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 You are in: Under Secretary for Political Affairs > Bureau of East Asian and Pacific Affairs > Releases > Reports > 2003

U.S.-Macau Policy Act Report

As of April 1, 2003, As Required by Section 204 of P.L. 106-570
Released by the Bureau of East Asian and Pacific Affairs
April 11, 2003

TABLE OF CONTENTS

I. SUMMARY

II. BACKGROUND

III. U.S. INTERESTS IN MACAU

IV. SIGNIFICANT DEVELOPMENTS IN U.S. RELATIONS WITH MACAU (4/1/02 Ė 3/31/03)

A. Anti-Terrorism Cooperation
B. Economic and Commercial Developments
C. Export Controls
D. Law Enforcement Cooperation
E. Political Developments
F. The Judiciary
G. The Nature and Extent of Macauís Participation in Multilateral Forums
H. Determinations under Section 203 (none)

V. COMPLIANCE BY THE GOVERNMENT OF THE PEOPLE'S REPUBLIC OF CHINA AND THE GOVERNMENT OF THE REPUBLIC OF PORTUGAL WITH THEIR OBLIGATIONS UNDER THE JOINT DECLARATION

A. PRC Organizations and Officials in Macau
B. Post-handover Macau SAR-PRC Agreements

I. SUMMARY

Macau continued to develop in a positive direction during the period of this report and cooperation between the United States and Macau remained broad, effective, and mutually beneficial. Over the past year, the Macau government has reiterated its support for the global anti-terrorism campaign and enacted anti-terrorism legislation; taken more steps to open and reposition its economy; and, continued to project its own identity through official interaction with the rest of the world. Macau residents continue to enjoy basic human rights and a unique way of life distinct from the Peopleís Republic of China (PRC), although Macau's civil society and democratic institutions remain weak. The PRC has respected its commitments regarding Macau's high degree of autonomy. Macau officials continue to run Macau and make their decisions pursuant to Macauís own identity and interests.

II. BACKGROUND

Macau's status since reverting to PRC sovereignty in December 1999 is defined in the Sino-Portuguese Joint Declaration (1987) and the Basic Law, Macau's constitution promulgated by China's National People's Congress (NPC) in March 1993. The Joint Declaration and the Basic Law specify that Macau's social and economic system, lifestyle, rights, and freedoms are to remain unchanged for at least 50 years. Under the concept of "one country, two systems" articulated in these documents, Macau enjoys a high degree of autonomy except in defense and foreign affairs. Macau officials, rather than PRC officials, run Macau through the exercise of separate executive, legislative, and judicial powers. Macau maintains its own separate currency, customs territory, immigration and border controls, and police force.

In recognition of Macau's high degree of autonomy, the United States continues to accord Macau a special status distinct from the rest of China under U.S. law and policy. For example, the sanctions imposed on China after the June 1989 violence in Tiananmen Square (section 902 of P. L. 101-246) do not apply to the Macau Special Administrative Region (SAR). The U.S. government supports Macau's autonomy by strengthening bilateral ties through the promotion of bilateral trade and investment, law enforcement cooperation, academic and cultural links, and high-level dialogue and visits (See Macau Policy Act of 2000, 22 U.S.C. 6901 note).

This report covers developments affecting U.S. interests in the period from April 2002 through March 2003.

III. U.S. INTERESTS IN MACAU

U.S. interests in Macau include enlisting Macauís support in the fight against terrorism; protecting American citizens; supporting the maintenance of Macauís free market economy and unique way of life, including respect for civil liberties; protecting U.S. commercial interests; and, working with Macau to combat IPR piracy, illegal textile transshipment, money laundering, and other transnational crimes. The extent of Macauís high degree of autonomy also serves as an important indicator of Chinaís respect for its international commitments.

There are nearly 600 American citizen residents in Macau, engaged in activities ranging from business to academia to missionary work. Approximately 86,000 Americans traveled to Macau in 2002 as tourists. U.S. investment in Macau, while small in the past, is expected to increase in coming years as the result of the 2002 awarding of two gaming concessions to consortia with U.S. interests. Though trade with Macau represents a small portion of U.S. trade, the United States was Macau's second largest trading partner after China. U.S. exports to and imports from Macau in 2002 were USD 79 million and USD 1.2 billion, respectively.

The U.S. Consulate General in Hong Kong performs a full range of services and operations in Macau under a March 25, 1997 U.S.-PRC Agreement on the Maintenance of the U.S. Consulate General in Hong Kong.

