Tel Aviv resident James Packer was probably sweating on who will win today’s presidential election in the Philippines, fretting about his stuttering Asian expansion strategy that, not so very long ago, looked for all the world like a stroke of genius. But why bother?
Richer than both the current Prime Minster and Kevin Rudd’s wife put together, Packer didn’t need to keep busting a gut in Asia, where the tables, for once, were loaded against him.
Armed with fiancee No. 4 in the shape of pop star Mariah Carey and having been handed a free ticket to add Sydney to his Australian cash-printing portfolio of monopoly or oligopoly casinos in Melbourne and Perth, why not just sell down his Asian interests to throw the dice-sized bet and revert to the tried and true family strategy of being the big money-making fish in the small Australian pond?
The Philippines, for the past couple of years, has been the go-go growth destination in south-east Asia, with annual growth of about 6% in the past few years. It’s the latest country to get the Melco Crown — the joint venture between Packer and Macau gambling scion Lawrence Ho — treatment. In late 2014 the group opened its latest City of Dreams Resort that contains a Crown Towers hotel.
But the Philippines has been slower to fire up than the group had anticipated. In results released last month, the red ink was flowing and profits looked to be years away. A guaranteed start in Sri Lanka was lost a few years back when the presidency unexpectedly changed hands; the cards were just not going Packer’s way offshore.
So last Wednesday, after markets closed, Crown announced it would sell down a US$800 million stake in the joint venture from 34% to 27.4% and Packer would step down as deputy chairman.
One of the problems highlighted by Ho when the group released its Filipino results was the infrastructure problems that plague the country. Along with Jakarta, which is finally sprucing up its international terminal, Manila has one of the worst airports for a city its size anywhere in Asia, and has nightmarish traffic.
In places like the Philippines, business folk like Packer are keen to see a continuation of the economic reforms and plans to fix the long-term, once intractable problems, that the outgoing government of Benigno Aquino (who, in terms of the nation’s domestic economy, defied expectations that he would be a dud, the reverse-Turnbull, if you like) had begun to address helping to boost the nation’s economy.
But the future is now in doubt, as the Philippines system allows just a single, six-year term for its president.
In a country where personalities rather than policies dominate its presidential elections, Rodrigo Duterte, a crime-busting mayor from the nation’s restive south, is leading in the polls. His populism and questionable outbursts about women — including an Australian nun who was raped and murdered — and other issues have had him likened to a loose cannon, and also compared to Donald Trump. Duterte wants to reshape the country into a federal model, shaking loose the grip on economic power by a tight-knit group or families in Manila. Politics and macroeconomics aside, Packer and Co face fresh competition from new rivals in Manila that will open later this year.
Still, the Philippines is, for the foreseeable future, just a drop in the great gambling ocean compared to Macau. Gambling revenues are only expected to reach US$3.1 billion in 2016 in the Philippines compared with nearly US$30 billion in Macau, where Melco’s new City of Dreams finally opened in January. Revenues in Macau that had ballooned to about seven times those in Las Vegas, have continued to fall by double digits, year on year, on the back of Chinese leader Xi Jinping’s “anti-corruption” campaign.
When Crikey visited the Packer casinos on a Saturday night last December, prime holiday time, it felt like a Monday. Croupiers with sad eyes were beckoning to their tables, swank Vegas style nosheries had a handful of tables dining. It had all the buzz of a sick bumble bee.
And Macau is where the Melco Crown group has made its biggest investments in Asia, and is continuing its long slide as Chinese leader Xi Jinping’s anti-corruption campaign, now into its third year, relentlessly eats into revenues. Now, party cadres baulk at carrying suitcase full of banknotes into Macau for laundering.
As many commentators have noted, Xi’s corruption campaign — whether it’s fair dinkum, a pogrom against internal dissent within the ruling Communist Party or a mix of both — is, like many things in Xi’s China, the “new normal”. Macau’s halcyon days were brief and appear to have passed; it’s not just the Xi campaign that is the problem but the continuing proliferation of casinos, sorry, “integrated resorts” across Asia. Everyone, including Australia, wants a slice, or a bigger one, of the pie.
Then there is Japan, a country that Melco Crown has tipped in extraordinary lobbying resources in an effort to win one of what are only two mooted casino/integrated resort licences.
But Japanese PM Shinzo Abe’s government is having serial problems in getting legislation for what will be the country’s first ever legal casinos — even to draft stage. The Japanese are wary that casinos are widely seen by analysts as potential gold mines, with many tipping the country as a second Macau, if it ever gets its casino act together. Right now the whole thing is on hold.
Abe needs to get a wriggle on. The idea was to have the two casino resorts as an integral part of the country’s infrastructure plans for the 2020 Olympics and four years is barely enough time to build them.
In Sydney, Packer has been given the red-carpet treatment, his free pass to prime position in a government-backed urban renewal project smack bang on one of the world’s most stunning harbours. Not to mention exemptions from the state’s egregious lockout laws.
Packer has finally had enough waiting around for a win in Asia. In any case, he has nothing much to prove to anyone any more.
There have been rumours floating around for some time he has been looking to privatise his listed business; this deal knocks those on the head.
For the meantime, he will take a windfall as ordinary Australians have their superannuation attacked. Much better to focus and the glittering casino that will taint the Barangaroo project — back to Australia, where the house (of Packer) always wins.