JOINT REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL MACAO SPECIAL ADMINISTRATIVE REGION: ANNUAL REPORT 2017
Date: 2018-04-24
Institutions: European Commission, European External Action Service
Subjects: Macao, bilateral relations, democratisation, economic cooperation, economic situation, economic transition, election, human rights, political situation, regional integration

EN 

  EN 

   EUROPEAN COMMISSION HIGH REPRESENTATIVE OF THE UNION FOR FOREIGN AFFAIRS AND SECURITY POLICY Brussels, 24.4.2018  JOIN(2018) 8 final  JOINT REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL MACAO SPECIAL ADMINISTRATIVE REGION: ANNUAL REPORT 2017  
 
 
JOINT REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 
MACAO SPECIAL ADMINISTRATIVE REGION: ANNUAL REPORT 2017 

Summary 

Since the handover of Macao to the People’s Republic of China in 1999, the European Union 
and  its  Member  States  have  closely  followed  political  and  economic  developments  in  the 
Macao Special Administrative Region (SAR) under the ‘one country, two systems’ principle. 
The  European  Union  adheres  to  its  ‘one  China’  policy  and  supports  the  ‘one  country,  two 
systems’ principle and its implementation. 

This annual report on developments in Macao is issued in line with the commitment given to 
the European Parliament. 

In 2017, the ‘one country, two systems’ principle continued to be implemented, to the benefit 
of the Macao SAR, China as a whole and the international community. 

In  September,  Macao  elected  a  new  Legislative  Assembly.  The  political  composition  of  the 
Legislative Assembly did not change after the elections. It continues to be dominated by pro-
establishment lawmakers. High participation in the Legislative Assembly elections, where 14 
out  of  33  seats  are  elected  directly,  shows  that  Macao’s  citizens  are  eager  to  participate  in 
political life and aspire to have a say in their future. 

Macao’s Basic Law and other legislative acts do not provide for the introduction of universal 
suffrage. Nevertheless, the EU encourages the Macao authorities to consider ways to promote 
greater public involvement in the election of the region’s Chief Executive and the Legislative 
Assembly.  This  would  increase  their  legitimacy,  increase  public  support  and  strengthen 
governance. 

The fundamental rights and freedoms of citizens continued to be generally respected in 2017. 
Macao’s media continued to express a broad range of views despite concerns about increasing 
self-censorship. 

Macao’s economy grew significantly during the year, and further initiatives were announced 
to diversify economy. 

The  EU  and  Macao  continued  to  have  solid  trade  relations  and  to  enjoy  a  good  level  of 
cooperation. 

Political developments 

On  17 September,  Macao  held  elections  for  its  Legislative  Assembly.  The  turnout  was  the 
highest on record with 57.22 % of electors casting their votes. Only 14 seats of the 33-strong 
Legislative  Assembly  are  directly  elected.  The  remaining  19  seats  are  elected  through 

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functional constituencies or appointed by the Chief Executive. The newly elected Legislative 
Assembly  remains  heavily  dominated  by  the  pro-establishment  camp.  It  has  only  four  pan-
democratic  lawmakers,  and  one  lawmaker  who  advocates  universal  suffrage  without 
subscribing  to  the  pan-democratic  platform.  Welfare  and  livelihood  issues  were  decisive  in 
the election. 

The  elections  were  held  in  an  orderly  manner.  However,  pro-democracy  party  New  Macau 
accused  the  authorities  of  applying  political  pressure  to  the  party  during  the  campaign,  and 
brought its case to court. The Court of Final Appeal ruled on 11 September in favour of New 
Macau and criticised the Civic and Municipal Affairs Bureau for rejecting the party’s request 
to  hold  an  electoral  campaign  event.  Pro-democracy  activists  complained  that  the  central 
government had hacked their social media, e-mail and instant messaging services in order to 
monitor  their  election  campaigns.  At  least  13  Hong  Kong  journalists  were  denied  entry  to 
Macao ahead of the election. 

On  4 December  pro-democracy  lawmaker  Sulu  Sou  was  suspended  from  his  seat  in  the 
Legislative Assembly. He was charged with civil disobedience in relation to a protest in 2016 
against  the Macao  Chief  Executive.  Macao’s  Legislative  Assembly  suspended  him,  with  28 
votes in favour of the suspension and 4 against. It is the first time since the handover in 1999 
that the Legislative Assembly used its powers to suspend a lawmaker over a criminal charge. 
If  Sou  is  found  guilty  and  jailed  for  more  than  30  days,  he  could  be  disqualified  as  a 
legislator. 

