Revista Oriente Ocidente N.14 Supplement IIM.MACAU

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Número 14 Dezembro de 2004 • Number 14 December 2004

THE MACAO SAR’S FIRST FIVE YEARS: A PRELIMINARY HISTORICAL REVIEW Ming K. Chan & Shiu Hang Lo

THE MACAO SAR’S FIRST FIVE YEARS: A PRELIMINARY HISTORICAL REVIEW

Ming K. Chan & Shiu Hang Lo

Published by the International Institute of Macau Number 14 December 2004 Editor Luís Sá Cunha Production IIM Graphic Design victor hugo design Printing Tipografia Hung Heng Print Run 1.000 copies

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THE MACAO SAR’S FIRST FIVE YEARS: A PRELIMINARY HISTORICAL REVIEW

ORIENTEOCIDENTE “newsletter” do IIM Instituto Internacional de Macau Número 14 Dezembro de 2004 Editor Luís Sá Cunha Produção IIM Design Gráfico victor hugo design Impressão Tipografia Hung Heng Tiragem 1.000 exemplares EASTWEST IIM’s “newsletter” Published by the International Institute of Macau Number 14 December 2004 Editor Luís Sá Cunha Production IIM Graphic Design victor hugo design Printing Tipografia Hung Heng Print Run 1.000 copies

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Ming K. Chan & Shiu Hang Lo

THE MACAO SAR’S FIRST FIVE YEARS: A PRELIMINARY HISTORICAL REVIEW Ming K. Chan & Shiu Hang Lo

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THE MACAO SAR’S FIRST FIVE YEARS: A PRELIMINARY HISTORICAL REVIEW

Ming K. Chan The holder of a Ph.D. in East Asian History from Stanford University, Ming Chan is the coordinator of the Hong Kong and Macau Documentary Archives at the Hoover Institution.

Shiu Hang Lo Having concluded his Ph.D from Toronto University, Shiu Hang Lo teaches at the University of Hong Kong, Department of Politics and Public Administration

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Ming K. Chan & Shiu Hang Lo

The retrocession of Macao under Portuguese administration to Chinese rule on 20 December 1999 closed the final chapters of four and a half centuries’ of European colonialism in Asia. Underlining the reintegration of this former colonial enclave with mainland China has been the “one country, two systems” model that provided for the reunited domain to become a “Special Administrative Region” (SAR) of the PRC with a promised “high degree of autonomy” in internal affairs and the continuation for 50 years unchanged of its pre-existing market economy, legal system, and socio-cultural lifestyle that are different from the Mainland’s socialist system. As such, the establishment of the Macao Special Administrative (MSAR) in December 1999 was of historical significance as the second “one country, two systems” experiment, two and a half years after that of the Hong Kong SAR. Unlike the HKSAR’s contentious politics that provoked Beijing’s intervention since mid-2003, the new MSAR has been characterized by: (1) a relatively high degree of autonomy, (2) a popular chief executive, and (3) a generally harmonious political arena.

First and foremost, the MSAR is marked by a high degree of autonomy in terms of internal administration. Compared with the HKSAR’s acute regime incapacity that necessitated a NPC Basic Law interpretation on the local right of abode for some mainland Chinese with HKSAR parents in 1999 and another interpretation to veto full direct elections in 2007-08, the MSAR has not encountered any such legal, constitutional, and political cries. Several factors explain why the MSAR is able to enjoy a relatively high degree of autonomy in internal affairs.

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THE MACAO SAR’S FIRST FIVE YEARS: A PRELIMINARY HISTORICAL REVIEW

The weakness of Macao’s pro-democracy forces means that local political demands did not pose any significant threat to the MSAR regime or the PRC central authorities. Although two pro-democratic figures were elected to the MSAR Legislative Assembly in 2001, the influence and capacity of Macao’s democratic camp remain weak since the handover. Local democratic activists have carefully refrained from provoking Beijing. Although the size of Macao’s middle-class and intellectual elements has grown since 1999, it is uncertain that this growth will yield a proportional increase in the pro-democratic forces’ appeal and effectiveness. For example, the annual Tiananmen Incident candlelight commemoration held in the MSAR has often drawn less than a hundred participants.