IV. SIGNIFICANT DEVELOPMENTS IN U.S. RELATIONS WITH MACAU:  April 1, 2002 Ė March 31, 2003

A. Anti-Terrorism Cooperation

After the September 11 attacks, senior Macau officials pledged full cooperation with U.S. and global efforts against terrorism. The legislature passed an anti-terrorism law in April 2002 that includes provisions that are consistent with the requirements of UN Security Council Resolution 1373. That legislation criminalized violations of UN Security Council resolutions, including those aimed against terrorist activities. The government is aware of the U.S. governmentís high priority accorded to counter-terrorism and is considering additional legislation that will give the government expanded authority to designate terrorists and freeze their assets without first obtaining a court order and allow prosecution of persons who commit terrorist acts outside of Macau.

Macau is a party to 10 of 12 major international anti-terrorism conventions and protocols. Because Macau is not a state, implementation of international treaties formally occurs via its sovereign, the PRC. After the PRC becomes a party to such treaties, it directs Macau to implement them. The two conventions and protocols that Macau has not yet applied because the PRC has not become a party to them are the International Convention for the Suppression of the Financing of Terrorism, and the Convention on the Marking of Plastic Explosives for the Purpose of Detection. Macau intends to apply the Protocol on the Suppression of Unlawful Acts of Violence at Airports Serving International Civil Aviation, to which the PRC is a party, following resolution of a legal technicality regarding the PRCís accession to it.

Macauís financial regulatory authorities continue to direct financial institutions to conduct account searches for terrorist funds, using lists of individuals and entities designated by the U.S. under relevant authorities, as well as the UN 1267 Sanctions Committeeís consolidated list of individuals and entities associated with the members of al Qaíida, the Taliban, and Usama bin Laden. No terrorist funds have been found. The Macau government has responded quickly and cooperatively when asked by U.S. law enforcement agencies for assistance on anti-terrorism matters. Macau participated in a voluntary self-assessment exercise for non-Financial Action Task Force (FATF) members in which it evaluated its compliance with the FATFís Eight Special Recommendations on Terrorist Financing.

B. Economic and Commercial Developments

Macauís economy grew strongly in 2002, with real GDP up more than 8 percent in the first three quarters, compared to only 2.1 percent growth in 2001. Rising activity in its two main sectors, gaming and tourism, drove this performance. Tourism benefited by a surge in tourists from China. Public finances remained sound, with a budget surplus, and foreign exchange reserves rose 7.7%. Unemployment remained high by historical standards, at 6.3% toward year-end, owing to the relocation of labor-intensive industrial processing to neighboring China and an inflow of migrant mainland China laborers willing to accept low-wage jobs. The pataca, Macauís currency, remained linked to the U.S. dollar through a currency board system.

In his November 2002 Policy Address, Chief Executive Edmund Ho announced a continuation of tax cuts and job creation measures. These included a 25% income tax reduction, a modest property tax cut, and tax exemptions for manufacturers and restaurants. The government plans USD 225 million in infrastructure investment in 2003, and hopes that this will create 8,000 new jobs. The Chief Executive also called for civil service reform.

After the government ended the 40-year-old gaming monopoly of the STDM Company in February 2002, the government awarded concessions to three consortia, including two with significant U.S. investment. The restructuring of the gaming industry remains the centerpiece of Macauís efforts to improve its international reputation and become a Las Vegas-like gaming, convention, and family-oriented holiday destination. The possible new investment of USD 1.5-2.5 billion in the medium term (a sizable percentage of Macauís GDP) will increase jobs and income and dramatically raise the U.S. business profile in Macau.

Macau-origin textiles and apparel continued to enter the United States under quotas separate from those of China. Under the terms of a September 2000 bilateral Memorandum of Understanding, our two governments cooperate in enforcing textile quotas and preventing illegal transshipment. The United States continued periodic visits by U.S. Customs Textile Production Verification Teams to ensure compliance with Macauís bilateral textile commitments.

The protection of intellectual property rights remains a priority issue on the U.S.-Macau bilateral economic agenda. Macauís progress since 1999 in strengthening IPR laws, tightening controls over DVD and VCD manufacturing, and stepping up street-level IPR enforcement resulted in Macau being removed from USTR's Special 301 list in 2002. Macauís new Customs Service worked with U.S. industry associations and maintained high tempo operations to combat piracy; for 2002, the government stepped up enforcement with 141 raids, during which it seized 86,718 pirated discs, 223 stampers, three optical disc production lines and two production lines for stampers. As a result, almost all optical disc manufacturers in Macau have been shut down or moved their operations to other jurisdictions.