In May, the chairman of the National People’s Congress Zhang Dejiang came to Macao for a 
three-day visit. He praised Macao for the successful implementation of the ‘one country, two 
systems’  principle  and  urged  the  SAR  to  take  further  steps  to  integrate  in  China’s  national 
development. 

In  August,  10  people  died  and  hundreds  were  injured  after  typhoon  Hato  hit  Macao.  The 
category-10  typhoon  wreaked  havoc  in  Macao,  leaving  the  city  without  power  for  several 
hours, indicating the vulnerability of Macao to the effects of climate change. At the request of 
the  Macao  government,  Chinese  People’s  Liberation  Army  troops  from  the  local  garrison 
were mobilised to support the relief efforts. 

In November, the National People’s Congress Standing Committee voted to add the national 
anthem law to Annex III of Macao’s Basic Law, which means that the law will apply in the 
Macao SAR. 

Throughout 2017, over a dozen pro-democracy activists and several journalists were refused 
entry  into  Macao.  Several  Hong  Kong  politicians  and  lawmakers  were  told  by  the 
immigration services that they posed a threat to Macao’s internal security and stability. 

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Equal opportunities, rights and freedoms 

Under  the  ‘one  country,  two  systems’  principle,  enshrined  in  the  Basic  Law  of  Macao,  the 
rights and fundamental freedoms of the people of Macao continued to be generally respected 
and the rule of law was upheld. Civil liberties are upheld in Macao and there is a high level of 
respect  for  human  rights.  Nonetheless,  in  2017  the  government  remained  opposed  to  a 
recommendation  by  the  UN  Committee  Against  Torture  (UN/CAT)  to  establish  an 
independent  human  rights  body.  It  argued  that  this  recommendation  was  not  applicable  to 
Macao as a Special Administrative Region of the People’s Republic of China. 

The media remained diverse and were able to express a variety of views without restriction. 
There appears to be a degree of self-censorship, particularly in Chinese-language media and 
when reporting on Chinese affairs. NGOs and media activists continue to raise concerns over 
self-censorship, which is due to the media’s reliance on government funding. 

In  2017,  the  Macao  Portuguese  and  English  Press  Association  released  its  first  report  on 
freedom  of  the  press  for  non-Chinese  media.  The  report  said  that  freedom  of  the  press  was 
well  respected,  but  that  Chinese-language  media  faced  more  challenges,  restraints  and 
pressure than English- and Portuguese-language media. The report said that the main obstacle 
to freedom of the press was difficulty in accessing sources and a lack of transparency from the 
authorities. 

There  continue  to  be  concerns  about  discrimination  on  the  grounds  of  sexual  orientation 
and  gender  identity.  These  concerns  are  particularly  acute  in  employment,  education  and 
healthcare.  Same-sex  relationships  are  yet  to  be  included  in  the  law  that  makes  domestic 
violence a criminal offence. The UN Committee on Economic, Social and Cultural Rights had 
urged Macao to adopt comprehensive anti-discrimination legislation. 

Despite the Macao Government’s continued efforts to fight against it, trafficking in human 
beings  remains  an  issue  in  Macao.  The  Macao  authorities  conducted  many  anti-trafficking 
training  sessions  and  public  awareness  campaigns  during  the  year.  To  combat  this  cross-
border  crime,  Macao  has  increased  cooperation  with  mainland  Chinese  and  Hong  Kong 
authorities through intelligence exchanges and joint operations. Macao’s anti-trafficking law 
is satisfactory, but law enforcement needs to be more stringent. The number of prosecutions 
and  convictions  for  trafficking  remains  low  despite  a  large  number  of  complaints.  The  EU 
stands ready to renew exchanges and cooperation and to provide technical expertise on best 
ways to address this global challenge. 

Macao  has  not  effectively  enforced  freedom  of  association  and  collective  bargaining  as 
enshrined in International Labour Organisation (ILO) conventions. Employees are free to take 
part in union activities and industrial action but they are not protected from retaliation if they 
do  so.  Article 70  of  the  Labour  Relations  Law  allows  the  employer  to  terminate  an 
employee’s service without just cause by giving a modest amount of compensation. The EU 
encourages Macao to take the necessary steps to comply with ILO conventions. 

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The  Macao  authorities  continued  to  crack  down  on  corruption  during  the  year,  and  the 
government  opened  several  high-profile  anti-corruption  cases.  Typhoon  Hato  raised 
questions  about  Macao’s  disaster  preparedness  and  disaster  relief  coordination.  In  the 
aftermath of the typhoon, the Commission Against Corruption launched an investigation into 
the procedures of the Meteorological and Geophysical Bureau for its typhoon forecasting and 
controversial  management  by  its  former  director.  The  Commission  Against  Corruption’s 
report found no evidence of illegality or external influence. 

