WT/TPR/S/82 Trade Policy Review
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IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
1. Macau, China is largely a services-based economy;  in 1998, services accounted for a large
and growing share of GDP (90%) and total employment  (69%).  The authorities expect this trend to
continue owing to investment in infrastructure (i.e. the new international airport and improved port
facilities), which has facilitated access to Macau, China, and continuing efforts to improve the qualityand diversity of tourism-related services.  Community and social services alone, including gambling
and casino activities, accounted for nearly 47% of GDP, and over 28% of employment (Chart IV.1).
By contrast, the industrial sector (manufacturing and construction) accounted for 13% of GDP.
1  I t
provided 32% of all jobs, which suggests that labour productivity in these two subsectors is relatively
low.  The contribution of agriculture and fisheries to GDP and employment is negligible.2
2. As pointed out earlier (Chapter III(4)(iv)), the openness of the MSAR economy to trade in
agricultural and, particularly, manufactured products has undoubtedly fostered competition in
domestic goods markets, in the absence of a comprehensive competition law.  Although there are few
formal barriers per se  to inbound foreign direct investment (FDI) that would impede the establishment
of foreign firms providing services, competition in several services markets could nonetheless beimproved.
3  Key services, such as electricity, water, basic telecommunications, and transport are
currently provided by private companies with exclusive rights under government concessions.
Gambling services, another major activity, remains a private monopoly.  The resulting restraint on
competition in these and other services may enable suppliers to charge higher prices, not just to
consumers but to firms for which services such as energy, telecommunications, and transportation, are
important business inputs.  The unduly high cost of such inputs would tend to impair such firms'
competitiveness and discourage them from doing business in Macau, China, thereby hampering theterritory's economic development.  The authorities maintain that initiatives are under way to improve
competition in certain services, notably telecommunications and gambling.
3. The MSAR's current commitments under the GATS are confined mainly to financial services;
further commitments in other services could foster economic development in Macau, China by
reinforcing the Government's efforts to diversif y the economy, especially away from gambling into
other services.  While the Government has announced plans to liberalize unilaterally some
telecommunications and air transport activities, the making of additional commitments under the
GATS in these and other fields would tend to enhance the transparency and predictability of the
territory's trade and investment regime, and move the liberalization process forward in the services
sector, much to the benefit of the MSAR economy as a whole.
                                                     
1 Figures do not add due to adjustments for financial intermediation services.
2 Nevertheless, interest rate subsidies are av ailable for fisheries activities (under Decree-Law
No. 23/98/M, and Law No. 4/99/M)  and imports of oil for use by fishing vessels are exempt from consumption
tax.
3 The cross-border provision of services is more likely to require producers of such services to be
located close to consumers than is the case with goods.Macau, China WT/TPR/S/82
Page 53
1995Per cent
a
Note:
Source :  Construction
6.0Manufacturing
7.9
Financial, real estate, 
renting & business
27.2Public administration, 
community & social/personal 
services
46.7
Electricity, gas &
 water supply  2.2
Transport, storage & 
communication
3.5Manufacturing
     9.3
Electricity, gas & 
water supply  3.1
Construction  3.7
Commerce, hotels 
& restaurants   9.9
Transport, storage &
communication
6.8Public admin., community 
& social/personal services
46.8
Financial, real estate,
 renting  & business
26.8
Total:  47.4 billion patacas1998
Total:  43.5 billion patacasChart IV.1
Com position of GDP , 1995 and 1998 (at current prices )a
Commerce, hotels 
& restaurants  10.4
Production-based.
Figures do not add to 100%, due to adjustments for financial intermediation services, representing 3.9% and 6.4%,
respectively for 1995 and 1998.
Data provided b y the authorities of Macau , China.
(2) MANUFACTURING
4. Macau, China's main industrial activities have been manufacturing, exports of which have
been an important, albeit, declining, source of income, and construction.  Both activities were
adversely affected by the Asian crisis.  But while growth in manufacturing has remained positive
(3.9% in 1996-97, and 2.5% in 1998-99) and its share in GDP rose from 7.9% in 1995 to 9.3% in
1998, construction slumped considerably, its share in GDP having fallen from 6% to 3.7%.4  Since
1998, however, manufacturing's contribution to GDP has also declined;  this could be attributed thetransfer of local manufacturing industries to Mainland China and other countries with lower unit
labour costs, increasing competition from other Asian countries, and limited investment in new
equipment.
5. The authorities' broad objectives are to increase the competitiveness of manufacturing and
diversify its exports so as to diminish the sector's over-dependence on textiles and clothing.  Theseobjectives are to be attained through the provision of tax incentives and interest-rates subsidies, aimed
at promoting the establishment of high value-added industries.
5  Despite these efforts to diversify,
textiles and clothing continues to be Macau's key industrial activity.  Whereas in 1995 textiles and
clothing accounted for 77% of gross manufactured output, it accounted for some 83% in 1998.  In
1998, this industry also absorbed 77% of all industrial workers, up from 73% in 1994.  Thisconcentration can be attributed to the decline in competitiveness, and thus production, of other
manufactured goods, such as toys.  The decline in competitiveness may be partly due to relatively
high unit wage costs in Macau, China, which is compounded by the depreciation of the currencies of
some of its main competitors in South-East Asia in the wake of the recent crisis.