C. Export Controls

Macau maintains its own border and customs controls. The licensing and regulation of trade through Macau is governed by a Foreign Trade Decree. This decree gives Macau Economic Services (MES) and other government departments broad authority to regulate the import or export of sensitive products ranging from firearms to CD manufacturing lines. In addition, under Article 12 of the decree, the Macau Chief Executive may unilaterally impose a prior licensing requirement for any strategic good. The Chief Executive has not exercised this prior licensing authority for any strategic goods, but MES officials are drafting a law to establish a control list. Enforcement of this licensing requirement and inspection of incoming goods are the responsibility of the Macau Customs Service.

As a practical matter, Macau's ability to maintain international export control standards remains limited. The Customs Service, established in November 2001, is still developing expertise in export control policy and those officers now policing the airport, border, and harbor have limited technical competence with which to identify sensitive goods. Moreover, there is currently no system in place to regulate trade in dual-use commodities. In May 1999, U.S. Department of Commerce regulations established Macau as a separate export control designation; the Macau Policy Act stipulates that U.S. export control laws, regulations, and practices shall apply to Macau in the same manner and to the same extent that they apply to the PRC.

The U.S. government aims to help Macau improve its export control regime. We provided training to Macau law enforcement officials on export controls through programs at the U.S.-sponsored International Law Enforcement Academy (ILEA) in Bangkok (see Law Enforcement Cooperation section). Macau also participated in regional export control conferences. Macau authorities have expressed interest in additional international export control training from the United States, Japan, United Kingdom or other partners.

D. Law Enforcement Cooperation

Law enforcement cooperation between the United States and Macau continued to deepen during this reporting period. U.S. law enforcement agencies assigned to the U.S. Consulate General in Hong Kong worked with their Macau counterparts on issues that included drug trafficking, money laundering, illegal textile transshipment, alien smuggling, and intellectual property rights protection. For example, the Macau Judiciary Police gave extensive assistance to the U.S. Drug Enforcement Agency in two important International Impact/Priority Target drug investigations and Macau authorities allowed U.S. Immigration and Naturalization Service personnel to be stationed at Macau international airport as U.S. Immigration Control Officers.

Macauís free port and lack of foreign exchange controls create an environment that can be exploited for money laundering in the region. Although the gaming monopoly has ended, organized crime groups continue to be associated with the gaming industry through their control of VIP rooms and various criminal activities. As a result, the gaming industry in particular provides an avenue for the laundering of illicit funds. The forthcoming expansion of international gambling establishments has the potential to increase the amount of counterfeit U.S. currency circulated in Macau. The lack of reporting on counterfeit currency activity by Macau authorities thus represents a significant challenge, which the U.S. Secret Service hopes to overcome through ongoing training and relationship building.

Macauís anti-money laundering legal framework is in line with international standards, but enforcement has been weak. The government continued over the past year to take additional steps to combat money laundering, such as implementing regulations designed to prevent money-laundering in casinos and establishing a financial intelligence unit. The IMF reviewed its regime as part of a financial sector assessment in 2002 and made numerous recommendations that have either been implemented by the government or are under active consideration. Positive developments include the governmentís drafting of regulations designed to prevent money laundering in the gaming industry. In addition, the increased attention paid to financial crimes in Macau after the terrorist attacks of September 11 led to a sharp increase in the number of suspicious transaction reports. In May 2002, the Macau Monetary Authority issued revised anti-money laundering regulations for banks that brought those regulations into greater conformity with international practices. The Monetary Authority also provided guidance for banks, money changers, and remittance agents on record keeping and suspicous transaction reporting for cash transactions over USD 2,500. Government officials participated in anti-money laundering training sessions offered by international bodies. The police also boosted hiring in 2002 which should provide more resources for anti-money laundering efforts. U.S. law enforcement agencies will host a money laundering seminar in Hong Kong in August 2003 and will invite Macau officials.
Macau officials involved in legislative, judicial, prosecutorial, and law enforcement crime fighting efforts continued to attend a variety of crime-fighting programs at the U.S.-sponsored International Law Enforcement Academy (ILEA) in Bangkok in 2002. INS in Hong Kong conducted quarterly fraudulent document training/recognition sessions with Macau Police/Immigration and commercial airline carriers.

Law enforcement cooperation between the United States and Macau is carried out on a case-by-case basis because there are no formal bilateral agreements on law enforcement cooperation.

E. Political Developments

Chief Executive Ho is a strong advocate of the principle that Macau people rule Macau and that Macau must maintain its unique way of life and freedoms.

