IV. Strengthening development strategy for Hong Kong-Macao's economic allocation and complementation.
1. General strategy: push reform in regimes and create good environment for investment and businesses
In the past few years, Macao's environment for investment has been continuously deteriorating. The most important cause of which has been the serious lagging of political and legal systems behind economic development. This situation has led to a very bad bureaucratic red tape, low efficiency of administration, rampant bribery and embezzlement. All these have developed into a great disadvantage for Macao's economic growth. In order to promote revitalization, stability and prosperity of economy, and to enhance cooperation with Hong Kong and other peripheral areas, after Macao has returned to China, the most important task will be building of a good environment for investment and business, and a market regime of fair competition.
1.1 Pursue reform of administrative regime and build step by step a government that is highly efficient, streamlined, clean and fair, apart from a regime of civil servants that maintains neutrality among various social interest groups.
Abuses of Macao's public administrative structure exist in every department, mainly found in the cumbersome, overstaffed public administrative structure, the unreasonable, overlapping institutional set-up among departments. and among central andlocal administrations. Moreover, there are no mechanisms for coordination, which has led to ambiguity or overlapping of competence references among departments, giving rise to bugpassing or cross-meddling, departmentalization, and low administrative efficiency. The general public has long criticized the government of Macao for its complex administrative procedures,low efficiency, frequent changes in policy and the lack of continuity therein. These factors have caused investors to flinch. Though recently the situation is improving, this still remains a major constraint in Macao's environment of investment. The general public in Macao has a consensus regarding this issue, and even those top-level officials of the Portuguese administration have the same feeling.Mr. Leonel Miranda, consultant to the Governor, director of Office for Planning and Cooperation, once confided in private that the current government was too unwieldy with functional overlapping,which was to an extent not only detrimental to Macao's economy,but also more than the current economy can support. Mr. Alberto Soares, ex-general manager of the Banco Nacional Ultramarino,also mentioned that the current bureaucratic regime of Macao could never attract foreign capitals to develop offshore finance in Macao.Therefore, Macao's existing administrative framework and civil servant regime are bound to be reformed, and the status quo can no longer be maintained. For Hong Kong, after returning to China,it has taken important steps towards reforming the civil servant regime, and reformation has become the historic trend. In this way,the Preparative Committee for the SAR of Macao and the future SAR government should seize the historic opportunity of return in 1999, and pursue the reform of regime with a step-by-step approach,under the prerequisite that the political handover is smooth, so as to create a new political and economic scenario.
In its reform of the administrative regime, Macao may wellrefer to the experience of Hong Kong. In fact, the Basic Law of Macao has consulted Hong Kong's Basic Law. And as far as the administrative framework and civil servant regimes are concerned,Hong Kong has had a lot of experience. The combined performance of the government of Hong Kong has been evaluated as ranking the second in the world spectrum for five consecutive years (1994-1998) by the IMD in Switzerland, second only to Singapore. The overall professional quality of Hong Kong's civil servants has also received praise by the international community.These are worthy of an example for Macao. On the other hand, it should of course be recognized that Hong Kong differs greatly from Macao, with the latter's current administrative regime being descendant from that of Portugal, which is different from Hong Kong's system of civil servants. Macao's legal system also originated from the continental legal system, as opposed to Hong Kong's common law tradition. Therefore, reform of Macao's administrative regime should refer to Hong Kong's experience, and it should be steadily carried out on the basis of its own history and reality.Meanwhile, Macao should come up with a prototype with its own characteristics. However, the ultimate objective is to build up a highly efficient, streamlined, clean and fair government, and a civil servant regime that is non-political and neutral among other interest groups.
1.2 Push legal reform to build up a modernized legal system with fair and just legal environment and "administe Macao by law"
Another important disadvantage in Macao's environment of investment and business is the inadequate modernization and internationalization of commercial and economic regulations, and its low degree of rule of law, in addition to lacking a market for fair competition. For instance, the current Macao's Company Act is basedon the Commerce Code of Portugal of 1888 and the Limited Liability Company Act of 1901. Many of the clauses therein, after a hundred or more years, can no longer meet Macao's reality. Even in Portugal,a new Company Act was issued in 1986. In 1990, the Macao government tried to revise the original Company Act, but unfortunately after many years of deliberation, the revision failed to be adopted by the Legislative Council. Macao's current property transfer tax, legacy tax, etc. are fail to adjust correspondingly to the changes in Macao's society and economy as well, making today's business and trade extremely inconvenient. Apart from that, all laws in Macao were in Portuguese instead of any internationally accepted language, such as English. Macao's lawyer had mainly been Portuguese or Macanese, and therefore when foreign businesses are confronted with legal issues, they have to go through interpretating procedures, causing delay in business. Moreover, the courts are closed for as long as three months for summer holidays,which has an adverse effect on business and trade which have to go on continuously. It is worth noting that Macao's tradition of "the Chinese and foreigners co-exist but administrated separately",resulted in the failure of sets of Portuguese laws introduced from Portugal to take root in Macao, and a general low degree of rule of law. Many problems would be better to solve by way of interpersonal relationship. There is an apparent lack of fair and just environment of rule of law.
Now that Macao is well into the period of transition, and as the localization of law advances, these have changed for the better.But problems remain of various magnitudes, and are becoming a hinder to the improvement of Macao's environment of investment and business. Therefore, after the establishment of the Macao SAR government, effort should continuously be made in promoting the localization, modernization, and internationalization of Macao's legalsystem, especially mercantile law. On the other hand, reference should be made to the experience of Hong Kong and of other peripheral areas, so that laws will get updated with economic development and conducive to economic exchanges between Macao and Hong Kong and other peripheral areas. Certain laws, such as the "Property Transfer Tax Act", when being revised, should take into account the simplification of contract procedures, so as to bring change to the current contract procedures, which are complex and time-consuming. In order to attract foreign investors, laws and regulations should, as far as possible, be made available in Chinese,English and Portuguese, in conformity with international practice.But of course, a sound, balanced regime of legal system and a fair and just environment of rule of law are more important and indispensable. The purpose of legal reform is to build a society with a high degree of rule of law, where everything is done by virtue of law, and entrust the administration of Macao to such rule of law.