                                                     
4 The slump began even before the Asian crisis.
5 Tax incentives are regulated by Law No. 1/86/M of 8 February 1986 and interest-rate subsidies are
regulated by Decree-Law No. 23/98/M of 1 June 1998.WT/TPR/S/82 Trade Policy Review
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6. In 1999, the textile and garment industry represented some 85% of the total value of
merchandise exports from Macau, China, up from 73%  in 1994.  Among textile and clothing exports,
knitted and woven apparel are dominant.  Since 1994, exports of textile and clothing have grown by
28% and 37%, respectively, in quantity and value.
7. Exports to Canada, the European Union, and the United States are subject to restraints.
Exports subject to quotas as a share in total exports have been growing steadily since 1994, to accountfor some 87% (of total exports of textiles and clothing) in 1999.  In 1999, the most important markets
for textiles and clothing subject to quotas were the United States (54%) and European Union (31%);
in 1994, 44% of the products were exported to the United States and 37% to the European Union
(Table IV.1).
8. Since 1994, exports of textiles and clothing not subject to quotas have slowed (Table IV.1).
The major unrestricted markets are Hong Kong, Chin a and Mainland China.  Exports to these markets
declined substantially after 1997 as a result of the Asian crisis;  exports to Mainland China have since
recuperated.
Table IV.1
Textiles and clothing exports by destination, 1994-99
(US$ million and per cent)
1994 1995 1996 1997 1998 1999Average
annual growth
1994-99
(%)
Total 1,363.6 1,544.3 1,599.2 1,827.5 1,822.2 1,858.3 6.2
Per cent
Restrained marketsa82.3 85.0 85.5 87.2 87.6 86.6 7.1
European Union 36.7 33.8 37.1 35.2 31.7 31.4 1.4
Germany 12.2 10.8 12.0 10.2 8.9 9.0 -1.8
United Kingdom 6.7 6.4 8.0 8.5 8.4 8.0 9.9
France 9.0 8.4 7.8 7.6 7.0 6.0 -3.3
Portugal 0.1 0.1 0.1 0.1 0.1 0.1 -0.6
United States 43.5 49.1 46.5 50.3 54.0 53.6 12.6
Canada 1.7 1.7 1.6 1.7 1.9 1.6 5.4
Norwayb0.5 0.3 0.3 n.a n.a n.a -0.6c
Unrestrained markets 17.7 15.0 14.5 12.8 12.4 13.4 1.6
Hong Kong, China 7.3 6.5 5.5 4.9 4.3 3.9 -4.9
Chinese Taipei 1.3 1.1 1.2 1.3 1.3 0.9 7.3
Japan 1.1 1.0 1.5 1.1 0.7 0.6 -2.6
China 5.4 4.6 4.3 3.8 5.3 7.4 12.6
Other 2.6 1.8 2.0 1.7 0.9 0.5 -8.7
n.a. Not applicable.
a Turkey is not included.
b Norway removed its quota in 1997/98.
c 1994-96.
Note: Figures in this table do not correspond to statistics in Chapter I, which are from UNSD, Comtrade database (SITC Rev.3).
Source: Macau Statistics and Census Services.
9. The quota allocation system, regulated by Government Decision 59/GM/94, has not changed
since 1994.  Macau Economic Services' Commerce Department is in charge of allocating exportMacau, China WT/TPR/S/82
Page 55
quotas to individual firms and exporters.  There are three types of export quota:  initial consolidated
quotas, acquired initial quotas, and additional quotas.  The initial consolidated quotas cover about
four fifths of the total quota volume available, with variations among product categories.  The
remaining 20% is allocated in the form of acquired or additional quotas.
10. Initial consolidated quotas are allocated on the basis of exporters' previous year's
performance, thus tending to favour entrenched interests;  the allocation of quotas on this basis isincluded to ensure predictability for producers.  These quotas may be transferred between companies
on a temporary or permanent basis.  The conditions are negotiated directly between buyer and seller;
the transfer must be registered with Macau Economic Services.  In the case of temporary transfer, the
original quota owner remains entitled to full "pas t performance" in the following year's allocation
process.  In the event of a permanent transfer, the recipient of the temporary transfer replaces theoriginal owner.
11. An acquired initial quota may be allocated to exporters, provided the company's investment is
aimed at modernizing its facility and increasing exports to new markets.
12. Additional quotas are allocated, twice or three times a year, to foreign trade operators
established in Macau, China for at least three years.  Allocations are made on the basis of the price oforders received (i.e the higher the price received, the greater the quota allocated) and quota fulfilment
of the individual exporters;  additional quotas are not transferable.  The allocation procedure is at the
discretion of the Commerce Department.
13. Newcomers registered as foreign trade operators may enter the market by buying initial
quotas and/or applying for an acquired quota.
(3) S
ERVICES
14. Macau's economic growth relies increasingly on the services sector.  Services account not
only for a large and increasing share of GDP (and employment) but, since 1991, exports of services,
in particular gambling-related tourism, have outstripped manufacturing exports.6  Macau, China is a
net exporter of services (Chapter I).
15. The most important subsectors were public administration, community, and social and
personal services (including gambling), followed by financial services and other business services.Tourism, which straddles several of these subsectors  is an essential source of foreign exchange and
tax revenues.  It is estimated that some 40% of Macau's GDP is derived from tourism and related
services;  30% of the labour force is employed directly and indirectly in this subsector.  In 1999,
Macau welcomed around 7.4 million visitors, representing an increase of 7% over 1998.  Total visitor
receipts in 1999 amounted to US$1.27 billion.
7  The authorities are aware of the importance of this
sector for the MSAR's future and offers full support  to the development and diversification of tourism.