Moreover, Macao’s political culture is far less confrontational than that of the more assertive HKSAR populace. While the 2001 Legislative Assembly direct elections results point to an increasing number of pro-democracy MSAR voters, the overall political climate still favors maintaining communal harmony. Macao is heavily populated by many recent mainland immigrants, whose survival pragmatism and less politicized orientation mean that the majority of residents prefer the status quo to overt pro-democracy activities that could potentially become divisive. Due to the continuation of the relatively passive MSAR political culture, neither Beijing nor its local Liaison Office has to intervene very directly in the MSAR’s governance.

The MSAR government’s proven effectiveness is another key factor buttressing the territory’s autonomy. Chief Executive Edmund Hau-Wah Ho’s performance is highly regarded by a majority of Macao residents.

He usually enjoys an impressive popular approval rate at nearly eighty percent in public opinion surveys. In his first sixty months at the helm, Ho has adopted a pragmatic approach to govern Macao, carefully avoiding any policy measures that would alienate the civil service, the professional sectors and the Macanese community. Perhaps, Ho has learnt from the hard lessons of the HKSAR regime that had attempted to rush a host of major reforms and policy changes through the legislature without adequate public consultation, thus meeting many setbacks. Blessed with a politically more docile populace, Edmund Ho’s governing style reflects a consensual approach to local politics. The MSAR government’s awarding of new gaming franchise to three casino operators in 2002 and the suppression of organized crime are good cases in point.

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Soon after taking office, Ho effectively stemmed the law and order breakdown in the final days of Portuguese rule when gangland strife depressed local tourism, Macao’s main economic pillar. Ending a forty-year monopoly, Ho successfully re-franchised the gambling industry to bring in major American investors. Ho refrained from making any unnecessary public remarks on the franchise matters, insisting that the decision would be up to the concession tender committee led by the Financial Secretary.

While casino tycoon Stanley Ho often publicly aired his views on franchise, Edmund Ho kept silent on the issue and maintained a deliberate distance with the former. In terms of political wisdom, social finesse and managerial skills, Edmund Ho might well become one of the most popular leaders in Macao’s history. Ho’s continued leadership as MSAR chief executive for a second term until December 2009 is popularly supported by most Macao residents who welcomed his unopposed re-election with 296 out of 299 votes cast on 29 August 2004.

Edmund Ho’s circle of advisors and subordinates also deserve credit for the MSAR’s administrative effectiveness. They did not persuade the MSAR chief executive to launch grandiose schemes, lofty plans and drastic reforms. Realist gradualism and careful moderation remain the tenet of Ho’s approach. Ho’s subordinates, who are much younger than most of the HKSAR principal officials as political appointees, have performed adequately since taking office. Macao under Portuguese rule had long adopted the political appointee system in which top officials come and gone with the colonial governors from Lisbon. This political appointee system has been inherited by the new MSAR administration. Hence, while the HKSAR in July 2002 inaugurated a brand new Principal Officials Accountability System amid various governance crises, the MSAR has no such need. In fact, some sort of an accountability system was practiced by the Portuguese in Macao, although it might not really be genuinely accountable to the public while maladministration and official scandals had happened.

In a sense, the MSAR’s relationship with Beijing has built up a constitutional convention of mutual self-restraint–an informal political practice that is not legally binding and can change over time. Beijing and its local arm, the PRC Central Government MSAR Liaison Office, have very much refrained from directly interferring in Macao’s internal affairs.

Rather the Liaison Office has involved in the MSAR political arena in a more subtle way with its tentacles penetrating deeply into Macao’s social fabric. The neighborhood (kaifong) associations, which have long been EASTWEST 7

THE MACAO SAR’S FIRST FIVE YEARS: A PRELIMINARY HISTORICAL REVIEW

dominated by pro-Beijing elites, always play a vital role in local undertakings. The impressive mobilization capacity of these pro-Beijing groups was clearly demonstrated in various public health campaigns.