1.3 Build up an effective system of supervision, reform the police, carry out anti-corruption, encourage cleaner government and decisively reverse the law-&-order situation for the better
The government of Macao has long been without an effective supervisory mechanism. It causes a waste of internal resources.Certain bad elements in government departments, especially in the disciplined forces, commit embezzlement and bribery unscrupulously. No strong measures have been taken for the increasingly rampant triads, causing a general deteriorating situation of law and order, which constitutes a glaring setback in the environment of business and investment.
The special institution responsible for anti-corruption and anti-administrative-breach-of-law in Macao is the High Commissionagainst Corruption and Administrative illegality. In the early 80's,influenced by the practice of anti-corruption and encouraging clean government in Hong Kong and other peripheral economically fast growing areas, there developed an increasingly stronger demand for setting up an anti-corruption institution in Macao. However, the Commission was not set up until 1992. And, due to the limitation by Portuguese Constitution and other factors, the Commission was apparently not well prepared, with great constraint in organizational structure, personnel, terms of references, and limited effectiveness.In spite of the set-up of the Commission, in the governmental bodies,especially in the disciplined forces, embezzlement and bribery are still rampant, which has been an open secret. So local citizens refer to the Commission as a "teethless tiger". Priority work of the Commission was on prosecutions regarding administrative affairs.Concerning this aspect, the first High Commissioner Mr. Jorge Alberto Aragao Seia admitted, at an early stage of its establishment, that "it has long been the general concept of an anti-corruption institution such as the Independent Commission Against Corruption (ICAC)of Hong Kong," however, it has never been the intention of Macao's legislators to have such an institution that has the characteristics of Hong Kong's ICAC. This made the Commission "rather a small institution, with neither special power nor conditions to operate in its spheres, only responding to some puzzling problems of local citizens"(Note 1). Mr. Jorge Alberto Aragao Seia's remark cuttingly revealed the important causes why the Commission could hardly be effective.
Therefore, after the establishment of Macao's SAR, much efforts should be put to set up an effective supervisory mechanism.According to the regulations of the Basic Law, reform of the Auditor'sOffice, the ICAC and the customs, refer to Hong Kong's experiences in conjunction with Macao's history and reality, so as to recreate the good image of the police, to carry out anti-embezzlement, and to wage war on criminal triad activities, improving law and order from the basic level.
2. Specific measures on enhancing Hong Kong and Macao economic relationship
2.1 Present a new image of Macao to Hong Kong and other peripheral areas
For a long time, people in Hong Kong and other peripheral areas had the impression of Macao as a gaming city, a place also known as "Monte Carlo in the East" with a rich of colorful nightlife. A couple years ago, the director of Akuda consultant Co. Ltd.said that Macao is only a tourist city, and not a place for investment for the Japanese. This is an obvious misunderstanding about Macao.In recent years, law and order in Macao have been worsened by the increasingly rampant criminal syndicates with frequent cases of violent crimes, Macao as a tourist and gaming city has lost much of its luster and is even viewed as the "Sicily in the East". People in the nearby areas are refraining from visiting Macao, let alone investing there. Therefore, when the SAR government is in place,resources should be allocated to improve Macao's environment of investment, specially promote the advantages of Macao's environment of investment to people in Hong Kong and other nearby areas, in order to rebuilding Macao's image. Promotion by the Macao SAR to Hong Kong should focus on the following aspects:
(1) The comparative advantages of Macao's environment of investment will enable Hong Kong's investors to have a better knowledge about Macao's environment of investment and business;
(2) Macao's economic orientation and long-term developmentstrategy in the new era, so that Hong Kong investors will be able to learn about the mid-&-long-term orientation of Macao's economic development.
(3) The general orientation of Hong Kong-Macao economic relationship in the new era is to emphasize the mutual economic complemention and allocation between Hong Kong and Macao,so that Hong Kong businessmen may know the business opportunities in Macao;
Regarding the means of promotion, these may be newspapers, TV commercials, investment introduction seminars,setting up consultant services centers and related web sites on the Internet. Macao may also flow Singapore 's example of putting up lots of TV commercials on Hong Kong's TV channels, and bring to full play the function of the Macao Bureau of Business and Investment Promotion by organizing regular promotion tours to Hong Kong, so that people there and in other peripheral areas will fully acknowledge the advantages of Macao's investment and business environment.
2.2 Develop the "Las Vegas in Asia" and enhance the mutual complementation and allocation in terms of tourism and gaming industry between Hong Kong and Macao
Las Vegas is a city that is poor in resources. However, under the encouragement and effective supervision of government policy,the gaming industry took the lead in the development of tourism and gaming industry as well as the whole economy, enabling the city to become the world's famous city of synthesized tourism and gaming, a center for international conference and exhibition. It is an economic legend in the desert. In order for Macao to become the "Las Vegas in Asia" and to enhance the mutually complemention and allocation in tourism industry with Hong Kong, attension shouldbe paid on the following strategies:
(1) Review and reform of the current system of casino franchise.
