Macau officials have big dreams to transform small economy

The garment industry has been important for Macau's economy, but may be ill-prepared for the future

December 18, 1999
Web posted at: 10:07 a.m. HKT (0207 GMT)

From Financial Correspondent Andrew Stevens

MACAU (CNN) -- Macau may be a small economy, but officials have some big dreams for the post-handover period. And they appear ready for the challenge of turning the area into a key economic hub.

They see Macau, which has been dependent on the gambling industry for decades, as a new link between China and the outside world. They are counting on manufacturing, high-tech businesses and better relations with China to fuel economic growth.

"The industrial sector is very important for the future. The incoming government wants to target high value-added products, and also high technology, and raise the quality of Macau's economy," Leong Song, adviser to Macau, said.

"(The government) has in mind the Silicon Valley's experience, and it wants to attract investors as well as talent from China and Taiwan," he added.

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Many consider tourism a bright spot for the enclave. Many of Macau's hotels and businesses have been trying to promote Macau as an escape destination, as a nice place to visit even for non-gamblers.

An economic transformation would benefit Macau. The small enclave, with about 400,000 people, has some large problems. Its economy has been in recession for the past five years, since before the Asian financial crisis hit the rest of the region.

Macau's unemployment rate is hovering around 7 percent, and the city is staggering beneath a property glut that will take years to wear off.

Slow-moving bureaucracy

The enclave is a difficult place to do business. A slow-moving bureaucracy and non-competitive monopolies dominate the city. Edmund Ho, the region's first chief executive, hopes to address these issues.

"I think with the transition and the handover, a lot of rethinking is already going on," suggests Richard Wong of the University of Hong Kong.

"From initial reports that we hear from the chief executive designate, he seems to be taking a much more hands-on view in terms of repositioning Macau and opening up sectors of the economy," Wong added.

Many of Macau's hotels and businesses have been trying to promote the enclave as a getaway destination

Dependent on gambling

Macau is addicted to gambling. Almost half of the city's economy, about half of the government's budget and roughly one-third of Macau's jobs are linked to the enclave's 10 casinos. That's a change from 20 years ago when manufacturing accounted for nearly half of Macau's economy, and gambling accounted for 25 percent.

Ho has been talking about cutting Macau's dependence on gambling, but many people wonder what would replace the sector.

The garment industry traditionally provided a lot of money for Macau's economy. But the industry is facing problems -- many of the factories are not prepared for the future.

Also, the worldwide quota on garments and textiles ends in five years. Macau, as a European territory, benefited from its quota excess to the European Union.