JOINT REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Macao Special Administrative Region: Annual Report 2011
Date: 2012-05-03
Institutions: European Commission, High Representative of the Union
Subjects: Macao, economic cooperation, economic situation, political situation

EUROPEAN COMMISSION 

HIGH REPRESENTATIVE OF THE
EUROPEAN UNION FOR 
FOREIGN AFFAIRS AND 
SECURITY POLICY

Brussels, 3.5.2012  
JOIN(2012) 10 final 

JOINT REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Macao Special Administrative Region: Annual Report 2011 

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JOINT REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

Macao Special Administrative Region: Annual Report 2011 

INTRODUCTION 

Since  the  handover  of  Macao  to  Mainland  China  12  years  ago,  the  European  Union  and  its 
Member  States  have  closely  followed  political  and  economic  developments  in  the  Macao 
Special Administrative Region (SAR). In order to fulfil the 1999 commitment to the European 
Parliament  an  annual  report  is  issued  on  developments  in  Macao.  This  is  the  tenth  report, 
covering developments in 2011. 

The  European  Union's  relations  with  Macao  are  based  on  common  values,  a  European 
heritage and shared interests in economy, environment, education and culture. During 2011, 
bilateral relations have  developed  further within the framework of the  Agreement  for Trade 
and Cooperation signed in 1992. 

The  EU  acknowledges  the  satisfactory  implementation  of  the  "one  country,  two  systems" 
policy during 2011 in accordance with the Basic Law of the Macao SAR. The fundamental 
rights  and  freedoms  of  Macao's  people  have  been  respected.  The  EU  hopes  to  see  further 
progress  towards  greater  democracy  in  Macao  in  the  framework  of  its  Basic  Law  and  the 
wishes of the people of Macao. 

POLITICAL DEVELOPMENTS 

2011 has been the second year in office for Fernando Chui, Macao's Chief Executive. In his 
annual  policy  address,  delivered  on  15  November,  Fernando  Chui  reiterated  that  improving 
people's  livelihoods  remains  his  administration's  first  priority.  He  also  highlighted  policy 
measures  to  diversify  Macao's  economy.  For  the  first  time,  he  unveiled  plans  for  political 
reform which would be introduced in a steady and orderly manner. 

On 17 November the Macao SAR government asked the National People's Congress Standing 
Committee to interpret the Basic Law to allow modifications to the method of formulation of 
the fifth Legislative Assembly in 2013 and the method of selection of the Chief Executive in 
2014.  Following  procedural  clarifications  received  in  late  2011,  the  Secretary  for 
Administration and Justice, Florinda Chan began the process of public consultation to solicit 
public opinion's views in order to amend Macao's political system. 

In 2011, the Macao Economic and Cultural Office was opened in Taiwan. In Macao, Taiwan 
opened  a  Taipei  Economic  and  cultural  Office.  The  Offices  aim  to  enhance  Taiwan-Macao 
cooperation and exchanges in economy, trade, tourism, and culture. 

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ECONOMIC DEVELOPMENTS 

In  2011,  Macao's  economy  experienced  a  substantial  growth.  GDP  increased  by  21.8%1  in 
real terms for the first three quarters, driven by the booming tourism and gaming sectors as 
well as a revival of investment spending. Along with continuous inflows of tourists, gaming 
revenues rose to a new record level of 269 billion patacas2 in 2011, an increase of 42% from 
2010.  Visitor  arrivals  grew  by  12%  to  reach  28  million  in  2011  with  Mainland  Chinese 
visitors accounting for 58% of Macao's tourism base, providing the major impetus to the rapid 
growth  of  Macao's  economy.  Macao  has  continued  to  be  the  world's  largest  casino  market 
with a size far exceeding its nearest competitors.  

To benefit from this tourism boom, developers have planned to construct more resort-casinos 
in Macao. As of the third quarter of 2011, there were altogether 32 new hotel projects under 
construction  and/or  going  through  approval  procedures  by  the  relevant  authorities3.  Once 
completed, more than 24,000 rooms will be added to the current capacity of 22,356 rooms. To 
curb  excessive  casino  growth,  the  Macao  SAR  government  has  stated  that  the  number  of 
gaming tables would be capped at 5,500 by 2013, and then limited to 3% growth annually. 

As a result of the rapid expansion of the service industries, the problem of labour shortages 
has become more acute than before. The unemployment rate fell to 2.1% in the fourth quarter 
of  2011,  the  lowest  in  the  last  decade.  Macao  increasingly  relied  on  imported  workers  and 
professionals to meet the needs of its growing economy. By the end of 2011, the number of 
non-resident  workers  rose  to  94,028  from  75,000  in  2010,  accounting  for  28%  of  the  total 
workforce.  The  corporate  sector  is  calling  for  a  more  dynamic  and  flexible  labour  import 
regime to ease the shortages of both unskilled workers and professional staff. 

