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Small and medium-sized enterprises (SMEs) in residential districts are facing hurdles in their post-COVID recovery due to high shop rents and a lack of consumer confidence, according to Macau Chief Executive Ho Iat Seng.
Speaking at the Legislative Assembly’s questions-and-answers session on Tuesday, Ho stated that the government would explore “additional support measures” for SMEs but ruled out the possibility of issuing new rounds of consumption vouchers to stimulate local spending.
“The government’s resources are limited,” he said. “Relying solely on continuous distribution of consumption vouchers is not a sustainable long-term solution.”
Nevertheless, he acknowledged the struggles faced by some SMEs in residential areas and old neighbourhoods, such as the northern district, where fewer residents are shopping and spending in the city. Since the easing of pandemic-related travel restrictions last year, more residents have been travelling to Mainland China for shopping and spending, while others have become more cautious with their expenses.
“The M2 money supply in the city has been expanded to over MOP700 billion, but why aren’t some residents willing to spend?” Ho asked. The M2 money supply is an official gauge of the total money supply in the city, including all the cash people have as well as deposits in bank accounts and other savings.
“It’s a problem of confidence,” the Chief Executive continued. “They [some residents] don’t know what will happen next year or the year after. Coupled with high interest rates and other factors, they don’t want to spend.”
In addition to a decline in customers, rising shop rents are also deteriorating the business environment for local SMEs. “We are aware that some SMEs have been struggling to survive during the pandemic, barely making ends meet. But when it comes to renewing their leases in the post-pandemic era, they face substantial rent hikes,” the official explained. “We heard, for example, that the [monthly] rental for a small shop has doubled from MOP50,000 to MOP100,000.”
However, Ho also expressed understanding towards the landlords’ decision to increase rents. “It’s because these landlords bought these commercial units at high prices… and now face pressure from banks to repay their mortgage loans,” he illustrated. “All these problems are due to the soaring property prices resulting from speculation in the past.”
The Chief Executive went even further, urging the local financial sector to engage in self-reflection regarding the imposition of borrowing limits during property transactions.
“Landlords should also refrain from excessively increasing rents in a bid to support local businesses,” he urged. “Residents should also make an effort to enjoy meals and spend in the city during weekends.”
Easing visa requirements for package tours
During the questions-and-answers session on Tuesday, Ho also revealed that the Macau government has recently held discussions with the central government to relax the visa requirements for Mainland Chinese package tours visiting Macau. This would enable these package tours to visit the city multiple times within a specific time period.
“This will help Macau attract more package tours from [the mainland],” he emphasised. “The central government always supports Macau, and there will be more beneficial measures in the future.”
The official also predicted that visitor arrivals in Macau would surpass 30 million this year. “Currently, the average daily number of visitors is about 100,000. If this trend continues, it is projected that the city will receive a total of 36 million visitors this year,” he illustrated. “If the average daily volume drops to 80,000, we estimate there will be 33-34 million visitors this year.”
According to official data, Macau welcomed 28.21 million visitors in 2023, marking a 394.9 percent year-on-year surge and reaching 71.6 percent of the pre-pandemic volume. In the first two months of 2024, the number of visitor arrivals more than doubled year-on-year, with a daily average of 102,586.
Ho also highlighted that the government’s finances have achieved a balanced budget so far this year, marking a significant turnaround from years of budget deficits during the pandemic. “The gross domestic product [GDP] remained stable in the first quarter of this year,” he added. “We anticipate no major issues in the economy moving forward.”
Two major sports events every month
The Chief Executive also pledged on Tuesday that there would be two major sports events held in the city each month for the remainder of the year, thanks to collaboration between the authorities and the six gaming concessionaires.
“A total of 17 major sports events were hosted in Macau in 2023, and this year we aim to have at least 20 major sports events, which translates to about two events per month,” he stated.
These initiatives help expedite sports tourism and accelerate the development of “tourism +,” Ho added.
Since the start of the new 10-year gaming concessions last year, the six gaming operators have been tasked with revitalising six local districts, namely: Lai Chi Vun Shipyard; Rua da Felicidade; the Barra area; Inner Harbour Piers 23 and 25; Avenida do Almeida Ribeiro and Rua de Cinco de Outubro; and the Iec Long Firecracker Factory.
The Chief Executive praised on Tuesday the efforts of the gaming operators in the rejuvenation of these six districts. For instance, about 350 small-scale art and cultural performances have been held in these districts since last September.
“These performances enhance the charm of the old neighbourhoods,” he highlighted. “The key [to rejuvenation] is for SMEs and shops in these districts to offer attractive products and services that appeal to local residents and tourists.”
He further explained that the district of Rua da Felicidade should undergo further enhancements. “There should be more eateries, restaurants, and shops that can attract tourists in the district,” he pointed out.
Source: https://www.macaubusiness.com/soaring-rents-low-consumer-confidence-pose-challenges-for-smes-ce/