Winning proposition

Macao has realized prosperous and stable socioeconomic development since its return to the motherland. However, moderate economic diversification is the key to better implementing the "one country, two systems" principle in the future.

Since the Macao Special Administrative Region government released policies to promote economic diversification in 2004, its economic landscape has not changed much. Macao still has a long way to go in economic diversification. Statistics published by the SAR show that the added value of gambling (including intermediary industries) accounted for 50.5 percent of Macao's GDP in 2018, 4.3 percentage points higher than 2004; in terms of tax revenue, gambling generates 113.5 billion patacas ($14.1 billion) in recurrent income and capital income, making up 80.3 percent of the SAR's total.

Moderate economic diversification is the future for Macao. But how? It will not be achieved solely on Macao's own strengths. Macao needs to ride the momentum of the plan to develop the Guangdong-Hong Kong-Macao Greater Bay Area. On the one hand, it should seek to attract resources from the Greater Bay Area to develop industries independent of gambling; on the other hand, it should develop a headquarter economy to get into the Greater Bay Area market and develop competitive industries.

In the first place, it should develop its financial industry. The traditional manufacturing industry and the service industry are not able to compete with the gambling industry with regard to profitability. The best choice for an alternative is therefore the financial industry. Monte Carlo serves as a good example for this. Macao should take into consideration its own strengths and weaknesses in positioning itself among neighboring cities such as Hong Kong, Shenzhen and Guangzhou. Macao should prioritize developing the bond, commodities and financial derivatives markets to cater to the needs of the Belt and Road Initiative and business cooperation between China and Portuguese-speaking countries. It can develop its wealth management, internet finance and green finance by following the fintech trend in finance and innovative financing. Macao is on the same starting line with other cities in the Greater Bay Area in innovative financing, but it can take advantage of its role as a free port. It should focus on selected areas and develop finance programs with rich resources and mature conditions. It should promote the pooling of financial resources, strengthen its cooperation with Portuguese-speaking countries and enhance cooperation with Hong Kong and Shenzhen as well as with technology and financing companies.

It should also develop its competitive industries such as high-end tourism by promoting education and training. And it should seek to become the tourism education and training center for the Greater Bay Area and cultivate high-end tourism professionals; develop a high-end tourism and leisure industry to cater to the needs of the residents in the Greater Bay Area; strengthen its tourism cooperation with other cities in the Greater Bay Area and develop package tourism itineraries to attract more tourists and customers.

Second, it should accelerate the development of the exhibition industry. The goal should be to establish Macao as Asia's hub for the exhibition industry and build a modern service industry with events and exhibitions at the core. Macao's exhibition industry, with conferences as the priority, should build a multi-level and complementary exhibition market for the Greater Bay Area, boosting the competitiveness of the area as a whole.

Third, it should develop its cultural and creative industry. It should seek to strengthen its position within the coordinated development of the cultural and creative industry in the Greater Bay Area, by building a cultural and creative industry chain.

Fourth, it should bolster the competitiveness of the traditional Chinese medicine industry by developing key technologies. It should develop frontier technologies of traditional Chinese medicine with the support from State Key Laboratories of Quality Research in Chinese Medicine and Shenzhen-Macao Innovation Research Institute of Traditional Chinese Medicine; expand the market of traditional Chinese medicine of Macao using the platform of Traditional Chinese Medicine Science and Technology Industrial Park of Cooperation Between Guangdong and Macao and promote the traditional Chinese medicine industry of Macao internationally, using the World Health Organization Collaborating Centre for Traditional Medicine as the platform for international exchanges.

To realize its moderate economic diversification, Macao should revise its laws and regulations to facilitate the development of new economic forms; adjust its policies for attracting and cultivating talents, which are essential for supporting its economic diversification; attract resources from the Chinese mainland to Macao, give full play to Macao's role as a free port; and enhance the relationship between Macao and Hengqin New Area in the neighboring mainland city of Zhuhai.

The author is director of the Center for Hong Kong and Macao Studies at the China Development Institute.