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 You are in: Under Secretary for Political Affairs > Bureau of East Asian and Pacific Affairs > Releases > Reports > 2002

U.S.-Macau Policy Report

United States-Macau Policy Act Report as of April 1, 2002 as Required by Section 204 of
Public Law 106-570
Released by the Bureau of East Asian and Pacific Affairs

TABLE OF CONTENTS

Preface

I. Significant Developments in U.S. Relations with Macau, Including any Determinations Made under Section 203 of the United States-Macau Policy Act

A. Cooperation in Anti-Terrorism Efforts
B. Gambling Sector Restructuring
C. Protection of Intellectual Property Rights (IPR)
D. Anti-Money Laundering
E. Creation of a Customs Service
F. Law Enforcement Cooperation
G. Determinations under Section 203 (none)

II. Significant Developments Related to the Change in the Exercise of Sovereignty over Macau Affecting United States Interests in Macau or United States Relations with Macau and the People's Republic of China

A. United States Interests in Macau
B. Economic and Commercial Developments
C. Combating Illegal Textile Transshipments
D. The Government
E. Human Rights, Rule of Law, and the Judiciary
F. Article 23 of the Basic Law: Treason, Subversion, and Related Crimes
G. Tackling Crime: Police and Commission Against Corruption
H. Border and Export Controls

III. The Development of Democratic Institutions in Macau

IV. 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. P.R.C. Organizations and Officials in Macau
B. Post-Handover Macau SAR-P.R.C. Agreements

V. The Nature and Extent of Macau's Participation in Multilateral Forums

Preface

Macau under Chinese sovereignty continues to develop in an overall positive direction. Over the past year, the Macau government has stated strong support for the global anti-terrorism campaign, taken decisive steps to open and reposition its economy, reorganized its customs service, and moved further to project its own identity through increased official interaction with the rest of the world. Macau citizens continue to enjoy basic human rights and a unique way of life distinct from China. While Macau's civil society and democratic institutions generally remain weak, the September 2001 Legislative Assembly elections were well run and fair. Pro-democracy groups made a stronger showing than observers expected. The People's Republic of China (P.R.C.) generally has respected its commitments regarding Macau's high degree of autonomy and P.R.C. representatives in Macau generally continue to maintain a low profile except on ceremonial occasions. Macau officials continue to run Macau and make their decisions pursuant to Macau's own identity and interests.

Macau's status since reverting to P.R.C. sovereignty in December 1999 is defined in the Sino-Portuguese Joint Declaration (1987) and the Basic Law, the SAR's mini-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 is promised a high degree of autonomy except in defense and foreign affairs. Macau officials, rather than P.R.C. 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 Public Law 101-246) do not apply to the Macau SAR. The U.S. government supports Macau's autonomy by strengthening bilateral ties (e.g., by concluding bilateral agreements), promoting trade and investment, where possible granting maximum validity visitor visas, arranging high-level visits, broadening law enforcement cooperation, and bolstering academic and cultural links.

This report covers developments affecting U.S. interests in the period from April 2001 through February 2002. These interests include: enlisting Macau's support in the fight against terrorism; preservation of Macau's free market economy; continuation of Macau's unique way of life, particularly respect for civil liberties and human rights; efforts to combat Intellectual Property Rights (IPR) piracy and illegal textile transshipment; and law enforcement cooperation to prevent transnational crime and money laundering.

I. Significant Developments in U.S. Relations with the Macau SAR including any Determinations Made under Section 203 of the United States-Macau Policy Act

A. Cooperation in Anti-Terrorism Efforts

Macau Chief Executive Edmund Ho has publicly pledged full cooperation with the U.S. and global efforts against terrorism. The government has formally implemented United Nations Security Council (UNSC) anti-terrorism resolutions 1267, 1333, and 1390. It is taking steps to come into full compliance with resolution 1373, including criminalizing violation of United Nations sanctions orders and boosting the government's authority to freeze assets. Because Macau is not a state, implementation of UN agreements and resolutions requires prior agreement by the P.R.C. After Beijing instructs Macau to implement mandatory UNSC resolutions they become part of Macau's body of law, though further domestic legislation may be required in certain instances for full implementation.

Prior to the September 11 terrorist attacks, Macau already had anti-terrorist provisions under its general criminal law. Under these provisions, any kind of support, financial or otherwise, direct or indirect, for entities or individuals involved in terrorist acts is criminalized. Macau is a party to most important international anti-terror conventions. The International Convention for the Suppression of Terrorism Financing is not in effect in Macau because the P.R.C. has yet to decide whether to become a party to this agreement.

