Report from the Commission to the Council and the European Parliament - First annual report by the European Commission on the Macao special administrative region
Date: 2001-07-25
Institutions: European Commission
Subjects: EU relations, Macao, economic situation, report, social situation

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 25.07.2001
COM(2001) 432 final

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In November 1999, prior to the reversion of Macao’s administration  to  China, the European
Commission  presented  to  the  Council  a  report  entitled  "The  European  Union  and  Macao:
Beyond  the  Year  2000"1.  The  report  set  out  the  European  Commission’s  overall  policy
towards  the  Macao  Special  Administrative  Region  (MSAR)  of  the  People’s  Republic  of
China.  This  is  to  develop  further  the  existing  relations  between  the  European  Union  and
Macao,  in  co-operation  with  the  MSAR  Government.  The  Council  welcomed  and  endorsed
this Communication in December 1999 and the European Parliament issued its own report on
the Commission’s Communication in early 2001.

The three principal institutions of the European Union, therefore, attach great importance to
Macao’s future. The long-standing historical links between Europe and Macao, shared values
and  similar  approaches  to  progress  and  development  will  all  help  to  ensure  that  Macao
remains a privileged bridge for exchanges of  all kinds between the European Union and the
People’s Republic of China.

To reflect its interest in Macao, the European Commission committed itself to drawing up an
annual report on the development of the Macao SAR. This is the first such report.

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Since  the  creation  of  the  Macao  SAR  on  20  December  1999,  the  "One  Country,  Two
Systems" principle has been followed closely.

the  Macao  SAR  Government  endeavours 

Internally, 
to  maintain  Macao’s  specific
characteristics  in  the  institutional,  economic  and  social  fields.  The  Macao  SAR’s  own
institutions  were  set  up  in  conformity  with  the  provisions  of  the  Basic  Law  and  the
establishment of the Court of Final Appeal, in particular, underlined Macao’s autonomy.

From  the  economic  point  of  view,  Macao,  as  a  free  port,  has  maintained  market  economy
principles,  although  the  economy  itself  remains  dominated  by  the  tourism  and  gambling
sectors. It is worth noting that, on his arrival in Macao to celebrate the first anniversary of the
transfer  of  sovereignty,  the  President  of  China,  Jiang  Zemin,  announced  that  Chinese
companies would not be authorised to invest or otherwise be involved in Macao’s gambling
sector.

At the social and cultural level, Macao remains an open and multi-faceted city. Aware of the
need to keep its specific mixture of characteristics from Chinese culture and Latin culture, the
Macao  SAR  Government  intends  to  make  Macao  "in  economic  and  cultural  exchanges,  the
bridge  between  the  Chinese  mainland  and  the  European  Union,  as  well  as  between  other
countries."

In the context of the "One Country, Two Systems" principle, and contrary to the  continuing
use of the death penalty in China, it is worth noting that Portugal was a pioneer in abolishing

1

COM(1999) 484 final

3

                                                
capital  punishment,  and,  as  a  result,  no  capital  punishment  has  been  carried  out  in  Macao
since 1867.

Internationally, the Macao SAR has been active in its own right, in conformity with the Basic
Law.  For  example,  Macao  obtained  its  own  radio  frequencies  from  the  International
Telecommunications  Union  and  participated  in  the  activities  of  the  Universal  Postal  Union.
Macao  concluded  a  legal  co-operation  agreement  and  an  investments  protection  agreement
with Portugal and a civil aviation agreement with Pakistan. Macao also submitted, through the
appropriate  authorities  in  Beijing,  its  report  on  the  implementation  of  the  "International
Convention on the Removal of any Form of Racial Discrimination".

In  addition,  Mr  Edmund  Ho,  Macao’s  Chief  Executive  has,  since  taking  up  his  duties,  paid
official  visits  to  Portugal,  France,  Singapore  and  Japan.  He  will  pay  an  official  visit  to  the
Commission in 2001.

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The Macao SAR’s first year has been primarily a year of adaptation and putting its institutions
into  place.  In  spite  of  the  departure  of  many  Portuguese  officials  and  the  lack  of  senior
governmental experience of a large number of senior officials, the Macao SAR Government
put the required institutions into place in an orderly way.

The  three  main  institutional  branches:  the  Government,  the  Legislative  Assembly  and  the
Judiciary each had to make great efforts to adapt to the new situation with the creation of the
Special Administrative Region.

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The  Macao  Government  proved  effective  in  setting  up  and  adapting  Macao’s  institutions  to
meet the needs of the Special Administrative Region.

