Despite falling tax revenues, it promised an increase of nearly eight per cent in spending in 2016 and will maintain annual payments of 9,000 patacas to every permanent resident and 5,400 patacas to non-permanent ones.
On 17th November, Chief Executive Chui Sai On delivered his Policy Address for the fiscal year 2016 to the Legislative Assembly. The next day the legislature passed the government budget. It estimated total revenue of 155 billion patacas, up 0.7 per cent over 2015, while spending will rise 7.8 per cent to 83.7 billion.
Chui estimated 2016 income from the gaming industry at 200 billion patacas, the lowest since 2010. It will be the third consecutive year of decline. In the first ten months of 2015, he said, the income fell 35.5 per cent to 196.07 billion patacas.
He said that inflation in 2016 would fall to four per cent and unemployment would remain below two per cent.
The government is operating under strong financial pressure after a three-year fall in casino revenues; they peaked at US$45.2 billion in 2013, the highest in the world and seven times that of Las Vegas.
Figures from the Financial Services Bureau showed that the government’s surplus for the first 10 months of 2015 fell by almost 60 per cent to 34.583 billion patacas from 85.855 billion in the same 2014 period.
In the third quarter of 2015, gross domestic product (GDP) fell 24.2 per cent in real terms from the same 2014 period, compared to a 26.4 per cent drop in the second quarter, according the Statistics and Census Bureau. For the first three quarters, the economy dropped by 25 per cent in real terms.
It was against this difficult background that Chui presented his budget.
“From an overall perspective, the whole economy of Macao is operating in a healthy way, public finances are steady and the government is maintaining a surplus,” he said. “All major construction projects are proceeding in an orderly way and the rate of unemployment remains low. Inflation has come down.”
He reported fiscal reserves of more than 570 billion patacas and no outstanding liabilities, after more than 10 years of rapid economic development.
The government has recently set up a committee, headed by the Chief Executive, for the construction of a world tourism and leisure centre. “We also have drawn up a Five-Year Plan for the 2016-2020 period,” he said.
This is the first time the SAR has created such a plan. This has been an important part of economic planning in the mainland since the People’s Republic of China was established in 1949. The 13th Five-Year Plan runs from 2016 to 2020.
The plan, published on 17th November, said that the city’s future role as a world tourism and leisure centre, had already been included in the national 12th Five-Year Plan.
“We must wholeheartedly promote the diversification of the Macao economy and improve the livelihood and welfare of the people,” it said.
“Its future development is full of oppor-tunities and challenges… Now the economic development of Macao is not to seek high growth but to seek high-quality growth. Our development model should gradually turn from an intensive form into a refined form.”
It sets out seven major targets, including maintaining overall stable economic growth; improving the structure of industry; improving construction of an international tourist city; continuing to raise the quality of life of the residents; raising the quality of education; clear results in environmental protection; and strengthening the efficiency of the government and deepening the building of the legal system. It does not give numerical targets.
It lists priority infrastructure projects for the next five years. They included the construction of the light rail system, new links between Macao and Guangdong; a fourth bridge to Taipa; expanding the waste incinerator; expanding and improving the treatment of waste water; building a general hospital for the outlying islands; and building an electronic surveillance system for the whole city.
The fourth bridge will link new urban zone A, near the present jetfoil terminal in Macao and zone E in Taipa near the airport, and aims to ease traffic congestion in the two areas.
“The government is facing many kinds of difficulties and challenges,” said Chui. “It is deeply analysing the source of the problems and is setting fixed strategies… it is calmly facing the accumulation of new and old contradictions and the complications arising from the internal and external environments.”
Gifts to residentes continue
Despite the economic slowdown, the gover-nment will continue to pay annual cash handouts to Macao residents.
The Chief Executive said that the budget included a cash payout of 9,000 patacas to permanent residents and 5,400 for non-residents, the same as in 2014. In addition, he proposed that the Old Age Allowance be increased in 2016 to 8,000 patacas from 7,500 patacas last year.