Economic developments 

Macao’s  economy  rebounded  in  2017  after  experiencing  a  major  downturn  in  the  previous 
three years when the gambling industry was greatly affected by the anti-corruption campaign 
in  mainland  China.  Macao’s  GDP  surged  by  9.1 %1  in  real  terms  in  2017,  a  significant 
improvement compared to 2016 when it declined by 0.9 %. The economic upturn was driven 
by a recovery of the gambling sector and sustained inflows of tourists. In 2017, visitor arrivals 
increased  by  5.4 %  to  32.6  million.  Visitors  also  spent  more.  Gambling  revenue  registered 
double-digit  growth  in  2017,  totalling  MOP  266  billion,  up  19.1 %  compared  to  2016. 
Domestic  demand  rose  steadily,  with  both  private  consumer  spending  and  government 
spending  recording  moderate  growth.  The  weakest  part  of  the  economy  was  private 
investment,  which  dropped  10 %  in  real  terms  in  2017.  Investment  spending  contracted 
because  several  large-scale  tourism  facilities  and  mega-resorts  were  nearing  completion. 
Inflation  eased  from  2.3 %  in  2016  to  1.2 %  in  2017.  The  unemployment  rate  has  been 
persistently below 2 % over the past five years, even during the economic slowdown, with the 
economy  relying  heavily  on  foreign  workers  and  professionals.  Over  40 %  of  Macao’s 
workforce  in  2017  was  made  up  of  foreign  workers,  with  around  two  thirds  of  them  from 
mainland China. 

On 14 November, Macao’s Chief Executive, Fernando Chui, presented his policy address for 
2018. He reiterated the major policy directions set out in Macao’s Five Year Plan (2016-2020) 
that  was  launched  in  2016.  The  Chief  Executive  said  his  administration  would  aim  to 
diversify  the  economy,  and  participate  in  China's  ‘Belt  and  Road’  initiative  and  in  the 
Guangdong-Hong  Kong-Macao  ‘Greater  Bay  Area’  initiative.  The  government  pledged  to 
continue  to  develop  business-related  tourism  from  Meetings,  Incentives,  Conventions  and 
Exhibitions; cultural & creative industries; Chinese medicine; financial leasing services; and 
wealth management. He encouraged small and medium-sized businesses to cooperate with e-
commerce operators in mainland China to explore markets in Portuguese-speaking countries. 
In  keeping  with  past  practice,  the  Chief  Executive  also  announced  a  package  of  financial 
subsidies  to  local  people.  This  was  the  11th  year  in  a  row  that  such  a  package  has  been 
provided, and this year’s package totals MOP 12.9 billion. In 2018, permanent residents will 
receive MOP 9 000 and non-permanent residents MOP 5 400. 

1 Source:  Unless otherwise stated, all macro-economic indicators were sourced from the Statistics and Census Service of the 

Macao SAR Government. 

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Macao’s fiscal position in 2017 remained sound, and the region has deep reserves. Its fiscal 
account has consistently recorded surpluses for years, despite the significant drop in revenues 
from gambling taxes in 2015-2016. Prudent fiscal policy during the boom years ensured zero 
public sector debt and fiscal reserves in excess of 130 % of GDP2. At the end of 2017, total 
fiscal reserves stood at MOP 490 billion3, exceptionally high for a territory of less than half a 
million  people  (excluding  the  working  population  who  were  not  born  in  Macao).  The 
government has announced in 2016 that it will set up a sovereign development fund by 2019 
to manage the fiscal reserves. 

long-term,  ongoing 

 While  diversification  of  Macao’s  economy  remains  a 
target, 
diversification  of  the  gambling  sector  gained  some  ground  over  the  last  year.  The  share  of 
‘VIP’  gambling  (high-stakes  gambling  by  wealthy  people)  in  total  gambling  revenue 
decreased from 70 % to 56 %4 in 2017. To accommodate mass-gambling and non-gambling 
tourists,  Macao  is  building  more  tourism  facilities  and  improving  the  city’s  infrastructure.  
Gambling  operators  have  committed  to  invest  in  very  large  luxury  resorts  to  attract  large 
conventions.  They  have  also  committed  to  invest  in  broader  types  of  entertainment  that  are 
appropriate for families, business travellers and holidaymakers. Five new multi-billion-dollar 
resorts are due to open in 2018. In total, Macao is due to add 9 000 new hotel rooms, on top of 
the  37 000  available  now.  The  government  has  stressed  that  the  ability  to  develop  non-
gambling tourism will be one of the key criteria for the renewal of gambling concessions. At 
present  there  are  six  companies  with  gambling  concessions,  and  their  licences  will  expire 
between 2020 and 2022.  

