Macao, a part of Chinese territory since ancient times, fell into the hands of Portuguese colonialists in the late 19th century. It smoothly returned to the embrace of the motherland on December 20, 1999.

"In the two years since the founding of the Macao Special Administrative Region, through self-consolidation and adjustment, society has reached a wide consensus on the direction of economic development. That is, under the prerequisite of opening up, focus on principal sectors while giving due consideration to other sectors, strive unceasingly to become stronger, make breakthroughs in business thinking and seek new business opportunities, so the SAR can have an optimum mode of development.¡±

These remarks, made by Macao Chief Executive Edmund Ho Hau Wah, are a summary of Macao's economic development, as well as a prospect of the year ahead.

In 2001, Macao SAR overcame difficulties in its economy and scored encouraging achievements. Despite the global economic slump and general sliding Asian economy, Macao's overall economy is expected to have an increase of 0.5-1 percent, thus realizing the second year of positive economic growth since its return.

Tourism, the pillar industry of Macao, maintained heartening signs of growth in the first 10 months, during which the number of inbound tourists increased 12 percent over the same period of 2000. By December 21, 2001, the number of tourists surpassed 10 million for the first time, up 9 percent over the previous year, which may enable the SAR government to increase its tax revenue from tourism by around 5 percent.

The boom of tourism sparked a growth of relevant sectors. In the third quarter, Macao's gross retail sales increased 3 percent over the same period of the previous year. In the first 10 months, hotel occupancy rose from the previous year's 57 percent to 60 percent.

Affected by the September 11 terrorist attacks on the United States, all countries suffered setbacks in air transportation business. However, Air Macao took the initiative to explore the market and achieve encouraging results. In the year, its passenger and cargo transportation increased 10 and 7 percent, respectively.

Utilization of outside capital also made some progress. By the third quarter of 2001, altogether 613 new companies were registered in Macao, involving 169 million patacas (8 patacas = 1 U.S. dollar) of investment, an increase of 15.8 percent and 11.9 percent, respectively, over the same period the previous year. Applications for investor residence increased 990 cases, an increase of nearly 25 percent.

Tax revenue, an important indicator of operations of different sectors, was also heartening. Revenue from lotteries is predicted to approach 6 billion patacas, surpassing the anticipated amount by 8 percent. More than 90 percent of other tax items have been paid, and it is predicted that the year's quota for tax revenue may be overfulfilled.

By the end of 2001, the gross value of the foreign exchange reserve of Macao SAR had reached 28.16 billion patacas, up 14.2 percent over 2000. The return on investment in foreign exchange reserve totaled 1.42 billion patacas, with net profit increasing by about 500 million patacas. The SAR reserve controlled by the Monetary Authority of Macao also recorded a return on investment of 5.7 percent in 2001, which increased the gross value of the SAR reserve to 10.83 billion patacas. Given this, the SAR government's reserve totaled 39 billion patacas.

In the year 2001, deposits in Macao's banks increased, reaching 115.4 billion patacas by the end of year, up 7 percent year on year. Although some difficulties occurred in loans, which dropped 2.8 percent year on year, the balance also kept at 49.4 billion patacas. Through efforts, the absolute amount of bad debts in banking declined compared with the previous year, and attempts of the banking industry to tap potential in non-conventional business generated some profits.

During the year, the life insurance sector in Macao made substantial progress. Premium revenue amounted to 926 million patacas, up 22.6 percent over the previous year, which also marked two-digit growth on the 11th year since 1991. The premium revenue of property insurance also obtained a growth of 3 percent, reversing the three-year negative growth.

Such impressive achievements in Macao's economy are attributed to reforms carried out by the SAR government and various policies and measures aimed at enhancing competitiveness. In particular, the SAR government opened the telecom and lottery sectors by introducing a competitive mechanism into them. Reforms in the two sectors brought new business opportunities to the market and will bring more. Another condition for promoting the healthy development of economy is the government's intensified input in large project construction. Construction of a number of roads and the Macao Sightseeing Tower also helped boost internal demand, stabilize economic development and increase employment.

To sustain economic development in Macao in 2002, the SAR government has decided to allocate 15 percent of its financial reserve, 2 billion patacas, to the implementation of 10 measures including the reduction/exemption of occupation tax, house tax on industrial and commercial businesses, business tax and tourism tax. These measures are expected to further improve the economic environment and inject new vitality into economic growth.

After its return to the motherland, Macao witnessed obvious improvements of its public security. In 2001, the exposed rate of gang crime cases declined further from the previous year. Nevertheless, Cheong Kuoc Va, Secretary for Security of the Macao SAR Government, admitted that the opening of the gambling sector poses some hidden perils on overall public security in Macao, but no symptoms of deterioration are currently in sight. He said that among cases of gang crime in 2001, violent crimes decreased 25 percent, most notable in drug trafficking and robbery. This is an indication that Macao's overall public security is being improved.

Ho Hau Wah said practice of the "one country, two systems" formula is successful in Macao. Economic and social development programs mapped out by the SAR government conform to actual conditions in Macao and are backed by the Central Government. He believes that with the concerted efforts of the SAR government and from people in all walks of life, Macao has bright prospects.