Using lists of terrorist organizations and individuals supplied both by the U.S. government and United Nations, the Macau Monetary Authority has directed financial institutions to conduct record checks. No terrorist accounts have been found. Shortly after the September 11 events, the Macau police responded quickly and effectively to allegations of local anti-U.S. terror plans. They have cooperated fully with U.S. law enforcement agencies, have asked the U.S. government to provide updated watch lists on a regular basis, and have pledged full cooperation in any terrorist investigations.

B. Gambling Sector Restructuring

On February 8, 2002, Macau formally ended the 40-year old monopoly held by the STDM company when it awarded two of three gambling concessions to companies with U.S. interests. Macau's economy is centered on gambling and related tourism industries and this action is the centerpiece of the post-reversion government's policy to improve Macau's international reputation and transform the SAR into a Las Vegas-like gaming, convention, and family-oriented holiday destination. Foreign involvement in the gambling and tourism industries is expected to alter fundamentally the economic landscape in Macau and provide a significant boost to investment and employment. The concession decision-making process by all accounts was fair and transparent. The new concessionaires will be able to begin gambling operations on April 1, 2002.

Both U.S.-linked concession winners state that they plan to invest hundreds of millions of dollars in hotels and convention facilities, as well as casinos. These amounts will dwarf previous U.S. investment and dramatically boost the U.S. business profile in Macau.

The former monopolist STDM also won one of the three concessions, and plans significant new gambling-related investment.C. Protection of Intellectual Property Rights (IPR).

Over the past several years, a priority issue on the U.S.-Macau bilateral economic agenda has been the protection of intellectual property rights. Following the mid-1990s crackdown on the production of unlicensed optical discs (DVD's and VCD's) in the P.R.C., Macau saw a surge of manufacturing and retailing of pirated material. In 1998, in reaction to this growing problem, Macau was placed on USTR's "Priority Watch List," one of the highest categories of scrutiny under the section 301 trade practices review.

From 1999 to date, the Macau government made progress in strengthening IPR laws, tightening controls over DVD and VCD manufacturing, and stepping up street-level IPR enforcement. Further reinforcing these positive trends was the strong performance of the new Macau Customs Service in working with U.S. industry associations and maintaining high tempo operations after Customs took responsibility for IPR enforcement in November 2001. Between January and October 2001, Macau Economic Services seized more than 243,000 pirated discs from factories, shops, and warehouses and Customs sustained this high tempo in its first months of operations. As a result of these improvements in legislation and a stepped-up enforcement effort, most optical disc manufacturers were either forcibly shut down or moved operations to other jurisdictions. Macau graduated to USTR's section 301 Watch List in April 2000.

D. Anti-Money Laundering

Macau's free port, lack of foreign exchange controls, and significant gambling industry, create an environment that can be exploited for money laundering. In addition, Macau is a gateway to China, and can be used as a transit point to remit funds and criminal proceeds to and from China, Hong Kong, and other Asian countries. Under the gambling sector's previous monopoly structure, organized crime groups were associated with the industry through their control of VIP gaming rooms and various criminal activities. As a result, the gambling industry in particular has provided an avenue for the laundering of illicit funds.

Although Macau's anti-money laundering legal framework is broadly in line with international standards, in the past the government did not have an active enforcement effort in practice. Over the past year, however, the government has taken a series of important initial steps to improve its anti-money laundering regime. Macau requested and provided full cooperation with a review conducted by multilateral organizations. The government is taking steps to comply with the review's recommendations, including drawing up plans for a Financial Intelligence Unit, revising guidelines for financial institutions and other businesses, and beginning an anti-money laundering public awareness campaign. In May 2001 Macau also joined the Asia Pacific Group, a regional anti-money laundering organization. Moreover, and in conjunction with the liberalization of the gaming industry, Macau is drafting, and plans to implement by April 1, 2002, regulations specifically designed to counter money laundering in the gambling industry. The U.S. government sponsored a familiarization visit in 2001 to the United States for Macau government officials and legislators involved in gambling restructuring, which provided an overview of the U.S. gambling industry and information about anti-money laundering procedures.

