Report by the Secretariat



trade policies by sector

1 Introduction

Since the 1980s, Macao SAR has undergone a transformation from a manufacturing centre to a predominantly service-oriented economy that relies heavily on gaming and tourism earnings; gaming tax accounted for 75% of government revenue in 2006. The services sector accounted for 89% of GDP and 75% of total employment in 2005 (Tables IV.1 and IV.2). The Government expects this trend to continue, owing to heavy investments in resort and entertainment projects and related infrastructural development that are transforming Macao SAR into the world's leading gaming destination. Gaming and tourism are set to remain the keystones of economic growth by attracting higher-end tourists; the Government is encouraging the development of non-gaming attractions, building the image of a stable society and continuing to manage gaming liberalization in an orderly manner.[1]

Table IV.1

Production-based GDP at current prices by sector, 2002-05

(Per cent)

| |2002 |2003 |2004 |2005 |

|Secondary sector |12.6 |12.7 |11.6 |14.7 |

|Manufacturing |7.2 |6.1 |5.1 |4.3 |

|Electricity, gas and water supply |2.8 |2.6 |2.1 |1.8 |

|Construction |2.7 |3.9 |4.4 |8.6 |

|Tertiary sector |92.7 |91.4 |91.6 |88.8 |

|Wholesale, retail, repair, hotels and restaurants |12.5 |11.7 |12.8 |12.1 |

|Transport, storage and communications |6.8 |5.3 |5.0 |4.7 |

|Financial intermediation, real estate, renting and business activities |21.7 |20.2 |19.4 |22.5 |

|Public administrations, other community, social and personal services |51.7 |54.2 |54.4 |49.5 |

|(including gaming) | | | | |

|Less: adjustment for FISIMa |5.3 |4.1 |3.1 |3.5 |

a Financial intermediation services measured indirectly.

Source: Macao Statistics and Census Service.

Table IV.2

Employed population by economic activity, 2003-05

(Per cent)

| |2003 |2004 |2005 |

|Total (thousands) |202.6 |218.0 |237.8 |

|Manufacturing |18.3 |16.4 |14.9 |

|of which textiles and garments |14.2 |12.7 |11.6 |

|Construction |8.0 |8.3 |9.7 |

|Wholesale, retail, repair, hotels and restaurants |27.1 |27.1 |25.4 |

|Transport, storage and communications |7.0 |6.8 |6.3 |

|Financial intermediation, real estate, renting and business activities |8.9 |8.6 |8.8 |

|Public administrations, other community, social and personal services |29.5 |31.8 |34.1 |

|(including gaming) | | | |

|Others |1.1 |0.9 |0.8 |

|Total |100 |100 |100 |

Source: Information provided by the Macao, China authorities.

The share of manufacturing in GDP declined to 4.3% in 2005, and around 15% of employment, indicating lagging productivity with respect to the rest of the economy. Macao SAR's status as a free port has ensured a competitive domestic market for goods but low productivity in the manufacturing sector has hastened its relocation to Mainland China. In response to the decline of manufacturing, dominated by textiles and clothing, and the abolition of textile quotas in 2005, the authorities are attempting to use the resources and opportunities offered by the Closer Economic Partnership Arrangement (CEPA) with Mainland China and are encouraging manufacturers to bring new industries into the newly established Macao-Zhuhai Transborder Industrial Park to expand the base of the manufacturing structure. Agriculture is negligible, and, therefore, there is no official information on its contribution to Macao SAR's GDP.

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, the Macao SAR authorities introduced competition and injected new dynamism into the sector, with positive spill-over effects on the rest of the economy. Local casino magnates, and others from Hong Kong, China, the United States and Australia, are leading the gaming industry towards growth and as their companies compete for market share, consumers (including gamblers, convention goers and tourists) will be increasingly able to choose from a bigger variety of mass market games, shows and entertainment, and hotels and restaurants. The authorities have also partially liberalized the telecommunications sector, opening up mobile communications and internet services to competition. However, the competitiveness of other key services, such as basic telecommunications, electricity, water, and transport, is 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, which reached nearly 22 million in 2006 in a city with a population of around 500,000.

2 Manufacturing

The manufacturing industry's contribution to GDP has been in long-term decline, falling from 20.6% in 1989 to 10.1% in 2000 and to 4.3% in 2005 (Tables IV.1 and IV.2); similarly, manufacturing employment fell from 28.5% of the working population in 1992 to under 15% in 2005. Generally, manufacturing has increasingly relocated to lower-cost Guandong province in China. The gradual improvement of the investment environment in China has fuelled the shift of Macao SAR's low-value-added manufacturing industries to China's Pearl River Delta Region. Macao SAR continues to produce manufactures for export, notably textiles, garments, toys, electronics, and footwear. Manufacturing has long been export-oriented, primarily producing garments and textile products.[2] The major manufacturing industry, garment manufacturing, has accounted for around 80% of domestic exports during the period under review and textiles for around 10%, with footwear, electronic products and toys together accounting for around 6% of domestic exports.

Well before the elimination of the international quota on textiles and clothing in 2005, Macao SAR's textiles and clothing sector displayed signs of decline, both in absolute and relative terms. The labour force in the garment and textile industry as a share of Macao's total labour force has decreased by 27% since 2001, to 9.4% of the total labour force in June 2006.

1 Textiles and clothing

In spite of increasing competition from the Mainland in textiles and garment manufacturing, Macao SAR still had over 1,200 manufacturing establishments in 2005[3], of which 44% were textiles or garment factories, employing over 80% of the industrial workforce. These factories contributed over 60% of gross manufacturing output and value added, and 91% of domestic exports (Table IV.3).

Table IV.3

Structure of manufacturing industry, 2005

(Per cent)

|Sub-sector |Number of |Persons employed |Gross output |Value added |Share of domestic|

| |factories | | | |exportsa |

|Total (number and P billion) |1,238 |34,688 |13 |3.1 |14.4 |

| |(Per cent) |

|Wearing apparel; dressing and dyeing of fur |37 |69 |61 |57 |91b |

|Textiles |6 |12 |16 |13 | |

|Tanning and dressing of leather; luggage, |1 |1 | ................
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