For instance, they helped to mobilize MSAR residents to fight against dengue fever infection soon after the handover. The MSAR was much more fortunate than the HKSAR in avoiding widespread infections in the spring 2003 Sars epidemic.

This does not mean, however, that the pro-Beijing “patriotic” forces monopolize all the key civil society dimensions. The labor sector, for example, has shown signs of change. Traditionally pro-Beijing unions have remained influential. But some workers in the casino industry and the unemployed have been dissatisfied with government policies. Both groups nominated candidates to run in the 2001 legislative direct elections. In particular, a labor group critical of the MSAR regime publicized a pro-democracy platform calling for the chief executive’s election by universal suffrage. This surge in labor discontent was a manifestation of the political fallout from Macao’s post-1997 economic recession. As with the HKSAR, the MSAR has been plagued by the Asian financial crisis and the Sars epidemic in Hong Kong and Guangdong that affected Macao’s tourist industry and other sectors. Macau’s property market plummeted after the 1999 handover but has recently recovered.

As the MSAR government is not burdened by budget deficits, it could reduce labor discontents by offering welfare payments as a safety valve for Macao’s social stability.

In this light, the MSAR has negotiated with mainland Chinese authorities, especially the Zhuhai Special Economic Zone, on establishing a crossborder industrial processing zone where three out of ten workers hired by each factory should be Macao residents. Hong Kong’s steady economy improvement since late 2003 has generated spin-off effects to uplift Macao’s economy, which also has benefited from new PRC policies (such as CEPA and “individual tourism”). By spring 2004, Macau’s unemployment fell to 5.5 percent; its 2003 GDP raised 15.6 percent to 69.41 billion pacatas from 2002 while GDP per capita increased 14 percent to 156,242 pacatas (about US$ 20,028). These are impressive figures that would seem even more striking when compared with the HKSAR economic indicators that are still below 1997 level.

Besides economic dependence on the mainland, MSAR autonomy is not an absolute matter but rather a matter of degree. The MSAR government ORIENTEOCIDENTE 8

Ming K. Chan & Shiu Hang Lo

has carefully toed the PRC central government line on key matters, such as the MSAR’s surveillance and relatively strong-armed policy toward Falun Gong members. Facing a strong state, Macao civil society has not shown any significant growth. The local Catholic Church remains politically docile, unlike its HKSAR counterpart. Few Macao intellectuals demand more political space and fuller democracy. Hence, Beijing is less vigilant over the MSAR democratic activists than in its concern for the HKSAR pro-democratic camp.

Finally, the effective capacity of the Edmund Ho administration means that Beijing could yield more political space to the MSAR. That senior Beijing officials have repeatedly praised Ho’s performance reflected the PRC officialdom’s highly affirmative attitude toward the MSAR leadership.

A vital unique personal factor that has cemented the PRC-MSAR leadership bonds is Edmund Ho’s well-connected pro-Beijing elite family background. His father, the late Mr. Ho Yin (1908-1983), a NPC Standing Committee member and the most influential local Chinese in his lifetime, was entrusted by PRC Premier Zhou Enlai to speak for China’s interests in Macao, especially during the 1950s-70s before Beijing-Lisbon diplomatic ties were established. Edmund Ho’s “patriotic” heritage and social networks, reinforced by his political skills and managerial capabilities honed by public service and business experience, made him an ideal inaugural MSAR chief executive. Hence, leadership quality, regime capacity, civil society, political culture, and the relative strength of local democrats are all crucial factors shaping the autonomy of the MSAR. The generally positive record of the MSAR’s first sixty months of existence, if could be maintained over the long run, should make the Macao experience an interesting alternative example of the “one country, two systems” model in practice, to the HKSAR’s so far lackluster performance.

Of course, the MSAR’s much smaller

population size and territorial domain also reduce the scale and complexity of its public policy issues and render them more manageable. Yet, like its narrow harbor, Macao has a smaller pool of human and material resources to support its developmental needs when compared with Hong Kong whose global linkages and strategic status keep it in the international headlines.