These initial steps represent an important and positive beginning, but it is too early to judge the impact of Macau's efforts to create an effective anti-money laundering regime. Further efforts are necessary, particularly ensuring that appropriate regulations and organizational structures are put in place and adequate resources allocated.

E. Creation of a Customs Service

Macau maintains its status as a separate Customs Territory. As required by the Basic Law, Macau established an independent customs service. On November 1, 2001, Marine Police Commander Choi Lai Hang became Macau's first Customs Commissioner. In July 2001 the Legislative Assembly approved a Customs Bill that provided a legal framework for the new customs service. The Bill gives Customs seven major responsibilities:

  • combating contraband and other fraudulent cross-border activities;
  • preventing illegal trafficking activities;
  • monitoring external trade;
  • ensuring protection of intellectual property rights;
  • implementing Macau's international obligations in the customs area;
  • protecting personal and property safety; and
  • participating in emergency civil defense.

Launched in October, the new customs service incorporated responsibilities from both the Marine Police and Macau Economic Services (MES). Despite fears in some circles that the customs service would have difficulty managing these responsibilities, the new organization has demonstrated a high degree of professionalism and effectiveness. On IPR matters, for example, in November and December 2001 alone, the new customs service seized 26,000 pirated discs during ten raids on retail establishments offering infringing goods. To support this new organization, the United States has invited Customs officials to attend training programs at the international law enforcement academies in Bangkok and Roswell, New Mexico.

The creation of a new and effective customs service has also provided an opportunity to increase cooperation on other issues of concern such as enforcing strategic trade controls and anti-money laundering enforcement. The United States government has already stepped up our bilateral dialogue in these areas, and will be looking for other areas of possible collaboration in the months ahead.

F. Law Enforcement Cooperation

Historically, and since reversion, law enforcement cooperation between the United States and Macau has been limited and carried out on a case-by-case basis. This reflects both the paucity of criminal cases with a U.S.-Macau nexus and a lack of established procedures or reliable institutionalized arrangements or formal agreements relating to law enforcement cooperation. In the absence of a mutual legal assistance agreement, Macau courts have turned down two requests, one by a U.S. financial regulatory authority and one by a U.S. court, for access to bank records associated with U.S. law enforcement cases.

The U.S. government continues to broaden its cooperative liaison and operational relationships with Macau government agencies, with particular attention to IPR protection, narcotics trafficking, alien smuggling, illegal textile transshipment, and money laundering. U.S. law enforcement agencies assigned to the U.S. Consulate General in Hong Kong are all in regular contact with their Macau counterparts. There were at least two significant cases where the Macau Police rendered assistance to the FBI over the past year. U.S. INS officers conduct document training in Macau for immigration and airline staff and enjoy a productive working relationship with their counterparts. U.S. Customs officials conduct joint textile factory inspections and quota enforcement investigations. With the granting of two gambling licenses to two U.S. firms, U.S.-Macau law enforcement cooperation will likely increase in the future.

Based on experience elsewhere in the world, the forthcoming expansion of international gambling establishments could increase the amount of counterfeit U.S. currency circulated in Macau. The lack of reporting on counterfeit currency activity by Macau authorities represents a significant challenge, which the Secret Service hopes to overcome through ongoing training and relationship building.

Since the 1999 reversion, Macau officials involved in legislative, judicial, prosecutorial, and law enforcement crime fighting efforts have participated regularly in programs at the U.S.-sponsored International Law Enforcement Academy (ILEA) in Bangkok, and for the first time will attend the ILEA facility in New Mexico in 2002.

G. Determinations under Section 203 (none)

Section 203(a)(2) of the United States-Macau Policy Act of 2000, PL. 106-570, 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 P.R.C., the President may issue an Executive order suspending the application of such laws or provisions to Macau. No determinations under section 203 have been made.

II. Significant Developments Related to the Change in the Exercise of Sovereignty over Macau Affecting United States Interests in Macau or U.S. Relations with Macau and the People's Republic of China

A. United States Interests in Macau

United States interests in Macau include protection of American citizens; maintenance of Macau's free market economy; preservation of Macau's unique way of life, particularly respect for civil liberties and human and labor rights; efforts to combat IPR piracy and illegal textile transshipment; and law enforcement cooperation to prevent transnational crime and money laundering. The extent of Macau's high degree of autonomy also serves as an important indicator of China's respect for its international commitments.