16. The role of the State in the services sector  continues to be substantial, especially in
transportation.8  In addition, certain services are provided by private monopolies as a result of
concessions granted by the Government.  The monopolies enjoyed by certain services during the past
two decades, particularly telecommunications, may have been detrimental to competitiveness in this
and other subsectors.  It follows that plans to li beralize telecommunications (e.g. internet services,
                                                     
6 GATT (1994).
7 Estimate by the Macau Government Tourist Office.
8 The State is involve in:  Macau Port Co., Ltd. (32%);  Macau International Airport Co., Ltd.( 55%);
Air Macau Co., Ltd. (5%);  and Teledifusão de Macau S.A.R.L. (Macau Television) (50%).WT/TPR/S/82 Trade Policy Review
Page 56
mobile telephony and relevant value-added services) and some other services could enhance the
economy's competitiveness.
17. Macau, China made no horizontal commitments in the Uruguay Round services negotiations.
It's specific commitments under the GATS cover the following areas:  business services (rental,
leasing services related to other transport equipment) ;  financial services (all insurance and insurance
related services, reinsurance and retrocession, services auxiliary to insurance, and banking and otherfinancial services);  tourism and travel-related services (hotels and restaurants, excluding catering, and
travel agencies and tour operators services).  No commitments were made regarding communications
(telecommunication and audio-visual) or transport services.
9
18. Since the conclusion of the Uruguay Round, Macau, China has participated in the WTO
financial services negotiations;  its offer represented an improvement of its Uruguay Roundcommitments in that subsector.
10  Macau, China accepted the Fifth Protocol to the GATS on
18 February 1999.11  However, it did not participate in the 1997 WTO negotiations on Basic
Telecommunications Services.
19. The Government is examining the possibility of making commitments in other services in
future negotiations.  However, at this stage the Administration, is not in a position to make a concreteoffer relating to the inclusion or exclusion of any services in or from Macau, China's Schedule of
Commitments.  However, Macau, China attaches special importance to the liberalization of air
transport, tourism, telecommunications, and e-commerce.
20. Macau, China grants most-favoured-nation (MFN) treatment to all WTO Members.  It did not
list any exemption to the principle of MFN treatment.  Macau, China does not participate in any
preferential agreements concerning trade in services.
(i) Financial services
(a) Banking
21. There were 24 banks in Macau, China at the end of 1999:  21 foreign-owned banks
(9 subsidiaries and 12 foreign branches
12);  a state-owned bank (the Post Office Saving Bank), and
two local banks.  There is a non-bank subsidiary (i .e. the holding company for the casinos).  Foreign
participation in the banking sector has been important since the enactment of the revised banking lawin 1982.  More recently foreign banks have been attracted to Macau, China because of their interest in
the Chinese market.
22. Any banking institution intending to operate in Macau, China requires a licence and an
authorization from the Chief Executive of the SAR (Secretary for Economic and Finance Affair, by
delegation).  Licences are granted on a case-by-case basis, by the Monetary Authority of Macau(AMCM), if the applicants fulfil the requirements.  A licence is granted so long as the goal of the
operation is consistent with the economic and financial policies pursued by the MSAR Government.
13
                                                     
9 WTO document GATS/SC/50, 15 April 1994.
10 WTO document GATS/SC/50/ Suppl.1, 26 February 1998.
11 WTO document WT/LET/288, 18 February 1999.
12 A subsidiary is a financial institution, which is a legal entity in its own right but is controlled by
another financial institution through holdings of its capital or through statutory or contractual provisions.  Abranch is a business located in Macau, China linked to a financial institution incorporated overseas, which is not
a legal entity in its own right but directly conducts transactions inherent in the head office's activity.
13 WTO document GATS/SC/50/Suppl.1, 26 February 1998.Macau, China WT/TPR/S/82
Page 57
Once a licence is issued by the AMCM, the Chief Executive authorizes the institution to operate.  If
the authorization is not granted, the applicant may appeal.14  The Chief Executive of MSAR has the
power to revoke licences on advise of the authority.
23. Banks incorporated overseas may apply for a licence to operate a full-licence or offshore
branch or a subsidiary in Macau, China.15  Fully licensed branches or subsidiaries may undertake all
the financial activities allowed for in the Macau Financial System Act.16  According to the Macau
Financial System Act, banks can also act as insurance companies, engage in stock brokerage, and
manage mutual funds.17  However, banks with offshore licences may undertake only operations that
are authorized by the laws or regulations governing this activity.
24. Subsidiaries require minimum capital of P 100 million at the time of incorporation and the
parent company must be a bank or financial institution ranked amongst the first 500 in the world.  Thequality and standards of the home-country regulator are also a major consideration in the approval of
the institution's establishment.  There are no specific compulsory minimum capital requirements for
the establishment of foreign branches.  However, they  are required to maintain at all times in Macau,
China, for certain categories of Pataca-denominated  assets, an amount equal to at least 50% of the
minimum capital required for constituting a local banking institutions of the same type.
25. All the qualifying shareholders (i.e. a shareholder holding more than 10% of all shares) and
managers appointed by banks must pass a test as prescribed in Macau, China's Financial System Act
in order to ensure the quality of the managers.  Br anches incorporated in Macau, China must appoint a
chief executive officer and at least one alternate CEO, each of whom must be residents in
Macau, China.  A subsidiary of a bank incorporated overseas, authorized under the Financial System
Act, must have at least three directors, two of whom must be residents of Macau, China.
