Macau Business Editorial |October 2023| By José Carlos Matias – Director
Confidence is a quintessential yet somewhat elusive concept and factor in economics. One thing is certain: “confidence is a self-fulfilling prophecy”. In other words, if consumers and businesses lose confidence in the future, they are less likely to spend and invest, and that ultimately leads to the economic stagnation they feared in the first place. Conversely, when consumers and investors are confident about the economy, they tend to increase consumption and investment based on an assumption those investments will yield real returns. Thus, confidence and expectations are intrinsically linked.
What we are witnessing in Macau is indeed encouraging: a robust economic recovery with major indicators showing clear improvement, led by the city’s core industries (tourism and gaming) which naturally serve as “head of the dragon”. However, the trickle-down effect for some of the region’s other business activities has not been immediate, and a conspicuously uneven recovery pattern has emerged.
On the small enterprise front, while those operating in tourist spots have reaped the benefits of the impressive resurgencein visitation other businesses in residential areas are faced with a much less optimistic picture. Many small shops are still struggling to regain their footing.
The impact of the double-edged sword that is the Northbound Travel for Macau Vehicles policy is certainly being felt by many of these small businesses.
Looking ahead, the authorities’ emphasis on community tourism is wise and is set to yield positive results as the revitalization projects for old neighbourhoods – conducted jointly between the Government and the six gaming operators – begin to take shape.
In terms of investment, overall business investor confidence and investment in real estate are closely intertwined, making the result of a land auction for two parcels in Taipa of considerable concern: just one company came forward to bid on the two plots. Considering this is the first land auction to be held in the SAR since 2008, this undoubtedly represents an undesirable development. Persistent nationwide property-sector woes combined with global economic uncertainty and a high interest-rate cycle to make the environment far from conducive for a successful tender.
The Chief Executive acknowledged this, stating the Government would give the private property sector time to recover before the next land auction. It would be unfortunate indeed to witness another missed opportunity at instilling investor confidence.
Promised (is)land
Ahead of the 2024 Policy Address and Budget, Ho Iat Seng also announced that existing social welfare measures will stay in place and that civil servants will see a salary increase. These are important moves towards ensuring social stability and consumer confidence, which should be accompanied by bold and innovative measures to support SMEs. Indeed, improving people’s livelihood was identified as one of four key priorities for elevating the city’s development highlighted by Chief Executive Ho Iat Seng at the reception commemorating the National Day of the People’s Republic of China, alongside a focus on safeguarding national security, expediting “appropriate economic diversification” and promoting the development of Hengqin island.
In addition to the upcoming Policy Address, all eyes will be on the soon-to-be-announced economic diversification blueprint expected to outline concrete steps towards appropriate (we assume pragmatic and market-oriented) diversification.
This process is closely intertwined with development of and integration with the Guangdong-Macau In-depth Cooperation Zone in Hengqin.
The forthcoming new customs management model, to operate under a “first-line, second-line” system designed to streamline the movement of goods across the border, is a key step along with various other important measures, as detailed by Hengin’s Economic Development Bureau Director António Lei in an interview for this issue of Macau Business.
The way forward: expedite these steps to bring results closer to expectations. Doing so will eliminate the need for a leap of faith, instead providing the confidence to partake in that promised (is)land lying just a stone’s throw away.
