2010 Investment Climate Statement - Macau

2010 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2010

Openness to Foreign Investment

1. Macau became a Special Administrative Region (SAR) of the People's Republic of China on December 20, 1999. Macau's status since reverting to Chinese sovereignty is defined in the Sino-Portuguese Joint Declaration (1987) and the Basic Law, Macau's constitution. Under the concept of "One Country, Two Systems", Macau is promised a high degree of autonomy in economic matters and its economic system is to remain unchanged for fifty years. Since reversion, the Macau Government has maintained a transparent, non-discriminatory and free market economy. Macau has separate membership in the World Trade Organization (WTO).

2. Macau is heavily dependent on the gaming sector and tourism industries. Exports of manufactured goods, once an important pillar of Macau’s economy, began to decline after the elimination of the multi-fiber agreement in 2004 and are no longer a significant business sector. In 2002, the Government ended a long-standing gaming monopoly, awarding two gaming concessions to consortia with U.S. interests. This opening has encouraged very substantial U.S. investment in casinos and hotels, and has spurred exceptionally rapid economic growth over the last few years. Macau,s 2009 gaming receipts exceeded those of the state of Nevada and Atlantic City combined, totaling almost US$15 billion, and accounting for almost 70 percent of Macau,s GDP. The Government hopes to diversify Macau's economy by attracting foreign investment in non-gaming sectors and is committed to maintaining an investor-friendly environment.

3. Corporate taxes in the non-gaming sector are low. The tax rate is 12 percent for a company's net profits greater than US$ 37,500 (300,000 Patacas). For net profits less than US$ 37,500, the tax ranges from 3 percent to 12 percent. The top personal tax rate is 12 percent. Gaming revenue is taxed at a higher level, with the government taking 39 percent of gross receipts.

4. Foreign firms and individuals are free to establish companies, branches and representative offices without discrimination or undue regulation in Macau. There are no restrictions on the ownership of such establishments. Company directors are not required to be citizens of, or resident in, Macau.

5. The Government liberalized the telecommunications sector in 2001, including opening the market for mobile phone and Internet services. It has issued three mobile telephone licenses to two foreign companies and one local firm. In March 2005, the Government issued a license to a company operating a Code Division Multiple Access (CDMA) network. In October 2006, the Government issued three 3G licenses, and 3G operators began providing their services in October 2007.

6. Certain requirements are imposed on three professional services sectors as described below. Under Macau law (Decree Law 14/95/M, 22/96M and 22/97/M), qualified professionals and executives may apply for the right of temporary residency.

-- Education - an individual applying to establish a school must have a Macau Certificate of Identity or have the right to reside in Macau. The principal of a school must be a Macau resident.

-- Newspapers and magazines - applicants must first apply for business registration and register with the Government Information Bureau as an organization or an individual. The publisher of a newspaper or magazine must be a Macau resident or have the right to reside in Macau.

-- Legal services - lawyers from foreign jurisdictions who seek to practice Macau law must first obtain residency in Macau. They also must pass an examination before they can register with the Lawyer's Association, a self-regulatory body. The examination is given in Chinese or Portuguese.

After passing the examination, foreign lawyers are required to serve an 18-month internship before they are able to practice law in Macau.

Third Party Indicators:




TI Corruption Index200943 (out of 180)
Heritage Economic Freedom201020 (out of 183)
World Bank Doing Business2010n/a (out of 183)

Conversion and Transfer Policies

7. Profits and other funds associated with an investment, including investment capital, earnings, loan repayments, lease payments, and capital gains, can be freely converted and remitted. The domestic currency, Macau Official Pataca (MOP), is pegged to the Hong Kong Dollar at 1.03 and indirectly to the U.S. Dollar at an exchange rate of approximately MOP8.02 = US$1. The Monetary Authority of Macau, the de facto central bank, is committed to exchange rate stability through maintenance of the peg to the Hong Kong Dollar.

8. Although Macau imposes no restrictions on capital flows and foreign exchange operations, exporters are required to convert forty percent of foreign currency earnings into MOP.

This legal requirement is not applied to tourism services.

