It was with some surprise that we opened the newspaper this morning to see the government admitting it had decided to punish a Cotai project for violating imported labor restrictions – and read that the project in question was not Sands China’s Lot 5&6. No, indeed, it was Galaxy Macau that came under the spotlight of the government’s labor administrators for hiring too many imported workers.

We are not 100% clear on the details of what exactly has happened. The Macau Daily Times story suggested that as many as 1,000 workers would be deported as the government had decided to cut the concessionaire’s imported labor quota. Galaxy sources have indicated that the issue is still being discussed and that the 1,000 workers were not actually employed, but would be taken out of their quota going forward – meaning, we guess, that managing director Jorge Neto Valente is working the phones. What seems beyond doubt is that Galaxy was one of several sites around Macau raided by the government recently and found to be in violation of the 1:1 ratio requirement for local workers. They cannot wiggle out of that so easily.

Could it be that the “local” concessionaire doesn’t have the political pull it once thought it had? If anyone can solve this problem, Neto Valente can. But it may well be that Galaxy is in a bigger rush to get its megaresort open in 1Q 2011 than the government is prepared to countenance. And it is plausible that the government’s priority of not rocking the boat with Beijing supersedes any considerations of fast-tracking anything for anyone in Macau right now, Galaxy included.

The company rushed out a statement for us saying that it was “doing its best to employ as many local employees as possible for Galaxy Macau’s construction development”, adding that it is a “priority to hire locals”, but would not provide further details. Other sources spoke off the record and said this was not a big issue, irritating though it might be. We empathize. though we don’t think there is cause to be blase about any of this. The government’s restrictions on labor imports are the stuff of Wonderland (Alice’s version). But Wonderland is the reality every concessionaire must live within, and we find it hard to believe this will not have an effect on the timeline for the megaresort’s completion if not resolved soon.

Is it a reason to dump the stock? Not in our view. We have concerns about the Galaxy management team’s depth in mass marketing experience for a Chinese audience, but we have no doubt about the quality of the property and how well it will be perceived when it (eventually) opens. Never mind the wave pool: we too cannot understand why they put that in the design. It’s the whole package that counts. Despite being on the back-end of Cotai, and not an easy stroll from the Venetian, we think the allure of the golden cuppolas will be enough. A delay in its completion might even be a blessing in disguise, as it will give the marketing team more time to figure out the difference between Dongguan and Guangdong. Stay tuned.

Used with permission & copyright to IntelMacau