A very brief twenty-year history of the Macau SAR

There was a sense of trepidation and uncertainty in the five years leading up to the handover of Macau.

People living in the city understood that the changes happening around them actually had little do with them. And yet, these ordinary people could not rest assured. By being here, they were potentially at risk.

It was a time of triad wars, or gang conflicts, as some might say. Conflict could erupt anywhere in the city; from luxurious chain hotels to working-class establishments such as Dai Pai Dong, street-side stalls that offer down-to-earth food service.

The prevailing thought in Macau is that the modern wave of patriotism can trace its origins back to the 1-2-3 Incident of 1966, after which Lisbon signed an armistice with Beijing and Macau residents, and love for the country grew drastically.

However, the incidents that took place before the handover might have left a deeper mark on the construction of patriotism in Macau than first thought.

In those days, news reports extensively covered the conflict and violence that occurred near daily. The intensity of the struggle even attracted news coverage from other parts of the world, destabilizing the confidence of tourists in Macau and leading to a 0.7% drop in the still-impressive tally of 7 million tourists in 1998, the earliest year for which reliable data is kept.

Having lived through those days, the older generations in Macau have developed a sense of gratitude. Indeed, at the time of the handover, the majority had the impression that that was the coming of Chinese sovereignty and was the key to the stability which had long been desired; a remedy to the unsettled conditions of the 1990s.

One report from a collection of interviews written by Sharon Cheung Po Wah, an ex-journalist from Hong Kong, is particularly telling. In it, former Macau Chief Executive Edmund Ho explains that the gang conflicts had been resolved using “political means.” Ho was quoted as saying that conflicts of this kind were incompatible with stability and effective governance.

Edmund Ho was the first Chief Executive of the Macau Special Administrative Region, before going on to become a national leader as vice president of the Chinese People’s Political Consultative Conference.

When reflecting on his time in office, Ho cannot be separated from his major market liberalization initiatives – firstly, in the telecom sector, and later, the gaming industry.

Before the handover, Companhia de Telecomunicações de Macau (CTM) was the sole operator of telecom services in Macau, including landline, mobile phone and internet services. Internet services back then ran on a 56k dial-up network, with its iconic screeches. A connection needed to be bridged every time a user wanted to go online.

Inheriting the telecom monopoly, Macau’s first CE set out on a path that would bring moderate liberalization of the mobile phone market.

In the early 2000s, the cell phone market was formally and legally opened to an oligopoly. The policy attracted the interest of several companies, mainly from Hong Kong, to bid for a license. The policy also set the bar for the three companies that would operate GSM900/1800 dual-band cell phone services in Macau.

CTM, Hutchison Telecom (Three Macau) and SmarTone won the bid and the cell phone market has remained mostly the same since then.

After the formation of the cell phone market, there was a brief period in which CTM franchised Hong Kong brand One2Free to Macau. The Hong Kong brand had an energetic and youthful image that was designed to appeal to younger generations. Indeed, a billboard posted by CTM’s surrogate brand on the outside of the then-Workers’ Football Ground employed slang terms and imagery evocative of mahjong, a Chinese game played by four people.

In the lead up to the 2005 East Asian Games in Macau, the government decided that further technological improvements in the telecom market were essential if the city was to adequately serve the needs of athletes and tourists attending the sporting event.

Just before the Games started, a license was awarded to China Unicom, which now operates as China Telecom, to operate certain network services in Macau.

There were also calls for internet services to be improved.

The government attempted to open the market but the initiative did not gather interest. This situation remained unchanged until mid-2013, when a new company, MTel, obtained a license to operate internet services in Macau. Its license remains valid until the end of 2021.

Concurrently, the gaming industry was experiencing a period of growth that would later cement its reputation as the engine of Macau’s economic rise for the last 20 years.

In 2002, the Macau government decided it would end the 40-year monopoly held by Stanley Ho’s Sociedade de Turismo e Diversões de Macau, SA (STDM), and open the market to more gaming operators.

From a total of 10 international bids, the then-Chief Executive Edmund Ho signed a dispatch that settled temporary concessions with three companies: Wynn Resorts Macau, Galaxy Entertainment and Sociedade de Jogos de Macau (SJM). The concessions came into effect on April 1, 2002.

An evolution of the concessions system spawned the so-called sub-concessions, which raised the number of gaming operators to the six present today.

One license went to Las Vegas Sands, which had previously partnered with Galaxy Entertainment in pursuing a license. The other two licenses were divided and sub-designated to Melco and MGM.

Las Vegas Sands did not hesitate to start building its first property, Sands Macao, which opened in 2004, less than two years after the concession was granted. On opening day, crowds packed the main entrance of the casino complex and, in their excitement to enter the building, inadvertently broke through several glass doors.

