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Fighting against the tide

As the newly-formed Macau Corporate Governance Institute marks its first official event today, and with the law firm bearing her name celebrating 30 years in business in the MSAR, Manuela António sits down with Business Daily to discuss why the city’s businesses need corporate governance, the evolution of the judicial system, the real steps necessary to achieve diversification and the results of recent government investigations and corruption cases.
What was the reason behind creating the Corporate Governance Institute and what difficulties have arisen in doing so?
It’s not very easy to create an organization such as this one, the Macau Corporate Governance Institute (MCGI), because the market that’s interested is not large, and also the companies that we hope to attract and that are interested in it are companies with presences in various countries in the region or with the necessity to travel frequently.
Despite this, and interestingly, the idea was very well received. All the entities that we contacted to be founders accepted the invitation immediately. They made themselves available, contributed and helped us to come up with the articles – the initial membership process was very energetic.
It won’t be easy, but our objectives also aren’t overly ambitious. We would like to do something every three months, four months. And at the end of the year be able to have some conclusions and takeaways, gather together the members and discuss to come up with a summary.

You mentioned that when you contacted the current members there was a lot of interest in participating. Why do you think there was such a high interest level?
Because the entities that we contacted are groups that already adopt a large part of the principles of Corporate Governance. Therefore they have an interest in continually developing them and expanding them.
We’re starting with a lunch at MGM, which will present and explain who we are (as MCGI), what we are, and what our objectives are, with a special guest who is very well versed in this area, Dr. Pedro Rebelo Sousa. He’s the president of the board of the Corporate Governance Institute of Portugal. He was involved in its founding, and will help explain the current status of Corporate Governance in Portugal.
One of our members is MGM, who’s from the United States, CTM has relations with the English and has other international links, BNU is linked to the Caixa Geral de Depósitos and is linked to the European Union, CESL Asia has relationships with Portugal, Ocean is part of a Hong Kong/Singapore group - they’re companies that have links to companies that are on stock exchanges or links that require them to make reports. They have to provide records to their shareholders, to their bondholders, and that are already following these rules.
Creating the institute also has as its intent to demonstrate that Macau is a developed territory and has the same concerns as developed countries. One of the objectives is to show that Macau is more than just a centre of leisure and tourism.

What’s the current level of corporate governance in Macau?
Overall, a large part of the companies in Macau, even today, are family companies. Therefore, the transparency results from the family link, the confidence. Nowadays, compared to 20 years ago, there are many more companies in Macau that aren’t family companies – or if they are, there’s a large number of family members that are shareholders, but whose management is conferred to third parties, which is what happens with the concessionaires themselves. It is true that some of them have family roots, but the management is already a separate department.
From the point that the funding becomes more extensive, it’s necessary (to have corporate governance), in order to reassure those who enter into participation with the company, it’s necessary to have transparency and have rules of reciprocal control or of reporting; the management informing the stockholders of what they’re doing. Something that in traditional companies in Macau wasn’t necessary. There weren’t even board meetings.
There’s a certain confusion between the business and the partners that results precisely from this origin as a family business and of family financing of the businesses. They have problems understanding exactly how the business has to create reports, meeting minutes, etc. We have to explain this, as here we don’t have a system in place.

You aim to improve transparency in businesses. Do you think this will have a direct effect on the government?
We would like that to be the case, because this is important for the government, but clearly the government also has to create a strategy towards businesses, which I don’t know what it is. We don’t know if the government wants to have more businesses, more companies in Macau, and what kind of businesses they want. There aren’t any indications. For example everyone knows that there’s a lack of human resources. There isn’t an orientation saying ‘the government prioritizes these sectors and in these sectors the (new) human resources are justified’. There just isn’t.
There’s a rhetoric of ‘investment aid, diversification of Macau’ – this is a rhetoric that later translates into nothing of substance, in any type of orientation. Because if you want more investment, if you want diversification, then you have to say in what areas.
For example, recently the Secretary of Economy and Finance came and said that he wanted Macau to create certain financial products. And then the example he gave was so ridiculous: leasing. Leasing exists everywhere in the world.
An RMB clearing centre, nobody knows what it is.
They say ‘we want to transform Macau into a financial centre - that’s why the fund is coming here’. And then we asked: ‘Give us an example of something specific’. They said ‘leasing’. I didn’t want to believe it. It was ridiculous, to say the least. Because leasing has existed since 1970, here since 1980-something, it exists all over the world. Unless he had said something specific like: leasing of gaming machines, or of something specific. But no, he didn’t.

