the most dramatic step taken by Beijing since early 2020 in loosening border control measures, is regarded as a signal that the world’s second largest economy is willing to relax restrictions to shore up the economy. However, brokerage Sanford Bernstein underscored in a research note: “Positive, but move forward changes very little in the short term, and we need to see what further positive changes are made and when. So far it is clear China is sticking with the zero-COVID policy.”

‘Crunch time’

By the time this magazine has gone to press, the latest outbreak is still causing havoc in the Macau community with different restrictive measures in place. In view of the hardship suffered by citizens, businesses and the public as whole, the authorities pledged a new round of support measures in a total value of MOP10 billion, including one-off subsidies for employees, self-employed and businesses; an exemption for tourism tax; a fuel subsidy for the taxi sector; and others. These measuresare on top of the new round of consumption e-vouchers, a MOP300-million scheme to subsidise companies to hire local staff, and other support measures put forward by the administration earlier this year.

In addition of these measures, Mr Loi from MPU thinks the government should provide subsidies for residents and enterprises that are directly impacted by the government’s efforts against the virus, for instance, those that have been placed in quarantine at hotels due to their close contact with the infected, as well as those in the red-code and yellow-code zones that face restricted movement.

“The government should do it as soon as possible as it’s crunch time for us,” Mr. Lei from the business association concludes.


The Government’s MOP10.3 billion relief package

 1 -New round of “Monetary support plan for workers, self-employed professionals and operators of commercial establishments”

2- Optimization of the subsidized training plan

3 – Return of property tax on industrial and commercial establishments

4 – Exemption from tourist tax to all establishments

5 – Waiver or refund of administrative license fees

6 – Refund of road tax for vehicles dedicated to commercial activity

7 – Specific bank credit interest subsidy plan for companies

8 – Provisional allowances for the taxi sector

9 – Consumption Carnival for the entire city.

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