At the time of the constitution of the Macao SAR Government, certain changes were made to
the responsibilities of the five Secretaries in charge of the various Government departments:
Administration and Justice, Economy and Finance, Security, Social and Cultural Affairs, and
Transport  and  Public  Works.  In  parallel  to  the  changes  in  responsibilities,  the  Government
had to carry out studies for the creation of new services such as the Customs Administration
and the Court of Auditors. The Criminal Investigation Department and the Civil Police Force
were put under a single command and the tasks of the anti-Corruption Office were expanded.

In addition, the Government committed itself to improving the effectiveness and the quality of
the Administration and officials by stressing training (Macao signed a co-operation agreement
with  Singapore  for  this  purpose)  and  the  reporting  system  for  officials  (inspired  by  the
Australian model). The Government also simplified administrative steps and procedures and
created a system for citizens to petition the administration. Finally, the Government decided
to undertake the reform of the Administration in the year 2001.

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The Macao SAR’s first Legislative Assembly was created in 1999 for a two-year period. Since
its creation, the Assembly has achieved, under the presidency of Mrs Susanna Chou, not only
impressive  legislative  work,  but  has  also  adopted  certain  regulations  governing  its  internal
working procedures. During the past year, the Assembly also carried out political debates on

4

the presentation of the Government’s work programmes in March, for the  year  2000,  and in
November,  for  the  year  2001.  By  the  end  of  2000,  the  Assembly  had  adopted  23  laws,
including  3  presented  by  parliamentarians  and  19  presented  by  the  Government,  including
amending  the  Notary  Code  and  the  Commercial  Register  Code.  In  addition  to  legislation
concerning  setting  up  the  Special  Administration  Region,  the  Assembly  adopted  the  draft
budgets for 2000 and 2001. It also adopted a law on electoral registration in preparation for
the  2001  general  election  and  began  examining  the  draft  electoral  law  submitted  by  the
government.

Lastly,  the  Assembly  adopted,  in  addition  to  its  rules  of  procedure,(cid:3) regulations  concerning
question time, hearings and service to the public.

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Since the creation of the Macao Special Administrative Region, the addition of the new Court
of  Final  Appeal  has  meant  that  the  Judiciary  consists  of  the  Court  of  First  Instance,  the
Appeals Court and the Court of Final Appeal. A total of 28 magistrates’ posts were provided
for, but only 23 posts were  filled  at  the end of 2000. The Public Prosecutor’s  Office  has 23
Prosecutors.  It  consists  of  an  Attorney  General,  6  Deputy  Attorney  Generals  and  16
Prosecutors.  Following  the  departure  of  Portuguese  magistrates,  the  Judiciary  lacks
experienced magistrates.  The  requirement  to  introduce  the  Chinese  language  into  the  courts
has gradually created an additional task for the limited resources of the Judiciary. Despite this,
the Courts were able to issue a large number of judgements last year and caught up with some
of the backlog of previous years.

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Contrary  to  other  countries  and  territories  in  the  region,  Macao’s  economy  experienced  a
downward adjustment well before the Asian financial crisis in 1997, as a result of the property
market adjustment and weak domestic demand. From 1996-1999, Macao registered negative
GDP  growth  consistently  in  four  consecutive  years.  In  2000,  a  moderate  recovery  was
underway, thanks to stronger external demand. Tourism and exports constituted two principal
factors  for  Macao’s  economic  improvement.  The  economic  recovery  of  its  surrounding
region,  Hong  Kong  and  the  Pearl  River  Delta  as  well  as  a  marked  reduction  in  crime  also
contributed to the revival. GDP is estimated to have grown 4.6% in real terms for 2000.

Macao  has  retained  its  status  as  a  free  port  and  is  exempt  from  all  taxes  imposed  by  the
central  government  of  the  PRC.  The  MSAR  Government  has  maintained  the  approach  of
letting  free  and  open  markets  determine  the  allocation  of  resources  within  the  SAR,  and
consequently, Macao's economic development

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The improvement of the economic situation was mainly attributed to the revitalisation of the
tourism  sector  and  impressive  trade  performance.  Tourism  accounted  for  40%  of  Macao’s
GDP in 1999, and employed about 30% of the labour force. It is also one of the key foreign
exchange  earners.  In  2000,  the  number  of  visitors  registered  an  increase  of  23%  compared
with 1999, breaking a historical record of over 9 million visitors to Macao. This provided an
impetus to growth to a wide range of tourism related economic activities and gambling.

