By: Our Correspondent

macau-gambleThere is either
a greater awareness in Beijing about corruption arising from the
gambling Mecca of Macau, or at least China is going through a
periodic bout of show trials while letting most sleaze continue
unmolested. Either way, it spells trouble for Macau’s vast wave
of new casinos and hotels.

Macau is
certainly in Beijing’s sights, but there are questions whether
the enormity of the cases will be followed up, a development that
could frighten huge numbers of officials and state enterprise
managers away from Macau, given its reputation as a place to gamble
with ill-gotten gains and launder money.

Three things
have come together. First is the trial in Macau of Ao Man-long, the
former minister for transport and public works, on charges of
receiving payoffs totaling HK$200 million on land deals and helping
firms obtain construction contracts on favorable terms. It is
described as the biggest corruption trial in Macau’s history.

Second are the
trials across the border of Wu Huali, the chief of police in the
Pearl River Delta city of Huizhou, who is accused of spending more
than 10 million yuan in Macau casinos, and of He Liqiong, the head of
a Foshan post office who allegedly gambled away 1.8 billion yuan of
postal savings bank money (see accompanying story).

Third, there is
an attempt to stop the illicit export to Hong Kong and Macau of
currency in cash or through grey market swaps arranged by dealers in
Shenzhen. This move was the main cause of a 4 percent drop in the
Hang Seng index on November 16. While in theory Beijing should
welcome capital outflow at present, it fears loss of control, the
volatile impact on Hong Kong stocks and the fact that such flows are
often the direct result of corrupt deals as the beneficiaries
scramble to get their money offshore and out of sight. Hong Kong and
Macau may not be the ultimate destination but they make a useful
first stop.

The Ao case
alone shows the depth of the problem in Macau. No less than 46
projects were claimed by the prosecution to be involved with
kickbacks ranging between 3 percent and 10 percent. Some 76 charges
have been filed on corruption, money laundering and abuse of power.
According to the charge sheet, the minister was on the take for a
huge number of projects, not only public works but also deals related
to giant casino projects including The Venetian, the recently opened
mega- project owned by the Sands Corporation of the US.

Events have also
thrown a spanner in the works of some casino/hotel projects,
including the City of Dreams being developed by Hong Kong-listed
Melco in a joint venture with Australia’s PBL, controlled by
James Packer. Final approval for the NASDAQ-listed Melco-PBL deal has
been held up as the matter is now in the hands of Macau Chief
Executive Edmund Ho, who took over Ao’s portfolio. According to
a filing with the US Securities and Exchange Commission, Melco-PBL
“has yet to receive either a formal grant of a land concession
or an occupancy permit for the City of Dreams site.”

Ho himself is
already under pressure because of a big May Day street demonstration
followed up by another one on October 1, National Day. The casino and
construction boom is regarded by critics as having benefited just a
few owners, professionals and officials, while local wages have been
held down and cheap labor brought in from the mainland.

Civil unrest is
not the sort of things that endears Ho to Beijing, which had been
showering him with praise, seeing Macau as a model business-driven
territory free of the political wrangling in Hong Kong. It may now be
worried about the depth of corruption and cronyism in Macau. The Ao
trial has revealed how much power a few officials could wield without
any effective oversight.

fabric … of Macau is being gutted,” security expert Stephen
Vickers, who heads up the consultancy International Risk, was quoted
as saying. “There has been a gentrification of triad society.”
Vickers cited undocumented gambling visits by mainland officials to
launder illegally obtained cash, the appearance of murdered bodies
along the nearby Chinese coast and graft charges against senior
government figures as examples of the worsening situation.

If Beijing is
serious about a cleanup it will need to do more than prosecute a few
individuals. It may force Ho to clean up the coterie of “patriotic”
businessmen who effectively control the territory on behalf of the
Communist Party, and did so even in the latter days of Portuguese
rule. But will it prevail on Ho to prosecute the companies which paid
the bribes? These include big mainland-based contractors as well as
many businesses connected with the casino projects.

Beijing knows
Macau is a safety valve for Chinese gambling instincts. But while it
can live with tens of thousands of small gamblers coming across the
border every day to try their luck at the tables, it may well feel a
need to keep a closer watch on the mainland high rollers and their
sources of cash. That would be bad news for operators who need high
rollers with money to burn to fill the casinos, five-star hotels and
glitzy new shopping centers of the “new” Macau.

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Macau’s Perilous Lure for China’s Cadres