There are nearly 600 American citizens resident in Macau, engaged in activities ranging from business to academia to missionary work. Approximately 81,000 Americans travel to Macau each year as tourists. U.S. direct investment in Macau is relatively small, inhibited by pre-handover bureaucratic red tape and the small size of Macau's domestic market. The United States officially provides only 5 percent of Macau's imports (U.S. $60.3 million), but this figure does not include substantial re-exports that come through Hong Kong.

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.-P.R.C. Agreement on the Maintenance of the U.S. Consulate General in Hong Kong.

B. Economic and Commercial Developments

According to press reports, expected new investment from the restructuring of the gaming industry will be in the range of U.S. $1.5-2.5 billion over the medium term, or approximately 24-40 percent of Macau's GDP. The resulting employment and income increases should help Macau emerge from the challenging economic environment it has faced in recent years. Macau has a small open economy that faces stiff competition both from nearby Hong Kong's highly developed services economy and the low wages and abundant land found across the border in mainland China. Macau is highly dependent on gambling and related tourism industries and on apparel exports. Gambling and tourism account for about 40 percent of GDP and taxes on gambling generate about 60 percent of total government revenue. Total exports, including domestic exports and re-exports, are equal to about one-third of Macau's GDP. Macau's main markets are the United States and the European Union, which purchase about one-half and one-quarter, respectively, of total exports.

After experiencing a four-year economic contraction from 1996-99 caused by the Asian financial crisis and a depressed tourism sector, Macau saw real economic growth of 4.6 percent in 2000. However, the subsequent global economic slowdown, exacerbated by the events of September 11, has undermined this recovery. The Macau government projects minimal growth of approximately 1.5 percent in 2001. In his November 2001 Policy Address, Chief Executive Ho set out a series of tax cuts and job creation measures designed to boost confidence and help revive spending and investment. These included a 25 percent income tax reduction, a modest property tax cut, and tax exemptions for manufacturers and restaurants. Ho promised to create 6,000 new jobs through additional infrastructure spending and provide funds for on-the-job training programs for 10,000 workers. He cautioned, however, that the government would only play a supplementary role in the economy and would rely on the private sector to drive growth. In 2000 Macau's nominal GDP totaled U.S. $6.2 billion and GDP per capita was U.S. $14,185.

Macau's public finances are sound. In the first 11 months of 2001, the government budget registered a surplus of U.S. $151 million, up by about 47 percent from the same period in 2000. The rise was due to increased revenue from gambling taxes. The government has prepared a balanced budget for 2002. There is no public debt. Macau's currency, the pataca, is indirectly pegged to the U.S. dollar through a currency board system. At the end of November 2001, foreign exchange reserves stood at U.S. $3.6 billion, up 9.5 percent over the previous year.

Macau's unemployment rate peaked at 7 percent in mid-2000 before dropping slightly to 6.5 percent at the end of 2001. The primary causes of the high unemployment rate are weak domestic demand and the relocation of labor intensive industrial processing to neighboring Zhuhai in China. Migrant labor from mainland China has also displaced some local workers and the government has faced pressure to reduce this flow as a means to lower unemployment. Officials expect the unemployment rate to stabilize in 2002 as the economy recovers.

C. Combating Illegal Textile Transshipment

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

D. The Government

Cooperation between the two-year old Macau SAR government and the U.S. government continues to be broad, effective, and mutually beneficial.

The Macau government is headed by Chief Executive Edmund Ho, who has pledged to maintain Macau's unique way of life and freedoms. In his November 2001 Policy Address, Chief Executive Ho said his priorities for the coming year were improving Macau's economy, creating more jobs, improving government services, and boosting local confidence through a package of tax cuts. He is a strong advocate of the principle that the Macau people rule Macau. Ho's approval ratings remain high.

Macau held its first post-handover Legislative Assembly election in September. Outside observers agreed that the elections were well run, open, and fair. Pro-democracy groups made a stronger showing than expected. The "pro-Beijing" candidates, despite considerable efforts and expenditures to influence voter decisions, made only modest gains. Well-funded candidates sponsored by the entertainment industry won two new seats in addition to the one they already had. The Legislative Assembly, which took office in October 2001 and will serve for four years, includes ten legislators elected region-wide (up from eight) under a proportional representation "list" system, ten (up from eight) elected by a small electorate representing various interest groups and trade unions, and seven appointed by the Chief Executive.

