Report from the Commission to the European Parliament and the Council - Macao Special Administrative Region: Annual Report 2009
Date: 2010-06-03
Institutions: European Commission
Subjects: EU relations, Macao, activity report, cooperation policy, economic policy, economic situation, political situation

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EUROPEAN COMMISSION 

Brussels, 3.6.2010 
COM(2010)288 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

Macao Special Administrative Region: Annual Report 2009 

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REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

Macao Special Administrative Region: Annual Report 2009 

Introduction 

Since the handover of Macao to mainland China ten years ago, the European Commission has 
been  closely  monitoring  economic  and  political  developments  in  the  Macao  Special 
Administrative  Region  (SAR),  in  order  to  fulfil  its  1999  commitment  to  the  European 
Parliament to issue an annual report on developments. This report covers the year 2009. 

2009 was an important year for the Macao SAR. It marked the 10th anniversary of its return to 
mainland China. A new Chief Executive replaced Edmund Ho. Elections for the Legislative 
Assembly took place in September 2009, ushering in a new legislature for a four-year term. 
Earlier in the year, Macao also witnessed the passage of national security legislation.  

The  European  Commission  acknowledges  the  satisfactory  implementation  of  the  "one 
country, two systems" policy since the handover in accordance with the Basic Law of Macao 
SAR.  The  Basic  Law  guarantees  that  Macao's  way  of  life,  rule  of  law  and  protection  of 
fundamental rights and freedoms will remain unchanged. All in all, the implementation of the 
Basic Law has worked, in general, well for Macao since its return to mainland China and the 
fundamental rights and freedoms of Macao's people have been respected.  

Political developments 

2009 marked the first change of leadership since the colony was returned to China in 1999. 
On 26 July 2009, former Macao Secretary for Social Affairs and Culture Fernando Chui was 
named  the  new  Chief  Executive  to  take  over  from  Edmund  Ho,  who  had  led  the  Macao 
government since its handover to mainland China. Dr Chui won the support of 282, or 94% of 
votes from the 300-member Chief Executive Election Committee. In remarks made after his 
election victory, Fernando Chui said that he would listen carefully to public concerns; lead a 
clean government and improve its transparency; and also ensure fair and healthy competition 
in the gaming sector, the backbone of Macao's economy.  

European  Commission  President  Barroso  congratulated  Fernando  Chui  and  wished  him 
success in his efforts in favour of Macao's stability and prosperity. He also thanked Edmund 
Ho  for  his  contribution  to  Macao’s  development  over  the  past  10  years  and  for  the 
strengthening of Macao’s links with the European Union.  

Macao's  Legislative  Assembly  elections  were  held  on  20  September  2009.  The  elections 
attracted  a  voter  turnout  rate  of  59.9%  -  the  highest  in  Macao's  electoral  history.  The 
legislature  is  composed  of  29  seats,  including  12  directly-elected  seats  and  17  indirectly 
elected  seats,  which  represent  ten  functional  constituencies  and  seven  seats  which  are 
appointed  by  the  Chief  Executive.  A  total  of  122  candidates  from  16  groups  contested  the 
direct  elections.  Eight  of  the  12  candidates  who  won  the  direct  elections  were  veteran 
lawmakers who have served terms in the legislature, while the other four were new faces in 
the Legislative Assembly. Macao's pro-democratic camp of legislators won another seat in the 
chamber, bringing their mandate up from two seats to three. The European Commission is of 

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the view that overall the elections were held in a fair and orderly manner. The record turnout 
was a positive indicator of Macao’s political development and a sign of rising civil awareness 
in the territory. The European Commission welcomes this development and believes that the 
increasing  political  maturity  of  Macao’s  citizens  provides  a  solid  foundation  for  progress 
towards greater democracy in Macao. 

