Cross border blues

Officially inaugurated in December 2006, the success of the Zhuhai-Macau Cross Border Industrial Zone is in dispute. While businessmen speak of a lost opportunity, the Macau government says it is achieving its goals. An investigation by Macau Business has found that 80 percent of the projected plants on the Zhuhai side of the industrial zone have been built, however, many have been shut down. On the Macau side, about a third of the area is not in use, prompting some businesses to consider moving out. Officially positive Macau government figures are more positive. The cabinet of the Secretary for Economy and Finance told Macau Business that there are now a total of 114 companies operating in the Zone, of which 34 are on the Macau side. Of these, 26 operate on rented industrial areas in facilities built by the government. The remaining nine projects include the construction of factories. This is far less than what was initially envisaged. In 2004, 68 applications were presented to the Macau government, 42 of which requested land leasing to build factories, adding up to more than 1.5 times the size of the entire industrial zone. After being reviewed by a special committee, in early 2005, 23 projects got the go-ahead on the Macau side, seven of which involved the construction of factories on leased land. The original goal The 0.4 square-kilometre zone is located near Gongbei, in Zhuhai and Ilha Verde in northwest Macau, and is split 0.29 square kilometres in Zhuhai and 0.11 in Macau. The State Council approved its establishment on December 5 2003. Its original focus was to promote the sustainable development of Macau’s traditional industries, namely manufacturing. It was also supposed to house auxiliary services like logistics, transit-trade, conferences and exhibitions. Different management systems were employed on the two sides of the zone. The Zhuhai side – an extension of the Zhuhai Free Trade Zone – operates as a Free Trade, Zone and is managed as a closed area. On the other hand, the Macau side is managed in accordance with the local laws and policies. Goods made on the Zhuhai side can be sold domestically in line with Free Trade Zone policies, while products made in the Macau area enjoy zero-tariff benefits for domestic sales in accordance with CEPA regulations. The zone’s customs checkpoint is open 24-hours. Imports and exports can be declared at one checkpoint but subsequent clearance is allowed at different customs checkpoints. Unused space Jack Chan Wai Chi, chairman of the Zhuhai-Macau Cross Broader Industrial Zone Chamber of Commerce, says the main infrastructural problem is outdated industrial positioning, which has not kept up with the development of the local economy. Chan accuses the Macau government of having no action plan to introduce new dynamics into the industrial zone, adding that the relevant government departments have never tried to find out what the real situation is on the Macau side. But the government thinks otherwise. “The Macau government sees the industrial zone as a policy instrument to promote diversification in Macau’s manufacturing sector,” the cabinet of the Secretary for Economy and Finance told Macau Business in an e-mailed statement. “With food and beverage manufacturers, pharmaceutical and medicine manufacturing firms, and computer components manufacturers operating in the Macau area, the Macau government believes that the development of the Zhuhai-Macau Cross Border Industrial Zone is instrumental to the future development of Macau’s moderately-diversified economy,” it added. Success stories There are indeed some successful companies operating on the Macau side. For instance, Sociedade Industrial de Macau (SIM). The coffee production company’s site covers more than 2,100 square metres, including factory, warehouses and offices, with a total investment of MOP200 million. In 2007 Venetian Macao also leased a 190,000 square foot warehousing and logistics centre situated on the Zhuhai side of the industrial zone. The eleven-floor building was set to be used as a servicing centre to support the company’s hotel, retail and entertainment developments. The zone was even to receive a distribution centre for Portuguese products, in a partnership between Chinese group Nam Kwong and Portugal’s External Trade Institute. However, the project was dropped in 2009. Demand for change Another reason businessmen are complaining is the lack of preferential policies to make the industrial zone attractive. Instead, factors such as shortage of human resources, increasing payrolls and other operational costs are making business harder, they point out. “The main problem is the industrial zone’s unclear positioning and lack of innovation,” says Jack Chan, who is engaged in the warehousing and logistics businesses on both the Macau and Zhuhai sides. Chan recalls that the initial goal of the zone was to drive the growth of the local textile and clothing industries. However, that didn’t happen, he says, with several companies eventually relocating to the mainland, leaving a large part of the Macau side empty. On top of that, the distinct management styles on either side of the industrial zone don’t make for efficient cooperation between companies, Chan says. Grabbing opportunities Chan insists  that it is essential to re-examine the positioning of the Zhuhai-Macau Cross Border Industrial Zone, and he suggests four proposals to help do so. First, he stresses the need to establish a forward-looking positioning of the infrastructure, focusing on high-tech, capital-intensive and value-added industries. To achieve this, he notes, it is necessary to launch preferential policies to attract companies. Secondly, the Macau government should establish a goods distribution centre in the zone, since almost all goods consumed locally are imported. This would help to reduce costs and shorten delivery times, while promoting the Macau side as a logistics platform, Chan says. Finally, the businessman expects the customs agreements to become more flexible and the Macau government to put more effort into promoting the zone. The government says there are no plans for change, just studies. “A working team jointly formed by government officials from Macau and Zhuhai is now researching the feasibility of introducing new policies into the industrial zone to develop the Zhuhai side into a modern service hub, nurturing logistics and warehousing services, and other trade-related business,” says the cabinet of the Secretary for Economy and Finance. Meanwhile, due to the industrial zone’s current situation, some community leaders have called for an end to the restrictions at its border checkpoint, in order to fully open up one more border point between Macau and Zhuhai.  Currently, special permits are required to use this checkpoint and only goods vehicles owned by factories within the industrial zone are allowed to use it. Chan doesn’t oppose this, but says the government shouldn’t put the cart before the horse. Officials “should primarily solve the operational difficulties found by investors who have purchased land in the industrial zone and support their development,” he adds.