“Macau’s economic dependency upon casinos will continue for many decades”

The creation of a public instrument to implement trade credit insurance should be one of the priorities in supporting SME’s and diversifying the economy, José Félix Pontes, a recently retired member of the AMCM, told Business Daily The overall economy in Macau has been shrinking. For the second quarter alone Gross Domestic Product declined 26.4 per cent year-on-year in real terms. This decline has been mainly driven by the slowdown of gaming revenues. How do you expect this to affect the non-gaming sectors? Inevitably, the unfavourable evolution of the gaming revenues will have an impact upon other economic sectors one way or another, mainly upon those more related with the casino business. If, in the past, in line with the excessive growth of the gaming revenues, some economic sectors benefited a lot, now, in the negative phase of the casinos, those sectors will be affected [likewise]. In a word, it’s the domino effect at work. In your view, has the market already hit bottom in terms of revenue decline? I’m only inclined to say that I’m moderately pessimistic… It’s better to wait for the news about gaming revenues for this current month. One of the main goals of the Macau Government is diversification of the economy. Is it possible for other sectors besides gaming to assume a major role? In an interview in 2011 with another local newspaper, I said no other industry could replace the gaming business in Macau. In other words, Macau’s economic-financial dependency upon casinos will continue for many, many decades! Concerning a certain diversification of the local economy, I believe that this objective is possible to achieve but only in the medium and long term, mainly if it was given room for the implementation of the health tourism that will be a great source of income. Macau has already a vast clientele – the citizens of the People’s Republic of China – that normally come to our city only for tourism, shopping and gaming. If we have private – or even public – providers of health tourism of high quality, those visitors will stay longer in Macau and spend more money. Is there any policy you would advise the government pursue at this moment to boost the diversification of the local economy? It should be implemented, in a very short time – the public instrument for the credit insurance scheme for imports and exports. It will constitute an effective and useful support for the activity of small and medium enterprises (SMEs). In reality, such an initiative will create favourable conditions for the SMEs to expand credit lines with existing customers, or to export (or re-export) to new markets and, for companies with other commercial objectives, to extend their range of products. Also, for enterprises with strong potential for growth, or for those that operate in high-risk sectors or with low margins, the acquisition of credit insurance entails many clear advantages. So, credit insurance can and should play a decisive role in the diversification of our local companies. Recently, the yuan was devalued but the effects on Macau have yet to be seen. Considering that most visitors to the city come from the Mainland, how do you expect this to impact the Macau economy? In my opinion, the sharp decline of the yuan, which was 4.6 per cent, will not continue in the near future, and its impact on the Macau economy should be minimal and manageable. The pataca has been pegged to the Hong Kong dollar, which in turn is pegged to the US dollar. Some economists questioned this indirect linkage. Do you believe this should change? In fact, the foreign exchange system adopted in Macau (and in Hong Kong) many years ago was based on the Currency Board System; that has worked very well and, in my personal opinion, is here to stay. With this scheme, there’s no question of currency stability and this is the major advantage for us, given that Macau, as a small open economy, can’t implement and sustain an independent monetary policy. Of course, when we are following the abovementioned scheme we can’t adopt a monetary policy taking into account domestic factors and this represents the main disadvantage for us. In the region, payments are accepted in Macanese patacas or Hong Kong dollars. Some even use the renminbi. Do you believe the pataca has the power to survive on its own? Or eventually after 2049, when the Basic Law expires, the MOP will be replaced? I strongly believe that our local currency will continue, even after the term of the Basic Law – that, much probably, will be renewed with some necessary adjustments. And I believe this in spite of the Hong Kong dollar and the Chinese yuan being well accepted for payments in everyday transactions, and even the US dollar, particularly for the acquisition for life insurance policies. In a certain way, the pataca represents one of the symbols that characterise Macau’s autonomy and this will be preserved as will Hong Kong’s. The essentially political rationale in keeping the status quo of the Macau Special Administrative Region will lead, in my personal opinion, to the Macanese pataca continuing as the legal tender of Macau after 2049. The number of insurance companies in the territory has been stable at 23 since 2010. However, HSBC non-life insurance branch is closing down. Do you believe the number of insurance companies in the territory is going to diminish? HSBC Insurance (Asia) Limited has withdrawn from the local insurance market, as well as from Hong Kong, only due to strategic reasons taken by the head office of its financial holding. I think that despite the current unfavourable