The  Macao  SAR  marked  its  10th  anniversary  on  20  December  2009.  Chinese  President  Hu 
Jintao was present at the celebrations. President Hu also took part in the ceremony to mark the 
inauguration  of  the  third-term  government.  In  his  speech,  President  Hu  lauded  the  SAR's 
achievements  over  the  past  decade  and  expressed  confidence  that  the  new  Chief  Executive 
and  his  officials  would  be  able  to  unite  and  lead  the  people  of  Macao  in  building  a  better 
future for the SAR.  

The  passage  of  national  security  legislation  was  another  important  political  development. 
Article 23 of the Basic Law commits the SAR government to introducing legislation covering 
treason, secession, sedition, subversion and theft of state secrets. Following a 40-day public 
consultation,  the  government's  draft  national  security  legislation  was  presented  to  the 
Legislative Assembly on 5 January 2009. It was passed by a large majority of the Legislative 
Assembly  on  25  February  2009  (only  the  two  pro-democracy  legislators  voted  against)  and 
came into effect on 3 March 2009. The national security legislation was praised by Chinese 
President Hu Jintao during the celebrations to mark the 10th anniversary of the handover. The 
EU  takes  note  of  the  new  national  security  bill  and  reiterates  the  importance  of  preserving 
fundamental rights and freedoms guaranteed in the Basic Law of Macao SAR. 

In  2009  Macao  was  mentioned  in  the  75th  session  of  the  United  Nation's  Committee  on  the 
Elimination  of  Racial  Discrimination.  The  Committee  acknowledged  Macao's  adoption  of 
the Law on the Fight Against Trafficking in Persons, as well as the law establishing the Legal 
Framework  on  the  Recognition  and  Loss  of  Refugee  Status.  The  Committee  also  expressed 
concerns  that  human  trafficking  is  still  a  serious  problem  in  the  SAR,  bearing  in  mind  that 
victims  were  often  women  and  children  who  were  not  citizens  or  who  belonged  to  ethnic 
minorities.  The  Committee  recommended  the  reinforcement  of  measures  to  adequately 
prevent, combat and punish human trafficking, especially of non-citizens. The committee also 
expressed concerns that migrant workers were excluded from the social welfare system in the 
SAR and recommended that relevant legislation be amended with a view to extending social 
welfare  benefits  to  all  workers.  The  European  Commission  also  noted  with  concern  the 
increasing  number  of  incidents  throughout  the  year  in  which  Hong  Kong  journalists, 
academics and activists were denied entry by Macao immigration officers, on the grounds of 
public security. 

Economic developments 

Since  the  liberalisation  of  the  gaming  monopoly  in  2002,  Macao  has  become  the  world's 
biggest casino market. This expansion was sustained by mainland Chinese visitors), coupled 
with  substantial  investment  injected  into  the  SAR  by  new  casino  operators.  Macao's  GDP 
figures have almost tripled over the past decade. However, its economy experienced its first 
economic recession in 2009 as a result of the global financial crisis and government policies 
to contain the excessive growth of the gaming industry. Although Macao's economy managed 
to weather the crisis it remains over-reliant on the gambling industry and continues to see a 
widening wealth gap expand.  

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In 2009, China has continued to tighten the number of visits mainland residents can make to 
Macao to curb gambling trips. China contributed to50.5% of Macao's visitor arrivals in 2009 
and is also its largest source of tourism. These visa restrictions on mainland visitors have had 
a  far  greater  impact  on  the  local  economy  than  the  global  financial  crisis.  To  reduce  the 
impact of economic downturn, the Macao SAR Government came up with various initiatives 
to  help  its  industry  and  provide  relief  to  its  residents,  such  as  a  one-off  cash  handout  to  all 
citizens,  increased  investment  in  public  works  and  infrastructure,  a  stimulus  plan  of  100 
million  Patacas  (€9  million)  to  help  tourism-related  industries,  and  a  small  and  medium 
enterprise  (SME)  loan  guarantee  scheme  to  support  them  in  coping  with  a  weaker  business 
environment. The impact of the global financial crisis on the world's largest gaming market 
was  most  notable  in  the  finances  of  US  casino  operators.  Some  of  their  casino  expansion 
projects were slowed down or suspended.  