Expropriation and Compensation

9. The U.S. Consulate General is not aware of any expropriation actions. Expropriation of property is allowed by law if it is in the public interest. In such cases, the Macau SAR Government is required to exchange the private property with an equivalent public property based on the valuation and conditions of the property. Although we are unaware of this provision ever being invoked, Macau officials assert that the exchange of property is in accordance with established principles of international law. There is no provision in law for remunerative compensation.

Dispute Settlement

10. The U.S. Consulate General is not aware of any investor-SAR disputes involving U.S. or other foreign investors or contractors and the Macau SAR Government. Private investment disputes are normally handled in the courts or via private negotiation. Alternatively, disputes may be referred to the Hong Kong International Arbitration Center.

11. Macau has an arbitration law (Decree 55/98/M), which adopts the United Nations Commission on International Trade Law (UNCITRAL) model law for international commercial arbitration. The Macau SAR Government accepts international arbitration of investment disputes between itself and investors.

12. Macau's legal system is based on the rule of law and the independence of the judiciary. Macau,s commercial and bankruptcy laws (Decree 40/99/M) are derived from Portuguese law and reflect the continental legal tradition. Courts in Macau include the Court of Final Appeal, Intermediate Courts and Primary Courts. There is also an Administrative Court, which has jurisdiction over administrative and tax cases.

These provide an effective means for enforcing property and contractual rights. Macau's dramatic economic expansion in the last few years, combined with a shortage of qualified jurists, have put a strain on the operations of the judicial system, leading in some cases to delays in case resolution.

Performance Requirements and Incentives

13. To attract foreign investment, the Macau SAR Government offers investment incentives to investors on a national treatment basis. These incentives are categorized as fiscal incentives, financial incentives and export diversification incentives and are contained in Decrees 23/98/M and 49/85/M.

They are provided if companies can fulfill at least one of the following purposes: promoting economic diversification, contributing to promotion of exports to new unrestricted markets, promoting added value within their activity's value chain, or contributing to technical modernization. There is no requirement that Macanese residents own shares.

14. Fiscal incentives include full or partial exemption from profit/corporate tax, industrial tax, property tax, stamp duty for transfer of properties, and consumption tax. Tax incentives are consistent with the WTO Agreement on Subsidies and Countervailing Measures as they are neither export subsidies nor import substitution subsidies as defined in the WTO Agreement. Financial incentives include government-funded interest subsidies (ranging from 4-6 percent) on private bank Pataca loans for buying/leasing new equipment or construction/leasing of industrial buildings.

Export diversification incentives include subsidies given to companies and trade associations attending trade promotion activities organized by Macau Trade and Investment Promotion Institute. Only companies registered with Macau Economic Services may receive subsidies for costs of space rental and decoration, production of audio-visual materials, etc. Macau also provides other subsidies for the installation of anti-pollution equipment.

Right to Private Ownership and Establishment

15. Macau law and regulations provide for the right of foreign and domestic private entities to establish, acquire and dispose of interests in business enterprises.

Protection of Property Rights

16. Macau is a member of the World Intellectual Property Organization. Macau has acceded to the Bern Convention for the Protection of Literary and Artistic Works. Patents and trademarks are registered under Decree 97/99/M. Macau's copyright laws are TRIPS compatible and government offices are required to use only licensed software. The Macau SAR Government devotes considerable attention to intellectual property rights enforcement and coordinates with copyright holders. Source Identification Codes are stamped on all optical discs produced in Macau. Macau Economic Services may use an expedited prosecution arrangement to speed up punishment of accused retailers of pirated products, but given the low level of goods piracy, prosecutions are rare.

17. The Macau SAR Government claims to have closed down all illicit optical disc production lines. Piracy of television signals (and much U.S.-origin program content) is rampant, however. The Government does not have a clear position on criminal liability for commercial end-use piracy of copyrighted works. The Consulate General continues to raise these issues with Macau officials.

18. Starting January 1, 2010, the Macau SAR Government sped up the registration processes for trademarks and patents by doubling the publication frequency of applications to two times per month.