Macao's current system of gambling franchise played a positive role in the initial development of gaming industry. However,after over 30 years of implementation, its drawbacks are beginning to expose, such as introducing an element of monopoly into the gaming industry, which results in problems of conservatism in operation, pronounced traditionalism, outdated facilities, and falling behind in competition internationally and regionally. In constrast neighboring areas are loosening their restrictions and introducing a mechanism of competition into the development of gaming industry. This has caused a great challenge to Macao's gaming industry. At the moment, the exclusive franchise of casino operation granted to the STDM will expire in 2001. One major economic policy the future Macao SAR government will have to adopt, is to review and reform the current system of casino operation franchise.This policy is cardinal and unavoidable to the Macao SAR government when designing the general economic policies, which will have a great impact on whether Macao will be able to develop into the "Las Vegas in Asia". Either to maintain the existing system of franchise temporarily or to introduce a mechanism of competition at a right time, the new supervisory system of gaming industry should be conducive to promote Macao's gaming industry: to introduce modernized management, to update its facilities, to develop hi-tech casinos and entertainment industry, to enhance service quality, and to create an advanced, healthy, comfortable,and safe gaming environment. It should strengthen attractions to regional and international communities when requirements are basically fulfilled. Certain competition mechanism should be introduced at an appropriate time, so that international capital maybe drawn into Macao's gaming industry and hence sharpen its international competitive edge.
(2) Proactively seeking understanding or tacit agreement with the Hong Kong SAR government regarding gaming industry policies.
Since the late 80's, there have been more and more deluxe gambling liners cruising along the high sea around Hong Kong which have posed direct competition and caused great pressure to Macao's gaming industry. Recently, public opinion in favor of legalizing gaming industry began to emerge. As pointed out by a well-known political and economic commentator, Mr. Lam Hang Chi, that the British Hong Kong government would not legalize the gaming industry "because of a profound political reason. The government worried that if the action would cause a deadly hit on Macao's economy, the Portugal government would have had to return Macao to China before the scheduled time. As a result, this would affect Hong Kong's position.As the British have withdrawn from Hong Kong in 1997, the time has now come for legalizing gaming industry in Hong Kong." This may well impose greater difficulty on Macao's economy, but "salvaging Hong Kong is far more important than salvaging Macao. Anyway,Macao can make use of its geographical advantages by associating with Shenzhen and Zhuhai to develop joint labor-intensive industries.Also, after the year 2000, Macao and Hong Kong will both be part of China. Viewed from an international perspective, legalizing gaming industry in Hong Kong or in Macao will make no difference for China." (Note 2). As Hong Kong economy is now at its lows, it is generally believed that this sort of opinion is quite popular. Once Hong Kong has legalized its gaming industry, the adverse impact on Macao's tourism and gaming industry and its economy will be rather long lasting.
Therefore, the future Macao SAR government should actively consult and coordinate with its Hong Kong counterpart in terms of gaming industry policies in the two communities, and try to convince the Hong Kong SAR to maintain its current policy regarding the gaming industry. It will be the biggest support and cooperation from the Hong Kong SAR to Macao if it could regain from legalizing gaming industry. In fact, an international cosmopolitan business city, legalizing the gaming industry in Hong Kong will be detrimental to its prestige. The British Hong Kong government kept itself from legalizing casino business. Now that Hong Kong has returned to China, there is even less reason for legalizing it. Regarding the issue of gaming liners, the two SARs can resolve it in an appropriate and feasible manner through consultation. The future Macao SAR may propose to Hong Kong to follow the practice of Singapore to re-draft the maritime regulations in Hong Kong, designating a limit on the number of out-bound ships without a specific destination,and that such ships may not return to Hong Kong in less than 36 hours, so as to put a stop to such casino liners. At the meantime,Macao should also pay attention to maintain Hong Kong's interest in horse racing, and prevent itself from seizing small gains at the expense of great losses. The two may reach agreement or understanding on gaming industry policies, so as to achieve a balance of interests.
(3) In coordination with Hong Kong's new tourism industry development, Macao should make in-depth use of its historicalcultural tourist resources, in an attempt to build Macao into a tourist and resort center in Asia with European style.
Tourism industry has always been one of the pivotal industries to both Hong Kong and Macao's economy. Recently, the Hong Kong SAR has put forward a series of measures to revitalize tourism industry, such as rebuilding the Ocean Park, building new fishingberths and ferry terminals, etc. Of those, the most eye-catching event is reaching an initial agreement with the world famous theme parks operator Disney Inc. in the US to building a Disneyland in Hong Kong. Since Disneyland is a combination of modern technologies, culture, entertainment activities and leisure tours, if this gigantic project comes true, it will attract more family-based tours and groups, and will become a new dynamic for developing tourism and gaming industry in Macao.
In order to attract such tourists to Macao, Macao has to make in-depth development of its historical and cultural resources, and take full advantage of its historical position as a center of East-West cultural exchanges, with an urban scenario of "museum style" and its rich historical and cultural heritage, and singling out its characteristics of an "European town" in Asia. In terms of development strategies, Macao should upgrade its urban development planning, giving special protection and reconstruction to a series of old-town relics of historical value along a line threading from Western Bay, onto the Leia Senado square, and ending at the Ruins of S. Paul, with a view to enhance its southern European style and a sense of leisure. The development of real estate industry should also avoid to follow Hong Kong's example of building monotonous high-rising towers, but instead to develop buildings with European styles. To complement that urban style, there could be built a restaurant street of Portuguese style, a pedestrians walking ares, plazas with folk-dance show, short term Portuguese courses so as to emphasize the characteristics and difference of Macao as a tourist resort in the tourism triangle region covering Guangdong,Hong Kong and Macao. On the other hand, Macao should develop a series of small and yet culturally significant theme scenic spots,to go with its traditionally well known international cultural activities,such as International Music Festival, International Arts' Festival,Grand Prix, International Show of Fire Works, and International Dragon Boat Racing, with a view to reframe Macao into a tourist and resort center as well as a center for medium and small-scale international conferences and exhibitions in Asia with an European style.