5

Merchandise exports, including textiles and shoes, surged by 15.9% in 2000 to 20.38 billion
patacas, compared with a mere 2.9% growth in 1999. On the other hand, merchandise imports
rose  by  11%  to  18.1  billion  patacas2  in  2000.  The  trade  surplus  increased  substantially  by
78.4% to 2.28 billion patacas.

The European Union was the second largest market of Macao’s exports, accounting for 28.4%
of  the  total  exports  of  goods  amounting  to  5.79  billion  patacas,  after  the  United  States
(48.3%),  and  followed  by  China  (10.2%)  and  Hong  Kong  (6.5%).  In  terms  of  import
suppliers,  the  European  Union  ranked  third,  contributing  9.6%  of  the  import  total,  reaching
1.73  billion  patacas  in  value  terms  in  2000.  China,  which  accounted  for  41%  of  the  total
imports, was the top supplier. Hong Kong (15.2%) was the second.

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The Macao SAR Government is fully aware that the economy, because of its limited size, is
very  much  influenced  by  the  situation  in  the  surrounding  territories  and  regions.  The
Government  has  chosen,  as  its  general  policy,  to  consolidate  the  existing  economic  base  to
ensure  stable  development  and  fiscal  discipline,  as  it  does  not  have  sufficient  financial
resources  to  launch  major  infrastructure  projects.  The  MSAR  Government  also  needs  to
accumulate reserves to prepare for future development.

In  his  speech  on  the  Government's  programme  for  the  year  2001,  the  Chief  Executive
announced that the single-licence system for the gambling industry would be reviewed when
it expired at the end of 2001. Under the existing arrangements the licence-holder (Sociedade
de Turismo e Diversoes de Macau, STDM) has been the only casino operator in Macau since
1962. The gambling industry contributed about one-third of Macao’s GDP and accounted for
about  55%  of  total  government  revenue  during  1996-99.  The  importance  of  the  gambling
industry, either on its own or as a generator of further tourism receipts in Macao’s economy,
cannot  be  underestimated.  For  this  reason  the  Government  intends  to  proceed  with  great
prudence on the reform of this sector. A study on licensing procedures and legal regulations
of the gambling industry in other jurisdictions has been commissioned by the Government in
order to consider what are the options available. A special Committee, chaired by the Chief
Executive, has been set up to study future developments in the industry.

In  addition  to  the  proposed  liberalisation  of  the  gambling  industry,  the  Government  has
already achieved some liberalisation in other economic sectors. For example, the Government
granted  two  new  licences  for  mobile  telephone  operators,  to  allow  competition  with  the
existing  licence-holder.  The  Internet  and  satellite  television  services  have  also  been
liberalised.  Nevertheless,  the  Government  considers  that  the  moment  has  not  yet  arrived  to
establish general legislation on competition.

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In spite of the improved economic situation, unemployment remains a cause for concern both
from  the  economic  and  social  points  of  view.  For  a  working  population  of  approximately
217,000 persons,  14,300  persons  are  without jobs. The unemployment rate reached  6.6%  in
the  three  months  to  December  2000.  This  rate  represented  only  a  very  slight  improvement
compared to a rate of 6.7% at the start of the year. The situation was particularly acute in the
construction industry, which had an unemployment rate of 17%. The return to Macao of many

2

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6

                                                
Macao-based  construction  workers,  who  had  sought  work  in  Taiwan,  only  served  to
exacerbate the situation, in the absence of any new public works in Macao.

The  high  rate  of  unemployment  in  the  construction  sector  was  the  root  of  protest
demonstrations  in  May  and  July.  As  a  result,  the  Government,  at  the  request  of  domestic
construction  workers,  agreed  to  reduce  the  number  of  non-resident  workers  from  28,000  to
20,000. However, this agreement will be very difficult to implement.

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Thanks to the efforts of the Macao SAR Police Force and also because of better co-ordination
and co-operation with the Hong Kong and South China police authorities, law and order in the
Macao SAR has shown a clear improvement recently. By the end of 2000, the total number of
crimes  and  offences  had  fallen  by  3.64%  in  relation  to  1999.  The  number  of  murders
committed fell from 40 in 1999 to 11 in 2000. The number of kidnappings went down from
20  cases  in  1999  to  8  cases  in  2000,  and  the  number  of  cases  of  arson  fell  from  164  to  82
cases.

