This little Island of Macau is part of China. At the same time, it's not, that sounds weird,
but that's the case! More on that later! It has a GDP per capita of 115K dollars, which
makes it one of the top 3 wealthiest countries in the world that competes to be at the top
of the list every year. The country is so small that you will hardly
find it out on the map, but it has its police, a different currency, and an independent government.
At least for now.
But Macau hasn't always been that rich. For most of history, it was one of the poorest
places in the world. And no, it didn't suddenly discover resources
under its feet like some other nations to build all of those skyscrapers and diversify
its economy and put its name on the map. It has taken a completely different path that
made Macau so rich that the government didn't know what to do with all of the money they
have collected, so they just started distributing that cash to the average people.
Imagine receiving a few thousand dollar checks every year just for being a citizen.
It sounds like a fairy tale story, but it's not.
Even oil-rich countries would envy them! So, let's try to figure out how exactly this
tiny country achieved such an incredible success.
Gambling
What is the Gambling Capital of the world? Most people would say Las Vegas, that's what
it is known for, but Macau that is ten times smaller than Vegas now earns five times more
than Vegas from gambling games. Surprised?! well, Listen to this!
It surpassed Vegas back in 2006 and stripped the title the Gambling capital of the world.
Sometimes its also known as the Las Vegas of Asia!
It’s weird because why would you name it the Last Vegas of Asia when its bigger than
Vegas, maybe Las Vegas should be called the Macau of Asia. Whatever!
Gambling is Macau's biggest source of revenue, making up almost 50% of the economy.
You see, when you have a country (China) with a population of 1.4 billion people where gambling
is entirely illegal, you will have millions of people coming to a neighbouring state where
gambling is legal (Macau)! For the last 50 years, China has been growing
exponentially, and its middle class rose dramatically. Eight hundred people were lifted out of poverty,
and the largest middle class was born, and when people have too much money to spend,
they began to think irrationally and spend it on gambling, and the closest destination
is Macau.
But it's not only China, if you look around, Japan, Vietnam, Taiwan, are also places where
gambling is completely illegal! So Macau remains the only option for hundreds of millions of
people.
With over 40 casinos, it's just the place to go.
But here is the main question! why did the government bet on gambling? Why haven’t
they focused on developing other industries? Tech, finance, especially when gambling is
illegal in most parts of the world? How did they manage to make their gambling
industry so successful that it became even wealthier than oil-rich countries!
Well, before we answer these questions, We have to take a look at history first!
Background about Macau. Is Macau a country? Macau was a barren fishing village with a
population of about 400 before the Portuguese arrived in the 16th century.
Unlike today, Back then, Portugal was a powerful empire, and it was trading with the rest of
the world. Well, not as powerful as British, but they had trading hubs in every corner
of the world. And Macau would become one of those trading hubs. The place where Chinese
and Portuguese merchants would come together to trade.
Since Portugal didn't enjoy an excellent relationship with China, but it needed a trading hub in
that region. It had to bribe the little island of Macau to establish its trading center.
However, Portugal's imperialistic desires didn't go that far, and it started to decline
as a world power by the 17th century, So Macau's position as a major regional trading center
dropped as well. Especially when Chine lended Hong Kong to
the British, and it became the major trading city making Macau less relevant. You know
that moment when your big brother takes all the attention.
Macau tried to develop different industries, but it never recovered from losing its position
as a regional trading center.
Things were getting worse, and by the 1920s, Fishing re-emerged as a dominant economic
activity since that was the only option they were left with. But it didn't give up and
tried to develop different industries and among them was gambling.
Gambling was already legalized in Macau in 1849, but it was an extremely small industry
and wasn't even a source of income. I mean, the entire population was poor so people literal
did not have the money to gamble.
However, the government realized the potential growth it could generate from this industry,
so it didn't give up and was eager to develop and began investing heavily.If Hong Kong was
the regional trading center, Macau could attract millions of Chinese to come to Macau to gamble.
The government granted a monopoly to the Tai Xing Company in 1937 to take the industry
to a new level. But, that company wasn't ready, so it ended up badly and ruined everything.
Fortunately, that didn't stop the government from still giving it another shot!
In 1962, they decided to back another company, STDM, and give it all the gambling rights!
And it paid off! The STDM introduced western-style games
and modernized the marine transport between Macau and Hong Kong, bringing millions of
gamblers from Hong Kong every year since Hong Kong was a wealthy neighbor. It was filled
with business people.
It has achieved some success, But the revenues weren't enough. And the biggest
challenge was still ahead. It was getting close to the end of the century.
- back to china When it was the year 1999, Portugal had to
hand back Macau to Mainland China like two years before that when Hong Kong was given
back to Chine since the 99-year lease expired. Portugal wasn't ready to easily give up Macau,
especially when it was thriving. Gambling revenues were increasing year after year.
So it argued that their deal was different from Hong Kongs one, and they could keep Macau,
theoretically forever. But remember, Portugal was no longer the superpower
that it has been once, and no one dares to support Portugal on their dispute with China,
especially when China now was the third-largest economy in the world. The entire world was
trading with it. So Macau was quickly and peacefully, given back to China.
And that's when everything changed. Not negatively, but rather positively.
You see, China has five times the population of the united states and now since Macau is
technically part of China. Still, its a separate country, so it's known as a special administrative
region, it has its laws, police, and everything that any other country has except the military.
Now, millions of Chinese could easily fly in and enjoy all the pleasure Macau had to
offer. Especially government officials and businessmen.
It became a little paradise! Since gambling in all forms is illegal in
mainland China.
In 2001, the monopoly rights of STDM had expired, and this tiny country wanted to encourage
competition and attract worlds largest casinos that primarily had their leading Casinos in
Las Vegas. So, that was the end of the gambling monopoly. Lots of different casinos came to
open Casinos in Macau, and now there are over 40 Casinos there.
In 2006 alone, the number of people visited Macau was 44 times its population, for one
single reason - Gambling and a year later, for the first time, It surpassed Las Vegas
and became the largest Casino revenue on the face of the earth .
But gambling isn't Macaus only distinctive trait. It's also a tax heaven.
A place where people usually hide their money or at least avoid paying high taxes in the
country that they made their money. We have an entire video on this matter, and
how exactly that works, the link will be in the description.
Lower taxes always attract investors, especially when you have a stable currency, political
autonomy, with separate executive, legislative, and judicial powers.
Capital gains and corporate income are taxed at significantly lower rates than in European
nations and the United States at the rate of only 12 percent. In Comparison even after
Trump’s massive tax cut, the corporate tax is twice larger in the US at 21 percent.
And since there are around 8 trillion dollars hidden in offshore accounts! Macau has got
some of that cash! Not every tax haven has such a great gambling
industry to waste that money!
When it comes to individuals, taxes are also low in comparison to its neighbors, such as
Japan. It has a progressive tax code with the highest rate of 12 percent. In comparison,
Australia's tax rate could go as high as 45 percent.
That's what makes Macau such a rich country! At the end of the day, gambling, which is
illegal in most of the world, seems to have only benefited this tiny little nation!
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