26. Offshore banks are not regulated by the same legislation as full-licensed banks.  New
legislation to govern Macau's offshore banking activities was introduced in 1999.
18  The main purpose
of the legislation is to facilitate the establishment of offshore banks so that Macau SAR may become
an offshore financial service centre, thus the application process has been simplified and expedited.
Offshore financial institutions (OFIs) may not engage  in the operations that are specifically prohibited
in the licence granted by the Chief Executive and/or in operations that are contrary to Macau's laws.OFIs must register at least 51% of their shares locally.  The Chief Executive of Macau SAR may, on a
case-by-case basis, authorize OFIs to grant credit or provide guarantees to residents so long as the
goal of the operation is in the interest of the Government.  OFIs are exempt from profit tax and
business registration tax.
19
27. Bank supervision in Macau, China is conducted by the Monetary Authority of Macau, which
has the power to set minimum capital requirements, prudential ratios and regulations, and the
frequency of submission of financial statements;  to audit and review institutions;  and to approve
external auditors.20  The Authority operates in line with in ternational standards;  for instance Macau,
China is studying the possibility of adopting the Basel Committee prudential ratios.  The banks submit
                                                     
14 The authorities noted that this has never occurred.
15 WTO document GATS/SC/50/Suppl.1, 26 February 1998.
16 These activities include accepting deposits, lending, money transmission services, operating in the
interbank markets, etc.
17 For instance, in 1999, one Port uguese-owned local bank acquired 43% of a large Portuguese-owned
local insurance company.
18 Decree-Law No. 58/99/M of 18 October 1999.
19 Law No. 3/99/M, 8 September 1999.
20 Other AMCM functions are stipulated in Decree-Law No. 14/96/M, 11 March 1996.WT/TPR/S/82 Trade Policy Review
Page 58
monthly reports to the AMCM for assessment of, inter alia , capital adequacy, loan classification,
earnings, and liquidity reserves.  In addition, a loan classification system has been set up in
accordance with international standards and will be introduced in 2001 to control credit quality.21
28. The banking sector in Macau, China has exhibited a relatively high degree of financial
strength.  Banks maintain high risk-weighted adequacy ratios (capitals/asset ratio), which stood at
15.9% in 1999.  The quality of assets has however, deteriorated.  The share of non-performing loansincreased from 1% in 1993-94 to 3.9% in 1998, and doubled to 8% in 1999.  This was mainly caused
by the collapse of GITIC (a large window company of the Guandong Province) towards the end of
1998, and the weakness of the property market, which increased the quantity of bad loans.
22
(b) Insurance
29. Insurance business in Macau, China has grown rapidly in the past few years;  between 1990
and 1999, average annual growth in gross premiums was around 22.8% for life insurance, and about
7.1% for non-life insurance.23  By the end of 1999, insurance fund assets pledged to the AMCM to
meet liabilities of MSAR insurance business amounted to some P 1.1 billion.  The number of
authorized insurers increased, from 19 to 24 firms during 1994–2000.24  The sector is characterized by
relatively strong business concentration;  in 1999, the top three life and non-life insurers accounted forabout 95% and 63% of the market respectively (in terms of the total gross premiums).
30. The Macau Insurance Ordinance sets out the regulatory framework for the insurance industry,
such as licensing requirements, notification requirement to the supervisory authority, and reserve and
minimum solvency margin requirements.  Insurance intermediary business is regulated under
Decree-Law No. 38/89/M of 5 June 1989.
25  The Monetary Authority of Macau is the regulatory
authority for insurance services in Macau, China;   the Insurance Supervision Department of the
AMCM carries out the actual functions of supervision, coordination, and inspection of insurancecompanies.
31. The provision of insurance services in Macau, China requires a licence from the AMCM.
26
An applicant incorporated overseas can operate in the MSAR in the form of a branch, a locally
incorporated subsidiary, or a representative office.27  National treatment is assured, however, the
general-manager of a branch must reside in the MSAR and be responsible for the conduct of thewhole of its insurance business within the MSAR .  Only AMCM-approved insurance products may be
provided by an insurance company.
                                                     
21 At present, the monitoring of loan quality is based on the overdue period and the type of collateral
provided.
22 Government of Macau, China.
23 Based on preliminary 1999 data.
24 There were four life insurers (all foreign, i.e. incorporated outside Macau, China) in 1994 and nine
(two local and seven foreign ) in 2000.  Out of 15 non-life insurers in 1994, three were local and 12 were foreign
insurers;  in 2000, there were five local non-life insurers and ten foreign insurers.  There are neither state-owned
insurers nor foreign representative offices in the MSAR.
25 Insurance intermediaries, i.e. insurance agents, insurance salespersons, and insurance brokers must
be authorized by the AMCM.  At the end of June 2000, there were 1,400 insurance intermediaries, includingeight foreign insurance agents (incorporated), seven insurance brokers (incorporated), and about 1,300 insuranceagents (individual persons).  No local insura nce brokers are incorporated in Macau, China.
26 A licence is needed if reinsurance companies wish to set up operations (i.e. physical presence) in the
MSAR.  Insurance companies licensed to operate in th e MSAR may freely accept or cede reinsurance contracts
from/to bona fide overseas insurance or reinsurance companies, even if such insurance or reinsurance companiesdo not hold a licence to operate in the MSAR.
27 A representative office is not allowed to conduct insurance business.Macau, China WT/TPR/S/82
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32. All authorized insurers, regardless of origin, are subject to the same prudential regulations.