Transparency of Regulatory System

19. The Government has transparent policies and laws that establish clear rules and do not unnecessarily impede investment. The basic elements of a competition policy are set out in Macau's 1999 Commercial Code.

Efficient Capital Markets and Portfolio Investment

20. Macau allows free flows of financial resources. Foreign investors can obtain credit in the local financial market.

There are twenty-seven financial institutions in Macau, including twelve local banks and fifteen branches of banks incorporated outside Macau. Moneychangers, remittance companies, and other non-bank financial companies are also present in Macau. These institutions provide a range of credit instruments. Mainland Chinese and Portuguese banks had a combined market share of about 80.6 percent of total deposits in the banking system at the end of October 2009.

Total deposits amounted to US$ 25.4 billion in September 2009. In September 2009, banks in Macau maintained a capital adequacy ratio of 16.05 percent, well above the minimum eight percent recommended by the Bank for International Settlements. Accounting systems in Macau are consistent with international norms.

21. In December 2009, the Macau Monetary Authority signed a memorandum with the People,s Bank of China to develop the Renminbi (RMB) settlement mechanism for cross-border trade.

According to the memorandum, the quota on the value of RMB exchange for each individual transaction will be increased from RMB 6,000 (USD 878) to RMB 20,000 (USD 2,928). The list of designated merchants who are allowed to exchange RMB for Pataca from Macau banks will be expanded to include institutions that provide telecommunications, education and exhibition/convention services. In addition, Macau residents will be allowed to use RMB cheques to pay for consumer spending in Guangdong Province up to RMB 50,000 (USD 7,320) per account per day. The implementation timeframe for these RMB-related measures remained uncertain as of year-end 2009.

22. Macau has no stock market, but companies can seek a listing in Hong Kong's stock markets. Macau,s financial regulators cooperate with their Hong Kong counterparts.

23. Under the Macau Insurance Ordinance, the Monetary Authority authorizes and monitors insurance companies. There are eleven life insurance companies and thirteen non-life insurance companies in Macau. Total gross premium income from insurance services amounted to US$ 299.2 million in the first nine months of 2009.

24. Offshore finance businesses, including credit institutions, insurers, underwriters, and offshore trust management companies, are regulated and supervised by the Monetary Authority. Profits derived from offshore activities are fully exempted from all form of taxes.

Competition from State-owned Enterprises

25. Macau,s gaming sector accounts for over 70 percent of the local economy. The Macau SAR Government has no ownership in any gaming companies. Several economic sectors ) including cable television, telecommunications, electricity, the airport and port management are run by private companies under concession contracts from the Macau SAR Government. The government holds a small percentage of shares in these government-affiliated enterprises ranging from one to ten percent. The government set out in its 1999 Commercial Code the basic elements of a competition policy to restrict commercial practices that can distort the proper functioning of markets, but there is no independent competition law.

Court cases related to anti-competitive behavior remain rare.

Corporate Social Responsibility

26. The six gaming concessionaires that dominate Macau,s economy pay two percent of gross gaming revenues to the government to fund cultural and social programs in the SAR.

Several operators also directly fund gaming addiction rehabilitation programs. Some government-affiliated entities maintain active CSR programs. For example, electric utility Companhia de Electricidade de Macau sponsored Macau,s regional Special Olympics program in January 2010, and the company,s volunteer programs include education programs and repair services provided free-of-charge to underpivileged residents.

Political Violence

27. Macau is politically stable.The U.S. Consulate General is not aware of any incidents in recent years involving politically motivated damage to projects or installations.


28. Macau's anti-corruption agency is caled the Commission Against Corruption (known by its Portuguese acronym CCAC). The CCAC has powers of arrest and detention. Its budget and manpower have been increased in recent years. Macau's explosive economic growth, a public outreach campaign to encourage reporting, and increased CCAC resources have led to significant increases of corruption cases in recent years.