Not only did the MSAR benefited from Hong Kong’s lessons, Beijing’s special policies and practical undertakings to buttress the depressed EASTWEST 9

THE MACAO SAR’S FIRST FIVE YEARS: A PRELIMINARY HISTORICAL REVIEW

HKSAR economy, especially the mid-2003 stimulant measures aimed at uplifting the embattled C. H. Tung HKSAR regime, also have direct beneficial effects on Macao. Following the June 2003 Mainland-HKSAR Closer Economic Partnership Arrangement (CEPA), the MSAR in October 2003 signed its own parallel CEPA with the mainland Chinese officialdom in order to create employment and promote economic revival. A major breakthrough for the MSAR, the CEPA became effective from January 2004 to function like a free trade zone ahead of the PRC’s WTO-mandated tax reduction and market opening by 2006, this CEPA offers both “zero tariff” on many Macao products exported into, and some MSAR professional services easier access to, the mainland market.

Also the “individual tourism” scheme introduced in mid-2003 for many mainland Chinese to visit Macao on their own (instead of mandatory group tour membership) has created a boom in local hotel, restaurant, retail, gaming and entertainment business. In 2003, Macao hosted a record 11.89 million visitors, mostly from Hong Kong, Mainland China and Taiwan. The tourist boom has helped to refloat the local property market and enabled the MSAR government to run a surplus budget in its first five years. Likewise, Beijing’s endorsement of a Hong KongZhuhai-Macao Bridge project, the preparatory work for which began in mid-2003, would create an efficient transport network linking the major economic centers on the Pearl River Delta’s (PRD) eastern and western shores. This bridge will be a major developmental breakthrough in the functional integration of Macao, Zhuhai, Hong Kong and Shenzhen, linking them as the core of a rising South China economy. The construction and operation of this massive bridge will help to uplift the MSAR economy by facilitating tourist traffic to support its casino, hotel and entertainment industry.

Despite a deflationary trend that engulfed the territory since the handover, (the composite consumer price index was -1.61 in 2000, -1.99 in 2001, -2.64 in 2002 and -1.56 in 2003), the MSAR economy has scored impressive recent gains, with Gross Domestic Product (GDP) expanded a real 4.6 percent in 2000, reversing the 1996-1999 yearly contraction in the final Portuguese colonial days. In the first quarter of 2004, Macao’s GDP grew 25.6 percent from a year ago, continuing the double-digit growth since mid-2003. Macao’s 2003 GPD at constant (1996) prices was P 69.74 billion (about US$ 8.942 billion, a 15.6% increase over 2002) with a per-capita GDP of P156,224 (about US$ 20,028, a 14.1% increase over 2002).

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Tourism and related services employed about a third of the work force and accounted for a third of Macau’s GDP while gambling taxes amounted to over 75 percent of the MSAR government revenue of P14.12 billion in 2003 while public expenditures were P15.71 billion. In 2003, the MSAR government received P10.57 billion from Stanley Ho’s STDM casinos as gaming and related business accounted for over 70 percent of government revenue.

Since 2000 the MSAR has focused on expanding, diversifying and streamlining its free market economic system. Based on its 2001 survey, a WTO report characterizes Macao as one of the freest and most open regions in the world in terms of trade and investment policies. The MSAR government has place high priority efforts to strengthen Pearl River Delta regional cooperation toward its development as a regional/international tourism-convention hub and as a China market business platform for local and overseas small and middle enterprises after the PRC’s WTO accession in 2001. Such MSAR-PRD functional integration is especially pronounced in joint infrastructural projects like a proposed Macao-Zhuhai Cross-Border Industrial Zone.

The MSAR also enjoys extensive collaborative interface with other Mainland entities. For instance, Macao has used the Guangdong-Macao Cooperation Group to facilitate the flow of goods, people and capital, and to promote bilateral economic and trade interactions. Macao’s other cooperative mechanisms with the PRC include the Mainland-Macao Joint Commission on Trade and Commerce, the Fujian-Macao and the Chongqing-Macao Economic Promotion Associations as well as the PanPearl River Delta Cooperation Forum, the “9+2” gathering that met in Macao on 2 June 2004.