economic cycle of Macau the number of authorised non-life insurance companies will tend to increase. On the one hand, there are some huge infrastructure projects in progress, either public – new hospital, light railway – or private like new hotels. On the other, we’ll have a few niche markets associated with new compulsory insurance – medical malpractice insurance, professional liability insurance for engineers and architects – that will inevitably attract the interest of large international insurance companies. In terms of the insurance market, it has been growing on average 30 per cent per year. Looking at the non-life insurance market, it has been growing but, after growing 40 per cent in 2012, it ended 2014 growing at 5 per cent. Do you expect growth to continue or that declining gaming revenue will affect the sector? I guess that the gross premiums to be generated by the local insurance sector will record positive growth, not only in the non-life insurance – because of what I explained before – but also in the life insurance business. It should be noted there is a large appetite by Mainlanders to acquire life insurance in Macau, combined with the huge range of life insurance products offered by the life insurance companies operating in Macau. Recently, one AMCM bulletin study warned the banking sector against the dangers of non-performing loans. Do you believe Macau banks must be more careful? The AMCM, as the banking regulator, should at all times alert the banks under its supervision to take all precautions when providing loans. In any case, as everybody is aware, the rate of non-performing loans in Macau is very low. After serving for 26 years in AMCM you decided to step down. What were the reasons for this decision? My real-time uninterrupted service exceeds 35 years. The first 9 years at the former Issuing Institute of Macau (IEM) created in 1980. And then 26 years and almost 4 months at the AMCM, which at the time of its creation on July 1989 replaced the Institute I first mentioned. In fact, I started my service at IEM on 27th April 1980 and thus, on 27th April 2015, I completed 35 years service, which is the maximum legal limit for the exercise of public functions. How would you assess the role played by the Authority during this time? Since its creation, I believe that the overall balance of the AMCM’s activities may be considered very positive and encouraging. It has produced much legislation and regulations for the financial and insurance sectors, and the respective supervision follows international standards, safeguarding citizens’ interests. Also, the management of foreign exchange and fiscal reserves has been marked by extreme prudence and with the aim of guaranteeing the capital invested. Of course, there’s always room for improvement in the legislative area and in the other fields of intervention of the AMCM, but what it has achieved in these 26 years is positive. Nobody can erase that! Since AMCM was created, Macau has been through such a deep change in its economy. What was the most challenging time for you in the Authority? I refer to not only one most challenging time, but several: the implementation of the Legal Regime for Private Pension Funds (1999), the difficulties resulting from the Asian (1997) and global (2008) financial crises and the ‘medicine’ actions we had to take. I will also mention the partial revisions of the legal frameworks of the Motor Vehicles Insurance (Third Party Risks) Ordinance (2011) and of the Employees’ Compensation Insurance (2015). You may have retired as a member of the Board of Directors of AMCM but you will continue to serve as Chairman of the Board of the Macau Institute of Financial Services (IFS). What are the main goals of the IFS? The Macau Institute of Financial Services was established in March 2002 as a non-profit making organisation. The Monetary Authority of Macau, the Macau Association of Banks, Macau Insurers’ Association and Macau Insurance Agents & Brokers Association were the founding members. The main goals of IFS are to upgrade performance, expertise and professional standard of Macau’s financial practitioners by providing professional training and conducting qualifying examinations in order to foster the sustainable development of Macau’s financial industry. What activities are being developed by the IFS to achieve these goals? To achieve these objectives we have conducted courses and exams for insurance intermediaries, seminars and similar events, and programmes related to the professional qualifications for financial planning. Up to now, 51,818 have attended these training activities – 35,827 in the insurance intermediaries qualifying examination; 7,886 in seminars and in continuing professional development events; 6,752 in IFS courses; and 1,353 in professional qualification in financial planning programmes. In relation to these programmes and special events what are the plans for next year? Next year, by delegation of the AMCM, we will start the Continuing Professional Development (CPD) Programme for insurance intermediaries, and we will provide free and unbiased financial education programmes to working adults and their families with the objective of enhancing the level of financial literacy of the overall population of Macau. Besides that, we are preparing some courses for local banking practitioners to achieve a good command of Chinese, Portuguese and English, as Macau needs to have a pool of trilingual professionals in the banking sector. In this programme, one of the subjects to be taught includes the legal framework of the financial systems of the Portuguese-speaking Countries.