(4) Strengthening cooperation and coordination the tourism triangle region covering Guangdong, Hong Kong and Macao.
Macao's economic cooperation with Guangdong will certainly grow further after Macao's return to China, of which its cooperation with Zhuhai will become the core. Right now, Zhuhai has already made a preliminary plan of developing the Montanha Island into an "international special tourist zone". According to the plan, the island's development will be powered by tourism industry, taking along other industries such as commerce, catering, finance and real estate development, etc. The tourism industry will be developed in a way that is emphasized on the characteristics of an island,using the theme of "cultural exchange between the East and the West", aiming at an all-around development for holidays, leisure,entertainment, conferences and exhibitions, with a view to become an international and synthesized tourist region. Development of the Montanha will be no doubt to break the constraint of space and resources on the part of Macao. Therefore, Macao should actively keep up its cooperation with Zhuhai, by undertaking a study of the feasibility of a joint development of the Montanha, so that Macao's tourism and gaming industry may join with the development thereof. Frontal competition may be avoided in a way that is mutually beneficial and complementary, and Macao will be turned into an indispensable link with special characteristics in the tourism triangle region covering Guangdong, Hong Kong and Macao.
Macao should also bring to full play of the role of "Agencyof tourist promotion in the Pearl River Delta", and the Tourism triangle region covering Guangdong, Hong Kong and Macao". The three should come up with their own respective tourist characteristics, combining "shopping paradise" with "casino resort",leisure town with "southern Guandong fold tradition", along a pattern of allocation that is mutually complementary and beneficial. In this way, their combined edge of competition will be sharpened, and new markets explored. 1999 is the year of return of Macao to China,in which the central government of China should liberalize its policies concerning the visit to Macao of the Mainland residents by simplifying related procedures, and give incentives to the recovery of Macao's tourism industry by making use of the concern about Macao's return. In order to promote the development of the tourism triangle region covering Guangdong, Hong Kong and Macao, the central government should also liberalize its policies concerning cross-boarder tours, by letting the Mainland residents on a "Macao tour" go to Hong Kong for a visit, so that Macao's tourism industry may further develop.
2.3 Strengthen Macao's economic and cultural association with the European Union and the Latin-speaking countries, and turn Macao into a bridge that links up the European Union, the Latin speaking countries and China, as an international city of trade and business
Eastern and western economic and cultural exchanges have been in Macao for more than 400 years. It has for a long time had economic, cultural and other connections with various international communities, especially the European Union (EU) and the Latinspeaking countries. Macao has enjoyed trade preference of the EU for its connection with Portugal. In 1991, Macao became a member of the European Community Investment Partner (ECIP). In 1992,Macao signed a trade and cooperation agreement with the EU (whichwill extend beyond 1999). In the same year, the EU set up the Macao Euro-info Center in Macao as the first of its kind in Asia. The center aims to strengthen economic, trade and cultural cooperation and information exchange between the EU and Asia, especially China. In addition to the ECIP, the center promotes the Asia Invest Project in 1998. The project aims encourage cooperation between medium-or-small-scale enterprises in the EU and Asia, to provide updated information of the market trend, to identify suitable partners,and to present a better image of the EU to Asia.
As the return approaches, Macao's role as a bridge between the EU and Asia, especially China, becomes increasingly apparent.The EU Celebrities Committee has recently presented a report on the relationship between the EU and Macao beyond 1999 to the EU headquarters.
The report mentions that Macao will play an active role in the relationship between the EU and China in the 21st century. It suggests that the EU should adopt a series of more positive and consistent policies for Macao. On the other hand, Japan and Taiwan are actively exploring the possibility of developing their economic and trade relationship with the EU, taking advantage of Macao's position. The Japanese Consulate in Hong Kong is studying Macao's social and economic status. It was reported that the Japanese, who have a close relationship with the United States, believe that Macao has a tremendous potential value to serve as a third party for Japan to develop its relationship with the EU. Therefore, in order to materialize its complementary allocation and interactively beneficial relationship with Hong Kong, Macao should make full use of these advantages to become an intermediary for the Asian countries,especially for China, the EU and the Latin-speaking countries.Specific strategies may be as follows:
(1) Actively promote the establishment of a permanent, multi-layer communication mechanism with the countries and regions of the EU and the Latin-speaking countries.
Macao should learn from the experience and lessons of Hong Kong's return, actively strengthen, rather than weaken, its connections with Portugal, the EU and the Latin-speaking countries.Recently, the Portuguese President Mr. Jorge Sampaio said in an interview that Portugal would set up a consulate in Macao, which would be one of the most important consulates of Portugal.Portuguese School of Macao and Oriental Portuguese Institute will also develop their activities in the new framework. When Governor Rocha Vieira visited the EU in March 1999, he has come to an agreement with the EU on reciprocally setting up representative offices in the EU and Macao, by virtue of a resolution by the SinoPortuguese Joint Liaison Group. Macao can still be a member of the City Federation of Countries of the Portuguese Language after the return. This federation is consisted of Portugal in Europe, Brazil in South America, Angola, Mozambique, Guinea-Bissau, Cabo Verde and Sao Tome and Principe in Africa, etc. with a market of positive 200 million population, Macao should, after its return, make positive and full use of these existing channels, implement the set up of the representative offices in the EU and Brazil, etc., and establish and strengthen the regular communication mechanism of both parties.Now, the EU has set up in Macao many strategic institutions,including the Macao Euro-Info Center set up in 1992, and the MacaoEurope-Chinese Entrepreneurial Club set up in 1996, etc. Macao should encourage these institutions to be fully functional, and should offer more preferences to the EU so that they may set up more institutions of other functions in Macao, and let Macao serve as a transfer station for the EU and Asia, and China particularly.
