Viva Macau just the ‘Tip of the iceberg’ | AL commission condemns lack of control over public spending

The Legislative Assembly’s (AL) Follow-up Commission on Public Finance has issued several reports addressing concerns expressed by members of the supervising body over the spending of public funds.

The AL body denounced a wide range of situations potentially damaging to public finances, perhaps in light of the government’s irrecoverable loss of MOP212 million in the recent Viva Macau case.

In their annual report, members of the Commission have now revealed concerns over several other companies in which the government has invested large amounts of money without guarantees and a near-complete lack of oversight and regulation, which may result in even heavier losses.

According to the report, over the last couple of years, the government has invested a total of over MOP6 billion in 15 government-funded companies. According to signed contracts and the commission’s analysis, the companies have no legal obligation to disclose project information and financial results, shielding them from public scrutiny.

The report noted that there were no rules or regulations obligating the 15 companies to refund the government any share of profits obtained in their operations.

Of the 15 companies, “Macau Investimento e Desenvolvimento, S.A.” was the one singled out. The company runs the Traditional Chinese Medicine Park on Hengqin Island. Public finance reports state that the government has so far invested MOP4 billion without any provisions for expected revenue, a fact that the Secretary for Economy and Finance, Lionel Leong, has been unsuccessfully trying to explain to lawmakers. The report notes that in his explanations, Leong often refers to large investments in infrastructure and equipment as reasons why the companies are not yet able to generate revenue. But the lawmakers are keen to enforce stricter rules and controls over financing mechanisms in order to prevent cases like Viva Macau from happening again, questioning the role of seemingly inefficient government-appointed company delegates.

Leong replied to the Commission, saying that “in the future, the definition of the guidelines [will be studied] as well as requirements to be fulfilled by the delegates from the government and official representatives from the companies,” acknowledging that at the moment, there are no such rules.

Other companies of concern include the Macau Productivity and Technology Transfer Centre and Macau International Airport Co. Ltd., among others.

In fact, Viva Macau is just the tip of the iceberg, according to the report, as it refers to other companies that the government has invested several millions in and have already opened bankruptcy proceedings. The government holds an 88 percent share in real estate company “Tai Lei Loi – Sociedade de Fomento Predial, Lda.,” for example, which filed for bankruptcy in 2016 and had their assets reduced to only MOP109 million, according to the latest information. But government reports show the government injected over MOP417 million into the company and registered a loss of MOP308 million, almost 50 percent more than the reported Viva Macau bankruptcy losses.

Lawmakers are now urging the government to enforce new rules which include the regulations of several neighboring regions, namely mainland China, where, over the last few years, documents such as Measures for the Administration of the Collection of Proceed from State-owned Capital of Central Enterprises, Interim Measures for the Administration of Central State-owned Capital Operation Budgets, and Interim Measures for the Management of Central State-owned Capital Operation Budgetary Expenditures have been published, among others.

PIDDA execution rates continue to concern

A topic that continues to plague the Legislative Assembly’s (AL) Follow-up Commission on Public Finance is the Public Investment Plan (PIDDA) execution rates for most government departments and bureaus.

The Commission highlighted several public services that have been registering very low execution rates in its latest report. At the top, the Housing Bureau registered an execution rate of just 0.7 percent, followed by the Macau Government Tourism Office with 6.5 percent, and the Cultural Affairs Bureau, which spent only 13.8 percent of their original budget.

According to the lawmakers, this report analyzed public services that registered execution rates lower than 40 percent only, and they are yet to include the Sports Bureau (15.7 percent), University of Macau (38.7 percent) and Civic and Municipal Affairs Bureau  (39.6 percent).

When addressing the many questions on the topic, government representatives continued to iterate the same answers, noting that there are different reasons for the low execution rates, the most frequent of which being “very general budgeting with poor forecast of outcomes,” as well as “insufficient or inadequate laws and regulations that force projects to be put on hold due to lack of regulation, training, equipment or interdepartmental collaboration.”

In some cases, delays to budgeted works or excessive approval times for the acquisition of materials, services or equipment were also suggested as possible causes.

These reasons led to the commission’s suggestion that budget forecasts should be delivered to “professionals” in order to avoid these “budgeting failures.”

Secretary Leong expressed hope that new bills on the “regime on expenditures with works and acquisition of goods and services,” for which the public consultation was expected to happen in the second trimester of this year, will address this and enter into force as soon as possible.