Scholars endorse gov’t MOP11 billion allocation for diversification development

Scholars say the government’s plan to establish a MOP11 billion guiding fund to support economic diversification could help professional asset management institutions identify high-quality local enterprises with strong competitiveness and sustainability, while attracting social capital to the region.

The initiative involves allocating at least MOP11 billion from fiscal reserves to create a government-led fund aimed at promoting appropriate diversification of the local economy.

In conjunction with the initial batch of social capital, authorities anticipate that the fund’s total scale will reach MOP20 billion.

Secretary for Economy and Finance Anton Tai outlined the fund’s objectives at a recent press conference, which include encouraging, pooling, and directing private capital to attract high-quality enterprises and exceptional managers for government-led investments in key industries.

As noted, this initiative aims to support the accelerated development of a diversified industrial structure in Macau, promote industrial upgrading and quality enhancement, foster coordinated regional development, and create diverse and high-quality employment opportunities.

It also seeks to open a new chapter of high-quality development for Macau residents while contributing to the national goal of establishing a science and technology powerhouse.

The “government-guided fund” reportedly emphasizes the principle of “government guidance and market operation,” with the government leading efforts to identify key industries and development directions. By establishing selection mechanisms and rules for professional fund managers, the fund aims to create favorable conditions for active market participation, leveraging the professionalism, flexibility, and efficiency of market operations.

This announcement aligns with Chief Executive Sam Hou Fai’s statement during last year’s inaugural Legislative Assembly plenary session, where he indicated that his administration would expedite research into establishing a government industrial fund and a technology commercialization guidance fund.

According to him, the government plans to engage third-party professional institutions to conduct preliminary research on the fund’s capital scale, management model, investment objectives, and operational framework, ensuring that the fund design meets local development needs.

According to experts, unlike traditional direct government investment models, guiding funds combine fiscal resources with market capital, leveraging the multiplier effect of fiscal funds to mobilize social capital toward high-tech industries, key sectors, and infrastructure. By synergizing an “efficient market” with an “effective government,” these funds aim to drive industrial transformation and economic restructuring.

The Macau Economic Association remarked that Macau’s economic structure and tax revenue sources remain relatively concentrated in its main industries, and the scale effects of diversified industrial development have yet to be fully realized.

Guiding social capital to enhance support and funding for diversified industries is expected to help resolve existing economic challenges, promote the optimization and upgrading of the industrial structure, and advance the moderate diversification of Macau’s economy.

As reported by public broadcaster TDM, a recent interview with Henry Lei, associate head of the University of Macau’s Faculty of Business Administration, identified the fund as a form of equity financing.

He reportedly noted that this approach is widely adopted in various regions globally, including Singapore, Hong Kong, and Israel, to raise long-term capital for enterprises engaged in technology commercialization. Lei believes this strategy can help guide professional asset management institutions in identifying and selecting high-quality local enterprises with market potential and commercial sustainability, ultimately providing development funding through equity financing.

Meanwhile, another economist, Ip Kuai Peng, vice rector of City University of Macau, commented that Macau currently has a limited number of high-quality, high-growth enterprises.

He warned that pursuing rapid capital deployment and making hasty investments risks creating inefficient “scattergun” approaches, which can lead to fragmented capital allocation, insufficient leverage, and even idle or misallocated funds. Ip emphasized that the core function of a guiding fund is to “guide” and “leverage” social capital, with subsequent operations needing to strictly adhere to market mechanisms and uphold professional, market-oriented principles, avoiding administrative thinking in project selection and investment decisions.

He also urged authorities to broaden their international perspective by welcoming participation from global fund management teams, asserting that leveraging international insights and expertise is essential for identifying high-quality projects and enhancing investment efficiency, ultimately maximizing the leverage effect of fiscal funds.