“I hope Macao residents understand why the government is not increasing the cash handout as in previous years,” he said.
The pay of civil servants rose by 6.8 per cent as from January 2015. The new pay scale was set at 79 patacas, up from 74, but below the 80 requested by the Macau Civil Servant Association.
Review of gaming sector
2016 will be an important year for the city’s gaming sector. Chui said that the government would conduct an analysis of the sector after completing its mid-term review.
The factors in the review include how agreements set out in the gaming concessions have been executed; synergies between gaming and non-gaming elements; the development of the gaming promoter industry; and the influence the sector has had on the local economy, small and medium enterprises (SMEs), the community and the livelihood of residents.
“We will encourage gaming operators to engage more in large-scale tourism projects that will help diversify the sector by offering more leisure activities and non-gaming elements,” Chui said.
“We will continue to strengthen supervision of the gambling industry and perfect the legal and regulatory system… We will standardise the management of middlemen and prevent and con-trol illegal activities,” he said. In October 2015, the gaming regulator issued internal guidelines to all the middlemen in the industry, “to further perfect the regulatory system and promote the healthy development of the industry.”
On the positive side, he noted that revenue from non-gaming elements accounted for about one third of the revenue of the gaming industry and more than 45 per cent of employment in large hotels and resorts; this compared to only 10 per cent in the past.
He reiterated the policy that only SAR residents can work as dealers in the city’s casinos.
The city will further promote its role as a destination for cultural heritage and leisure tourism, diversify international sources for tourism, promote its historic centre and ensure it is marketed via multi-destinationl travel packages.
Chui identified three emerging sectors – Chinese medicine, the cultural and creative industries and meetings, incentives, conferences and exhibitions. The growth of these sectors will create new employment opportunities and further diversify the economy.
The official document given out with the policy speech said that construction of a Macao-Guangdong traditional Chinese medicine technology industry park in Hengqin will be accelerated.
It also said that it would continue to make good use of CEPA and other related policies and create a new co-operative model between Guangdong and Macao, promoting the liberalization of the service trade of the two. It would work hard to create better conditions for local SMEs, specialists and young people.
Macao will take an active role in the construction of the free trade experimental zones in Guangdong, it said. These are in Nansha, Qianhai and Hengqin.
Chui said that seizing development oppor-tunities arising from national strategies – such as the pilot free trade zones in Hengqin and Nansha – would help Macao’s economy to thrive and achieve its goal of becoming a “World Centre for Tourism and Leisure” and a commercial and trade co-operation service platform between China and the Portuguese-speaking countries (PSCs).
Platform for Portuguese-speaking countries
The Chief Executive reaffirmed Macao’s role as a commercial and trade co-operation platform between China and the PSCs.
This includes the role to help SMEs operate in these countries: a distribution centre for goods from them: and a convention and exhibition centre for the PSCs, China and Macao.
Chui said that the government would continue to play its special role in China’s 13th Five-Year Plan and would gradually invest part of its fiscal reserves in large-scale construction projects in Guangdong and Fujian provinces, and elsewhere, to guarantee returns on and the value of the reserves.
These investments would have guaranteed returns and low risks of losses, he said. They would require approval from the Legislative Assembly.
Compared to countries around the world whose GDP is falling, Macao is in an envious position. It has enormous reserves in real and per capita terms and no debt; it can still afford to give cash payments to all its people, even those who are not permanent residents.
It remains by far the globe’s largest gambling centre, in the middle of the world’s fastest growing region. It is within easy flying distance of major tourism markets – South Korea, Japan, Taiwan and countries in Southeast Asia – not to speak of the mainland.
It is adjacent to large areas in Guangdong that offer land and opportunities for growth not available in its limited space. (By Mark O’Neill, photos GCS and illustrations Fernando Chan)
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