Though restricted by law from carrying out its own official international relations, the SAR's administration continues to establish its own identity through increased interaction with the rest of the world. Indicators of Macau's growing worldwide outreach over the past year include Chief Executive Ho's visit to Europe; training of senior and middle ranking civil servants in Singapore; Macau government participation in the WTO ministerial at Doha; establishment of a Macau representative office at the EU in Brussels; and permission for the Taipei Economic and Cultural Office to handle entry documents for Taiwan-bound visitors. Over 57 countries provide visa services to Macau residents either through their Hong Kong consulates or offices in Macau.

E. Human Rights, Rule of Law, and the Judiciary

The government continued generally to respect the human rights of its citizens. Macau citizens enjoy freedom of religion and that right is enshrined in the 1998 Freedom of Religion Ordinance. Senior Macau government officials have said that members of the Falun Gong spiritual movement, banned on the Mainland since October 1999, may continue their legal activities without interference from the government. Macau's several dozen practitioners regularly perform qi gong exercises in Macau parks and public areas and distribute literature protesting the P.R.C. government's treatment of practitioners on the Mainland. However, the U.S. government has expressed concern that since the December 2000 celebrations of the first anniversary of the handover there has been some police harassment of Falun Gong members. This has involved identification checks at police stations.

Macau's press operates without government interference. During a February 2002 visit to Macau by National People's Congress (NPC) Chairman Li Peng, however, Macau police allegedly assaulted, and broke the camera of a Hong Kong reporter who was attempting to film anti-Li demonstrators. The case is being investigated by Macau's independent public prosecutor, the procuratorate. Inadequate provision for persons with disabilities, a lack of legal protection for strikes and collective bargaining rights, and trafficking in women continue to be areas of concern.

Over the past year, Macau enacted legislation in several new areas to conform to the changing situation since the handover. New legislation included the Legislative Elections Ordinance, the Customs Ordinance, and the Gaming Industry Regime Ordinance. With the exception of ten laws listed in Annex III of the Basic Law (including, for example, laws on the Chinese flag, emblem, and anthem and the P.R.C. Nationality Law), P.R.C. laws do not apply in Macau. The Standing Committee of the NPC may add to or delete from the list of laws in Annex III after consulting with the Macau Basic Law Committee and the Macau government, but Article 18(3) of the Basic Law states that laws listed in Annex III shall be confined to matters outside the limits of Macau's autonomy.

Macau continues to enjoy an independent judiciary. Courts enjoy freedom from overt political interference. There have been no complaints of which the U.S. government is aware concerning any official, local or P.R.C., attempting to interfere with a decision of any court. On several occasions, the courts have ruled against the Macau government. As reported last year, the Chief Executive appoints both local and expatriate judges to Macau courts on the recommendation of an independent commission, which reviews professional qualifications. Judges receive adequate remuneration ranging from U.S. $5,700 (45,500 patacas) to U.S. $13,000 (104,000 patacas) per month, depending on their length of service and level of court in which they serve, and there is security of tenure. By comparison, senior civil servants earn approximately U.S. $5,750 (46,000 patacas) per month.

F. Article 23 of the Basic Law: Treason, Subversion, and Related Crimes

Article 23 of Macau's Basic Law 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." Some democracy and human rights activists are concerned that broadly drawn legislation on sedition and subversion could threaten fundamental freedoms and civil liberties. However, no proposed draft legislation or decisions on the content of the laws relating to Article 23 have yet been announced. 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.

G. Tackling Crime: Police and Commission Against Corruption

After the 1999 handover, the serious law and order problem spurred by gangland-style inter-Triad (organized crime) disputes diminished measurably. This trend has continued. A February 2002 car bomb incident, with possible Triad involvement, is still under investigation.

With the creation of a unitary police command in October 2001, the division of Macau's security forces into three branches under separate commands came to an end. Legislation placing the Public Security Police (law and order) and the Judicial Police (investigations of serious crimes) under the supervision of the Secretary for Security but directly answerable to the Chief Executive was enacted in January 2001. The Marine Police (sea border and anti-smuggling) was reorganized and subsumed into the newly established Customs Department in November 2001 (see section I. E.).

In August 2000, the Legislative Assembly passed legislation that reconstituted the pre-handover High Commission Against Corruption as the Commission Against Corruption, drastically increasing the budget and manpower of the Commission and granting it powers of arrest and detention. The new commission has also increased cooperation with Hong Kong's Independent Commission Against Corruption (ICAC), including training and a visit to Macau by the head of Hong Kong ICAC. The number of complaints of corruption handled by Macau's Commission increased from 978 in 2000, to 1,265 in 2001. However, its overall effectiveness remains constrained by legislation limiting the scope of its authority to public, not private, sector corruption.

