VZCZCXYZ0000
RR RUEHWEB

DE RUEHHK #0086/01 0151019
ZNR UUUUU ZZH
R 151019Z JAN 10
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 9406
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS HONG KONG 000086 
 
SIPDIS 
 
STATE FOR EAP/CM AND EB/IFD/OIA 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EINV ETRD KTDB OPIC USTR HK CH
SUBJECT: 2010 INVESTMENT CLIMATE STATEMENT FOR MACAU 
 
REF: 09 STATE 124006 
 
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. 
 
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. 
 
Corruption 
---------- 
 
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. 
 
Labor 
----- 
 
¶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 Kong               4,037.0           36.5 
United States                 2,208.0           20.0 
China                   1,239.1           11.2 
Portugal                        511.9            4.6 
United Kingdom                   97.8            0.9 
Others                        2,959.4           23.9 
TOTAL                   11,053.8        100.0 
Source: Statistics and Census Service 
 
 
¶38.  Table 2: Stock of foreign direct investment by industry, 
2008 
 
Sector      US$ Million       % of Total 
 
Gaming      7,554.1                 68.3 
Banks and securities    1,931.4                 17.5 
Industrial production     398.8                  3.6 
Hotels and restaurants     56.4                  0.5 
Transport, storage, communications    -10.6 
-0.1 
Insurance     263.3                  2.4 
Construction        449.1                  4.1 
Wholesale and retail      368.4                  3.3 
Cultural, recreational, services       43.0 
0.4 
TOTAL                              11,053.8 
100.0 
 
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 
MARUT