JOINT REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Macao Special Administrative Region: Annual Report 2018
Date: 2019-05-08
Institutions: European Commission, European External Action Service
Subjects: Macao, bilateral relations, discrimination on the basis of sexual orientation, economic cooperation, economic situation, economic transition, human rights, political situation, regional integration, trafficking in human beings

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  EN 

   EUROPEAN COMMISSION HIGH REPRESENTATIVE OF THE UNION FOR FOREIGN AFFAIRS AND SECURITY POLICY Brussels, 8.5.2019  JOIN(2019) 7 final  JOINT REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Macao Special Administrative Region: Annual Report 2018  
 
 
JOINT REPORT TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 
MACAO SPECIAL ADMINISTRATIVE REGION: ANNUAL REPORT 2018 

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 1997. 

In 2018, 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.  

The rule of law and the independence of the judiciary are upheld, as seen in the case of the 
judicial  procedures  against  the  opposition  lawmaker  Sulu  Sou.  Rights  and  fundamental 
freedoms are generally respected. 

Although civil liberties are protected by Macao’s Basic Law, the political opposition is weak 
and civil society is not very vocal. The Basic Law and other legislative acts do not provide 
for  the  introduction  of  universal  suffrage.  Nevertheless,  the  EU  encourages  the  Macao 
authorities  to  provide  for  greater  public  involvement  in  the  election  of  the  SAR’s  Chief 
Executive  and  the  Legislative  Assembly.  This  would  increase  their  legitimacy,  increase 
public support and strengthen governance. 

In  2018,  Macao  received  two  recommendations  during  the  Universal  Periodic  Review  of 
China, carried out in Geneva in November: one on the protection of migrant workers and one 
on discrimination against LGBTI people. Human trafficking remains an issue of concern. 

In  2018,  the  Macao  authorities  undertook  or  announced  several  initiatives  to  strengthen 
national  security,  which  brought  the  SAR’s  policy  more  into  line  with  the  views  of  the 
mainland:  the  Legislative  Assembly  passed  an  amendment  preventing  foreign  judges  from 
ruling on matters of national security, a national anthem law was passed, and plans to amend 
national security laws were announced. 

Macao’s  media  continued  to  express  a  broad  range  of  views  despite  concerns  about 
increasing self-censorship. 

Macao’s  economy  did  well  in  2018,  showing  strong  growth  driven  by  the  gambling  and 
tourism  sectors,  very  low  unemployment  and  a  sound  fiscal  position.  The  government’s 
stated aim of diversifying the economy is, however, far from being achieved. Only 6.8 % of 
the revenue of Macao’s casinos came from non-gambling sources. 

October  2018  saw  the  inauguration  and  opening  to  the  public  of  the  Hong  Kong-Zhuhai-
Macao Bridge. This major infrastructure project links the mainland city of Zhuhai with Hong 
Kong and Macao, stretching both over and under the sea for 42 kilometres (55 km if access 

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roads  are  included).  The  bridge  forges  better  connections  between  the  cities  of  the  Greater 
Bay Area and will contribute to greater integration with the mainland, while presenting new 
opportunities and new challenges. 

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

Political developments 

In  May  2018,  pro-democracy  opposition  lawmaker  Sulu  Sou  was  convicted  of  unlawful 
assembly  for  his  participation  in  a  protest  in  2016.  He  had  been  suspended  from  the 
Legislative  Assembly  since  December  2017.  The  prosecution  demanded  prison  terms  for 
Sulu Sou and a fellow anti-establishment activist, Scott Chiang for aggravated disobedience, 
but the court decided that a prison sentence was not warranted as the protest had been non-
violent  and short.  If Sulu  Sou had received a jail  sentence of more than  30 days, he would 
have been disqualified from the Legislative Assembly, which would have further weakened 
the already meagre opposition.  After the court’s  decision, Sulu  Sou was able to  resume his 
duties as a lawmaker. The prosecution charges were criticised for being politically motivated, 
but the court’s decision highlights the independence of the judiciary. 

In March, the government announced its intention to amend its national security law ‘to keep 
up  to  date  with  modern  society’.  Issues  listed  as  needing  urgent  amendment  were  the 
procedures  for  collecting  evidence  in  criminal  investigations  and  the  special  rules  for 
coercive measures in evidence collection. 