On  regional  cooperation,  Macao  and  China  signed  two  new  agreements  in  December  under 
the  framework  of  the  Mainland  and  Macao  Closer  Economic  Partnership  Arrangement 
(CEPA).  These  two  agreements  were  the  ‘Investment  Agreement’  and  the  ‘Agreement  on 
Economic and Technical Cooperation’. The Investment Agreement provides a mechanism to 
settle investment disputes and a framework for legal proceedings. Earlier in October, Macao 
and  Hong  Kong  signed  an  agreement  intended  to  simplify  the  free  movement  of  goods, 
facilitate  customs  procedures  and  trade,  open  trade  in  services  and  establish  bilateral 
cooperation in the field of intellectual property under the CEPA framework. Macao and Hong 
Kong have each entered into a separate CEPA with the Mainland. It is expected that the three 
administrations will build upon their CEPAs to draw up a new, common platform to advance 
further liberalisation and facilitation of trade and investment in the Greater Bay Area. 

Macao  plays  a  role  as  an  economic  bridge  between  China  and  the  Portuguese-speaking 
countries. To strengthen this role, a flagship fund promoting cooperation between China and 
the  Portuguese-speaking  countries  moved  its  headquarters  to  Macao  from  Beijing  in  June 
2017. The fund was founded in 2013 by China Development Bank and the Macao Industrial 
and Commercial Development Fund. It is managed by the China-Africa Development Fund. 

2 Source: 2016 Article IV Consultation Staff Report of Macao SAR, IMF. 
3 Source:  Monetary Authority of  Macao, press release of 1 March 2018. 
4 Source: The Gaming Inspection and Coordination Bureau, Macao SAR Government. 

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The fund has pledged to include more small and medium-sized businesses from Macao in its 
future projects. 

Macao continued its work to fight money laundering and terrorist financing during the year. 
These efforts were acknowledged in the 2017 Mutual Evaluation Report, conducted jointly by 
the Asia Pacific Group and the Group of International Finance Supervisors, according to the 
evaluation methods stipulated by the Financial Action Task Force. In November, Macao also 
implemented a cash declaration system for visitors carrying cash in excess of MOP 120 000 
(or equivalent). 

EU-Macao bilateral relations 

In  2017,  the  EU  was  Macao’s  second  largest  source  of  imports  after  mainland  China, 
contributing  to  25%  of  Macao’s total  imports.  However,  the  EU  was  the  destination  of  less 
than  2%  of  Macao’s  export  of  goods.  These  trade  imbalances  have  generated  long-standing 
trade surpluses in favour of the EU, as Macao’s import demand has continued over the years 
while its manufacturing sector has been shrinking to less than 1% of GDP. 

Bilateral  trade  in  goods  rose  by  8%  to  EUR  744  million  in  2017.  EU  exports  to  Macao 
reached  EUR  626  million,  a  4%  increase  year-on-year,  resulting  in  a  trade  surplus  of  EUR 
508  million  in  2017.  Macao  is  a  growing  market  for  European  luxury  goods.  The  business 
opportunities  in the gambling and tourism industry are central  to EU-Macao trade relations. 
Major EU export products included high-end leather goods, clothing, watches and jewellery, 
food and beverages, and automobiles. 

Procurement  in  the  transportation,  energy  and  construction  sectors  is  also  potentially  of 
interest  to  EU  companies  since  Macao  is  engaged  in  an  increasing  number  of  infrastructure 
projects. However, compared to other major investors (Hong Kong, China and the US), direct 
investment  by  EU  companies  in  Macao  remains  modest.  Portugal  was the  most  notable  EU 
investor  in  Macao,  accounting  for  3.7%  (MOP  9  billion)  of  total  direct  investment  stock  in 
2017.  

