Sovereign dreams

Three years. That, apparently, is exactly how long the city’s fiscal reserves will take to accumulate its capital to “a comfortable level”. Indeed, the government thinks it is now time to study the establishment of a Macau SAR Investment Development Fund.
The announcement of the long-awaited initiative has won the overwhelming support of critics and analysts despite the lack of a detailed blueprint, in which the government can look into many directions but the bottom line is to heed public opinion.
“The investment fund opens up the possibilities of investment, offering more options than what AMCM [the Monetary Authority of Macau, which oversees fiscal reserves] is now doing,” said local economist José Luís de Sales Marques.
He added that the fund could “boost the role of Macau on the international stage and [facilitate] the development of the relationship between China and Portuguese-speaking countries.”
As of January, the assets of the city’s fiscal reserves reached MOP342.13 billion (US$42.84 billion) – similar to the size of the nominal gross domestic product of Serbia last year – including MOP134 billion in basic reserves and MOP208 billion in excess reserves, figures from the territory’s central bank reveal.
But the government has long been castigated over its management of the reserve’s investment portfolio, whose annual yield has failed to catch up with the territory’s consumer prices.
Jack Chang Chak Io, Vice President of the Macau Association of Economic Sciences, advises that the government pay attention to “the long-term prospects” when laying down the strategies of the fund.
“If you’re looking for short-term returns, the performance [of the fund] will greatly fluctuate,” he said. “The public should also be fully aware of the decisions made by the fund and they need to understand it’s impossible to have high investment yields with low investment risks.”
“It will also take time” before the fund presents a satisfactory balance sheet due to its limited size in the initial stage, Mr. Chang added. “The law mandates a certain proportion of the money remain in the reserve, so the seed money will be small compared to other existing funds.”
The full story can be read in this month’s issue of Macau Business magazine, available at newsstands and online at www.magzter.com.