Economy of Macau

The economy of Macau is based largely on tourism (including gambling) and textile and fireworks manufacturing. Efforts to diversify have spawned other small industries - toys, artificial flowers, and electronics. The tourist sector has accounted for roughly 25% of GDP, and the clothing industry has provided about three-fourths of export earnings; the gambling industry probably represents over 40% of GDP. More than 8 million tourists visited Macau in 2000. Although the recent growth in gambling and tourism has been driven primarily by mainland Chinese, tourists from Hong Kong remain the most numerous. Recently, gang violence, a dark spot in the economy, has declined somewhat, to the benefit the tourism sector.

The casino industry, the linchpin of the economy, has been controlled by the Sociedade de Turismo e Diversoes de Macau (STDM) monopoly for the last 39 years. That will change in 2001 when casino licenses will be offered to other casino operators.

Macau depends on mainland China for most of its food, fresh water, and energy imports. Japan and Hong Kong are the main suppliers of raw materials and capital goods. Output dropped 4% in 1998 and the economy remained weak in 1999. Macau reverted to Chinese administration on December 20, 1999. Gang violence, a dark spot in the economy, probably will be reduced in 2000 to the advantage of the tourism sector.

Over the longer term, the relocation of manufacturing operations from Macau to the neighboring Chinese province of Guangdong will extend to textiles and garment production as China's entry into the World Trade Organization (WTO) gives the mainland increased direct access to international markets. Mainland competition, along with the phasing out of Multi-Fiber Arrangement (MFA) quotas, which provide a near guarantee of export markets, over the next few years, will eventually spell the end of Macau's low-end mass production of textiles, which comprise the bulk of the SAR's merchandise export earnings. The best opportunities may lie in providing services - shipping, finance, legal - to facilitate mainland exports through Macau to the rest of the world, and conversely inflows of goods and investment to the mainland. Tourism, building on current gambling tourism, is expected to be an important area of potential economic growth and foreign-exchange earnings.

Table of contents
1 Industry
2 Agriculture and Fishing
3 Labor Force
4 Unemployment Rate
5 Trade
6 Financial Institutions
7 Currency/Exchange Rate
8 Tourism
9 Gambling
10 Miscellaneous

Industry

Industries: clothing, textiles, toys, electronics, footwear, tourism, gambling
Industrial production growth rate: NA%

Major activities are textile and garment manufacturing, accounting for 83.8 percent of principal domestic exports in 1999. Other major sectors are footwear, electronics, and toys. Mainland China provides most of Macau's raw materials.

Agriculture and Fishing

Agriculture - products: rice, vegetables

Traditionally, fishing and harvesting oysters has been the major form of food production. However, meat production in 1996 was 1,246 metric tons of buffaloes and 10,938 metric tons of pigs slaughtered; declining catches led to the suspension of fishing in July 1996. In the previous two years, only 1,900 metric tons (1994) and 1,600 metric tons (1995) of seafood were caught.

Labor Force

In 1999, Macau's labor force totaled around 217,000. Most (27.9 percent) workers were in public administration and personal and social services; 26.2 percent in wholesale, retail, restaurant, and hotel trades; 22 percent in manufacturing, 8.1 in construction and public works; 7.8 percent in financial activities, real estate, leasing, and commercial services; 7.4 percent in transportation and communications; and 0.6 percent in other services. Nearly 13 percent of Macau's labor force is made up of mainland construction workers and Filipino shop and restaurant employees; a presence that was the cause of demonstrations in May and July 2000.

Labor force: 281,117 (1998)
Labor force - by occupation: industry 31%, restaurants and hotels 28%, other services 41%

Unemployment Rate

The official average unemployment rate was 4.3 for 1996, 3.2 for 1997, and 4.6 for 1998; unemployment jumped to 6.5 in 1999. For the January-June 2000 period, the rate reached 7 percent and, unofficially, may have been higher.

Trade

In 1999, Macau's free-market economy produced total exports of US$2.2 billion (MPtc 17.6 billion) and consisted mainly of textiles and garments, toys, electronic goods, and footwear. Total imports for the same period reached US$2 billion (MPtc 16.3 billion), and consisted mostly of raw materials and semi-manufactures, consumer goods, capital goods, and mineral fuels and oils. Total reexports were about US$317 million (MPtc 2.5 billion). In 1999 positive growth rates were seen in all three categories. Principal import trade partners in 1999 were China (35.7 percent), Hong Kong (18.1 percent), the European Union (12.9 percent), Taiwan (9.5 percent), Japan (6.7 percent), the United States (5.1 percent), and other countries (12 percent). Exports went to the United States (47 percent), the European Union (30.2 percent), China (9.2), Hong Kong (6.8 percent), and other countries (6.8 percent).