The minimum equity capital required for locally established insurance providers is P 30 million and
P 15 million for life insurance and non-life insurance, respectively;  for branches of foreign
companies, the requirement is P 7.5 million and P 5 million, respectively.28  A company may not offer
both life and non-life policies.  Insurance companies are prohibited from offering banking services.
Investment in fund assets are regulated by way of notices published in the Official Gazette .  Notice
3/2000/AMCM of 4 January 2000 sets out the maximum limits (in terms of percentage of total
technical reserves of the preceeding year) for various categories of assets, such as bank deposits,
immovable property, loans, and securities.  The authorities state that foreign insurers and locally
established insurers are treated equally in this respect.  The conditions and premium rates of
compulsory insurance services are regulated, those of non-compulsory insurance are not.29  N o
domestic retention requirements exist with regard to reinsurance.
33. The authorities state that there are no cartels or monopolies in Macau's insurance sector, nor
arrangements among companies to specify structure and level of premiums or limit competition for
new clients.  All domestic economic operators are free to contract their preferred insurance company,
and insurance conditions do not discriminate against imported goods and services.
34. Macau, China made commitments in the insurance business for the first time under the
Fifth Protocol.  It's GATS Schedule lists no li mitations on market access regarding consumption
abroad, except for compulsory insurance.  Only a locally licensed corporate entity is permitted to
provide insurance services in Macau, China.  The presence of natural persons is unbound except for
certain types of intra-firm transfers.
(ii) Telecommunications
35. The number of telephone lines in operation has been increasing since 1990, as has the number
of main lines per 100 inhabitants.  Revenue from the subsector in 1999 was P 1.6 billion, equivalent to
some 3.3% of GDP in 1999, up from 2% in 1994.30  Investment in the telecommunications subsector
as a percentage of total revenue declined from 28% in 1994 to 13% in 1999.  The use of mobile
telephones has expanded rapidly;  the waiting period is only one day compared with seven days for
the installation for a fixed telephone line.  In addition, the application and installation cost for a fixedtelephone service is P 850 compared with P 300 for a mobile phone.
36. Public telecommunication services are provided by the Companhia de Telecomunicações de
Macau (CTM) under a contract signed in 1981 for 20 years;  this was revised and extended in
December 1999 for a further ten years.  The revision allowed for the liberalization of local and
international mobile telephony services, informa tion providing services, internet services, and
value-added services;  other services remain exclusive.
31
                                                     
28 The capital of the head office of a foreign insurer establishing a branch in Macau, China must not be
less than the minimum capital required for a locally established insurer in Macau, China.
29 Compulsory insurance includes third-party liability in respect of vehicles, recreational vessels,
publicity, and propaganda materials;  employer's liability in respect of employees;  and professional liability oftravel agents.  Only insurers authorized by the AM CM may provide compulsory insurance in Macau, China.
30 Calculations are based on ITU data, where revenue is defined as the earnings from the direct
provision of facilities for providing telecommunication services to the public (i.e. not including revenues of
resellers).  This includes revenue from fixed teleph ones, mobile communications, text (telex, telegraph and
facsimile), leased circuits, and data services (ITU (1999)).
31 These are local-fixed telephone service, telegram service, fixed telex service, fixed service for data
transmission, and rental circuit services;  international-fixed telephone service, telegram service, fixed telexWT/TPR/S/82 Trade Policy Review
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37. Since 29 June 2000, telecommunication activities in Macau, China have been regulated by the
Office for Development of Telecommunications and Information Technology (GDTTI).32  T h e
GDTTI formulates the overall telecommunication policy, which is submitted to the Executive for
approval.  Other responsibilities of the GDTTI include:  issuing licences;  controlling the quality of
service and the pricing of public telecommunications and information services;  overseeing the
fulfilment of regulations by telecommunication and information operators;  managing andcoordinating the radio spectrum;  and promoting the application of international conventions,
agreements, and other instruments in areas of telecommunication and information technology.
38. Legislation stipulating application procedures for a provisional licence to provide public
mobile services was issued in July 2000.  Applications had to be submitted by 1 September 2000.
The Government issued two provisional licences in July 2000.  Licences were awarded according to,inter alia , the service to be offered, its quality, the tariff, and the coverage.  These provisional licences
will be valid for one year and then converted into a definitive licence for a period of eight years, once
the legal framework and associated regulations are in place.  Definitive licences will be granted only
if the legal procedures as well as the conditions and requirements are fulfilled.
33
39. The new legal framework and associated regulations will redefine the role of the Macau
telecom regulator (GDTTI).  The GDTTI will regulate interconnection charges as well as public
telecommunications services charges, to guarantee a competitive environment.
40. Fixed telephone, mobile, internet, and international services tariff rates are revised annually
by the CTM and the regulator.  Tariffs are set according to cost of service, profit margin, price
elasticity, tariff comparison between the neighbouring countries or regions, traffic forecasting, etc.
The Consumer Council is consulted during the revision of tariff rates.  The CTM is allowed to
cross-subsidize, since at present there are no regu latory contracts preventing the operator from doing
so.
41. Call-back services are prohibited since local and international call services are provided
exclusively by CTM.  However, pre-paid calling-card services are allowed.
42. Macau, China made no commitments in the area of telecommunications, nor did it participate
in the WTO negotiations on Basic Telecommunications Services.  Despite the revision of theconcession contract of CTM, certain areas remain under exclusive operation.  However, the Macau
SAR Government is assessing possibilities of further liberalizing other telecommunications services.
