For quite some time now there has been a staggering contrast between the capacity of Macao to generate an extraordinary amount of wealth and its inability to make good of that newly acquired affluence. The recurring symptom of that abysmal gap between riches and expenses has been felt by many in their day-to-day life: expectations regarding public services, whether directly operated by state agencies or conceded to private entities, and the promises of a “better quality of life” are increasingly and consistently frustrated. The execution of the 2012 government budget that is now under discussion in the second commission of the Legislative Assembly tells us that public accounts have managed to produce a surplus of a mind-blowing MOP90.9 billion! Should we really rejoice?
If we look back at the 14 years passed since the handover, there has been no single year of public deficit. Surpluses have therefore been the rule, but starting in 2007 these excesses transformed into “mega surpluses”: that year alone, the public account surplus tripled compared to the previous year, reaching MOP30 billion, and government spending only reached 43% of government revenues. Five years later, in 2012, the surplus has again tripled and the government now spends only 37% of its revenues.
By just adding up yearly surpluses, I came to realize that accumulated excesses since 2000 amounted to an astounding MOP343 billion, that means close to our 2012 GDP of MOP348 billion or more than six years of government expenditure at current level! As far as the report on the execution of the budget is concerned, financial reserves are indicated as being “only” in the amount of MOP100 billion (less than 30% of GDP and a bit less than two years government expenditures) at the end of 2012.
If only part of the yearly surplus goes to the reserve (80% in 2012) and another part feeds the foreign exchange reserves (a total of MOP132 billion in 2012), one can then wonder why overall stocks are so low and whether the very lean profitability of such reserves really makes sense. Moreover, if financial reserves as a percentage of GDP appear to be well on par with Hong Kong, whereas Macao is supposed to have grown richer in relative terms, actual public spending is still lagging behind our neighboring SAR, where public expenditures now reach 20% of GDP against only 15.5% in Macao.
In the Index of Economic Freedom published yearly by the Heritage Foundation, an American conservative think-tank extremely free-market oriented, Hong Kong tops the list as the freest economy on the planet, followed by Singapore. Although I have strong reservations about the actual economic freedom of Hong Kong proper given that it is the one part in Asia that has made the word “tycoon” a household expression and brought to ultimate sophistication the oligopolistic nature of capitalism, it is nevertheless interesting to note that when it comes to macro-economic data, government expenditures as a percentage of GDP in Hong Kong and Singapore run higher than the tax burden as a percentage of GDP, whereas Macao, that ranks an honorable 26 in this index, clearly posts an inverted ratio: taxes as a percentage of GDP run at 34% in 2012, more than double the percentage of expenditures.
If government expenditures are good for territories like Hong Kong and Singapore, why would not it be so for Macao?
Furthermore, that inverted ratio between expenditures and taxation put Macao in a group of only four places in the world where such an imbalance exists, the three other places being Timor-Leste (166 in the ranking of 177 countries), Turkmenistan (169) and Eritrea (173), three countries characterized by widespread corruption, weak rule of law and crippled economic activity. Is that really fair to Macao? There is thus no doubt that the Macao government should spend more, but how and for what purposes should of course be opened to debate.
Published in Macau Daily Times, November 8 2013
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