H. Border and Export Controls

Macau maintains its own border, customs, and entry and exit controls. Macau Customs controls the borders and patrols the coast.

The licensing and regulation of trade through Macau is governed by a Foreign Trade Decree (effective since January 1999) that 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 law, the Macau Chief Executive may unilaterally impose a prior licensing requirement for any strategic good. To date, the Chief Executive has not exercised this prior licensing authority for any goods. Enforcement of this licensing requirement and inspection of incoming goods is the responsibility of the Macau Customs Service.

As a practical matter, Macau's ability to maintain international export control standards is very limited. The Customs Service, although well intentioned, has little practical 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. May 1999 U.S. Department of Commerce regulations established Macau as a separate export control designation; the United States-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 P.R.C.

In February 2002 MES participated for the third time in the annual Asian Export Control Seminar hosted by the Government of Japan. In addition, Macau authorities have expressed interest in international export control training, either from the United States or from other partners such as Japan and the U.K.

III. The Development of Democratic Institutions in Macau

The ability of Macau citizens to change their government is significantly restricted. The government is led by a Chief Executive, who was selected in 1999 by a Selection Committee composed of 200 Macau residents chosen by the Preparatory Committee (60 Macau and 40 mainland representatives appointed by the P.R.C. government). The Basic Law requires the Legislative Assembly to enact an Election Law determining how members of a 300-member Election Committee to select the Chief Executive in 2004 will be chosen. Amendments to the method for selecting the Chief Executive for terms after 2009 may be made with the endorsement of two-thirds of the Legislative Assembly and the Chief Executive's consent. Any such amendment must be reported to the Standing Committee of the NPC for approval. Unlike Hong Kong's, Macau's Basic Law does not posit "universal suffrage" as an ultimate goal in choosing the Chief Executive or the legislature.

An annex to the Basic Law prescribes that the number of directly elected legislators increase from the present ten in 2001 to 12 in 2005 (there were eight directly elected legislators at the time of the 1999 handover). The number of indirectly elected legislators will remain at ten in 2005. The number of appointed legislators will remain at seven, for a total of 27 legislators in the current Assembly, and 29 in the 2005-2009 Assembly. Like changes to the method for selecting the Chief Executive, after 2009, amendments changing the terms for election of legislators may be made with the endorsement of two-thirds of the Legislative Assembly and the Chief Executive's consent. Any such amendment must be reported to the NPC Standing Committee for approval.

Even with the small increase in the number of directly elected legislators in 2001, Macau's democratic institutions remain weak. The ability of the legislature to initiate legislation is limited, although it plays a role in shaping it. There is little public pressure for democratization or broader government restructuring. Macau's civic organizations are not well developed. Notable exceptions, such as the Residents' Associations, have historically been regarded as pro-Beijing. There are no political parties and few civic groups organized specifically to deal with political issues. Most of the civic organizations that run candidates for election come together for the purpose of the election and disband shortly thereafter. In the 2001 elections, about 83,000 voters -- 52 percent of those registered -- cast ballots. In contrast, there were only 2,224 electors representing 625 associations who voted for the indirectly elected legislators.

IV. 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. P.R.C. Organizations and Officials in Macau

Since the handover, P.R.C. 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 a high degree of 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 any business activities.

B. Post-Handover Macau SAR-P.R.C. Agreements

There have been no Macau-P.R.C. agreements concluded since the handover, although Macau and the P.R.C. are negotiating an Agreement on Service of Documents in Civil and Criminal Matters. Macau's Secretary for Security announced in March 2000 that Macau and the P.R.C. would discuss a prisoner transfer agreement, but no agreement has been concluded. (As of February 2002, 214 of the 879 prisoners in Macau jails come from the Mainland.)

V. The Nature and Extent of Macau's Participation in Multilateral Forums

Macau submitted a report under the Convention on the Elimination of Racial Discrimination in July 2001. Macau's reports are transmitted to the UN through Beijing, which does not edit them. Macau's report on compliance with United Nations resolution 1373 on terrorism was incorporated into the P.R.C.-wide report. As mentioned above, 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. A comprehensive list of Macau's participation in multilateral forums is contained in the Department's March 27, 2001 Report.

Released April 11, 2002


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