As part of its agenda for fair taxation at global level, on 5 December the EU unveiled a list of 
17 non-cooperative tax jurisdictions (Annex I to the relevant Council Conclusions), including 
Macao.  During  the  screening  phase,  three  issues  were  identified  in  the  Macao  tax  system. 
First,  concerning  the  exchange  of  information,  Macao  had  committed  to  apply  the  OECD 
Automatic Exchange of Information Standard on the basis of the bilateral approach but does 
not have a network of agreements covering all EU Member States. Second, Macao does not 
yet participate in the OECD Multilateral Convention on Mutual Administrative Assistance in 
Tax Matters (MAC).  Third, concerning the standards of fair taxation, Macao has one fiscal 
regime, the "Offshore companies" regime, that has been identified as being harmful. On the 
basis of this assessment, Macao had been invited to commit to address these deficiencies by 
the end of 2018. The commitment taken at the end of 2017 was not assessed as sufficient by 

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the  Member  States  and  Macao  was  therefore  placed  on  the  list  of  non-cooperative 
jurisdictions. On 23 January 2018, following a new commitment to remedy EU concerns on 
Macao's  participation  to  the  OECD  Multilateral  Convention  on  Mutual  Administrative 
Assistance  (MAC),  Macao  was  removed  from  the  list  of  non-cooperative  jurisdictions.  The 
EU will now monitor the effective implementation of the commitments made by Macao.  

Macao’s annual Global Economic Tourism Forum was held in October. At this event, it was 
announced that the EU would be the Forum’s 2018 ‘Official Partner’. This announcement fits 
well with the EU-China Tourism Year 2018 initiative, which was announced in June 2017 by 
European Commission President Jean-Claude Juncker and Chinese premier Li Keqiang. The 
EU  looks  forward  to  working  with  Macao  to  make  the  Global  Economic  Tourism  Forum  a 
success, in Macao and beyond. 

The EU-Macao Joint Committee meeting — usually held annually — was not held in 2017. A 
meeting is expected to take place in 2018, and cooperation continues on the priorities agreed 
earlier. For the future, the EU and its businesses are keen to work with the Macao government 
to  diversify  its  economy,  improve  the  sustainability  of  its  economic  development,  and 
promote bilateral trade and investment flows. EU businesses could play an important role by 
providing  expertise  and  services  in  the  many  ongoing  infrastructure  projects  and  in  the 
expansion plans of private investors. Because Macao suffers from acute shortages of labour 
and skilled managers, European companies operating there rely heavily on expatriate staff and 
foreign workers. Obtaining work permits for them has proven difficult. The EU is willing to 
work  with  the  Macao  authorities  and  with  European  businesses  to  help  identify  areas  of 
economic  activity  where  the  situation  is  particularly  acute.  Giving  qualified  professionals 
easier  access  to  Macao’s  labour  market  would  help  boost  its  competitiveness.  The  EU  and 
Macao will continue cooperation on legal and regulatory affairs. 

As  they  do  every  year,  the  Macao  European  Chamber  of  Commerce5  and  the  European 
Chamber of Commerce in Hong Kong jointly coordinated the large European participation in 
the  Macao  International  Environmental  Cooperation  Forum  &  Exhibition  in  March  and  the 
Macao International Trade and Investment Fair in October. 

Legal affairs and interpreters’ training programmes continue to be the flagship projects of EU-
Macao  cooperation.  Since  the  establishment  of  EU-Macao  cooperation  in  the  field  of 
interpreter training in 2006, 90 Portuguese-Chinese interpreters have been trained. The Macao 
Polytechnic  Institute  (MPI)  runs,  in  cooperation  with  the  European  Commission,  a  training 
program addressed to university teachers of interpretation and professional interpreters from 
Macao and mainland China. An international conference organised on 10-11 October 2017 at 
MPI  marked  the  10th  anniversary  of  the  EU-Macao  cooperation  in  the  field  of  interpreter 
training,  whose  importance  is  gaining  in  strength  since  Macao  has  been  designated  "the 

5   The  Macao  European  Chamber  of  Commerce  is  a  hybrid  organisation  that  has  both  direct  company  members  and 
members from the national chambers of EU countries. It currently includes the British Business Association of Macao, 
the France Macau Business Association, the German Macau Business Association, the Irish Chamber of Commerce in 
Macau, the Macao-Romania Chamber of Commerce and the Portuguese-Chinese Chamber of Commerce and Industry. 

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commercial  and  training  platform"  between  mainland  China  and  Portuguese  speaking 
countries.  

Following the 20th EU-Macao Joint Committee meeting, the Macau Science and Technology 
Development Fund (FDCT) set up a co-funding mechanism to encourage Macao researchers 
in participating in the EU's Framework Programme Horizon 2020. Under the scheme, FDCT 
will provide financial support for Macao participants in selected Horizon 2020 proposals. 

The European Union Academic Programme, managed by a consortium led by the University 
of  Macao,  organised  many  new  activities  such  as  hosting  visiting  speakers,  seminars, 
research, academic exchanges, the EU-themed short film challenge, a regular radio show on 
EU-related topics, and a ‘Model EU’ competition. 

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