Macau's democratic institutions remain weak. The ability of the legislature to initiate legislation is limited, although it plays a role in shaping legislation. There is little public pressure for democratization. Pursuant to Macauís Basic Law, the number of directly elected legislators will increase to 12 in 2005. After 2009, the selection of the Chief Executive may be changed by two-thirds endorsement of the Legislative Assembly and approval by the NPC Standing Committee. Changes in the method for forming the Legislative Assembly require a two-thirds endorsement of the assembly, agreement by the Chief Executive, and notification to the NPC Standing Committee. Except for a few Residentsí Associations that support Beijing, Macau's civic organizations are not well developed. There are no political parties and only one civic group organized specifically to deal with political issues. The ability of Macau citizens to change their government is significantly restricted, and, unlike Hong Kong's, Macaoís Basic Law does not posit "universal suffrage" as an ultimate goal in choosing the Chief Executive or the legislature.

During the year, the Macau government began work to draft legislation required by Article 23 of Macauís Basic Law. Article 23 states that "the Macau SAR shall enact laws on its own to prohibit any act of treason, secession, sedition, subversion against the Central People's Government, or theft of state secrets and to prohibit foreign political organizations or bodies from conducting political activities in the Region, and to prohibit political organizations or bodies of the Region from establishing ties with foreign political organizations or bodies." The government plans to submit a bill to the Legislative Assembly in Spring 2003. Local democracy and human rights activists expressed concern about the impact such legislation could have on civil liberties. The U.S. government has urged Macau to undertake widespread public consultation on these laws as they are drafted to ensure that they are consistent with Macau's legal tradition and the International Covenant on Civil and Political Rights, as reflected in the Basic Law.

During this reporting period, Macau continued to establish its own identity through increased interaction with the rest of the world. Examples of Macauís continuing worldwide outreach included Chief Executive Hoís visits to Mozambique and East Timor, and visits by Economic and Trade Office delegations to Brussels and Portugal. Sixty-one countries provide visa services to Macau residents either through their Hong Kong consulates or offices in Macau.

F. The Judiciary

Macau continues to enjoy an independent judiciary. Courts are free from political interference. On several occasions, including in 2002, the courts handed down verdicts against the Macau government. The Chief Executive appoints both local and foreign judges to Macau courts on the recommendation of an independent commission, which reviews professional qualifications.

G. The Nature and Extent of Macauís Participation in Multilateral Forums

Macau's UN reports are transmitted through the central authorities in Beijing. SAR government officials have said that Beijing does not alter Macauís reports. Information on anti-terrorism measures Macau has taken under United Nations Security Council Resolution 1373 was incorporated into the PRC-wide report. In May 2001 Macau joined the Asia-Pacific Group, a regional anti-money laundering forum. Macau has full, partial, associate and participatory memberships in a large number of multilateral forums and bilateral agreements.

H. Determinations under Section 203

Section 203(a)(2) of the Macau Policy Act stipulates that whenever the President determines that Macau is not sufficiently autonomous to justify treatment under a particular law or provision of the United States different from that accorded the PRC, the President may issue an order suspending the application of such laws or provisions to Macau. No determinations under section 203 have been required.

V. COMPLIANCE BY THE GOVERNMENT OF THE PEOPLE'S REPUBLIC OF CHINA AND THE GOVERNMENT OF THE REPUBLIC OF PORTUGAL WITH THEIR OBLIGATIONS UNDER THE JOINT DECLARATION

A. PRC Organizations and Officials in Macau

Since the 1999 handover, PRC official organizations in Macau, including the Ministry of Foreign Affairs and the Central People's Government Liaison Office, have maintained a low public profile and have not interfered in areas over which Macau exercises autonomy.

Between 500 and 600 People's Liberation Army (PLA) soldiers are stationed in Macau, primarily as a symbolic presence to underscore Chinese sovereignty. The remainder of the 1,200-strong Macau garrison resides just across the Chinese border in Zhuhai. Although the Basic Law states that the Macau SAR government may "when necessary" ask the central government to allow the garrison to assist in maintaining public order or disaster relief, Chief Executive Ho has said that, in keeping with the Basic Law the garrison will play no role in internal security. The garrison has maintained a low profile, with soldiers generally wearing civilian clothing when off base and not engaging in business activities.

B. Post-handover Macau SAR-PRC Agreements

Macau and the PRC have an Agreement for Mutual Service of Judicial Documents in Civil and Commercial Proceedings between PRC and Macau courts, which took effect September 2001. Macau and the PRC are currently negotiating an Agreement on Service of Documents in Criminal Proceedings. Macauís Secretary for Security announced in March 2000 that Macau and the PRC would discuss a prisoner transfer agreement, but no agreement has been concluded to date. (As of October 2002, 200 of the 911 prisoners in Macau jails came from the mainland.)

[End]  


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