On  3 July,  the  Legislative  Assembly  passed  an  amendment  preventing  foreign  judges  from 
ruling on matters of national security. The definition of national security is a broad one, and 
can  thus  be  used  to  exclude  foreign  judges  from  many  cases.  The  authorities  said  that  the 
amendment  was  essential  to  protect  the  State’s  fundamental  interests.  This  decision  was  a 
significant step back from its current mixed legal system which allows Macao to benefit from 
the  expertise  of  foreign  judges.  According  to  official  figures,  10  out  of  49  magistrates  in 
Macao hold foreign citizenship, mostly Portuguese.  

Veteran  legal  advisers  of  Portuguese  origin  at  the  Legislative  Assembly  were  dismissed  in 
August 2018. They were on temporary contracts, but the sudden decision raised concerns in 
civil  society  about  increasing  efforts  to  sideline  Portuguese/foreign  expertise  in  favour  of 
Chinese expertise. 

On  14 August,  Macao  passed  a  national  anthem  law  which  includes  a  fine  for  individuals 
who disrespect the anthem. The law also includes teaching about the history of the anthem in 
school curricula. 

In March 2018, the organisers of the Macao  Literary  Festival  cancelled the participation of 
writers Jung Chang, Suki Kim and James Church after they were informally notified that they 
could  not  be  guaranteed  entry  to  Macao.  PEN  Hong  Kong1  issued  a  statement  expressing 
dismay at this ‘censoring and authoritative move’. This incident should be seen in the context 
of a string of bans in 2017 on foreign journalists and political activists from entering Macao. 
National  security  grounds  were  invoked  as  justification  for  the  refusals  to  grant  entry. 
Although  Macao’s  immigration  authorities  have  the  power  to  refuse  entry  to  the  SAR’s 

1 http://www.penhongkong.org/about/ 

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territory, the lack of transparency in  such  cases suggests a worrying trend towards political 
censorship. 

Equal opportunities, rights and freedoms 

The  rights  and  fundamental  freedoms  of  the  people  of  Macao  continued  to  be  generally 
respected  and  the  rule  of  law  was  upheld  under  the  ‘one  country,  two  systems’  principle 
enshrined in the Basic Law of Macao. 

Macao has not established an independent human rights body despite the recommendation to 
do so issued by the UN Committee Against Torture in December 2015. 

The November 2018 Universal Periodic Review of China included a section on Macao. Two 
countries, one of them an EU Member State, made recommendations for Macao: one calling 
for  the  ratification  of  the  International  Covenant  on  the  Protection  of  the  Rights  of  All 
Migrant Workers and Members of their Families, and another calling for the introduction of 
anti-discrimination legislation to protect all marginalised groups, including LGBTI people. 

In previous reports, the EU has also voiced 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 also urged Macao to adopt comprehensive anti-discrimination legislation. 

Press freedom is respected. There appears to be a degree of self-censorship, particularly in 
the  Chinese-language  media  and  when  reporting  on  Chinese  affairs.  NGOs  and  media 
activists continue to raise concerns over self-censorship. Another obstacle to freedom of the 
press is the difficulty to access sources and obtain full information from the authorities. 

Trafficking  in  human  beings  remains  a  problem  in  Macao.  Macao  has  an  anti-trafficking 
law  but  law  enforcement  needs  to  be  more  stringent.  The  number  of  prosecutions  and 
convictions for trafficking remains low despite a large number of complaints. In 2018, Macao 
authorities  sent  a  representative  to  the  Seventh  Bali  Process  Ministerial  Conference  and 
Senior  Officials  Meeting,  signalling  its  willingness  to  further  engage  in  international 
cooperation  to  combat  trafficking  in  human  beings.  During  the  annual  EU-Macao  Joint 
Committee  in  March,  Macao  committed  to  cooperate  with  the  EU  on  the  fight  against 
trafficking in human beings. The EU stands ready to renew exchanges and to cooperate with 
Macao to provide technical expertise on best practices to address this global challenge. 