The  inflation  rate  rose  rapidly  from  2.8%  in  2010  to  5.8%  in  2011.  To  improve  people's 
livelihood  and  help  combat  inflation,  the  Macao  SAR  government  continued  to  provide 
various  relief  subsidies  and  direct  cash  handouts  to  all  residents.  This  measure  has  been  in 
place since 2008.  

Diversification of the economy remains a key challenge.. Gaming continued to expand rapidly 
and remained the largest sector of employment, employing 21% of Macao’s total workforce. 
Gaming  tax  contributed  to  83.5%  of  fiscal  revenues  in  2011,  compared  to  72%  in  20074. 
Some  improvements  were  made  in  other  non-gaming  sectors  such  as  the  MICE  (Meetings, 
Incentives,  Conventions  and  Exhibitions),  creative  and  cultural  industries.  Most  efforts  to 
diversify Macao’s economy were government-led, including the organisation of several large-
scaled  trade  fairs  and  forums.  Hotels,  restaurants  and  the  retail  sectors  also  performed  well 
last year.  

Regional integration is a top priority for Macao. Macao continues to foster further integration 
with  the  Pearl  River  Delta  region  and  is  carving  out  a  niche  position  as  a  bridge  between 
China and the Portugese Speaking Countries under the Macao Forum for Economic and Trade 
Cooperation.  Macao’s  role  was  underlined  in  a  dedicated  chapter  of  China’s  12th Five-Year 
Plan.  China  pledges  to  support  Macao  to  be  an  international  tourism  and  leisure  hub,  a 

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Unless otherwise stated, all economic data pertaining to Macao are official statistics released by the Statistics and Census Service 
of the Macao SAR Government. 
Source: Gaming Inspection and Coordination Bureau of the Macao SAR Government. 
Source: Land, Public Works and Transport Bureau, of the Macao SAR Government. 
Source: Financial Services Bureau of the Macao SAR Government. 

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platform  for  business  and  trade  between  China  and  the  Lusophone  countries.  China  also 
supports moderate diversification of Macao's economy. The Guangdong-Macao Cooperation 
Framework Agreement was signed immediately after the unveiling of the 12th Five-Year Plan 
in March 2011. The Agreement seeks to strengthen the socio-economic integration of Macao 
and  Guangdong,  facilitate  diversification  of  Macao’s  economy  and  improve  implementation 
of  the  Closer  Economic  Partnership  Arrangement  (CEPA)  with  China.  CEPA  Supplement 
VIII was signed on 14 December 2011. 

Hengqin (situated in Zhuhai, Mainland China) is a key development project between Macao, 
Zhuhai  municipality  and  Guangdong  province  under  the  Guangdong-Macao  Cooperation 
Framework Agreement. It is regarded as an exemplary zone for a new mode of cooperation 
between  the  provincial  authorities  and  the  Macao  SAR.  1km2  of  the  plot  Macao  rented  in 
Hengqin  will  be  used  by  the  Macao  University  while  the  remaining  4km2  will  be  used  for 
developing new industries. European business has expressed a strong interest in this latter part 
of  Hengqin.  The  leased  area  will  be  run  under  Macao's  jurisdiction,  and  more  detailed 
planning is underway. The Macao SAR government has ruled out building more casinos on 
this geographical extension of the SAR.  

Macao  has  made  notable  progress  in  extending  its  network  of  agreements  on  exchange  of 
information for tax purposes. In 2011, Macao concluded eight tax information agreements and 
one  double  taxation  agreement  protocol  providing  for  exchange  of  information  with  its 
trading  partners.  Previously  Macao  had  already  concluded  five  double  taxation  agreements, 
thus it has now exceeded the threshold of 12 relevant tax agreements required by the G-20 (6 
with  the  EU  Member  States).  Macao's  efforts  to  establish  agreements  to  the  internationally 
agreed  standard  were  duly  recognised  by  the  OECD  Global  Forum  on  Transparency  and 
Exchange of Information in its Phase I Peer Review Report.  

Regarding EU-Macao trade, bilateral merchandise trade flows have reversed since 2008, with 
EU  exporting  more  to  Macao  than  vice  versa.  This  trend  resulted  from  Macao's  shrinking 
manufacturing base and a robust demand for imported goods. In the first nine months of 2011, 
EU  exports  to  Macao  surged  by  68%  to  €247  million  while  EU  imports  from  Macao 
amounted to €60 million 5. The EU was Macao’s second largest imports supplier after China, 
accounting  for  24%  of  its  total  imports  in  20116.  Regarding  investment,  there  were  54 
companies of EU origin established in Macao7; over half of them were in the wholesale and 
retail  business,  the  rest  were  by  financial  institutions,  transport,  communications,  and 
industrial  production  companies.  EU  business  chambers  in  Macao  are  also  becoming 
increasingly active. 