Nonetheless,  Macao's  economy  recovered  through  increased  arrivals  of  visitors  and  robust 
gaming  revenues  in  the  last  quarter  of  2009.  Total  visitor  arrivals  rebounded  by  5%  in  the 
fourth quarter after falling in the first three quarters. Gaming revenue rose by 9.4% to a record 
high  of  119  billion  Patacas  for  the  whole  year  of  2009  (€10.7  billion).  Due  to  the  liquidity 
available in Asia despite the global financial crisis, Macao's casino operators were able to find 
new sources of funding by listing their casino businesses on the Hong Kong Stock Exchange, 
allowing  them  to  pay  off  some  of  their  debt  and  resume  work  on  suspended  projects.  The 
number of casinos therefore increased from 31 in 2008 to 33 in 2009.  

Macao's GDP registered a double-digit decline in the first half of 2009 but started to pick up 
towards  the  second  half.  GDP  attained  a  mild  growth  of  1.3%  in  real  terms  in  2009.  This 
growth momentum accelerated throughout the fourth quarter. The recovery was largely led by 
exports of gaming services. The unemployment rate was stable at 3.6% in 2009. Inflationary 
pressure eased off with the inflation rate falling rapidly to 1% in 2009 from 8.6% in 2008. On 
the  external  front,  merchandise  exports  were  very  weak  due  to  the  sluggish  demand  in 
overseas markets. Exports of goods plummeted by 52%, and imports fell by 14%, yielding a 
widening trade deficit of over 29 billion Patacas (€2.6 billion).  

Macao’s  official  statistics  show  that  the  EU  remains  Macao's  second  largest  importer  after 
China, accounting for 21% of its imports. ,. The EU was also the fourth largest export market 
for Macao, taking up 8.2% of Macao's total exports. According to Eurostat, EU imports from 
Macao plunged by 54% to €107 million in 2009, while exports to Macao dropped by 9% to 
reach €200 million, yielding a trade surplus of €93 million . Transport equipment, machinery 
and  electrical  equipment,  and  food  products  were  the  largest  categories  of  EU  exports  to 
Macao. 

Macao continued to progressively integrate its economy with mainland China in 2009, which 
is  key  to  sustaining  its  long-term  economic  future.  The  sixth  supplement  of  the  Closer 
Economic  Partnership  Arrangement  (CEPA)  between  Macao  and  China  was  signed  in  May 
2009.  CEPA  has  provided  a  platform  to  integrate  the  two  economies  and  the  arrangement 
provides wider opportunities for Macao companies to conduct business in China. Moreover, 
Macao  has  been  keen  to  actively  contribute  to  the  long  term  development  plan  of  the  Pearl 
River  Delta  Region.  The  three  governments  of  Macao,  Guangdong  and  Hong  Kong  have 
launched studies and infrastructure projects to link up these major cities in the Delta, forming 
a 'one-hour intercity traffic circle' to allow transportation between any two places within it.  

China  also  extended  favourable  measures  to  assist  Macao's  growth  and  development  –  as 
shown  in  the  lease  of  a  plot  of  land  on  an  adjacent  island  (Hengqin)  to  Macao  for  the 

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expansion  of  Macau  University  and  the  endorsement  of  Macao's  plan  for  land  reclamation. 
China has rented out a plot of land in Hengqin to Macao for a total sum of 1.2 billion Patacas 
(€108 million) until 19 December 2049. Macao will ex ercise jurisdiction over this new area. 
The Macao SAR government expects that this extension of its geographical jurisdiction will 
help  Macao  diversify  into  other  service  sectors,  such  as  education,  cultural,  recreational  or 
sporting activities.  