Macao citizens continue to enjoy freedom of assembly on a variety of issues ranging from 
the 4 June Tiananmen Square vigil to labour rights. In September, a new demonstration and 
assembly law was approved, requiring demonstrators to submit a demonstration notice to the 
police instead of the Civic and Municipal Affairs Bureau. 

Macao  has  not  effectively  enforced  freedom  of  association  and  collective  bargaining  as 
enshrined  in  International  Labour  Organisation  (ILO)  conventions.  The  EU  encourages 
Macao to take the necessary steps to comply with ILO conventions. Macao does not have a 
minimum  wage,  except  for  cleaning  and  security  workers.  The  government  intends  to 
introduce a universal minimum wage for all workers in 2019. 

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Economic  and  social  inequality  is  of  concern.  There  is  no  official  poverty  rate.  The 
government claims that only 2.3 % of Macao’s population lives in poverty, but civil society 
organisations estimate that the figure is close to 10 %. In September, the UN Committee on 
the Elimination of Racial Discrimination (CERD) stated that the need for poverty reduction 
was  an  area  of  concern.  The  Committee  urged  the  government  to  take  steps  to  eliminate 
ethnic  economic  disparities  and  to  provide  statistical  indicators  on  economic,  social  and 
cultural rights and on the effectiveness of measures taken. 

Macao  is  pursuing  the  fight  against  corruption  and  has  not  shied  away  from  high-profile 
cases. Investigations of the President of the Macao Trade and Investment Promotion Institute 
and of the head of Pension Fund were launched in 2018, illustrating the government’s resolve 
to show zero tolerance for corruption among public servants. 

Economic developments 

Macao’s GDP grew by 4.7 %2  year-on-year in 2018, compared with 9.7 % growth in 2017. 
The  strong  growth  in  2017  came  after  a  major  downturn  in  the  previous  years  when  the 
gambling industry was affected by the anti-corruption campaign in mainland China. In 2018, 
the IMF ranked Macao the fourth- richest economy in the world in terms of GDP per capita.  

The government is implementing a long-term strategy to diversify the economy, but Macao 
continues to rely heavily on gaming and tourism. The upturn in 2017 and 2018 was driven by 
the recovery of the gambling sector and sustained inflows of tourists. In 2018, 35.8 million 
visitors entered the territory, a 9.8 % increase on 2017. Gambling revenue grew by 14.0 % to 
reach MOP 303 billion (approx. € 33 billion). 

Macao enjoys full employment and relies heavily on foreign workers and professionals3. The 
unemployment rate has been persistently below 2 % over the past 7 years (including during 
the  2014-2016  downturn),  and  2018  was  no  exception.  Inflation  rose  to  3.0 %  in  the  2018 
from 1.2 % in 2017. 

While 2018 growth numbers are good overall, the economy was decelerating during the year, 
from 7.6 % in the first half to 2.0% in the second half. The slowdown was due to a decline in 
investment (particularly construction investment) and to a slowdown in the growth of exports 
of services (particularly gaming exports). 

On  15 November,  Chief  Executive  Mr  Fernando  Chui  Sai  On  delivered  his  last  policy 
address  as  Chief  Executive.  The  primary  aim  remains  to  consolidate  tourism  and  gaming, 
Macao’s  main  industries.  The  priorities  are  regulation,  fiscalisation  and  promoting 
competitiveness.  Macao  is  to  pursue  economic  diversification  based  on  its  existing  main 
industries, using existing infrastructure to grow its convention and exhibition industry, foster 
creative  industries  and  develop  specialised  financial  businesses.  The  government  has  also 
vowed  to  facilitate  innovation  and  support  SMEs  by  offering  incentives  to  business  and by 
reducing  taxes.  For  the  12th  year  in  a  row,  the  government  is  implementing  a  package  of 
financial subsidies, including cash handouts, to improve people’s livelihoods. 

Macao’s fiscal  position in 2018 remained sound. The SAR has deep reserves, and its fiscal 
account has consistently recorded surpluses. At the end of September 2018, the government’s 
financial reserves stood at about MOP 554.9 billion (€ 60.4 billion). 

