The SAR’s investment promotion agency gears up to harness the economic momentum that has been unleashed

From a slow-paced city that was a popular weekend getaway for Hong Kong residents, Macau, with its bucolic charm and seedy, smoky casinos, has become the region’s hottest tourist destination. A magnet for foreign investment driven by huge Las Vegas-style mega resorts, the enclave of Macau is now the region’s biggest overnight success story.

Ever since its reversion to Chinese administration in 1999, Macau has served as a showcase for the successful implementation of China’s doctrine of “One Country, Two Systems,” with the new Special Administrative Region (SAR) maintaining its open economic system, rule of law and free port status. But the reason it is in global business media headlines is much more exciting than that.

The liberalization of Macau’s gaming industry in 2002 started the economic development ball rolling, as Las Vegas corporations vied to land licenses to operate in a market that had been monopolized for four decades by the enormously successful Dr. Stanley Ho, head of Sociedade de Jogos de Macau. FDI poured in and huge infrastructure projects were begun, several of which, like the Sands Macao, Wynn Macau, The Venetian Macao Resort Hotel and MGM Grand Macau, are already bringing in substantial profits.

Macau’s annual average GDP growth shot up by 17 percent in 2006, and real GDP growth for the third quarter of 2007 reached 30.9 percent. Total investment surged by 38.3 percent on the back of large-scale construction projects.

In addition, record numbers of tourists are pouring through Macau’s entry ports, most from Mainland China, where restrictions on individual travel have been gradually relaxed. During the first ten months of 2007, some 22 million came, nearly 23 percent more than the previous year.

Along with the opportunities such unprecedented growth presents, Macau Trade and Investment Promotion Institute (IPIM) President Lee Peng Hong sees some big challenges. His role is to look beyond the gaming and tourism explosion to find ways that Macau’s economy can be diversified. In a city of less than 30 square kilometers, with a population barely reaching half a million people and a relatively small economy, he says, “our strategy is to build Macau as a service platform for economic cooperation in order to overcome these difficulties.”

He points out that Macau has actively sought to establish areas of cooperation with Mainland China, particularly in the Pearl River Delta Region, sometimes referred to as the “nine plus two”, for nine provinces in Mainland China and two Special Administrative Regions, Hong Kong and Macau. Small and medium-sized companies (SMEs) are the focus of much of IPIM’s efforts. The Institute works with its counterparts and entrepreneurs on the Mainland as well as with the international market and foreign companies, especially those in Portuguese-speaking countries.

“The long-term objective is to build up Macau as a service platform for economic cooperation not only in tourism, but other services, such as exhibitions, trade fairs, professional services and logistics,” says Lee.

The strategy also aims to boost Macau’s image not only as a casino city but also as a business hub, especially for Portuguese-speaking and European countries. “We think we have an advantage, and we have a role to play in this context,” he remarks.

Macau has an agreement with Mainland China to encourage foreign SMEs to use the SAR as a platform to export goods and services to the Chinese market, and which also allows Mainland companies to use Macau to reach international markets. The Zhuhai cross-border industrial zone pilot project is a good example of this cooperation. The relatively small park is already full, but its success has led to the planning of similar future projects.

“As trade and investment promotion agents, we help our local entrepreneurs to enter the international market. We also make a lot of effort to help newcomers, that is, foreign companies, in setting up in Macau, especially SMEs,” Lee concludes.