On the regional front, Macao faces increased competition from other Asian cities which aim 
to  enter  the  casino  business.  The  launch  of  direct  cross-Strait  passenger  and  cargo  flights 
between Taiwan and mainland China poses some challenges to Macao's civil aviation sector, 
which for many years used to be a transit hub for flights between Taiwan and China. In this 
regard,  in  his  inaugural  speech  on  22  December  2009,  the  new  Chief  Executive  Fernando 
Chui  proposed  to  strengthen  exchanges  and  cooperation  with  Taiwan  in  order  to  reinforce 
Macao's  role  as  a  service  hub.  He  also  stated  that  Macao  will  continue  to  put  effort  into 
diversifying  its  economy  into  other  sectors  such  as  culture,  education,  and  the  Meetings, 
Incentives,  Conventions  and  Exhibitions  (MICE)  industries,  and  to  strengthen  ties  with 
Portuguese-speaking countries as well as the European Union. The Macao SAR government 
has also introduced a series of measures to support the operation and development of SMEs in 
non-gaming  industries.  The  European  Commission  notes  positively  Macao’s  efforts  to 
diversify its economy, which will be beneficial for its long term stability.  

EU – Macao cooperation 

The  European  Union's  relations  with  Macao  are  based  on  common  values,  a  European 
heritage and a shared interest in areas such as the economy, the environment, education and 
culture.  Relations  have  developed  under  the  framework  of  the  Agreement  for  Trade  and 
Cooperation  signed  in  1992  between  the  EU  and  Macao.  The  2009  EU-Macao  Joint 
Committee meeting, held annually under this framework agreement, took place in Macao in 
February 2009 and highlighted the fact that Macao continues to be a significant partner for the 
EU.  

At  this  meeting,  views  were  shared  on  the  effects  of  the  global  financial  crisis,  the  rise  of 
protectionism  and  climate  change  strategies.  Agreement  was  also  reached  on  working 
together  to  keep  the  EU  and  the  Macao  economies  open  and  to  enhance  cooperation. 
Strengthening the multilateral trade system, improving intellectual property rights protection, 
upgrading  Macao's  public  procurement  tendering  procedures,  acknowledging  bilateral  co-
operation  on  anti-dumping  investigations,  and  the  satisfactory  implementation  of  the  EU– 
Macao Readmission Agreement were also covered in bilateral discussions. 

This  bilateral  cooperation  is  guided  by  the  European  Commission's  Communication,  "The 
EU,  Hong  Kong  and  Macao:  possibilities  for  cooperation  2007-2013".  It  sets  a  number  of 
challenging objectives to move EU-Macao relations forward by broadening cooperation. The 
launching  of  the  "European  Union  Business  Information  Programme"  for  Hong  Kong  and 
Macao (EUBIP) in Macao in February has proved to be a very useful instrument in promoting 
knowledge-sharing and a better understanding between Macao and the European Union. 

The consortium formed by the European Chamber of Commerce in Hong Kong, the Macao 
Trade  and  Investment  Promotion  Institute,  and  the  Institute  of  European  Studies  of  Macau, 
has successfully implemented through EUBIP a series of activities in close partnership with 
national  chambers  of  EU  Member  States  and  ad  hoc  relevant  business  and  industry 
associations.  In  particular  for  Macao,  the  participation  of  the  EU  alongside  Member  States 

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and European businesses with a joint European Union pavilion and speakers has given more 
visibility to the European Union in Macao and has substantially contributed to forums such as 
the  Macao  International  Environment  Cooperation  Forum  (MIECF)  in  April  and  the  Macao 
International  Fair  (MIF)  in  October  2009.  A  seminar  on  the  European  Union's  chemical 
regulation (REACH), with expertise from the European Chemicals Agency and supported by 
the Macao Trade and Investment Promotion Institute, was a case in point.  