(2) Turn Macao into a center for science and technology transfer and exchange between the EU and China.
Macao's role as a center for science and technology transfer and exchange between Asia and Europe became distinct during the "Eureka meets Asia" conference held in early April in 1998.That event was the largest Eureka activity that received an unprecedented number of participant enterprises and individuals,of which 568 were scientific research institutes, universities and enterprises in Asia and Europe, and more than 1000 representatives.Institutions and enterprises from 24 provinces and cities in China amounted to 433, with 855 people, while those from 15 European countries amounted to 102, with 148 people. During the event,Chinese Minister Zhu Lilan of Ministry of Science and Technology and his Portuguese counterpart Mr. Jose Manano Gago signed a joint declaration on science and technology cooperation, with the arrangement that the "Eureka - Asia" international technologic cooperation conference would be held in Macao every other year.This is initial framework for Macao to become a center for science and technology exchange and transfer between Asia and Europe.It is reported that the EU plans to set up an EU-Macao-China information sharing system, providing a mutual access between Europe and China via the information super highway. Macao should,after its return, positively promote the implementation of these plans, and the development of its information industry, by making use of the existing two microwave communication channel to Hong Kong, and the two fiber optical communication lines, and the commercial use of the Internet. In this way, Macao should be able to provide information to Mainland China and other Asian countries and regions, regarding information of economic, trade, market,science and technology, and law in the EU and the Latin-speaking countries. Meanwhile, information regarding Mainland China can also be transmitted to the EU, and thus Macao may become an information access point between the EU and Mainland China.
(3) Turn Macao into a training center of Portuguese in Asia.
Macao's historical and social life is rich in experience of Asia-Europe cultural exchanges. 3% of its population know very well both Chinese and Portuguese, and Macao is actually a multilingual community. More than 100 thousand of its Chinese and Macanese residents have Portuguese passports, who can still have free access to the 15 countries in the EU after 1999. These people have a special cultural connection with the EU and countries of the Latin group. In this way, Macao should, after the return,develop itself into a training center for Portuguese in Asia, to provide more specialists with proficient Portuguese. Portuguese will not only continue to serve as Macao's official language, but also more importantly, it will serve as a tie for enhancing the economic and cultural connections between China and countries and regions using Portuguese. For this purpose, Macao should take effective measures to persuade those people with Portuguese proficiency to stay, set up Portuguese training schools, and enhance Portuguese education in universities, etc. In addition, Macao may serve as an access point where scholars, businessmen and other people from Europe, who wish to explore or develop in the south China, may learn Chinese.In this way, Macao should become a center for exchanges of AsiaEurope languages.
If Macao is successful in achieving the above policy objectives,it will become an economic and cultural tie linking Asia and Europe.This development potential may attract capitals and businesses from Mainland China, Hong Kong, Taiwan and other regions in Asia.This will reduce the extent to which Macao relies on Hong Kong in economic terms, and thus help to build up a frame of development pattern in which the two cities share a mutually complemention and beneficially interactive allocation.
2.4 Strengthen cooperation in science and technology between Hong Kong and Macao, and promote re-orientation and upgrading of Macao's manufacturing industry
Macao has been losing its comparative advantage as a base for developing labor-intensive export-oriented process industry since late 80's, because production costs, especially labor cost and workshop rents, are continuously increasing. Therefore marginal profit has been dropping for processing industry. As a result,businesses and labor-intensive processing are gradually moved to the Pearl River Delta area in Guangdong. Macao's manufacturing industry is gradually shrinking. The statistics show that in 1997,manufacturing accounted for only 8.3% of Macao's GDP, of which textile and garment industry accounted for more than 85%. A grave challenge of survival now confronting us is that the textile quotas,on which Macao's manufacturing industry (the bulk of which is textile and garment industry) relies for survival and development,will eventually be terminated by the year 2004.
Macao's industrial circle is now actively calling for the government and the community to promote the upgrading and reorientation of the manufacturing industry. The approach to be adopted is to reframe the traditional industries and give support to emerging industries, shifting from a prototype of "masses" to that of "quality". This means that, on one hand, new technologies and administration should be used as much as possible to reform and upgrade the existing traditional businesses as textile and garment industry. It should turn to be fast-response and be creative through upgrading product quality, technology, and value-adding processing to achieve "small orders", "variety" and "quality". On the other hand,it should rally all resources to get a breakthrough in a short time to several emerging pivotal industries to develop projects with medium technological sophistication and labor intensity meeting Macao'smarket and reality. Such as optical electronic products, peripheral products for information equipment, food processing, biological pharmacy, etc., Investment may be small or large. As soon as there are successful projects, there will be positive promotional effect on the re-orientation of Macao's industries.
