Albano Martins
The master plan for the development of the Guangdong-Macau intensive cooperation zone in Hengqin was recently made public. These are the first steps to be taken towards the integration of Macau into the Greater Bay Area.
It is a complete integration which is projected to be faster than was originally anticipated given the task to overcome possible and inevitable delays of such a process with so many demanding goals.
Contrary to what has been said, it has little or nothing to do with Macau’s industrial diversification, for the simple reason that Hengqin is not Macau’s territory and as such the production from any industry held there by residents does not enter Macau’s GDP but counts only for its GNP.
It is a diversification of Macau’s investment into new industries or other activities outside the territory, which directly contributes to its GNP but not to its GDP, as indeed any investment made within the country or in any foreign country, through the so-called “external remuneration factors” (such as salaries or dividends of Macau residents) that are transferred to Macau as a result of this investment.
There is great effort by China to reduce the tax burden on companies in this cooperation zone in Hengqin, but they missed a small detail. The document speaks of a 15 percent corporate tax, but in Macau the tax system is much more appealing with a maximum level of 12 percent, exemptions of 600,000 patacas from taxable income and, after calculating the tax, a “Forgiveness” of taxes (deduction from taxable income) of 300,000 patacas.
Technically, in Macau, a company only pays tax on profits if the profit is higher than 3.1 million patacas, including expenses like depreciation and amortization of investments.
Therefore, these incentives must be improved for this to be much more inviting.
In my opinion, this document is more intended for the development of Hengqin, and Macau is being called upon to contribute to it, while naturally benefiting from the business opportunities that will be catalyzed by this project, and in this way to integrate into Greater China.
This cooperation zone will create jobs for local residents on the island of Hengqin for those who want to move there, will drive the emergence of other businesses, and at the same time will gradually increase integration and dilute the characteristics of the Macau system.
But what is the positive effect on the activity within Macau’s borders?
The competition will increase, the local real estate market will tend to lose value, correcting the huge speculative market values of recent years, the pressure on the local workforce will tend to increase due to its continued shortage, small businesses at home will benefit and other small businesses will emerge.
There will be a lot to do to achieve this full integration and many decisions to be taken and among them the resolution of key and very complicated issues, if the idea is to preserve what was internationally agreed until 2049.
Whatever the effect of this document’s appeal, only private entrepreneurs will be able to determine for themselves whether or not they are interested in investing in this “cooperation zone,” or whether it is more convenient and safer to limit their investments locally, based upon the knowledge that the Government of Macau should necessarily be involved, and rightly so in my view, in this cooperation effort with its own publicly owned companies.
Macau’s history doesn’t bode favorably for such an ambitious scheme. Local entrepreneurs seek very short-term businesses, which is why their important textile industry has disappeared.
This process of integration and development is intelligent, but economic and social life does not always follow plans made inside cabinets.
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