It was also reported that the company saw a return on its near quarter billion dollar investment after just one year of operation.

The opening of the gaming industry and the market competition that followed created a need for other attractions and amenities, namely in the entertainment, hospitality, retail, and food and beverage sectors. World-class restaurants, luxurious hotel rooms and delicate spas soon became calling cards for Macau.

The gaming liberalization also created demand for large public works and infrastructure projects to help move gamblers, who were the new economic lifeblood of Macau, into and around the city.

Coinciding with the opening of the first integrated resorts, the Macau SAR government had the idea to build a mass transit system in the city, to be known as the Light Rapid Transit (LRT).

The government commissioned Hong Kong’s MTR Corp. to advise on the feasibility of such a system in Macau. The report was positive and work on its details soon commenced, including the routes and whether the system would be located above or below ground. The carriages and systems were tendered to Japan’s Mitsubishi Heavy Industries.

But it would be nearly two decades before the first section of the LRT would complete its first route and begin operating as it did earlier this month.

While they were waiting for the LRT, people in Macau only had one other choice when it came to public transportation – public buses.

This system, which was based on the services provided by the companies involved rather than a public concession, underwent only minor changes over the years.

The most significant changes occurred in 2011, when the government re-tendered the provision of bus services. Licenses were granted to the previous two operators, Transportes Urbanos de Macau S.A.R.L. (Transmac) and Sociedade de Transportes Colectivos de Macau SARL (TCM), as well as a third operator, the Reolian Public Transport Co. (Reolian), for the first time. Reolian was a joint venture owned by France’s Veolia Transport RATP Asia and local firm H. Nolasco Group.

At that time, the service was also changed from being a private operation with a fare established by the government to a government-subsidized operation. With this new system in force, bus travel for residents become cheaper and more convenient. The trend continued with the introduction of the Macau Pass smartcard, which allowed connections between several bus routes and different operators without having to re-pay fares.

Macau’s modernization and rapid development required the city to keep abreast of international standards – or at least try to do so.

Smoking control in defined public areas was one of these standards.

In 2009, the idea of regulating smoking in Macau was put onto the government’s agenda. Consensus was difficult to achieve both in- and outside of the legislature because smoking was associated with profitable gambling activities. Casino operators, lawmakers, and even members of the public were worried that a smoking ban on all indoor venues would severely affect Macau’s gaming revenue. Other measures to discourage smoking included increasing the tobacco tax.

The actual ban on indoor smoking only came into effect in 2012, with an exception made for the casino floors. The next year, the ban was extended to casinos.

In the first version of the law, violators were subject to a fine of 600 patacas, but the amount was raised to 1,500 patacas in January of this year.

The use of plastic bags for most purchases is also subject to payment now. The law governing the use of plastic bags was passed by the Legislative Assembly on August 8, 2019, with the “plastic bag charge” taking effect from November 18 onwards.

The law says that plastic bags obtained for all previously packed products shall be subjected to a 1-pataca fee per bag.

In what is perhaps an illustration of the wealth that Macau has amassed, some reports suggest that customers are immune to the deterrent effects of this and instead treat the surcharge as, in the words of one columnist, “regular inflation that has come a little earlier.”

Meanwhile, homemakers have been much more enthusiastic, due to either economic or environmental motives.

The eco-friendly population at large has applauded the enactment of the law, hoping that it will help reduce the use of single-use plastic bags. Notably, environmentalists are also calling on the government to go further with similar eco-friendly initiatives.

Macau welcomed more than 36 million visitors last year, a figure that equates to a ratio of about 54 visitors per resident. Last decade, this figure was only 16 visitors per resident.

The astonishing growth of visitors to Macau has fueled concerns in some groups that the territory is nearing its maximum capacity. Despite the cooldown in the local economy, the number of visitors will increase further in 2019 and approach the 40-million mark.

The number of hotels in Macau has grown at a much slower rate after the handover, however. According to figures provided by the Statistics and Census Service, there were a total of 77 hotels and similar units at the time of the handover.

In 2008, the same survey showed that the number of hotels had grown by less than 10% since the handover. The pace of growth quickened in the second decade, when the number of hotels increased by about 50% compared to the handover year.

Another change that has been observed in Macau’s tourism industry over the past 20 years is the type of visitor accommodation being built. At the start of this period, the number of hostels slightly exceeded hotels, with many of the latter being regarded as mid-range properties. In more recent years however, the new accommodation being built is overwhelmingly five-star properties built by gaming operators.

