Economy development of Macao

11:14, December 15, 2009      

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Macao has an island-type economy, which means that its development is inevitably constrained by its limited domestic market, its resources and its own structural limitations. Yet it remains one of the most dynamic economies in the Asia-Pacific region.

The gaming and tourism sector continued to prosper amid a favourable external environment, propelling Macao's GDP to reach MOP 43.57 billion (USD 5.45 billion) in the third quarter of 2008, with a real growth of 11.3% over the same period of last year.

In 2007, the per-capita GDP of Macao hit MOP289,153, which is equivalent to USD36,144.

Though Macao has a relatively small economy, it pursues an open economic policy. Macao plays a unique role in regional economies. Export has been a key industry in Macao for decades. While the manufacturing industry is striving to meet the challenge of a new era, export of services becomes more and more important in Macao’s economy.

Macao is one of two international free ports in China. Goods, capital, foreign exchange and people flow freely in and out of Macao. Since the establishment of the Macao Special Administrative Region (MSAR) Government, economic policy in Macao has focused primarily on protecting and streamlining its free market economic system. It has cultivated a world-recognised, free and open, fair and orderly market environment.

In April 2007, the World Trade Organization (WTO) released a review of trade policies of Macao, a study that takes place every six years. The WTO recognized Macao’s economic achievements over the past six years and its optimistic prospects for future development, and reaffirmed the openness of its economy.

In order to develop into a service centre in the western region of the Pearl River Delta , the MSAR Government capitalises on its advantages and makes efforts to strengthen external economic cooperation. Meanwhile, the Government is also strengthening economic and trade cooperation with other members in the Asia Pacific region, European Union, the Romance language-speaking countries and especially Portuguese-speaking countries. Thus, Macao aims to play a more active role as a mediator among Mainland China, the above countries and the regional economies.

The economic policies of the MSAR are as follow: to grasp opportunities, to create a quality environment for development, to enhance local competitive advantages, to promote regional economic cooperation, to assist small and medium sized enterprises (SMEs), to facilitate adjustments and improvements to the economic structure, to continue to creatively nourish the gaming industry, to stabilise traditional industries, to support newly developed industries, to maintain and consolidate the trend of local economic development, and to lay down a solid foundation for the long-term, stable and healthy development of Macao’s economy.

The Tourism and Gaming Industry
The tourism and gaming industry, a general term for tourism, hotels, catering, retails and gaming, is a major driving force of Macao’s economy. Gaming industry by itself is the largest source of direct tax in Macao.

The rapid growing tourism and service industries are the main source of income for Macao. The income generated from tourism has exceeded the total value of exports since 1992. Over the 1990s, the tourism industry in Macao prospered and its development accelerated following the establishment of the SAR Government.

In February 2009, Macao’s tourist arrivals and non-resident arrivals totalled 2.25 million, and visitor arrivals were 1,652,377, down by 17.3% compared with February 2008.

The top three markets were Mainland China (827,804), Hong Kong SAR (540,668) and Chinese Taiwan (91,218).

As of the year-end of 2008, there were 17,490 hotel rooms. The hotel occupancy rate in December was 79%, a decrease of 4.1% over the same period in 2007.

Each visitor stayed for 1.1 nights in Macao on average in the fourth quarter of 2008. Each visitor spent MOP1,788 (USD223.5) on average, an increase of 4% comparing the last quarter, and visitors from Mainland China topped the chart with an average spending of MOP4,103 (USD512.9).

In the last decade, the gaming industry contributed to about 30% Macao’s GDP. After the establishment of the SAR, public security improved significantly and the industry had continued to grow.

In the fourth quarter of 2008, the gross revenue of the gaming sector amounted to MOP26.2 billion (USD3.28 billion). The sector contributed MOP33.62 billion (USD4.2 billion) in direct tax to the MSAR in the first ten months of 2008.

Manufacturing Industry
The manufacturing industry in Macao is dominated by the textile and garment sectors. It is labour-intensive and export-oriented. Most of its products are exported to the United States of America and Europe.

The development of Macao’s manufacturing industry dates back to many decades ago, starting with firecrackers and incense. Textile and garment industry, which is still a significant part in the manufacturing industry, started to develop in the 1960s and entered its “golden age” in the 1970s and the 1980s. In addition to the textile and garment industry, companies manufacturing toys, electronics and artificial flowers also flourished. Entering the 1990s, the manufacturing industry slowed appreciably as Macao felt the impact of economic weakness in its two major export markets - the United States of America and Europe, as well as rising domestic wages and competitive pricing from newly developing industrial countries.

In the fourth quarters of 2008, Macao’s exports totalled MOP3.14 billion (USD393 million), a decrease of 42.4% over the same period of 2007. Locally manufactured exports and re-exports dropped by 54.8% and 14.5% respectively. Meanwhile, the value of imports in 2008 totalled MOP43.03 billion (USD5.38 billion), down 0.2% comparing to the figure of 2007.

In terms of export markets, 49.8% of the total exports of goods in 2008 were exported to the United States and the European Union, which accounted for 39.9% and 9.9% of Macao’s total export value respectively.

As the abolishing of export quota in international garment trade in 2005 posed a significant challenge to Macao’s manufacturing industry, the SAR Government had proposed to the Central Government a plan to build a cross-border industrial zone between Macao and Zhuhai in order combine the advantages of the two regions. With the approval of the Central Government, Macao and Zhuhai agreed to build the industrial zone on reclamation along the northwest coast of Macao. Now the industrial zone has already inaugurated and has started operation.

Service Industry
Strengthening external economic cooperation, developing bilateral and multilateral economic relations and intensifying cooperation among regional economies are the development strategies of the MSAR Government.

With China’s accession to the WTO and a new series of reforms and liberalisation, Macao has taken advantage of its unique competitive edge to strengthen its economic cooperation with the western region of the Pearl River Delta and gradually develop itself into a service-oriented centre providing a cooperation base for local and overseas enterprises planning to invest and expand there.

Macao has traditional ties with the European Union, the Romance language-speaking countries and especially Portuguese-speaking countries. Meanwhile, the Government is also strengthening economic and trade cooperation and interaction with Singapore, Japan, South Korea, Hong Kong and Chinese Taiwan in order to play a better role as a bridge for cooperation among Mainland China, the above countries and the regional economies. In addition, the MSAR continues to strengthen its relationships and cooperation with international economic organisations such as the World Trade Organization (WTO), the International Monetary Fund (IMF), the Asia-Pacific Economic Cooperation (APEC) and the European Union.

The Central Government’s support to Macao’s aim to become a mediator between the Mainland and Portuguese-speaking countries was realized in the signing of the “Closer Economic Partnership Arrangement” (CEPA) and having the first “Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries” held in Macao in October 2003. All participating countries of the Forum signed the "Economic And Trade Cooperation Action Plan", which established the mode of cooperation between the participating countries in the future.

Labour and Employment
In the fourth quarter of 2008, the total labour force was estimated at 337,000, among which 3.3% unemployed.

Labour force participation rate was 70.7%, while the figure for male was 76.6% and 65.1% for female.

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