A Study On Macau Fiscal Policy And Fiscal Reserve System

The handover of Macau to China was in 1999. The Portuguese Governor of Macau concerned much about its own interest during the transition, thus the policies trended to myopia. Not only the appeal for the fiscal reserve establishment from communities was rejected, but also the cumulative fiscal surplus was exhausted intentionally. By the time of economic predicament, the new Macau SAR government scrupulously stuck to the fiscal principle of making ends meet. There were only about 300 million Macau dollar surpluses in the first year after the handover. Tourism and gaming of Macau rapidly developed with the gambling right opening and the launching of the "Individual Visit Scheme" of China, and then led to the increase of the tax revenue of gaming. The fiscal income of Macau SAR government was over 100 billion and the cumulative fiscal surplus exceeded 200 billion. Therefore, the fiscal of Macau SAR government is ample in the predicable future, while the fiscal administration in Macau has its uniqueness. Compared to those countries which focus on cutting the fiscal expenditure and avoiding deficit, the fiscal management in Macau focuses on how to use the fiscal surplus more efficiently and increase the value of the public wealth.With a long period of discussion, Macau SAR government established the fiscal reserve system in 2012. The cumulative fiscal surplus will be managed in two parts, one is the basic fiscal reserve and the other one is excess fiscal reserve. For prospective development of the fiscal reserve, we consider establishing the Sovereign Wealth Fund (SWF) for Macau as a suitable direction which can increase the value of the Macau fiscal reserve through the active investment management. Besides, it can advance the development of economic diversification in Macau.For the above purpose, this paper will introduce the development and the trend of SWF, also analyze three successful funds in the world, which are Norway Government Global Pension Fund, Singapore Temasek Holdings and Hong Kong Monetary Authority Exchange Fund. Meanwhile detailed study through several aspects:the goal of the policy, the system of the management and the investment strategies, etc.Furthermore, basing on their experiences, we will discuss the feasible system for the future SWF of Macau. According to the actual situation of Macau, the SWF of Macau should set up the short-term, middle-term and long-term policy goals and with a series of strategies, as well as the mechanism of management and the supervision system to achieve.By means of the analysis in every aspect, we hope to provide a refined reference for Macau to establish Sovereign Wealth Fund in the future.