World Trade Organization |
RESTRICTED |
| |
WT/TPR/S/181 | |
|
(07-1169) |
|
|
Trade Policy Review Body |
|
TRADE POLICY REVIEW Report by the Secretariat MACAO, CHINA |
This report, prepared for the third Trade Policy Review of Macao, Any technical questions arising from this report may be addressed to Mr. Mario Kakabadse (tel: 022 739 5172). Document WT/TPR/G/181 contains the policy statement submitted by |
Note: This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on Macao, China.
Page
SUMMARY OBSERVATIONS vii
(1) Economic Environment vii
(2) Trade and Investment Regime viii
(3) Trade Policies and Practices viii
(4) Sectoral Policy Developments ix
(5) Outlook x
I. Economic environment 1
(1) Introduction 1
(2) Recent Economic Developments 2
(i) Macroeconomic performance 2
(ii) Macroeconomic policies 6
(iii) Balance of payments 8
(iv) Structural policies 9
(3) Developments in Merchandise Trade 9
(i) Composition of merchandise trade 10
(ii) Direction of trade 10
(4) Foreign Direct Investment 13
(5) Outlook 14
II. trade policy regime: framework and objectives 15
(1) Introduction 15
(2) General Constitutional and Legal Framework 15
(3) Trade Policy Formulation and Implementation 17
(4) Trade Policy Objectives 21
(5) Trade Agreements and Arrangements 22
(i) Multilateral agreements 22
(ii) Regional agreements 23
(iii) Bilateral agreements 23
(6) Trade Disputes and Consultations 25
(7) Foreign Investment Regime 25
III. trade policies and practices by measure 28
(1) Introduction 28
(2) Measures Directly Affecting Imports 29
(i) Procedures 29
(ii) Customs valuation and rules of origin 30
(iii) Tariffs 30
(iv) Other charges on imports 31
(v) Import licensing, prohibitions, and other restrictions 32
(vi) Anti-dumping, countervailing, and safeguard measures 35
(vii) State trading, countertrade, and cartels 35
Page
(viii) Standards and other technical requirements 35
(ix) Trade-related investment measures 38
(x) Government procurement 38
(3) Measures Affecting Exports 41
(i) Procedures and documentation 41
(ii) Export taxes, charges, and levies 41
(iii) Export cartels and other arrangements 42
(iv) Export prohibitions, restrictions, and licensing 42
(v) Export support 43
(vi) Export finance, insurance, and guarantees 43
(vii) Export promotion and marketing assistance 43
(4) Measures Affecting Production and Trade 43
(i) Taxation system and tax incentives 43
(ii) Non-tax incentives and other forms of assistance 46
(iii) Intellectual property rights protection 49
(iv) Competition policy 52
(v) Corporate governance 54
iV. trade policies by sector 55
(1) Introduction 55
(2) Manufacturing 56
(i) Textiles and clothing 57
(ii) Industrial diversification 58
(iii) Construction 59
(3) Services 59
(i) Telecommunications 61
(ii) Financial services 64
(iii) Transport 68
(iv) Tourism 71
(v) Gaming 72
references 77
APPENDIX TABLES 79
Page
I. ECONOMIC ENVIRONMENT
I.1 Production composition of merchandise trade, 2001 and 2005 11
I.2 Direction of merchandise trade, 2001 and 2005 12
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
II.1 Structure of the Secretariat of Economy and Finance 18
II.2 Structure of
TABLES
I. ECONOMIC ENVIRONMENT
I.1 Major features of
I.2 Performance of
I.3 Resident and non-resident workers, 2003-06 5
I.4 Government budget and fiscal reserves, 2000-06 7
I.5 Balance of payments, 2000-05 8
I.6 Inward direct investment by industry and investors' place of residence, 2001-05 13
II. TRADE POLICY REGIME: FRAMEWORK AND OBJECTIVES
II.1 Main trade-related legislation in
II.2 Selected notifications by
II.3
III. TRADE POLICIES AND PRACTICES BY MEASURE
III.1 Consumption taxes, 2006 31
III.2 Responsibility of government bodies for import authorizations, 2001 and 2005 32
III.3 Import licensing regime, 2005 33
III.4 Accredited laboratories, December 2005 36
III.5 Government procurement, 2001-05 39
III.6 Local and foreign procurement contracts, 2001-05 39
III.7 Type of tendering in public sector construction projects, 2003-06 40
III.8 Regulated exports and governing legislation, 2001 and 2005 42
III.9 Government account, 2001-06 44
