The Macau government said Monday that it will get a guaranteed 3.5 percent rate of return annually from the recently-established 20.01-billion-yuan Guangdong-Macau Cooperation Development Fund during its 12 year duration, regardless of any losses incurred in investment projects in the neighbouring province.
The government said earlier this year that Macau will pay 20-billion-yuan (about 25 billion patacas) into the fund while Guangdong province will be responsible for carrying out the respective investment projects.
The Macau government also said that it will initially put two billion yuan into the fund.
The Macau Monetary Authority (AMCM) briefed local lawmakers about the operation of the cooperation development fund. The briefing session, hosted by four AMCM senior officials, was held in the Legislative Assembly (AL) building.
The Macau government signed an agreement with the Guangdong government in last month in Guangzhou – the provincial capital – to set up of the Guangdong-Macau Cooperation Development Fund.
Secretary for Economy and Finance Leong Vai Tac said in April that talks between Macau and Guangdong on the setting-up of the cooperation development fund had been concluded and an agreement would be signed by the two sides as soon as possible. He made the remarks during a session about the development of the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) on the sidelines of this year’s Boao Forum for Asia (BFA) in Hainan province.
The Macau government announced in 2016 that via the Guangdong-Macau Cooperation Development Fund, Macau would invest in infrastructure and other important projects in the neighbouring province.
After AMCM President Benjamin Chan Sau San delivered a speech, Christina Ho Sok Fong, deputy chief of AMCM Monetary and Foreign Exchange Department, briefed lawmakers on the details of the fund’s operation.
Legislative Assembly President lo lat Seng as one of the legislature’s 33 members as well as Leong Vai Tac and several senior officials of his portfolio attended the session.
In his speech, Chan said that he setting-up of the Guangdong-Macau Cooperation Development Fund is an innovative achievement or the collaboration between the two jurisdictions, adding that it is an important starting point for Macau to participate in the GBA development. He also said that the fund could allow Macau to have more opportunities for investing in projects in the neighbouring province.
Chan also said that Macau’s financial reserves amounted to 14.89 billion patacas, or slightly over half a trillion patacas, at the end of March. The financial reserves are managed by the Macau Monetary Authority.
Christina Ho said that the cooperation development fund, with a capital of 20.01 billion yuan, as already been registered and that it will come into operation very soon. She added that the local govemment will put the remaining money into the fund phase by phase, spending on the progress of the investment projects to be carried out in Guangdong.
According to Christina Ho, Macau will invest in projects concerning the GBA development and the Guangdong Free-Trade Zone, as well as projects beneficial to the socioeconomic development of the two jurisdictions. The projects to be invested in will cover the areas of transport, new energy, high-end equipment manufacturing, and the environmental industry.
Christina Ho said that Macau, as a limited liability partner, will pay 20 billion yuan into the 20.01 billion-yuan fund, while Guangdong, as a general partner, will “symbolically” pay 10 million yuan into the fund, with the province responsible for the fund’s operation.
The duration of the cooperation development Fund will be 12 years, Christina Ho said.
According to Christina Ho, Macau will get a guaranteed 3.5 percent rate of return annually from the fund during the 12-year period.
According to Christina Ho, when the operation of the fund reaches seven years, the total annual average income will be calculated and, if the annual average return rate exceeds 7.8 percent, all remaining value will then be split by Macau and Guangdong according to a ratio of 55 percent for the former and 45 percent for the latter.
The total annual average income will be calculated for the second time when the fund’s operation reaches 12 years of its duration, according to Christina Ho.
Christina Ho said that if losses are incurred in the fluid’s investment projects, all the losses will be borne by Guangdong, adding it means that Macau will not have to face any investment risks and that Macau will always be paid the 3.5-percent return rate during the 12-year period.
During the Q&A session, several lawmakers asked that if the annual average return rate falls between 3.5 percent and 7.8 percent, how would the two governments split the extra return above the 3.5-percent guaranteed return rate.
In reply, Chan said that as Macau will not need to bear any investment risks from the investment projects by the cooperation development fluid, all the extra return above the 3.5-percent guaranteed return rate but below the 7.8-percent will go to Guangdong.
