Looking for the elixir

The first round of the consumption subsidy scheme provides short-lived relief for local businesses, which expect some changes to the scheme, more help from the authorities — and ultimately the comeback of visitors

The main goal of the consumption subsidy scheme launched by the government in May is to enhance the spending power of residents and thus to expedite the recovery of local businesses amid the outbreak of the novel coronavirus (COVID-19). But the impact of the first round of MOP3,000 consumption vouchers has so far been constructive but fleeting, and many businesses still await for more elixirs.

“The consumption cards mostly benefit the shops and merchants in neighbourhoods… while those in tourist districts remain to have little or no business,” says Fong Kin Fu, president of the Federal General Commercial Association of Macau Small and Medium Enterprises (SMEs).

“Residents also only use the consumption smartcards on daily necessities or when there are discounts offered by the shops,” he continues. “As the future prospect is still clouded by uncertainties, residents remain cautious over expenditure.”

As one of the means to facilitate the recovery of local economic activities, the government has forked about MOP2.2 billion to give out each Macau resident a stored value smartcard of MOP3,000 to spend in local merchants between May and July. Due to the severely negative impact of COVID-19 upon the economy citywide and worldwide, the authorities have announced there will be a second round of vouchers, in which residents could spend MOP5,000 between August and December.

“The consumption subsidy scheme overall did help to a certain degree in stimulating the domestic demand, as residents now are reluctant to spend,” Mr. Fong says. “The [business] environment now is slightly better than the worst times but it is still far from the pre-pandemic times.”

According to a mid-term report on the scheme unveiled by the Economic Bureau, about 15.64 million transactions were settled through e-vouchers across various sectors in a total of MOP1.46 billion in the 1 May – 15 June period. As of 15 June, consumption card holders have spent MOP2,481 in average.

The mid-term report also shows that a total of MOP410 million were injected into the local economy through the consumption cards in the first week of the implementation of the scheme, but the amount has been on a declining trend since then as more and more residents have depleted the MOP3,000 quota. The weekly amount dropped over 15 percent to MOP338 million in the second week of the scheme and more than 36.9 percent to MOP253 million in the third week, before wrapping up the sixth week with only MOP101 million.

Spending power

“Many residents have finished up their MOP3,000 quota quickly after the start of the scheme, and the local spending power has worsened again in recent times,” says Lei Cheok Kuan, chairperson of the Macau Central and Southern District Industry and Commerce Federation that covers the city’s downtown.

He agrees the retail and food and beverage businesses in neighbourhoods have benefitted the most from the scheme. “I run a small jewellery store near the Ruins of St. Paul’s and the business in the past few months has been dreadful albeit the [consumption subsidy] scheme,” he adds.

As most of the merchants in neighbourhoods have reopened doors, quite a many stores in tourist districts — namely, the areas near the Ruins of St. Paul’s, Senado Square, Avenida de Almeida Ribeiro and Rua do Cunha in Taipa — are still out of business amid the absence of travellers, the businessman notes.

Though the territory has only reported 45 COVID-19 cases with the last case dating back to 8 April and the virus situation in Mainland China has been stable despite the recent hiccups in Beijing, the travel restrictions across the region have remained in place. Mainlanders, the major source of tourists for Macau, have not been able to visit the gambling enclave on a package tour group or under the Individual Visa Scheme (IVS) since late January. As a result, the visitor arrivals to Macau plunged 81.1 percent year-on-year to nearly 3.25 million in the first five months of 2020 with the visitation plummeting 99.5 percent in May, latest official figures show.

“The consumption subsidy scheme overall did help to a certain degree in stimulating the domestic demand, as residents now are reluctant to spend,” says Fong Kin Fu, president of the Federal General Commercial Association of Macau Small and Medium Enterprises. “The [business] environment now is slightly better than the worst times but it is still far from the pre-pandemic times.”

Closing doors

Mr. Lei notes some shops in tourist districts “might have probably been dissolved” given the lack of income for almost half a year and the running expenditure like rents and salaries for staff. “The exact number remains to be seen — when tourists are able to visit Macau again in the future how many shops in those areas could reopen?” he adds.

Macau Business paid a visit to the city’s downtown, including the districts of the Ruins of St. Paul’s and Senado Square, on a weekday afternoon in mid-June and found that the traffic flow remained scattered with some shops keeping their doors closed. For instance, in one section of Rua de Sao Paulo that leads up to the city’s landmark heritage site, 25 out of 44 shops, or about 56 percent, were out of business that day.

There are no official figures on how many merchants or shops have closed down since the start of this public health crisis. Latest public data only show 156 companies across all services were dissolved in the first quarter of 2020, compared with 210 firms and 264 enterprises in the same period of 2019 and 2018 respectively.

Mulling changes

As it is still not certain when travellers will start to come back and the consumer sentiment has quieted down again, Mr. Lei suggests the government could bring forward the beginning of the second round of e-vouchers from August to this month in a bid to support local SMEs. Officials could mull over making changes in the scheme, for instance, residents now could only spend up to MOP300 a day via the smartcards.