Whether it is to reform and upgrade the existing traditional industries, or to render positive support to emerging industries,there will always be the need to enhance cooperation with Hong Kong and Mainland China, especially in science and technology.Advantages of all aspects should be completely used. In terms of reforming and upgrading existing traditional industries, the key is to increase the added value added to the textile and garment manufacturing, leading it to become a second garment industrial center in complement of Hong Kong. According to specialist opinion, after the worldwide termination of textile quotas in 2005,textile trade will still be subjected to all sorts of intangible limitation of projectionist practice by various countries. By then the world's trend of garments consumption will have changed, turning towards two extremes of quality-fashion and everyday clothing. The inbetween traditional garment market will have been seriously eroded.This trend allows room for development of high value-adding garment processing in Hong Kong and Macao. While Macao's garment industry has a technological sophistication that rivals with that of Hong Kong, its production cost is not even half of that in Hong Kong. In addition, Macao's policy on labor import is relatively flexible. Therefore, in new historical setting, Macao may, by virtue of these advantages, attract large garment businesses of Hong Kong to invest in Macao, and become partners with their Macao counterparts. As a result Hong Kong capital, technology, advanced managerial techniques and market network may be introduced or extended to Macao, and thus sharpened the international competitiveedge of Macao's garment industry. In order to adapt to such development, the Macao SAR government should provide present policies in this regard including the development of some industrial bases like the Concordia Industrial Complex, adopt a more flexible labor import policy, actively develop those facilities that complement related projects, and thus turning Macao into another garment center that is complementary to Hong Kong.
As regards rendering active support to emerging industries,Macao should pay more attention to the cooperation with Hong Kong and Mainland China in science and technology. The Hong Kong SAR government has already worked out a long-term strategy for developing sciences and technology, and has for this purpose set up a Commission for New Sciences and Technologies, headed by Professor Chang-lin Tian, Ex-Chairman of the University of California at Berkeley. A series of measures have been taken to positively accelerate the upgrading and reorientation of Hong Kong's manufacturing industries. Macao may,by cooperation with Hong Kong, make full use of Hong Kong's advanced achievements in science and technology by transplant those techniques, processes, and products of high-tech that could be used in Macao's manufacturing industries, so as to promote the development of emerging industries. There have been some successful experiences in this regard, such as the enterprise jointly set up in Macao by Va Meng (Group) Co. Ltd. And Bao Shing (Group) Co. Ltd., which produces optical crystal products,including crystal materials, precision optical equipment and accessories, small laser beam generators, etc., which sell well in international market places.
2.5 Strengthen cooperation and coordination between Hong Kong and Macao for property industry
According to Hong Kong governmental statistics, Hong Kong has a population of 6.5 million and more than 1.5 million families,of which only 50% of the families own their residential units. It has became an outstanding social problem that a considerable number of citizens could not afford to buy their own flats due to steadily high property prices. This has severely limited Hong Kong's economic development. Though after the Asian financial turmoil,Hong Kong's property prices have dropped drastically, but having considered that Hong Kong government withheld land sale, property developers in accordance slowed down their real estate projects.Therefore, in the near future, considerable pressure from the massive population for demand on housing will continue to exert.
In contrast, Macao's property market is oversupplied due to over-development in previous years, with unoccupied residential units estimated to amount to 35,000. At present, Macao's property prices are only 15-20% of those in Hong Kong, with cost of living standing at only 40% of that in Hong Kong. Macao's social system and life style is similar to Hong Kong, with complete medical facilities and conditions of living that are even better than in Hong Kong.Transportation between Hong Kong and Macao is equivalent to that from Hong Kong to Tun Mun in the New Territory or to Lama Island, taking only one hour of ferry journey. If Macao can attract part of the Hong Kong newly immigrated and retired to buy their residential units and live in Macao, then not only Macao can relieve its long burden of property surplus and capital accumulation, but also for Hong Kong to relieve the pressure from demand for houses and to stabilize property prices. This will be good for strengthening Hong Kong's international competitiveness and sustaining the development of the economy. In order to enhance cooperation between Hong Kong and Macao in this issue, Macao should take a series of measures, which mainly include:
(1) Solve the problem of Hong Kong residents' abiding right in Macao and their entry and exit from Macao.Historically Hong Kong people have been active in investing in Macao, one important reason was because of the free, easy access entering and exiting Macao with no constraints. In 1989 and 1991, however, the Macao government twice made revision on the lawsconcerning right of abode and foreign investment, imposing some limits on Hong Kong people residing in Macao. These limits have had a negative effect. Therefore, the would-be Macao SAR government may consider suspending these limits, so as to provide more conveniences.
(2) Improvement on transportation between Hong Kong and Macao and lowering fare cost.
Presently, passenger transportation by sea between Hong Kong and Macao is already well developed and very convenient.But for those Hong Kong people, who bought property and live in Macao, ferry fares for travelling to and fro are still a considerable expense. So it may be considered to use a discounted monthly ticket for frequent travelers between Hong Kong and Macao, and thereby lowering the travelling cost. It may also be considered to build a bridge spanning Hong Kong, Macao and Zhuhai, so that people may drive directly between Hong Kong and Macao, thus improving transportation between the two places and thereby giving incentive to Hong Kong residents to buy property and live in Macao.
(3) Sound real estate laws and regulations, simplify property transaction procedures.
Macao should refer to Hong Kong's successful experience in bettering laws and regulations related to real estate development and transaction, so as to protect the interests of investors and consumers, especially for those laws concerning property transaction, such as the "Law of Property Transfer Tax", which needto be revised to simplify procedures, so as to improve efficiency,and bring about changes to the existing contract procedures, which are complicated, time consuming and costly in handling.
(4) Residential areas should be facilitated with relevant infrastructure
In order for Macao's property to be attractive to the Hong Kong market, there needs to be something more than just price and that is the infrastructure to support the property, such as good medical and education facilities. Good facilities such as a highquality international school not only can attract Hong Kong citizens to live in Macao, but also may attract international companies, with regional headquarters in Hong Kong, to move part of their back up services to Macao.
(5) Real estate promotion in cooperation with related organizations in Hong Kong.
Official or semi-official organizations of the Macao SAR government may organize property developers to go to Hong Kong for promotional campaigns, such as to jointly organize a property sales exhibition with the Hong Kong Trade Development Council,so that Hong Kong residents may have better knowledge about the quality, price and supporting infrastructure at residential areas in Macao.
