By Kate O’Keeffe
Dow Jones Newswires
HONG KONG—Sands China Ltd. will likely receive permission from the Macau government later this month to circumvent the government’s tough labor policy and hire the foreign construction workers needed to restart its $4 billion expansion project, a person familiar with the situation said Monday, removing the major obstacle to the completion of a long-delayed casino resort.
The Macau government told company officials that construction companies employed by the Las Vegas Sands Corp. unit should receive approval to hire the 5,000 foreign workers they need to immediately restart work this month, the person said.
Government officials didn’t respond to requests for comment.
The Macau government imposed new regulations earlier this year requiring that one local construction worker be employed for every construction worker from outside Macau. A shortage of labor in the Chinese territory had earlier prompted developers to import many of their construction workers from elsewhere, especially mainland China.
Sands China, which initially suspended construction on the project in November 2008 at the height of the global financial crisis, earlier said it had resumed building this spring and targeted an opening in the third quarter of 2011.
However, the company said in August the project would be delayed further to the fourth quarter of next year because of an insufficient number of construction workers, highlighting the consequences of Macau’s foreign-labor restrictions on businesses.
Sands China rival Galaxy Entertainment Group Ltd. has also been struggling to hire necessary construction workers to complete its enormous project in Macau’s Cotai area, which is home to Sands’s flagship Venetian casino resort.
Analysts said construction companies will need about a month to recruit workers once they get the go-ahead to hire. This would imply a mid-2012 opening date for the Sands project given the company’s earlier statement that it would take approximately 16 months to complete the first phase of the project once it had “sufficient labor to ramp up construction activity to requisite levels.” RBS analyst Philip Tulk estimates the property will open on July 1, 2012, or about a year later than company executives’ had indicated just months earlier.
Sands China Acting Chief Executive Mike Leven said in July the company had about 1,300 construction workers on site—half of what was needed at that time—and nowhere near the 10,000 to 11,000 workers required at the peak of construction. Leven is also chief operating officer at Las Vegas Sands.
Industry observers have speculated that the labor restrictions, proposed at the end of April just days ahead of a sensitive anniversary, were aimed at appeasing disgruntled labor activists. On May 1, 2007, violent clashes broke out during a Labor Day protest by Macau workers over corruption and use of illegal laborers in the construction industry.
Macau’s casino boom, with gambling revenue up 63% so far this year, has transformed the economy of this once-sleepy former Portuguese colony, but it has also led to rising social tensions such as labor frictions as some residents don’t feel they have benefited from the boom. A new administration in Macau that came into power in December has emphasized the need for balanced growth.
But many Macau residents have complained that the labor crackdown isn’t helping anyone. Given the Chinese territory’s unemployment rate of just 2.9%, the restrictions are taking a toll on a variety of other construction projects unrelated to casinos, including the government’s plan for a new light-rail system and private residential real-estate developments. Businesses that aren’t building have also been subject to stricter quotas on foreign labor, which they complain has affected operations.
Some industry observers said a relaxation of the restrictions is likely to follow the Oct. 18 conclusion of a top level meeting in Beijing in which top Chinese officials discuss priorities for the country’s next Five Year Plan, which will be unveiled in 2011. Macau officials have kept the restrictions in place to prevent another bubble in the Chinese territory’s labor market and are unlikely to make a move without a nod from Beijing, they said.
However, others said Beijing isn’t involved in decisions about Macau’s labor market and that the restrictions are an example of botched local policymaking.
It remains unclear if any decision to let Sands China hire foreign construction workers for its project would prompt a territory-wide relaxation of labor regulations. A large amount of labor will also be needed when Sands China and Galaxy open their resorts, and when Wynn Macau Ltd., SJM Holdings Ltd. and MGM Macau start their respective expansion projects in Cotai.