2 Source: unless otherwise stated, all macroeconomic indicators were sourced from the Statistics and Census Service of the Macao SAR Government. 
3 Over 40 % of Macao’s workforce in 2017 was made up of foreign workers, with around two thirds of them from mainland China. 

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Diversifying  Macao’s  economy  remains  a  long-term  goal.  One  of  the  targets  set  by  the 
authorities  in  Macao’s  2016-2020  five-year  development  plan  is  to  increase  the  share  of 
casino operators’ revenue from non-gambling sources to 9 % by 2020. This goal is, however, 
looking  increasingly  unachievable  according  to  a  report  from  the  Statistics  and  Census 
Bureau on economic diversification released at the end of December 2018. Indeed, 2017 was 
a disappointing year for economic diversification as only 6.8 % of the casinos’ revenue came 
from non-gambling sources, down from 7.4 % in 2016. 

On  environmental  protection,  in  this  year’s  policy  address  Macao’s  Chief  Executive 
proposed  to  build  a  facility  to  pre-process  paper,  plastic  and  metal  wastes  before  they  are 
exported, and to build a centralised food-waste processing facility. The Chief Executive also 
announced  targets  to  install  200  electric  vehicle-chargers,  introduce  plastic-bottle  recycling 
machines and complete legislation restricting the use of plastic bags. 

Regional cooperation 

On  12 December,  Macao  and  the  Chinese  Ministry  of  Commerce  signed  an  agreement  on 
trade in goods under the Mainland and Macao Closer Economic Partnership Arrangement 
(CEPA). The new agreement, which is to be implemented as of 1 January 2019, establishes 
rules  of  origin  and  more  flexible  methods  for  determining  origin  for  all  products  classified 
under  the  mainland  tariff  codes.  It  also  further  enhances  the  level  of  customs  clearance 
facilitation for trade in goods. A special chapter is dedicated to the Guangdong-Hong Kong-
Macao  Bay  Area,  the  aim  being  to  implement  measures  for  customs  clearance  of  goods 
within the Bay Area on a pilot basis. 

The  Hong  Kong-Zhuhai-Macao  Bridge  —  the  world’s  longest  sea  bridge  —  opened  in 
October.  The  bridge  cuts  travel  time  between  Macao  and  Hong  Kong  and  will  play  an 
important role in the integration of the Greater Bay Area (GBA).  

Macao serves as an economic bridge between China and the Portuguese-speaking countries. 
In  this  regard,  the  2019  policy  address  proposes  setting  up  a  monetary  services  platform 
between  China  and  Portuguese-speaking  countries  and  developing  Macao  as  a  renminbi 
clearing centre for Portuguese-speaking countries. 

In the GBA Blueprint published in February, Macao was designated as one of the four core 
cities  (together  with  Hong  Kong,  Shenzhen  and  Guangzhou)  to  play  a  key  role  in  the 
development of the region. According to the plan, while continuing to diversify its economy, 
Macao  is  to  strengthen  its  position  as  a  world-class  tourism  and  leisure  centre  and  as    a 
commerce and trade cooperation service platform between China and Lusophone countries.  

EU-Macao bilateral relations 

In  2018,  the  EU  was  Macao’s  second-largest  source  of  imports  after  mainland  China, 
accounting for 25 % of Macao’s total imports. However, the EU was the destination of less 
than  1.7 %  of  Macao’s  exports  of  goods.  These  trade  imbalances  have  generated  long-
standing  trade  surpluses  in  favour  of  the  EU,  as  Macao’s  import  demand  has  continued  to 
grow over the years, while its manufacturing sector has shrunk to less than 1 % of GDP. 

Bilateral trade in goods rose by 29.5 % to EUR 963 million in 2018. EU exports to Macao 
reached  EUR 852  million,  a  36.1 %  increase  year-on-year,  resulting  in  a  trade  surplus  of 
EUR741 million  in  2018.  Macao  is  a  growing  market  for  European  luxury  goods.  The 

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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. 

The  Chief  Executive’s  2019  policy  address  explicitly  highlights  interest  in  strengthening 
economic relations with the EU, using Portugal as the entry point. 