29. The highest-profile corruption case to date was leveled at Macau's Secretary for Transport and Public Works, Ao Man Long, who was arrested in December 2006. The CCAC reported that Ao had received bribes from real estate and construction companies in excess of US$23 million in return for contracts and approvals in 20 public works projects. Assisted by family members and others, Ao used shell companies in Hong Kong and the British Virgin Islands to launder money. On January 30, 2008, he was convicted on 55 counts and sentenced to 27 years in prison. In addition, US$31.5 million of his assets were seized, including assets not directly linked to his corruption and money laundering cases. His wife was sentenced in absentia to 23 years in jail. His father, younger brother and sister-in-law were convicted of 6-14 counts of money laundering, and were sentenced to 10-18 years.

30. In 2009, the Director of the Financial Services Bureau was forced to take indefinite leave when it was discovered that she and two subordinates had inflated reimbursement claims to defraud the government out of almost US$500,000.

31. Until 2009, the CCAC's overall effectiveness remained constrained by legislation limiting the scope of its authority to government - but not private - sector corruption. In August 2009 the Legislative Assembly passed amendments that will empower the CCAC to also investigate private sector corruption. The bill will become effective from March 1, 2010.

Bilateral Investment Agreements

32. Macau has signed investment protection agreements with Portugal and the Netherlands.

OPIC and Other Investment Insurance Programs

33. Overseas Private Investment Corporation (OPIC) coverage is not available in Macau.


34. Macau's unemployment rate in November 2009 was 3.1 percent, down from a high of 6.1 percent in 2003, primarily due to the increase in gaming facilities and hotels. Rapid economic growth has increased demand for skilled workers.

Macau has labor importation schemes for unskilled and skilled workers who cannot be recruited locally, but concerns that foreign labor will supplant local Macanese workers makes labor and immigration policy a sensitive political issue. The Legislative Assembly passed a bill in October 2009 establishing stiff criminal penalties for employers of illegal migrants. Upon becoming law in the second quarter of 2010, the bill,s provisions will also impede foreign workers from changing employers in Macau and require them to leave for six months before applying for a new work permit with a different employer. As of October 2009, Macau businesses employ 75,944 foreign workers out of a total workforce of 314,900. The Government uses the proceeds of a 2005 tax on the import of temporary workers for retraining local unemployed people.

Foreign-Trade Zones/Free Ports

35. Macau is a free port without foreign trade zones. Macau and the PRC implemented a free trade agreement, the Closer Economic Partnership Arrangement (CEPA), on January 1, 2004.

The agreement is similar to the Hong Kong-PRC CEPA. As of 2009, it provided tariff-free access to Mainland China for all Macau-origin products and preferential treatment for 41 service sectors. In December 2005, the Government inaugurated the cross-border industrial zone located between the northern part of Macau and Zhuhai. Manufacturers have begun operating in the industrial zone, including one U.S. manufacturer of gaming tools.

Foreign Direct Investment Statistics

36. According to the Direct Investment Statistics 2008 compiled by the Statistics and Census Service, there were 2,020 foreign direct investment companies in Macau, employing 106,440 workers. Hong Kong was the largest foreign investor in Macau, accounting for 36.5 percent of total foreign direct investment. The United States now exceeds Mainland China as the second largest foreign investor in Macau, accounting for 20.0 percent of foreign direct investment.

37. Table 1: Stock of foreign direct investment by country/territory, 2008

Country/Territory US$ Million % Share of Total
Hong Kong4,037.036.5
United States2,208.020.0
United Kingdom97.80.9

Source: Statistics and Census Service 38.

Table 2: Stock of foreign direct investment by industry, 2008

Sector US$ Million % of Total
Banks and securities1,931.417.5
Industrial production398.83.6
Hotels and restaurants56.40.5
Transport, storage, communications-10.6-0.1
Wholesale and retail368.43.3
Cultural, recreational, services43.00.4

Note: Total does not sum due to rounding.

Web Resources

Macao Special Administrative Region Government: http://www.macau.gov.mo Macao
Trade and Investment Promotion Institute - IPIM: http://www.ipim.gov.mo/en/index2.asp Macau
Fair & Trade Association: http://www.macaufta.com
World Trade Centre Macau: http://www.wtc-macau.com