*By Oriol Caudevilla
Now that 2020 is about to end, it seems the perfect time to analyze what opportunities 2021 may bring to Macau. This year 2020 has been, undoubtedly, one of the most challenging years in the last decades. We have seen things that none of us could have expected last January 1.
The COVID-19 pandemic (which hopefully will, if not end, at least be much more controlled by the end of this coming year) has affected the whole world, some countries to a greater extent than others, but no country has been free from the pandemic nonetheless.
One of the many consequences of COVID-19 is the fact that consumer behaviour is changing, thus turbocharging a financial technology revolution all over the world. Hong Kong, Macau (to a lesser but relevant extent) and the rest of the Greater Bay Area (GBA) are indeed becoming FinTech hubs, but that is also the case of other places in Asia.
The interest for digital transformation is not new, and, even without the pandemic, we would have gradually seen our world becoming much more virtual, but COVID-19 has undoubtedly sped this whole process up a few years.
What opportunities will 2021 bring to Macau, though? Luckily, thanks to the quick, stringent and scientifically sound measures implemented by the Government of Macau (and also thanks to the remarkably good behaviour of the citizens of Macau), the Special Administrative Region is not suffering the consequences of the pandemic to the same extent that many other regions and countries.
At the time of writing this piece, there have been 46 infections and 0 coronavirus-related deaths reported since the pandemic began, being the last case on June 25. The figures are really remarkable, much better not only than those of any European country or region, but also much better, for example, than those of China´s other Special Administrative Region, Hong Kong, which, despite having controlled the pandemic very well, is currently struggling with its fourth wave.
It does not mean, though, that Macau is immune to the consequences of the pandemic: tourist arrivals in Macau have dramatically dropped in 2020, as well as the gambling revenues, which plunged 70.5 per cent in November YoY.
However, the decline was not as severe as in recent months as the Special Administrative Region saw an increase in visitors from its key market, Mainland China: revenue plunged 72.5 per cent in October and 90 per cent in September.
Consequently, the first priority for Macau (and, to some extent, opportunity) is to mitigate the economic effects of the pandemic and to try to increase the number of tourist arrivals and gambling revenues, especially those from Mainland China.
Nevertheless, falling revenues from gaming and tourism amid slowing growth on the mainland have prompted Macau to lessen its dependence on gambling. This trend had already started even before COVID-19, but the current pandemic is undoubtedly accelerating it.
Aside from that, and as I mentioned in my article “Macau should leverage the Wealth Management Connect Scheme as part of its economic diversification” (Macau Business, December 14), Macau´s future focus will be on finance. A series of financial initiatives may bring many opportunities to Macau in 2021.
For starters, the Special Administrative Region is trying to diversify its economy by creating a new stock exchange (a NASDAQ-like market denominated in yuan, facilitating fundraising by technology companies from the Bay Area economic hub) and embracing both the Belt and Road Initiative (which offers many opportunities to Macau given its belonging to the Portuguese-speaking world) as well as the Greater Bay Area (GBA) project.
The timing of this stock exchange is not clear yet, but the creation of a local stock exchange is, without any doubt, a key element for the development of a large and efficient financial infrastructure and the fostering of economic diversification.
Also, the fact that China will start its Digital Yuan tests soon in Macau is a clear sign of the importance of the former Portuguese colony in the present and future of China. As of today, we do not know yet when the tests will start in Macau, even though it should be very soon. In any case, the DCEP is going to bring a myriad of opportunities to Macau, which is in a perfect position to be leveraged on this initiative.
Committed to being the trade and commercial services platform between China and the Portuguese-speaking countries, as well as being part of the Guangdong-Hong Kong-Macau Greater Bay Area and the ‘Belt and Road’ initiative. Macau, for example, could serve as a point of connection between Mainland China and some Portuguese-speaking countries in Africa for the usage of the DCEP.
At last, another interesting initiative is the development of ‘enclave economies´: Macau could exploit the infrastructure of several bases built in the Guangdong Province, such as the cooperation demonstration zone located in Zhongshan, or the Traditional Chinese Medicine Science and Technology Industrial Park in Hengqin.
To sum up, given the fact that Macau has managed to control the COVID-19 pandemic remarkably well, the Special Administrative Region is in a perfect position to grasp the opportunities offered by 2021, such as seeing an increase of the number of tourist arrivals and gambling revenues, especially those from Mainland China, but Macau can also leverage other finance related opportunities such as the new stock exchange, the digital yuan tests in the region and the development of enclave economies, most notably Hengqin.
The author works as a FinTech Advisor and Researcher. He holds an MBA and a doctorate in Hong Kong real estate law and economics. He has worked as a business analyst for a Hong Kong publicly listed company and he has given seminars at HKU on Shadow Banking in China and at several universities in Macau on China´s new digital yuan. He is currently a member of the Blockchain, Digital Banking and Greater Bay Area Committees at the Fintech Association of Hong Kong (FTAHK).