(iii) Transport
(a) Air transport
43. The Macau International Airport began operations in November 1995 with capacity to handle
6 million passengers and 165,000 tonnes of cargo per year.  Passenger and cargo throughput increased
                                                                                                                                                                    
service, fixed service for data transmission, and rental ci rcuit services;  and transit-fixed telephone service, telex
service, telegram service, and fixed service for data transmission.
32 Macau Posts and Telecommunications (CTT Macau) regulated telecommunications in Macau, China
until 29 June 2000.
33 These conditions and requirements will be defined in the new legal framework, which is expected to
be in place by July 2001.Macau, China WT/TPR/S/82
Page 61
during 1996-98.34  In 1999, the number of passengers increased, while the number of flights and the
cargo throughput decreased (Table IV.2).
Table IV.2
Air transport in Macau, China, 1995-2000
(Units, tonnes and per cent)
1995 1996 1997 1998 1999 2000a
Number of flights 622 13,386.0 19,837.0 24,015.0 23,862.0 11,458.0
of which Air Macau (%) .. 42.9 44.4 41.7 42.7 42.7
Number of passengers ('000) 43.6 1,300.9 1,952.6 2,214.5 2,640.2 1,260.4
of which Air Macau (%) .. 46.6 50.9 51.4 48.5 49.2
Cargo (tonnes) 136.6 25,043.4 45,540.5 65,166.8 53,117.5 24,651.7
of which Air Macau (%) .. 20.1 20.7 20.0 27.1 27.5
.. Not available.
a January-May.
Source : Data provided by the authorities of Macau, China.
44. The Government of MSAR has granted a concession to Macau International Airport
Company (CAM) for the right to operate the Macau International Airport.  Slots are allocated by the
CAM once an airport access application is approved by the Civil Aviation Authority.  Slots are
allocated on a first-come-first-served basis with priority given to scheduled flights.  The CAM alsohas the right to subcontract airport services to other companies.  Concessions have been granted
through a public tender, for the provision of certain related services, such as ground handling,
catering, fuel supply, duty-free and general aviation handling services.  Concessionaries for each type
of service were granted exclusivity to provide a particular service for a specified period.  A contract
has also been awarded to a company to supply aircraft and repair maintenance services.  Theauthorities noted that these services are not yet available in Macau, China, since the concessionary is
only certified to service one type of aircraft.  However, aircraft may be maintained and repaired by the
airline companies themselves or outside Macau, China at stations certified by the Civil Aviation
Authority.  All services, equipment and facilities must be provided, maintained, and operated in full
compliance with procedures and standards, approved or specified by the Civil Aviation Authority ofMacau in accordance with Annexes to the Convention on International Civil Aviation.
45. Air Macau is the only local airline and the only airline allowed to establish in Macau, China.
It was established in 1994 with registered capital US$50 million held by the Chinese and Portuguese
companies and individual;  the MSAR Government holds 5% of the shares.  Air Macau flies to
11 scheduled destinations in South-East Asia and, according to the authorities, carries approximately48.5% of the passengers transported in these routes from Macau.
35
46. Air Macau has been exempt from income taxes since 1995.  In addition, the airline is exempt
from consumption tax on fuels.  Air Macau holds the monopoly rights for air, passenger, and cargo
transport services.  However, any decision whether to operate a particular route, rests with the airline
itself and it is based purely on market considerations.  Civil servants and/or government-relatedcargoes are not compelled to fly Air Macau.
                                                     
34 The authorities noted that the figures in 1998 were biased because the Macau International Airport
was used as an alternative airport until the new Hong Kong International Airport, opened in 1998, became fully
operational.
35 South-East Asia is defined as Mainland China, Chinese Taipei, Korea, Thailand, and the Philippines.WT/TPR/S/82 Trade Policy Review
Page 62
47. The Civil Aviation Authority (AACM), Macau's regulatory authority, is responsible for
formulating Macau's air transport policy and ensuring the technical safety of the civil infrastructure.
The access to and the supply of aviation services in Macau, China are governed by bilateral
agreements negotiated by the AACM.  There are three types of bilateral arrangement:  the air services
agreement governing flights between Macau, China and China;  the memorandum of understanding
between commercial companies, governing flights between Macau, China and Chinese Taipei;  and
air service agreements (ASAs) governing flight operations between Macau, China and any other
destination.  As at October 2000, Macau, China had signed 34 ASAs.
(b) Maritime transport
48. There are 349 vessels flying the MSAR flag with a total gross tonnage (GT) of 28,501;  these
vessels are used for river trade or fishing.  The Government of Macau, China does not own or operateany cargo, passenger or fishing vessels.  For a vessel to fly the Macau SAR flag (except those offering
services in MSAR's territorial waters), the owner or representative, shipmaster, and first mate must be
residents of Macau, China.  Neither exclusivity rights nor subsidies are given by the Government to
national-flag vessels.
36  There are no official statistics on waterborne trade carried by national-flag
vessels;  however, since few of these vessels use international routes, the authorities estimate that thequantity and/or value of international trade carried by these vessels is low.
49. The Maritime Administration of the MSAR, under the Secretariat for Transportation and
Public Work, regulates domestic and international maritime transport services.  All maritime services,
including the shipping register, ship building and scrap, ships' certificates and documents, and
navigation safety are regulated by Decree-Law No. 90/99/M of 29 November 1999.  Commercial
maritime activities (e.g. selling, buying, building, and repairing ships, contracts and liabilities between
shipper and carrier;  maritime insurance, etc.) are governed by the Law of Maritime Commerce(Decree-Law No. 109/99/M, 13 December 1999).