III.10 Main types of taxation and related incentives in
III.11 Estimated tax revenues forgone as a result of incentives/exemptions, 2001-05 45
III.12 Subsidies granted, 2001-05 46
III.13 Violations of intellectual and industrial property rights, 2001-05 51
IV. TRADE POLICIES BY SECTOR
IV.1 Production-based GDP at current prices by sector, 2002-05 55
IV.2 Employed population by economic activity, 2003-05 55
IV.3 Structure of manufacturing industry, 2005 57
IV.4 Telecommunication market, 1999-05 62
IV.5 Major financial sector indicators, 2001-05 64
IV.6 Financial institutions, 2001-05 65
IV.7 Total visitor arrivals, by source and method of travel, 2000-06 68
IV.8 Total exports by means of transport, 2001-05 69
IV.9
IV.10 Investment projects of gaming concessionaires and sub-concessionaires, 2006 74
IV.11 Gross revenue of concessionaires and share of total gross revenue of games of fortune, 2002-06 75
IV.12 Overview of gaming in
APPENDIX TABLES
I. ECONOMIC ENVIRONMENT
AI.1(a) Total merchandise exports by group of products, 1999-05 81
AI.1(b) Domestic merchandise exports by group of products, 1999-05 82
AI.1(c) Merchandise re-exports by group of products, 1999-05 83
AI.2 Merchandise imports by group of products, 1999-05 84
AI.3(a) Total merchandise exports by destination, 1999-05 85
AI.3(b) Domestic merchandise exports by destination, 1999-05 86
AI.3(c) Merchandise re-exports by destination, 1999-05 87
AI.4 Merchandise imports by origin, 1999-05 88
SUMMARY OBSERVATIONS
1. The economy of Macao, China having recovered from the Asian financial crisis and subsequently SARS, grew at an average annual rate of 14.5% in the period 2001 to 2005; in 2006, growth is expected to have been well above that average, perhaps close to 20%. Growth has been led by a rapid increase in tourism, underpinned by the gaming industry. While the overall direction of trade and investment policies of the Macao Special Administrative Region (SAR) is broadly the same as at the time of its previous Review in 2001, great emphasis has been placed since 2002 on the opening of gaming, which now constitutes the cornerstone of the economy of the Macao SAR. Competition between gaming operators has stimulated massive private investment in casinos, hotel resorts, and other tourist facilities, and this is expected to continue into the foreseeable future. In the same period there has been a significant and increasing inflow of tourists from the Mainland. The introduction in 2003 of the "Individual Traveller Scheme", which relaxed visa restrictions on travel by Mainland Chinese, has enabled a strong growth in tourism to
(1) Economic Environment
2. Badly hit by the 1997-98 Asian financial crisis, the economy recovered in 2000 in response to external demand and then slowed as the world economy entered a sharp downturn. Growth since then has been strong with GDP growing by 10.1% in 2002, supported by a strong expansion in gaming and tourism. Except for a temporary decline of 3.1% in the second quarter of 2003, due to the effects of the SARS outbreak, the economy experienced strong growth in the second half of that year, partly supported by the introduction of the Individual Traveller Scheme, which led to a tourism boom in the latter months of 2003. The expansion in the tourism sector continued into 2004 as strong investments continued to be made in infrastructure as well as in casinos and hotels. The overall result was a very impressive and historically high 28% growth of GDP in 2004. Real GDP growth was more moderate in 2005 at 6.7%. The inflation rate rose from 1% in 2004 to 4.4% in 2005, reflecting the overall rapid pace of economic growth.
3. Macao, China's currency, the pataca, remains pegged to the
4. The Basic Law requires the MSAR Government to strive to achieve fiscal balance, and throughout the period under review, the Government has consistently run a budget surplus, mainly on the basis of revenue from the gaming industry. The fiscal position has benefited from a thriving economy in recent years; income from gaming tripled between 2001 and 2005.