The MSAR has come through the 2001 global economic downturn with a relatively quick economic recovery by 2002 when it attained a 9.5 percent economic growth rate. This was in part due to a surge in Mainlander tourists and an increase in taxes on gambling profits. The 2002 gambling industry triple franchise liberalization ended tycoon Stanley Ho’s fourdecade long STDM casino monopoly and attracted investment from two major Las Vegas operators whose new Sands and Galaxy casinos in Macao were opened in mid-2004. These new U.S. casino operators are required to invest US$1.1 billion each in local tourism development projects. The two American investment-linked new casinos in Macao have stimulated a rapid expansion of the local leisure and tourism industry.

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THE MACAO SAR’S FIRST FIVE YEARS: A PRELIMINARY HISTORICAL REVIEW

After the 2003 Sars epidemic affecting Greater China, the MSAR economy has been climbing fast since late 2003 on a double digit growth as stimulated by CEPA benefits and new casino-tourism gains. With the new gaming franchises drawing American investments in large-scale casino and tourism projects, the MSAR is strategically repositioning itself to become a regional tourism-convention center as well as a small and medium enterprise service platform within the Pan-Pearl River Delta developmental framework.

The Macao experience is in many ways different from Hong Kong. In retrospect, Portuguese colonialism in Macao was far less efficient and forceful than British colonial rule in Hong Kong. Macao never achieved Hong Kong’s global reach and strategic status, but had often remained an almost neglected backwater, even to Lisbon. Since the 1967 Portuguese governor’s acceptance of Chinese demands, Macao has gradually evolved into a small enclave highly susceptible to Mainland Chinese pressure. The Macao people have long been acclimatized to the dominant influence of Beijing and its local “patriotic” front, rendering them more adaptable to the mainland’s socialist polity and authoritarian political culture as residents in a “semi-liberated zone” of the PRC, a third of a century before the 1999 handover. The stronger Chinese national identity among the Macao Chinese also facilitated their easier and fuller reintegrative interface with the mainland than their problematic Hong Kong counterparts.

In contrast to the HKSAR’s recent political crisis, the thus far smooth functioning of the MSAR regime constitutes a more successful alternative “one country, two systems” actualization record. Because of Macao’s generally positive post-handover experience, it is premature to declare the “one country, two systems” formula a failure due to the HKSAR’s many problems. In fact, the MSAR has not experienced any civil society unrest as angry and volatile as that in the HKSAR. In 2000-04 Macao witnessed economic revival and a gambling industry restructuring with infusion of massive investments in tourism and infrastructure projects. With two Las Vegas-invested casinos opened for business in mid-2004 and another American-operated casino-resort opening in 2006, Macao is shifting to high gear for its quest to become a Pacific Rim entertainment and convention hub. In Macau-Taiwan relations, Edmund Ho has made good use of the MSAR’s unique status to develop it into a convenient transit point in the mainland-Taiwan air links, yielding a Taiwan tourists traffic that the more rigid HKSAR-Taiwan official dealings did not so easily facilitate.

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In a nutshell, the MSAR’s “country, two systems” in practice experience has been characterized by effective leadership and a relatively satisfied, passive civil society. Still, Macao has been undergoing generally positive transformative processes in polity, economy, socio-cultural value orientations and relationship with the mainland since its mid-1980s sovereignty retrocession process and after it has become a part of China.

With adroit leadership and effective strategies, the MSAR might become an exciting case of successful post-colonial development. Thus, despite its small size, the unique experience of China’s Macao SAR in the 21st century truly deserves global attention for its big message on Asian urbanism and its profound implications as an attractive “one country, two systems” showcase for Greater China reunification. The continuous development of Macao as an open, liberal, modern and cosmopolitan Chinese city also reflects on the PRC leadership’s effective capacity to confront the challenges and opportunities arising from the Chinese mainland economic reform, marketization, and globalization. As such, the MSAR constitutes a key dimension in the unfolding saga of contemporary China’s socio-economic transformation and national reintegration.

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