50. There are no specific requirements regarding participation of national lines in international
conferences/consortia capacity sharing or price fixing on specific routes.  A contract with the
Macau SAR Government is necessary to set up a shipping line to transport passengers.  The
company's fleet capacity, safety, services quality, sailing schedule, tariffs, port facilities, port agent,and market share are taken into account when awarding the contract.  The tariff rates are defined in
the contract.
51. A contract is not required to establish a cargo shipping line.  However, a company is required
to submit an application to the Maritime Administration of Macau SAR through its subsidiary,
branch, representative or agent in Macau, China.  In this regard, the company's fleet safety, servicesquality, sailing schedule, port facilities and port agent should be taken into account for approval of the
application.  The shipping company sets the freight rate.
52. There are no cabotage restrictions and there are no exclusive domestic routes in
Macau, China.  Most vessels sail between Ma cau, China and Hong Kong, China, or between
Macau, China and Mainland China without restrictions.  The authorities noted that the use ofdomestically owned ships is mandated only in emergency situations or to protect the public security.
53. Port agents must submit pre-arrival notice and copies of the vessel's valid certificates, to the
Maritime Administration, 48 hours before actual arrival of a vessel into the port of Macau, China.
Vessels used for international trade must comply with international regulations and have valid
                                                     
36 "Nationally owned or operated" refers to SAR-owned or operated since Macau, China is not a
sovereign State.Macau, China WT/TPR/S/82
Page 63
certificates and documents of international conventions for ship safety and pollution prevention.
Vessels for river trade must comply with the regulatio ns of their port of registry;  they should also
have the valid certificates and documents for ship safety, pollution prevention, etc.
54. The Port of Ka-Ho is Macau's main international port.  Its container terminal (MACAUPORT
Port Administration Ltd.) is 31.84% government held.  The terminal area includes a container ship
berth (135m long), a 20,400m2 container yard, and a 1,200m2 container freight station.  The volume
handled is 80,000 TEU per year.
55. The Outer Harbour passenger ship terminal is around 65,000m2, and has 12 berths for high-
speed passenger ships including ferries, jetfoils, and catamarans.  The terminal is able to handle
30 million passengers per year.  Presently, three shipping companies run the passenger transportation
route between Hong Kong, China and Macau, China with about 76,500 trips per year.
56. Port agents and local companies may supply all port services with the exception of pilot
services, which must be provided by Maritime Administration of Macau SAR or licensed pilots.
There are no restrictions on foreign equity participation in the companies supplying port service.
However, no data are available regarding foreign investment in port services;  the authorities estimate
that foreign investment in this sector it is limited.
(4) TOURISM
57. Tourism is one of Macau's major foreign exchange earners, and an important employer (30%
of the labour force);  it accounted for 40% of the GDP in 1999.  As a result of the Asian crisis the
number of tourist arrivals has declined;  the average length of stay has remained low (less than
two days) (Table IV.3).  Hong Kong, China cont inues to be the major source of visitors to
Macau, China.
58. The authorities consider tourism to be the engine of growth for the economy because of its
backward and forward linkages.  Thus, the Govern ment's aim is to improve quality, increase the
number of visitors, attract more affluent tourists, increase the length of stay, and diversify tourism
related activities.  In this regard, although Maca u, China is known for being a gambling center, it also
provides other tourism-related activities, and is trying to develop the convention tourism industry.
59. In order to facilitate the entry of tourists, Macau, China has been developing its air, sea, and
land infrastructure.  In 1993, the Outer Harbour terminal was constructed in order to accommodate the
increasing number of tourists coming to Macau by ferry from Hong Kong, China.  At present, this
new terminal is able to handle 30 million passengers per year, two to three times more than the old
terminal.  Most tourists arrive by sea (Table IV.3).
60. In 1995, the Macau International Airport, which has a capacity to serve 6 million passengers
annually, began to operate.  Before the inauguration of the international airport, Macau, China relied
entirely on Hong Kong, China as the port of entry fo r tourists.  At present 12 airlines offer 442 weekly
scheduled flights to 27 cities (20 of which are in Mainland China).  Macau, China has been actively
seeking connections with other destinations (e.g. Japan, Europe, Oceania, and the United States) in
order to diversify its sources of tourism.
61. In addition, to cope with the saturation at the Border Gate, Macau SAR has considered
expanding the existing immigration facilities there.  The project is expected to start at the end of 2000
upon the approval of the Chief Executive of Macau SAR.  The new facilities would include 12 traffic
lanes and 76 customs counters to service some 80,000 visitors per day.WT/TPR/S/82 Trade Policy Review
Page 64
Table IV.3
Tourism in Macau, China, 1994-2000
(Units and per cent)
1994 1995 1996 1997 1998 1999 2000a
Tourist arrivals ('000) 7,833.8 7,752.5 8,151.1 7,000.4 6,948.5 7,443.9 6,840.3
Arrivals by nationality
(% share of total)
Hong Kong, China 77.7 72.5 63.9 62.9 - 53.7 52.5
China 3.1 7.0 7.4 7.5 75.8b21.9 24.7
Chinese Taipei 3.1 3.6 9.3 13.0 11.8 13.4 14.2
Japan 4.8 5.4 6.3 4.2 2.4 2.2 1.7
United Kingdom 1.4 1.4 1.5 1.5 3.3b3.2 2.0
United States 1.3 1.2 1.3 1.2 1.1 1.0 0.8
Other 8.6 8.9 10.3 9.8 5.6 4.6 4.1
Arrivals by means of travel
(% share of total)
By sea 77.3 77.3 74.1 69.1 67.5 59.6 58.0
By land 22.4 22.3 20.9 23.2 25.2 31.4 32.9
By air 0.3 0.4 5.0 7.7 7.4 9.0 9.1
Average duration of stays (nights) 1.3 1.3 1.3 1.3 1.4 1.4 1.3
.. Not available.
a January-September.
b Including visitors from Hong Kong, China.
