HONG KONG (Bloomberg) -- President Hu Jintao urged Macau to diversify its economy in a speech that was part of a ceremony marking the 10th anniversary of the former Portuguese enclave’s return to Chinese rule.

In the past decade, the 27 square kilometer (10 square mile) territory, an hour’s ferry ride from Hong Kong, has been transformed into the world’s biggest gambling hub, as companies such as Las Vegas Sands Corp. and Wynn Resorts Ltd. spent billions of dollars building casinos. Along the way, soaring living costs, uneven wealth distribution and concern over graft have fueled public protests.
Macau’s leadership “should utilize fully the series of measures that the central government has already adopted to support Macau,” said Hu, who arrived in Macau yesterday. The city should be “strengthening and improving the management of the gambling sector,” diversifying the economy, lifting living standards and improving the educational system, he said.
Hu has said the central government wants Macau to lessen its dependence on gambling, and has helped the city by assisting the development of its Pearl River Delta region. Hu pledged support for Macau’s new leader, Fernando Chui, inaugurated Sunday.
Chui succeeds Chief Executive Edmund Ho, who led Macau after its return to China following 442 years of Portuguese rule. Chui got 282 of the 296 votes cast by Macau’s 300- member election committee in July, his victory a foregone conclusion because he was the only candidate.
One country
Macau is a semi-autonomous region using the same “one country, two systems” principle applied to Hong Kong, returned by the British in 1997, two years before Macau. The central government controls the flow of gamblers, who provide the bulk of Macau’s tax revenue. Hu didn’t comment on any possible easing of restrictions on mainland citizens’ travel to Macau.
Ninety percent of the high-rollers to Macau’s casinos come from China, according to Kai Cheong Fok, vice president and dean of arts at the Macau Millennium College. Gambling contributes as much as 80 percent of the city’s taxes.
In the first 10 months of this year, the gambling industry paid 34.9 billion patacas ($4.37 billion) in tax, Bloomberg calculations based on government figures show. When billionaire Stanley Ho was first granted a monopoly on Macau casinos in the early 1960s, gambling contributed 3 million patacas, Fok said.
After Ho’s monopoly ended in 2002, investments by Las Vegas-based magnates Sheldon Adelson, who heads Sands, and Stephen Wynn propelled the city into the world’s biggest gambling hub. Beijing helped by relaxing visa restrictions for its citizens to the city.
Ho’s return
Ho, 88, made his first public appearance since he was hospitalized for more than four months and two surgeries at Sunday’s inauguration of the city’s new government. Ho was in a wheelchair, accompanied by Angela Leong, mother of his five youngest children, and son Lawrence Ho.
“What the outside world thinks, ‘the one country, two systems’ policy is quite successful,” Fok said. “But when you think about economic growth, you also have to be more concerned about issues such as literacy and the gap between the rich and the poor.”
Five of the six casino operators are also owned by foreign companies, fueling complaints that the benefits of the gambling boom aren’t benefiting ordinary Macanese, Fok said.
Since its handover on Dec. 20, 1999, Macau’s economy has expanded as much as fivefold. When adjusted for purchasing power, that makes the city’s 550,000 residents on average the richest in Asia, 2008 World Bank figures show. Median incomes have almost doubled since their low in 2002. Still, residential property prices have surged more than fourfold in the same time.
Protesters gather
While many cabs in Macau displayed city flags to celebrate the anniversary Sunday, there were also hundreds of demonstrators carrying banners urging the government to combat corruption and stop selling land cheaply to the casino operators and developers.
“The economy has grown so much in the past 10 years and property is so expensive, but my salary has stayed almost the same, about 4,000 patacas a month,” said Mary See, a garment worker in her 40s who participated in the protest. “The government should build more homes and encourage employers to hire those in their 40s and 50s,” she said.
In addition to prices and jobs, corruption has created discontent. Ao Man Long, Macau’s secretary for transportation and public works, was jailed for 28 1/2 years in April for graft.
“It’s not just Ao who’s corrupt,” legislator Ng Kuok Cheong told demonstrators Sunday. He’s collecting signatures calling for the popular election of the chief executive in 2019 and the building of 40,000 government homes by 2014.
Corruption a priority
Sixty-six percent of 1,052 Macanese surveyed by the One Country Two Systems Research Centre said the next government should make eradicating corruption its top priority, Hong Kong’s Ming Pao newspaper reported Dec. 17.
China last year curbed travel visas to Macau, giving no official reason. Even with the curbs, gambling revenue is set to rise to a record this year as the mainland’s economy rebounds on the back of the government’s $586 billion stimulus package.
Record new loans in China boosted spending, lifting gross domestic product 8.9 percent in the third quarter. Macau’s economy followed suit, growing 8.2 percent in the three months ended Sept. 30. The city’s economy shrank for three straight quarters prior to that.
“There’s no urgency or reason to help out,” said Billy Ng, a Hong Kong-based analyst at JPMorgan Chase & Co.
Casino revenue in Macau climbed more than 6 percent in the first 11 months of the year, and may post a record high this year, Portuguese news agency Lusa reported earlier this month.
China also has to maintain its own ongoing battle against corruption, Willy Lam, adjunct professor of history at Chinese University of Hong Kong, said in a Dec. 16 phone interview.
Photo: Chinese President Hu Jintao, right, and Macau's new Chief Executive Fernando Chui stand during Chui's swearing-in ceremony in Macau Sunday, Dec. 20. (AP photo)