2.6 Strengthen financial cooperation and coordination between Hong Kong and Macao
In order to strengthen financial cooperation and coordination between Hong Kong and Macao, it must first strengthen cooperation and coordination between the Monetary and Foreign Exchange Authority of Macao and Hong Kong Monetary Authority. As Hong Kong and Macao are financially closely related, monetary issuance in Macao and Hong Kong are both through a mechanism of"Monetary Authority". Besides, Macao dollar is pegged with the Hong Kong dollar which accounts for a great deal of Macao's foreign exchange reserve and is the most widely circulated currency. In view of these, the Monetary and Foreign Exchange Authority of Macao should aggressively establish communication channels with the Hong Kong Monetary Authority to seek regular consultations,exchange information with each other on monetary policy, interest movements, and other related issues, so that Macao may be better equipped and prepared for financial crisis. Macao should also seek active cooperation from Hong Kong in making laws to supervise financial investment companies, and prevent those Hong Kong foreign exchange companies to seek legal loophole in Macao.Regulations on bills of exchange should be devised, and crisis management mechanism for the banks should be improved, so as to be well prepared for financial crisis, and maintain stable development of Macao's financial industry. In the long run, as Hong Kong and Macao are becoming more and more associated economically, the two places may well consider the adoption of one single currency, which will not only greatly reduce the risk that Macao's financial institutions are likely to face, but also help stabilize currency, and drastically reduce the cost of exchange between the two currencies. In this way, it strengthens the economic tie between the two SARS.
Another facet of strengthening financial cooperation and coordination between Hong Kong and Macao is making full use of Hong Kong's role as an international finance center, so as to develop Macao's offshore finance business, and thereby becoming an offshore finance center in supplement to Hong Kong. Nowadays,international offshore finance centers fall into three categories: 1)the internal-external separated type, i.e., the offshore finance markets are detached from their domestic counterparts, and is available tonon-residents only, examples of which are New York in the US and Tokyo in Japan; 2) the internal-external integrated type, in which the domestic finance market is completely integrated with its offshore counterpart, where residents and non-residents are free to transact without any limitation, such as London in Britain and Hong Kong in China; 3) tax-haven type offshore finance centers,which serve only as registered domiciles for international finance institutions, functioning as base for book keeping without engaging in actual dealings. Bermuda Islands, Cayman and Bahamas are of this type. As a small economy nearby an international finance center,Hong Kong, it is hardly possible for Macao to develop into another finance center to rival with Hong Kong. However, Macao and Hong Kong are alike in that they both pursue policies of a free economy and free port, with simple and low tax regimes, and without foreign exchanges control. Yet Macao is more flexible and liberal than Hong Kong in terms of policy. Therefore, Macao is well conditioned for developing into a tax-haven type offshore finance center. And,different from Bermuda Islands, Cayman and Bahamas, Macao's finance sector is actually engaged with a considerable portion of practical offshore business. Macao may make use of Hong Kong's advantages and develop itself into an offshore finance center that combines both the tax-haven and practical business types, as a functional extension of Hong Kong. There are two target markets for Macao in this regard: (1) By virtue of low rental, low labor cost and more liberal policies to attract those offshore finance institutions,from all over the world, which station in Hong Kong; (2) Attracting those finance institutions owned by overseas Chinese in Southeast Asia and to serve as a transit point for Taiwan businesses that wish to invest in Mainland China. This kind of offshore finance caters mainly to joint-venture enterprises in neighboring regions such as the west of the Pearl River Delta in GuangDong and Fujian province,etc. In order to cope with this development, Macao should, apart from improving its business environment, speed up the revision of its policy concerning offshore banking, give incentives to offshore finance businesses by reducing their tax levies, and speed up the introduction of international finance institutions to Macao, expand and widen money supplies and funding channels, so as to build up a capitalistic market eventually.
Apart from that, Macao should make use of Hong Kong's advantage to train local financial personnel, so as to upgrade finance management. Hong Kong is the fourth largest banking center in the world, with a pool of high-quality financial managerial personnel,and financial management has been in international standard. Macao could upgrade its own management level by introducing talents,offering training to local personnel and introducing new financial products, so that Macao's financial sector will become stronger,which in return will further strengthen Hong Kong's position as a financial center.
2.7 Strengthen cooperation and coordination in terms of transportation infrastructure between Hong Kong, Macao and Mainland China, and enhance Macao's function as a free port
For Macao to become a functional and effective extension of Hong Kong, it needs to bring its function as a free port more fully into play. Macao's function as a free port has long been limited by the lack of a deep-water harbor and an international airport.Now that Macao's international airport is in full operation, constraints will continue to be felt by the lack of a deep-water port as well as the inadequate cargo transport facilities between Macao and Mainland China. During the construction of the Ka-Ho Port, Macao had two clear objectives. One was to take over the container shipping operation from the Interior Port by serving as a specializedcontainer and fuel shipping port. The other was to match the development of the airport and the railway line in the planning stage in order to become a major port of transshipment for the western areas of the Pearl River Delta. However, the Ka-Ho Port falls short of these two objectives, second phase engineering project should be undertaken as soon as possible, to deepen the port basin to 7 to 9 meters to make it capable of accommodating a cargo shipment capacity of 5,000 tons, and to serve as pilot project for further port development on a larger scale.