Source: Macau Statistic and Census Services, Tourism Statistics.
62. The Secretary for Social Affairs and Culture formulates tourism policies;  these policies are
implemented by the Macau Government Tourist Office and the Institute for Tourism Studies.  To
further support development of the sector, the Government set up the Commission for TourismDevelopment.  The main task of the Commission is to design a strategic tourist development plan.
The Commission acts not only as a forum to discuss macro issues concerning the development of
tourism, but also as an advisory body for institutions interested in tourism development in the long
term.  Members of the Commission are chosen from the public and private sectors.
63. Macau, China provides a number of sector-specific and general incentives to encourage
investment.  These include interest rate subsidies and refundable and non-refundable subsidies for
investment projects.  Imported goods to be used  in the tourism industry are not taxed.  Other
sector-specific incentives include:  property tax exemption for up to eight years in Macau and
12 years in Taipa and Coloane;  industrial tax exemption for the same period;  property transfer tax
exemption for the transfer of buildings used for tourism purposes;  and exemption of vehicle tax forvehicles used in the tourism sector (Decree-Law No.81/89/M).
64. Gambling is the most important tourism related activity.  On average during, 1996-99, the
industry accounted for 30% of GDP and 55% of total government revenue.  In 1999, some 6%
(12,400 people) of the labour force was employed in the subsector.  The gross revenue from gambling
reached approximately P 13 billion in 1999, down from P 17.20 billion in 1997 (a record year).  Theindustry was negatively affected in 1998 and 1999 by the Asian crisis;  nevertheless the tax revenue
from gambling still reached P 5.1 and P 4.5 billion respectively.  The revenue from horseracing,
greyhound racing, Chinese lotteries, instant lotteries, and sport lotteries is relatively low compared
with other games of fortune.  In 1999, these games accounted for some 6% of the total gambling
revenue.Macau, China WT/TPR/S/82
Page 65
65. Since 1962, the Sociedade de Turismo e Diversões de Macau (STDM), a private company,
has held the exclusive casino franchise.  On 23 July 1997, the Government of Macau, China and the
STDM renewed their contract until 2001.37  The contract stipulated the taxes to be paid by STDM as
well as the social commitments (i.e. financing the construction of a new ferry terminal).  STDM
operates ten casinos and affiliated businesses including horse and greyhound racing, lotteries, hotels,
and fast ferries between Hong Kong, China and Macau, China.  In accordance with the contract, someof STDM's profits have been invested in urban development and infrastructure projects, including the
ferry terminal, the new Macau-Taipa bridge, and the airport.  Upon expiry of the contract, the
concessionaire must transfer the Lisboa Casino and the Hotel Complex, including all its furniture and
contents, to the Government.
66. The introduction of "sports lotteries" in mid 1998 marked a new era in the development of the
gambling industry.  The concessionary company was authorized to accept electronic submission of
bets on sports lotteries, through the World Wide Web, as of June 2000.  The authorities consider that
this new way of betting will, to some extent, enab le the gambling industry in Macau to become more
dynamic.
67. The gambling tax is one of the most important sources of government revenue.  A betting tax
of 31.8% is levied on STDM's gross revenue and a premium of P 1.375 billion was set for payment to
the Government in instalments during 1986-2001.  In turn, STDM is eligible for tax exemptions on
net profits, dividends, and imports.
38  However, the concessionary has to compensate the Government
for such exemptions by payment of a fixed amount;  this was set at P 3 million annually during
1987-91, and has been increased by 10% annually since 1992.
68. Hotels and restaurants require a licence, which is subject to a tax, to operate in Macau, China.
Licences are issued by the Macau Government Tourist Office (MGTO), which also supervises hotelsand restaurants.  Local and foreign investment standards or regulations are the same.
69. The Macau Government Tourist Office also supervises the licensed travel agencies operating
in Macau, China.  All travel agencies require a licence to operate, issued by the Macau Tourist Office;
the licence fee is P 25,000.  Until 1998, travel agencies could obtain a licence to provide only
outbound (i.e. tourists leaving Macau, China) or inbound (i.e. tourists coming to Macau, China)services.  This distinction was eliminated so that currently travel agencies may provide both services.
Foreign travel agencies and tour operators are not permitted to establish a branch or subsidiary in
Macau, China.
39  Travel agencies and car rental companies must be locally registered.  Foreigners are
allowed to invest in other tourist-related activities.  However, no data are available regarding the
percentage of assets held by foreign entities.
                                                     
37 The SAR Government has set up a Special Committee to study future development of this industry
once the gambling concession expires in 2001.
38 Paragraph No. 1, Section 12 of Decree-Law No. 6/82/M, 29 May 1982.
39 WTO document GATS/SC/50, 15 April 1994.Macau, China WT/TPR/S/82
Page 67
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