x Abu Dhabi, UAETuesday 25 July 2017

Macau digs deep for the grass-root consumers

With a good surplus and not much to spend it on, the former Portuguese colony has led the Asian swing from export to domestic demand with payouts to its residents.

Nothing illustrates the divergence in fortunes of Europe and Asia than the contrast between what is happening in Ireland and in Macau, South China.

Just as the bankers were gathering in Ireland to saddle future generations with billions of euros in debt, the Macau government was giving away thousands of dollars to every resident from the government surplus.

Macau is not as well known as Hong Kong, on the other side of the Pearl River Delta, but when it comes to per capita income Macau is doing better than its big brother.

Part of the reason for its obscurity is that it has a population of just 500,000 compared with 7 million in Hong Kong.

As an international financial centre Hong Kong has a visibility beyond its shores that Macau, which relies on tourism and casinos, lacks.

But last week Dr Fernando Chui, the chief executive of Macau,said each "permanent resident" would receive 5,000 patacas. The Macau pataca is pegged at 8 to the US dollar, which means they will receive US$625 (Dh1,830) each.

Even the foreign temporary residents were included. "Non-permanent residents" will receive 2,400 patacas each.

The "elderly", those above 65, will receive another 5,000 patacas and students another 1,500 patacas each.

Macau has also given each resident a medical voucher worth about 500 patacas.

The government on November 16 also announced a 25 per cent reduction in most taxes and a pay rise for civil servants.

While most of Macau's citizens are happy, there are also critics who say these sorts of one-off "giveaways" in good times reflects the way in which a traditional small Chinese business is run and should not be the policy of a modern city. Instead, the critics say, the surplus should be invested in the island's infrastructure.

The critics may have some valid points but with its small population, it is difficult to see what sort of long-term infrastructure Macau should be investing in. Nearly a quarter of the population already own properties.

The island has a nice airport, ferry piers and roads. There is a university that is expanding aggressively and the territory has carved a small niche for itself as the meeting place for former Portuguese colonies such as Timor-Leste, Angola and Mozambique.

In one sense, Macau reflects the problems of plenty and shows it is not always easy to spend or invest surplus. This is a problem the rest of the world may find difficult to sympathise with but it is a problem, just as obesity is to be treated as seriously as malnutrition.

On the other hand, Macau may be an unsung pioneer in the current policy of east Asia to switch from export-led growth to domestic consumption as the main driver.

The place to watch what impact, if any, the policies of tiny Macau have on the rest of Asia will be Hong Kong, which is its close neighbour but a far bigger economy.

Hong Kong has been forecast to post a budget surplus of almost $10 billion for the financial year ending next March 31. That would be quite a turnaround for a government that was projecting a deficit of $3bn, and reflects a robust economy.

No doubt the people of Hong Kong will be expecting some gifts from the government.