5.
(2) Trade and Investment regime
6. In line with the principle of "one country, two systems", the Basic Law, the main constitutional document governing the MSAR, grants it a high degree of autonomy in economic matters including the conduct of foreign trade relations.
(3) Trade Policies and Practices
7. Restrictions at the border are few. Imports enter the Region duty-free although the scope of
8. In 2001, optical-media piracy constituted a serious problem for the authorities. During the review period,
9. Macao, China, which is not a party to the GPA, has not made any significant changes to its legislation on government procurement since 2001, but it has taken steps to simplify procedures and enhance transparency in order to attract more bids. However, in the construction sector, open tendering has accounted for less than 10% of tenders during the period under review.
10. Macao, China's tax system is characterized by a low overall level of taxation and a pronounced reliance on direct taxes, in particular those derived from gaming, which account for three quarters of government revenue. As in 2001, most direct taxes, including those on profits and employment income, are levied at low rates, which helps to make
11. Policy-making seems unnecessarily opaque in several areas, such as government procurement, use of tax incentives, and the allocation of government-owned land, a potentially important policy instrument given the scarcity of land in
12. Although
(4) Sectoral Policy Developments
13. Over the past two decades,
14. At the time of Macao, China's previous Review, in 2001, it was suggested that competition in several services markets – provided by private companies with exclusive rights under government concessions – could be improved. In particular, gaming services were a private monopoly. By liberalizing gaming ownership and granting licences to three bidders in 2002 (subsequently expanded to include three further sub-concessions), the
15. The authorities have also partially liberalized the telecommunications sector, opening up mobile communications and internet services to competition. The competitiveness of other key services, such as basic telecommunications, electricity, water, and transport, where there have been monopoly restraints on competition, are being severely tested by the frenetic pace of construction of new resort and casino projects, the requisite infrastructural development, and the large and increasing influx of visitors.
16. The manufacturing sector's declining share of GDP was 4.3% in 2005 although it still accounts for around 15% of employment, indicating lagging productivity with respect to the rest of the economy. In response to the decline of manufacturing, dominated by textiles and clothing, and the abolition of textiles quotas in 2005, the authorities are trying to use the resources and opportunities offered by the Closer Economic Partnership Agreement (CEPA) with Mainland China; they are encouraging manufacturers to bring new industries into the newly established Macao-Zhuhai Transborder Industrial Park to expand the narrow base of the existing manufacturing structure. The objective is to attract higher-end manufacturing production in order to take the advantage of the tariff concessions under the CEPA to access the larger Mainland Chinese market. Agriculture's importance is negligible and no official information on its contribution to
17. In part to hedge against the risk of demand not keeping pace with supply in the tourism sector, the Government has taken measures to encourage the diversification of the economy. It introduced a number of incentive schemes for industrial sectors, including the introduction of a guaranteed loan scheme to small and medium-sized enterprises, as well as fiscal incentives for the corporate sector as a whole.
(5) Outlook
18. The economy again grew rapidly in 2006, at some 15.4% in the past three quarters of the year and subsequently accelerating, for an expected annual rate of close to 20%. Services exports remained the main driving
force of the territory's economy. As large construction projects come on stream, the opening of brand-name casinos, hotel resorts, and other tourism-related facilities are expected to be strong tourist attractions. Visitor arrivals have continued to increase along with the wider implementation of Mainland
19. The main thrust of economic policy in the years after 2006 will be to ensure the smooth progress of gambling sector liberalization in coordination with the healthy development of other sectors. As was made clear in the MSAR Chief Executive's Policy Address for 2007, the gaming industry is only one constitutive element in the tourism sector, which is not focused on pursuing a path of unilateral development based on gaming. The high dependence on gaming and tourism poses risks to economic stability. The tourism sector tends to be highly sensitive and vulnerable to external shocks, such as avian flu or other epidemics; adverse performance in the MSAR's main tourism markets; or shifts in overseas interest in casino investment. The Government is therefore prudently pursuing efforts to diversify the economy in general and the tourism market in particular. Regarding the latter, the many new private investment projects have the potential to turn