Back in the early days of the handover, before the market liberalization of the telecommunications and gaming sectors, few would have imagined Macau as a possible center for lawful financial activities. Recent developments and initiatives presented during President Xi Jinping’s visit have set the region on a new path. One that is designed to assist with the development of diversified economic products and services, and reduce Macau’s reliance on casinos.

At the same time, after a long period of resistance, Macau is beginning to adopt electronic payments (e-payments) which are replacing traditional forms of payment.

Besides gaming, Macau is also famous for having a “hermetically sealed” banking system. It is disconnected from the main international banking networks and, in doing so, escapes the surveillance and scrutiny of outside institutions.

If this has in any way contributed to Macau’s reputation for discretion, it has also impeded trade and the acquisition of products and services from abroad, namely from companies and large organizations.

Non-traditional forms of payment, such as PayPal, have always encountered difficulties in Macau. Only with the popularization of mainland e-payment systems, such as AliPay from Alibaba Group or WeChat Pay from Tencent, is the local market finally coming to widely accept them.

E-payments have become increasingly popular in only a matter of years. Local variants, such as Mpay which was developed by Macau Pass, have begun sprouting up and are gaining acceptance in Macau fast.

On a related note, in recent years, several restrictive measures have been imposed on the use of cash machines, with the purpose of curbing capital outflows from the mainland.

One measure, which was enforced about two years ago, was the installation of the know-your-customer (KYC) facial recognition technology at over a thousand ATMs in Macau. According to figures provided by the company, there are around 1.5 million UnionPay cards in Macau, including credit cards, debit cards and business cards especially designed for VIPs and enterprise clients.

The use of the KYC facial recognition technology has been credited with causing two phenomena. The first is the increase in cash withdrawals in the neighboring region of Hong Kong. The second is the birth (or maturation, at least) of so-called “illegal currency exchange” cases, which mostly occur at casino venues. These have been the basis of many fraud and scam reports in Macau in recent months.

KYC technology was installed to monitor cash machine withdrawals by mainland UnionPay cards more effectively, and to prevent users from carrying as many as 50 bank cards to circumvent capital outflows. In many cases, the individuals carrying the bank cards did not match the names on the cards.

The internationalization of Macau’s finances has increased dependence on the already-popular Hong Kong Dollar (HKD).

Although Macau’s currency – the pataca – is to be retained as local currency as per the Macau Basic Law, the HKD has been equally widespread since the earliest days of the gaming liberalization.

Even so, the use of the two currencies has been relatively stable over the last 20 years, and they have carved out specific uses for themselves. For example, the pataca has found its place in everyday transactions, while the HKD is typically used for larger transactions.

The Chinese yuan (RMB) saw its status remain stable, primarily used for transactions with the mainland. In Macau, it is generally only accepted if received in exchange for a profitable rate for the client of 1:1 by most commercial establishments. The offer results in a loss of about 15% of the value of the currency in favor of the shop at current exchange rates.

Since the days of the handover, the local political system has been ruled according to Article 31 of the Constitution of the People’s Republic of China, which grants the Special Administrative Region the powers and constitutional rights to implement the “One Country, Two Systems” policy, as well as the local “mini-constitution” or the Basic Law. This has granted the region a “high degree of autonomy” in the 50 years leading up to December 2049.

The SAR government is led by the Chief Executive, who wields executive power in the city.

One of the evolutions that has taken place over the last 20 years in Macau is the composition of the committee that elects the Chief Executive. Members of the committee are nominated by sectors of society, associations, and people who hold positions in the central government.

A specially organized 200-member electoral committee was established for Macau’s first election, which placed Edmund Ho in the position of Chief Executive in May 1999. Ho was then re-elected for a second term in 2004, this time by a committee of 300 members.

Although 100 members were added, their origins remained the same in proportion, with many of the members coming from industrial, commercial and financial sectors, followed by those who represent the cultural and educational sectors, as well as labor, social services, religious and other interests.

In 2009, when Chui Sai On succeeded Edmund Ho as Chief Executive, it was decided that the committee would be expanded using the method known as “2+2+100.” The method expanded the electoral committee to the 400 members of today, and added two seats to the composition of the Legislative Assembly for lawmakers elected by both direct suffrage, and another two seats for those who were indirectly elected by the functional constituencies.

Over the past 20 years, criticism of the pace of reform of Macau’s political system has been mounting, with those in pro-democracy factions of local politics decrying it as exceptionally slow, or nonexistent even.

Although Chui pledged in his election manifesto to advance the reform of Macau’s political system, he later justified his inability to promote such reform by saying it was a matter that “depended on the initiative of the central government.” Renato Marques & Anthony Lam, coordinated by Daniel Beitler

Categories Macau