The  22nd  EU-Macao  Joint  Committee  meeting  was  held  on  23 March  in  Macao.  In 
particular, the parties took stock of the monitoring by the EU in 2018 of the commitments on 
tax  good  governance  taken  by  Macao.  Macao  had  been  included  in  the  EU  list  of  17  non-
cooperative  tax  jurisdictions  of  December  2017,  but  was  removed  in  January  2018  in 
response  to  commitments  made  by  the  Government  of  Macao  to  comply  with  EU 
requirements  by  the  end  of  2018.  During  the  monitoring  process,  the  EU  welcomed  the 
extension of the Convention on Mutual Administrative Assistance in Tax Matters to Macao 
SAR  by  the  People's  Republic  of  China  and  the  activation  of  the  necessary  agreements  for 
exchange of information by Macao SAR. The EU also endorsed the assessment of the OECD 
concerning a tax regime giving benefits to offshore companies, following amendments to this 
regime by Macao SAR in December 2018 to comply with OECD requirements. On this basis, 
the Council of the European Union agreed in March 2019 that Macao had fulfilled its current 
commitments on tax good governance. The dialogue with Macao SAR on the implementation 
of  the  G20  minimum  standards  against  Base  Erosion  and  Profit  Shifting  will  continue  in 
2019. 

The EU took note of Macao SAR’s ambition to become a traditional Chinese medicine hub. 
The  EU  and  Macao  agreed  to  organise  an  information  exchange  at  expert  level  on  the  EU 
regulatory  regime  with  regard  to  traditional  herbal  medicinal  products.  The  two  sides  also 
agreed  to  continue  exploring  cooperation  on  the  environment  and  on  green  technology, 
particularly  in  the  Macao  International  Environmental  Cooperation  Forum  and  Exhibition. 
On tourism, the two sides discussed how to boost tourist flows and exchanges. 

As  they  do  every  year,  in  2018  the  Macao  European  Chamber  of  Commerce  (MECC4) 
and  the  European  Chamber  of  Commerce  in  Hong  Kong  jointly  coordinated  European 
participation  in  the  Macao  International  Environment  Cooperation  Forum  &  Exhibition  in 
March, and in the Macao International Trade and Investment Fair in October. 

Tourism  was  particularly  important  for  the  bilateral  relationship  in  2018  as  it  was  the 
EU-China Year of Tourism. The iconic Macao tower was dressed in the blue of the EU flag 
on  Europe  Day.  On  23 October,  Macao  hosted  the  7th  Global  Tourism  Economy  Forum 
with  the  European  Union  as  its  partner  region  and  Guangdong  as  its  featured  partner 
province. The EU had a pavilion represented at the event, organised a business matchmaking 
event, and participated prominently in the forum. 

4 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. 

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The EU and Macao have two flagship projects that continue to work well: one in the field of 
legal affairs and one on the training of interpreters. First, the Third Macao-EU Cooperation 
Programme  in  the  Legal  Field  contributes  to  the  modernisation  and  development  of  the 
Macao SAR’s legal system. Second, the training programme in conference interpretation 
the  Public 
in  Chinese  and  Portuguese  between 
Administration  and  Civil  Service  Bureau  of  Macao  has  been  running  since  2006  and, 
addresses the demand for qualified interpreters in both  languages. Up to now 97 Macanese 
interpreters  have  been  trained  and  most  of  them  are  presently  working  in  the  public 
administration.  Since  2010,  the  Macao  Polytechnic  Institute  (MPI)  also  runs  a  training 
programme, in cooperation with the European Commission, aimed at university teachers and 
professional interpreters from Macao and Mainland China. The European Union Academic 
Programme  in  Macao  has  been  succeeded  by  activities  under  the  Jean  Monnet  Project. 
These continue to contribute to better understanding of the EU in Macao. 

the  European  Commission  and 

A co-funding mechanism under the Horizon 2020 programme was established following the 
EU-Macao Joint Committee meeting in 2015, and the EU delivered a briefing session in 2018 
to  encourage  participation.  Funding  is  provided  unilaterally  by  the  Macao  Science  and 
Technology Development Fund to successful Horizon 2020 project participants from Macao. 
Over the last 2  years, however, the Fund has received only one application, which was  not 
selected.  By the end of 2018, no entities from Macao had participated in Horizon 2020. 

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