EU – MACAO COOPERATION 

During  2011  bilateral  relations  and  cooperation  between  the  EU  and  Macao  continued  to 
develop building on the solid basis already established. Strengthened cooperation between the 
EU and Macao, including cooperation in new substantive areas of common interest, remains a 
key goal for both parties. This was reconfirmed by the constructive discussions at the annual 
EU-Macao Joint Committee Meeting, held on 29 June 2011 in Macao.  

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Source: Eurostat, as at 12 Jan 2012. 
Source: External merchandise trade statistics, Statistics and Census Service of the Macao SAR Government. 
Source: Direct Investment Statistics 2010, Statistics and Census Service of the Macao SAR Government. 

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During  the  Joint  Committee  meeting,  both  sides  reviewed  the  latest  developments  in  their 
relationship, including in the area of trade and investment. Both sides took stock of existing 
cooperation activities, including the Legal Cooperation Programme and the ongoing training 
programme  forMacao  interpretors,  as  well  as  the  various  activities  in  Macao  under  the  EU 
Business Information Programme for Hong Kong and Macao (EUBIP). Both parties updated 
each  other  on  the  state  of  cooperation  in  tax  matters  and  on  their  respective  positions 
regarding possibilities for enhanced cooperation in the area of taxation of savings. 

There was also a fruitful exchange on other substantive issues of common interest, including 
education,  cultural  exchanges  and  environmental  protection  and  the  willingness  to  explore 
these areas as possible areas for future cooperation. The EU encouraged Macao to sign up to 
the  WTO  Government  Procurement  Agreement.  The  progress  made  in  these  new  areas 
illustrates the widening bilateral relationship between the EU and Macao.  

On  29  June  in  the  margins  of  the  Joint  Committee  meeting,  the  Horizontal  Agreement 
between  Macao  and  the  European  Union  on  Certain  Aspects  of  Air  Services  was  initialed. 
This marked a strengthening in bilateral relations in the field of air transport.  

The activities of the EUBIP in Macao, co-funded by the European Commission and under the 
management of the European Chamber of Commerce (ECC) in Hong Kong, have continued 
to  increase  in  number  and  have  become  more  diverse.  EUBIP  continues  to  be  a  successful 
channel  for  an  increased  understanding  between  the  business  communities  of  the  EU  and 
Macao.  During  2011,  priority  was  given  to  the  sovereign  debt  crisis  in  Europe,  CEPA  and 
trade  relations  between  the  EU  and  Greater  China,  as  well  as  the  participation  in  the  two 
major annual events in Macao (MIF and MIECF). The participation of the EU alongside EU 
Member  States  and  European  businesses  with  a  joint  EU  pavilion  at  these  two  events  has 
resulted  in  significantly  increased  visibility  for  the  EU,  and  has  also  provided  a  good 
networking platform for Macao and Mainland Chinese visitors, and exhibiting EU businesses. 
EUBIP  has  attracted  strong  support  and  participation  from  the  EU  Member  State  business 
chambers  for  its  activities  in  Macao.  However,  a  more  direct  participation  of  Macao-based 
industry  in  the  EUBIP  business  councils  for  various  industry  sectors  could  contribute  to  a 
better identification and understanding of business' specific concerns and interests. 

The EU and EU Member States accredited to the territory increased public diplomacy efforts, 
with  the  aim  to  further  intensify  ties  with  Macao,  enhance  people  to  people  contacts  and 
promote educational exchanges between faculties and students including through the Erasmus 
Mundus programme. The EU continued to support the Jean Monnet chair at the University of 
Macao,  which  continued  to  organise  many  successful  Jean  Monnet  conferences  throughout 
the  year.  Inter-cultural  dialogue  was  further  deepened  with  the  joint  European  UNESCO 
heritage sites photo exhibition.  

In late 2011, the EU launched a call for proposals for an EU Academic Programme in Macao 
which  will  run  from  2012-2015.  The  main  objective  is  to  develop  outreach  activities  to 
enhance  the  visibility  of  the  EU  and  strengthen  academic  cooperation  with  EU  higher 
education  institutions,  including  encouraging  more  scholars  and  students  to  undertake 
research and studies on EU related issues. 

the  Macao  authorities 

2011 witnessed further cooperation to increase the number of qualified interpreters available 
to 
their  bilingual  Chinese-Portuguese 
the  needs of 
administration.  Under  the  programme,  training  of  interpreters  takes  place  in  Macao  and 
Brussels over a five month period.  

to  meet 

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The  EU  will  continue  to  nurture  its  relationship  with  Macao  SAR,  increase  economic  and 
trade  links,  enhance  cooperation  with  business  and  civil  society  and  promote  mobility  and 
exchanges with the Macao people. The various exchanges and dialogues between the EU and 
Macao  are  set  to  continue  in  2012.  In  particular,  the  EU  expects  an  increase  in  activities 
related to cultural exchanges and academic issues. 

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