In the second half of the 20th century, Macau's economy was diversified with the development of light industry, the influx of migrants from mainland China to serve as a labor force, and increased tourism. Portugal's efforts to develop economic and cultural links between Macau and Brazil and Portuguese holdings in Africa, however, were not successful. Economic ties to the European Union and Taiwan are considered important aspects of Macau's economic role as part of the People's Republic of China. Direct access to the neighboring Zhuhai Special Economic Zone facilitates trade with mainland China. As a special administrative region, Macau functions as a free port and as a separate customs territory.

Exports: $1.7 billion (f.o.b., 1999)
Exports - commodities: textiles, clothing, toys, electronics, cement, footwear, machinery
Exports - partners: US 48%, EU 31%, Hong Kong 8%, mainland China 7% (1998)

Imports: $1.5 billion (c.i.f., 1999)
Imports - commodities: raw materials, foodstuffs, capital goods, fuels, consumer goods
Imports - partners: mainland China 33%, Hong Kong 24%, EU 11%, Taiwan 10%, Japan 8% (1998)

See also: Closer Economic Partnership Arrangement

Financial Institutions

Two banks issue currency: the Banco Nacional Ultramarino and the Bank of China (starting in October 1995). There are twenty other licensed banks, sixteen of which are foreign. Macau has five of the top 500 commercial banks in Asia, including Banco Tai Fung (Tai Fung Bank) and Banco Seng Heng (Seng Heng Bank).

Currency/Exchange Rate

Currency: 1 pataca (P) = 100 avos
Exchange rates: patacas (P) per US$1 - 8.01 (January 2000), 7.99 (1999), 7.98 (1998), 7.99 (1997), 7.962 (1996), 8.034 (1993-95); note - linked to the Hong Kong dollar at the rate of 1.03 patacas per Hong Kong dollar

US$1 = Macau patacas (MPtc, M$, or MOP) 7.9907 (August 7, 2000). One pataca divides into 100 avos. Coins are issued in 10, 20, and 50 avos and 1 and 5 patacas; notes are in 5, 10, 20, 50, 100, and 500 pataca denominations. Hong Kong currency is freely used and represents about two-thirds of the currency in circulation. The new banknotes were issued by the Bank of China and the Banco Nacional Ultramarino on December 20, 1999, and are fully convertible to foreign currencies.

Tourism

Major source of foreign exchange (US$1.9 billion in 1993); employed estimated 30 percent of labor force and contributed estimated 45 percent GNP in 1995. According to official figures for 1999, some 7.4 million persons visited Macau. Nearly 57 percent came from Hong Kong, 22 percent from mainland China, 13 percent from Taiwan, and 8 percent from other sources. Most made short, overnight visits. Overall, tourism declined in the 1990s but increased in 1999.

Gambling

Gambling has been licensed since 1850 and has always been an important source of revenue for the government. In the early 1960s, gambling provided 50 percent of Macau's official revenue. Starting in 1962, the gambling industry has been operated under a government-issued monopoly license by the Sociedade de Turismo e Diversões de Macau (Macau Tourism and Entertainment Corporation). Macau had nine casinos in the 1990s; gambling reportedly represented 20 to 25 percent of Macau's GDP. Direct taxes on gambling were 44.5 percent of total government revenue in 1998, up from 40.1 percent in 1997. In 1999, however, there was a 9.1 percent decrease in this sector. Internet gaming, with its worldwide access, was scheduled to be initiated in Macau in Summer 2000. The monopoly license of the Sociedade de Turismo e Diversões de Macau expires in 2001. Organized crime is reported to be heavily involved in gambling in Macau (see Organized Crime, q.v.).

Miscellaneous

GDP: purchasing power parity - $7.65 billion (1998 est.)
GDP - real growth rate: -4% (1998 est.)
GDP - per capita: purchasing power parity - $17,500 (1998 est.)
GDP - composition by sector:
agriculture: 1%
industry: 40%
services: 59% (1997)
Population below poverty line: NA%
Household income or consumption by percentage share:
lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices): -3% (1999 est.)

Budget:
revenues: $1.34 billion
expenditures: $1.34 billion, including capital expenditures of $260 million (1998 est.)

Electricity - production: 1.34 billion kWh (1998)
fossil fuel: 100%
hydro: 0%
nuclear: 0%
other: 0% (1998)
Electricity - consumption: 1.42 billion kWh (1998)
Electricity - exports: 1 million kWh (1998)
Electricity - imports: 175 million kWh (1998)

Debt - external: $1.7 billion (1997)
Economic aid - recipient: $NA

Fiscal year: calendar year


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