The  improvement  in  law  and  order  was  also  made  possible  thanks  to  the  strengthening  of
discipline in the police force. A citizens’ complaint system was set up to deal with complaints
made  against  the  police  force  and  the  prison  authorities.  The  MSAR  Government  is  aware
that  the  improvement  in  law  and  order  is  a  long-term  process.  It  intends  to  continue  to
improve the quality and effectiveness of the police force by training and the gradual creation
of an "esprit de corps". Improved facilities and equipment are also priorities for the future.

(cid:24)(cid:17)

(8(cid:16)0$&$2(cid:3)5(/$7,216

The  good  relations  between  the  EU  and  Macao  that  existed  before  the  hand-over  have
continued and developed since the hand-over.

The European Commission submitted a proposal in January 2000 to the Council of Ministers
in favour of  visa-free access3 to the  EU for Macao SAR  passport  holders. The EU  took  the
political  decision  last  December  to  approve  the  principle  of  granting  Macao  SAR  passport
holders visa-free access to the territories of 13 Member States. The Macao SAR Government
welcomed this decision. Once agreed by the Parliament and the Council, visa-free access will
facilitate the exchange of visits between Macao and the EU considerably.

The European Parliament’s delegation for relations with China, led by Per Gahrton MEP, paid
an official visit to the Macao SAR at the beginning of November 2000. The Chief Executive,
Mr  Edmund  Ho,  received  the  delegation,  as  did  Mrs  Susana  Chou,  President  of  the
Legislative Assembly. The delegation also met most of the Legislative Assembly’s members
and  a  discussion  took  place  on  the  implementation  of  the  "One  Country,  Two  Systems"
principle.

The seventh meeting of the Joint Committee of the EU-Macau Co-operation Agreement was
held in Brussels on 30 June 2000. This enabled both sides to examine the monitoring of the
recommendations  of  the  Commission’s  Communication  "The  European  Union  and  Macao:

3

In early 2001, the Parliament and the Council of Ministers approved a European Commission proposal
in  favour  of  visa-free  access  to  the  EU  for  Macao  SAR  passport  holders.  This  came  into  effect  on
10 April 2001 and was welcomed by the Macao SAR authorities.

7

                                                
Beyond the Year 2000", to exchange information on the implementation of the Macao SAR’s
transition  arrangements,  and  provided  a  means  for  promoting  and  improving  bilateral
relations in commercial, economic and co-operation matters. The two sides also reviewed the
implementation of existing co-operation projects and the new legal co-operation project.

As far as EU-Macao trade relations are concerned, the Commission appreciates Macao’s long-
standing free trade tradition. The Commission also welcomes Macao’s continued commitment
to WTO principles and support for the multilateral trading system.

In the field of intellectual property protection, the Commission very much welcomes Macao’s
effort to develop  intellectual  property legislation.  It  considers  however  that the  enforcement
of IPR legislation remains a crucial issue in Macao, and urges the Macao authorities to pursue
its efforts in this field.

(cid:25)(cid:17)

&21&/86,21

The Macao SAR has, on the whole, got off to a good start.

These  are  early  days.  But  thus  far,  political  life  continues  to  be  led,  as  in  the  past,  in  a
consensual way and the people of Macao are increasingly interested in the political and public
management of the Special Administrative Region.

Some slight progress  had been made on the economic front, where the Government is fully
aware of Macao's limited economic base and dependence on regional neighbours. In view of
this  and  the  requirement  in  the  Basic  Law  to  achieve  fiscal  balance,  the  Government  has
adopted  policies  of  consolidation  for  the  moment  and  gradual  liberalisation  when  the
circumstances are right. Macao's trade and investment regime remains among the most open
in the world.

The MSAR Government has succeeded in sharply reducing crime, which has had a beneficial
knock-on effect by boosting tourism.

Since Macao's return to China, the life-style that characterises Macao remains deeply rooted
and diversified.  It is clear  that  Macao  is  coming  to  terms  with  its  new  status  in  a  calm  and
business-like way. However, as with the Hong Kong SAR, the foundation for Macao's secure
development  and  future  prosperity  will  be  adherence  to  the  "One  Country,  Two  Systems"
principle and to the tenets of the Basic Law.

The  Commission  remains  committed  to  assisting  Macao  wherever  possible,  and  to  helping
Macao  develop  and  realise  its  full  potential.  The  Commission  will  continue  to  maintain  a
close watch on events in Macao, paying particular attention to the full implementation of the
Joint Declaration and the principle of "one country, two systems".

8