TNAG-2679-FCO40-3876-British-Trade-Commission--Hong-Kong--and-China-Trade-Unit-re-1993 — Page 6

10-DEC-1993 11:03

BRITISH TRADE COMMISSION

CODE 18-77

RESTRICTED

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Reference

P.03

The chief of these was

b) But there were practical problems. localisation. Out of the population about 400,000, there were about 4,000 Portuguese, 4,000 Eurasians and about 8,000

All the rest were assorted Thais, Europeans, Philippinos.

But the Cantonese and Shanghainese, who ran the economy. government was firmly in Portuguese and Eurasian hands, operating both verbally and on paper in Portuguese, which very few Chinese spoke. There were no Chinese judges, very few Chinese lawyers and the Macau authorities had put virtually no investment into education. So, therefore, a pretty sharp distinction between a Portuguese government operating in Portuguese and a large Chinese community in whose hands virtually all economic power lay. But one should beware of the standard assumption that virtually everything was in the hands of Stanley Ho. Brüning thought that casino revenues accounted for 80% of direct taxation but that only about 35% of overall government income came from this source.

c) Brüning said that the JLG was about to enter its 18th round. The position in Macau was the reverse of that in Hong Kong, with the Chinese complaining of sluggishness and lack of progress in localisation. Overall, he thought that the negotiations between the Chinese and Portugal benefited from

The Chinese the situation in the Hong Kong negotiations.

wanted to show that they were able to secure a smooth transition in Macau and they have not had to push very hard to achieve this.

But even so, the Chinese won virtually all the tricks. For example, mainland Chinese firms have won two-thirds of the contract value of everything for the new airport and indeed had blocked the main contract spurious grounds of noise pollution etc - until mainland Chinese firms had got most of the action.

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on pretty

a) Holberton and Brüning said that manufacturing industries. were rapidly relocating to the mainland. Brüning thought that this was partly because the Macau GATT quota system was now operating to the disadvantage of local manufacturers.

e) The general view was that the economic future of Macau depended mainly on developments in China and partly on developments in Hong Kong. The former is self-evident from the above. The latter stems from the fact that at least in banking sector, most Macauese operations are sub-branches of Hong Kong operations. Macau had no stock market, no future market; no capital market. It was all commercial banking and, given the elementary stage of financial markets in China, the dependence on Hong Kong was significant.

f) Cable & Wireless: George Russell explained that the present arrangement was 50% Cable & Wireless with the remainder held by Marconi of Portugal, CITIC and 1% by the Macau Government. It was a very tight monopoly for Cable & Wireless and the franchise negotiations were proving difficult. There was Portuguese resentment about the, tightness of the original deal, with much face involved

RESTRCI TED

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