“The daily threshold could be adjusted upward to MOP500 or MOP1,000, allowing more types of businesses to be benefitted from the scheme, because the daily threshold of MOP300 somehow limits the expenditure of residents on groceries, daily necessities and local eateries,” he reasons. “The importance is that the government should analyse the data from the first round of the scheme and make any changes when necessary to improve the scheme and help more SMEs.”

Data from the Economic Bureau show about 24.2 percent of MOP1.46 billionwere spent in the local food and beverage service via the e-vouchers , particularly cha chaan teng (Cantonese-style cafe) and noodle shops, in the first six weeks of the scheme, while supermarkets accounted for 23 percent of the total expenditure so far.

The mid-term report says the consumption scheme has so achieved its goals in relieving some of the financial burdens of residents, stabilising domestic demand, improving the consumption sentiment, and increasing the morale of local businesses. The report also claims the scheme has “significantly improved” the operation of local businesses in the short run, but it acknowledges up to half of the local merchants continue to see lower turnover compared with last year albeit the implementation of the scheme.

Tai Kin Ip, director of the Economic Bureau, said in a press conference in late June that the government would closely monitor the consumption habit of residents and consider other factors before making a decision whether it would introduce any changes to the second round of the scheme.

“The importance is that the government should analyse the data from the first round of the [consumption subsidy] scheme and make any changes when necessary to improve the scheme and help more SMEs,” says Lei Cheok Kuan, chairperson of the Macau Central and Southern District Industry and Commerce Federation

Inflation spike?

Macau  Political Economy Research Association President  Samuel Tong Kai  Chung also believes the consumption subsidy scheme does help to rejuvenate the business environment for the community, and any changes to the scheme should be cautiously considered. “There are many factors the government has to mull over, for example, enhancing the daily threshold might drive up the consumer prices,” the scholar reasons.

According to the Statistics and Census, the inflation in May was 1.67 percent, the lowest since October 2017, while the consumer price also dropped 0.1 percent from the previous month. Albeit the government data showing no significant increase in inflation, the public have kept a close eye on the changes in products and services.

Royal Supermarket, one of the largest supermarket chains here, has been accused of taking steep price hikes for its products, coinciding with the beginning of the consumption subsidy scheme. Though the supermarket chain has claimed the hikes were due to the confusion in price labels, the government still found the firm’s explanation “unacceptable” and voided its “Certified Shop” recognition awarded by the Consumer Council amid the mounting public pressure.

“Though the businesses in tourist districts might not receive a big boost from the consumption smartcards, it should be noted that the scheme is among a basket of measures rolled out by the authorities to expedite the recovery of local businesses,” Mr. Tong adds. “We should not expect the scheme alone could help resolving all the problems.”

“We should not expect the [consumption subsidy] scheme alone could help resolving all the problems,” scholar Samuel Tong notes

Local tours

In addition to the one-off financial assistance running between MOP15,000 and MOP200,000 for enterprises, and simplifying procedures for SME loan schemes, the administration also launched in late June a MOP280 million subsidised programme for 148 local travel agencies to cater one-day package tours for residents to travel around the city. The so-called “Macao Ready Go! Local Tours” scheme, running from late June until 30 September, offers 15 itineraries in two categories, including six itineraries for “community-based tours” to wander around local neighbourhoods, and nine itineraries for “leisure tours” within the non-gaming offerings of casino resorts.

Each resident is subsidised MOP280 by the government for joining one of the tours — and could take part in two trips until 30 September — while they only have to pay between MOP18 and MOP138 for each tour. For the “community-based tours”, the MOP280 subsidy for residents includes a MOP100 dining voucher for residents to spend in eateries and restaurants in neighbourhoods.

Mr. Tong applauds the new move, which could continue to help stimulating economic activities in both neighbourhoods and tourist districts. “It is beneficial for tour guides, travel agencies and other tourism businesses, not only could they get back to work again and have income but also they could be better prepared when travellers come back again.”

Arduous path

Iun Ioc Va, president of the Macau Industry and Commerce Federation of Islands, which covers businesses for Taipa and Coloane, also hails the new tour programme. “The business environment has become dire again [in June] after many residents have finished up their consumption smartcards,” he notes.

“So this subsidised tour programme — in particular the MOP100 dining voucher — is good news for businesses to keep their operations running before the second round of the consumption subsidy scheme,” he says, hoping the government could continue improving the subsidised tour programme by incorporating unique shops in neighbourhoods in the itineraries.

But he stresses the key to the recovery of local businesses, particularly those in tourist districts, still rely on the comeback of travellers. “In a worse case scenario, up to 30 percent of shops [in tourist districts] will gradually close down should there be no changes to the travel restrictions soon,” he cautions.

Mr. Fong from the SME association also highlights the importance of travellers. “Even though some of the travel restrictions might be lifted soon, it is expected it might still take time for the visitation to resume to the level [before the pandemic], meaning local SMEs might still have an arduous path ahead,” he says.

The government might consider giving out a second-round one-off financial assistance for enterprises, or subsidising their water and electricity bills again after doing so in the April-June period, he suggests. “The authorities should monitor closely the latest development of SMEs and roll out [new measures] when necessary,” he adds.