Due to the natural constraints inherent in the Ka-Ho Port site, it is difficult to make further fundamental improvements. In view of this, some consultant companies have suggested that a man-made island may be constructed some 10 kms off the Ka-Ho coast line, on which to build a deep-water port of approximately 17 meters, which will be directly accessible from the international navigation route nearby with an offshore operational dock built on the open sea as a facility for inland river transport to the Pearl River Delta. This project could strengthen Macao's function as a port of transshipment serving an area that covers the western part of the Pearl River Delta and the middle and lower reaches of the Xijiang River. Another proposition is that Macao strengthens its cooperation with Zhuhai, and with the consent of the central government earmark certain suitable islands in Zhuhai for Macao to build a deep-water port, independently or on a joint-venture basis, with Zhuhai. Of Course, this is a rather difficult proposition, which is better left for specialized research. In building such a deep-water port, it may well be worth inviting Hong Kong's container docking groups to join in, so that things would be easier when it comes to attracting cargo transport clients and developing business networks.
The improvement of Macao-Mainland cargo transportation could be tackled with three approaches: waterways, highways andrailways. One is to re-open the Qianshan waterway, so transportation from the Qianshan River to the Xijiang River may be restored.Another is to accelerate the Beijing-Zhuhai highway and the Guangzhou-Zhuhai railway projects, and extend both of them to Macao, to bring about a significant improvement in the transportation links between Macao, the Pearl River Delta and other parts of Mainland China. Macao would then be able to bring its free port functions into full play, and strengthen its role as a "bridge" and "intermediary" between China, the EU and regions sharing the Portuguese language, thereby turning itself into a city of intermediary international trade and business.
Macao-Hong Kong cooperation and coordination in development of transportation infrastructures in the short or midterm perspective should mainly focus on improvement to cargo and passenger transport by sea between Macao and Hong Kong at a lower cost. In terms of passenger transport, one measure to take is to lower the fares. Another is to increase ticket categories, such as monthly ticket, monthly multi-return ticket, student ticket, favored business class ticket, etc. A further option is to improve the transport linkage between the ferry terminal and the airport and to "Porta do Cerco", by running a special bus service from the terminal to the airport and to the "Porta do Cerco", or building an airport ferry terminal, so that in-bound passengers by air may board a ferry to go on to Hong Kong straight away. Checking-in-and-out procedures should also be simplified at the airport and the ferry terminal. Special gates could be designated for monthly ticket users and visitors from Hong Kong to afford more convenience to frequent travelers to Macao.
From a long-term perspective, the key lies in coordinating and resolving the controversy of building the Linding Cross-estuary Bridge. Two particular options are available: 1) assign an accesspoint only to Zhuhai or to both Zhuhai and Macao, or build a separate Hong Kong-Macao bridge; 2) allocate the Hong Kong side starting point at Tun Mun in Lan Kok Tsui or at Lama Island.As this huge project would affect the interests of Hong Kong, Macao and Mainland China, this would be better coordinated by the central government, so that it would be beneficial to the economic relationship of the three places.
2.8 Build up a multi-level coordination mechanism among Hong Kong,Macao and Mainland China
After the return to the motherland of Hong Kong and Macao,there will undoubtedly be even closer economic and trading relations amongst Hong Kong, Macao and Mainland China, especially the Pearl River Delta area in Guangdong. There will also be more economic union in the region. However, according to the policy of "one country, two system", Hong Kong and Macao will be two SARs under the Central People's Government of the PRC, both of different social and economic systems from the Mainland. Between them will be a complex web of relations in trade, investment,finance, transportation, labor and personnel exchanges. This will also be true of the economic and trading relations between Hong Kong, Macao, various provinces, municipalities, and sectors of the Mainland. At present, it is the function of the State Council's Office for Hong Kong and Macao Affairs to coordinate the relations between these two centers. However, due to limited authorization,the Office is not yet fully authoritative and autonomous. Therefore,in order for Hong Kong and Macao to associate effectively with the Mainland fully exploit each other's advantages, while compensating for each other's shortfalls, the central government should further strengthen the functions of the Office for Hong Kong and Macao affairs and set up a powerful and authoritative special institutionfor overall coordination headed by a high ranking official.
There should likewise be a communication and coordination mechanism with channels between the Hong Kong and Macao SAR governments. It would be worth considering setting up a governmental coordination, consisting of entrepreneurs and scholars,such as the Hong Kong-Macao Economic Coordination Commission,to be headed by high officials from the respective SARs. Regular meetings of the Commission could be held on the long-term planning and major issues of economic cooperation between the two places, as well as exchanges of views and consultation. The Commission could set up some specialized agencies such as the existing Guangdong-Hong Kong-Macao Coordination Group for Major Infrastructure Development Projects. Effective measures should be taken to handle the social and economic problems between the two communities as well as issues that concern both parties such as travel documents for residents who wish to travel between the places, mutual investment issues, coordination of cargo transport by air, demarcation and control of air space, major infrastructure development projects, coordination of gaming industry policies, cooperation in tourism industry, industrial upgrading and re-orientation, anti-smuggling, and protection of intellectual property rights, etc., so as to effectively solve the problems encountered in economic cooperation between the two places, and to promote the integration process of the two economies.
Of course the coordination mechanism for economic and trading relations between Hong Kong and Macao should be multilevel. Apart from the governmental coordination institutions, there should also be coordination channels between sectors such as finance and trade, for example between the Monetary and Foreign Exchange Authority of Macao and the Hong Kong Monetary Authority, Macao's Trade and Investment Promotion Council andHong Kong Trade Development Council, Macao Productivity and Technology Transfer Center and the Hong Kong Productivity Council, etc. Regular mechanism should also be established so Hong Kong and Macao can keep in close contact to form a multilevel coordination mechanism for economic and trade relationships on official, semi-official and non-official levels.
Notes 1:Source:Annals 1992 of Macao High Commission Against Corruption and Administrative Illegality.
Notes 2:Source:Hong Kong Economic Journal of 23rd December 1998.