The  environment  is  an  important  issue  of  concern  for  the  Macao  SAR  Government  and 
continues  to  be  an  area  for  close  cooperation.  The  European  Commission  welcomes  the 
Macao  SAR  Government's  efforts  to  lead  the  organisation  of  international  environmental 
cooperation  forums  and  exhibitions  to  promote  international  awareness  of  environmental 
protection  in  Macao,  such  as  the  MIECF.  The  SAR  has  been  very  active  in  promoting 
governmental and civil society exchanges and has also stepped up efforts to raise awareness 
about environmental protection as well as encouraged businesses to use energy-efficient green 
products. 

Cooperation  between  the  EU  and  Macao  expanded  in  2009  in  a  number  of  sectors.  In 
December,  the  European  Commission  and  Macao  signed  an  EU-Macao  cooperation 
agreement  in  the  legal  field  to  strengthen  Macao's  legal  system  and  enhance  public 
administration, legal and judicial expertise, following the successful completion of a similar 
project  in  2007.  The  rule  of  law,  good  governance,  and  respect  for  fundamental  rights  and 
freedoms  are  inseparable  from  a  high  level  of  awareness  of  the  legal  system  by  Macao 
residents and the existence of well trained judges and legal practitioners.  

Contacts between senior European and Macao officials continued in 2009 to explore means of 
cooperation in the area of civil aviation. Macao has confirmed that it will opt for a horizontal 
air services agreement that will update all 15 existing bilateral agreements with EU Member 
States to include the principle of Community designation. As it has no air space of its own, 
Macao confirmed that it had already obtained the agreement of China to conclude a horizontal 
agreement  with  the  European  Union.  The  European  Commission  will  appreciate  further 
progress with a view to concluding discussions for a horizontal agreement within 2010. 

Talks  between  European  Commission  and  Macao's  senior  officials  continued  in  2009  to 
explore means of cooperation in the area of taxation of savings. As a first, partial step in this 
direction,  Macao's  commitment  to  the  implementation  of  the  OECD  Standard  in  respect  of 
exchanges  of  tax  information  between  jurisdictions  is  certainly  welcome  by  the  European 
Commission. To this end Macao adopted a law on information exchange in tax matters that 
came  into  force  on  15  September  2009.  The  dialogue  on  possible  further  measures  which 
could be genuinely equivalent to those of the Savings Directive will be continued in 2010. 

2009  has  also  seen  an  expansion  of  people-to-people  contacts  between  Europe  and  Macao. 
Macao has actively participated in the 2009 Erasmus Mundus Programme extending contacts 
between  universities  and  students  of  Europe  and  Macao  and  deepening  the  understanding 
between us. The EU has also supported the Jean Monnet chair at the University of Macao by 
participating  in  the  successful  Jean  Monnet  Conferences  held  throughout  the  year.  Further 
strengthening  of  cooperation  is  foreseen  after  the  signing  in  January  of  a  protocol  with  the 
Macao government to organise a series of courses for the training of around 100 interpreters 
from Macao for conferences in the next four years.  

Outlook for the future 

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2010 will be a new era for Macao, under a new leadership and a new Legislative Assembly, 
based  on  the  legacy  successfully  built  since  the  handover.  Macao  shares  with  Europe  a 
valuable  heritage  and  the  same  values  of  openness  and  tolerance.  The  EU  will  continue  to 
maintain close ties with Macao's government and its people in this new phase to strengthen 
the  existing  relationship.  The  European  Commission  will  continue  to  support  the 
implementation  of  the  "one  country,  two  systems"  in  Macao  SAR  and  for  this  purpose  to 
monitor closely political, institutional, economic and social developments in the SAR. 

The  European  Commission  is  keen  to  see  progress  in  bilateral  dialogue  in  matters  such  as 
civil aviation and taxation of savings. The European Commission would also like to enhance 
academic  and  cultural  exchanges,  as  well  as  encourage  Macao  to  participate  in  worldwide 
EU-funded  programmes,  such  as  the  Erasmus  Mundus  which  will  call  particularly  on  small 
countries and territories such as Macao in 2010.  

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