What about the financial programs currently in place?
There isn’t continual support. They say that they want something but then they’re not consistent. People fight against lack of space, the lack of labour - those are the primary: the rents in the zones and the lack of workers. People who know about art aren’t able to (succeed) because there’s no strategy. If we want business people in these areas, they have to provide more detailed and more accurate instructions in these areas. They provide access to loans but don’t provide the conditions for them to be paid back.

Judging by the conditions we have now, will diversification be able to happen?
No. Until there is a clear indication from the government into which areas of diversification they will support and finance. Until there are instructions, a type of office that accompanies the horizontal growth of the company, from the entry into the project until the end, someone responsible for expediency of these processes, it’s not possible.
There aren’t the minimum conditions for any type of diversification unless it’s done by the large companies. They have the funds, the financial muscle, to be able to lose money over the course of two or three years. Then they have 10 or 15 [more years] for the road to straighten out. Which is the case of the casinos. They also suffer though.

What about public housing?
I think it’s an excuse and it’s a mirage.
First, there’s no statistics to know how many people want (public housing), how many need it, and what they want. And the proof of that is in the hundreds and hundreds of available units which aren’t being occupied and no one is interested in. It could be preferable to give assistance for rents, the government providing assistance if the individuals need it, for their rents. I think it’s a panoply to trick and it was the key that the government found, because there’s a certain lobby group that uses it all the time. The government is transforming this into the Philosopher’s Stone. As if public housing will resolve the alchemy of the territory’s problems. No.
I think public housing is another manifestation of the lack of capacity of the government to understand where it wants to go and what it has to do to get there.

It seems like we have the capacity for further development, but it’s just not happening. Is that the case?
There’s everything. There are capable people, some capable people, there’s an enormous desire to work, there’s money, there are willing investors, but the government has run out of ideas.

Regarding land swaps, do you think that now they have started digging more, there will be more cases that come to light, and what possible consequences could that bring about?
There’s very bad faith coming from the government’s side. I don’t want to believe it. I’m not afraid to say, that I think that the negative effects for Macau are so huge that I still hold out hope that they will turn back from their current path. All the signs point in the other direction, but I still don’t believe it.
It’s clear that here there’s yet again an immense responsibility on the government’s part, because the government knew of, and was aware about, the situations which existed and the difference between the situations. Between those who didn’t use the land because they couldn’t, and those that didn’t because they didn’t want to. And therefore they can’t be treated in the same way - someone who didn’t want to and someone who wasn’t allowed to. That’s the same thing as penalizing a construction company or a supplier for not delivering when they said that they didn’t want to receive it yet. It’s not possible.

How about the Pearl Horizon case?
[The developer] Polytec received one license, the continuation of a license to continue the foundations already after the new law. And then the government a year later says, ‘give it here, that’s mine’. So it gives them the license to continue the foundations, after the law, and then they say ‘give it here’. This is inconceivable.

After 30 years in the justice system, what has changed?
It was a challenge. It was a challenge but unfortunately, even though society was less developed than it is today and it had more difficulties, the judicial system was better than it is today. Justice was better carried out. It was quicker and it was incomparably superior and unbiased, completely unbiased. And today it’s not.
Justice today is on a downward path. And it’s more difficult today. The relationship which used to exist between the officers of the judicial area, between the courts, the judges, the magistrates, the lawyers and the employees, in which everyone was rowing in the same direction, each carrying out their functions, but with a reciprocal dialogue and respect, today that has disappeared.
There is fear in the air. Everyone is scared of everybody else.
It’s much more difficult to be a lawyer today than it was 30 years ago, incomparably so, from that perspective.

The corruption cases of Ho Chio Meng and Ao Man Long – what long-term effects will these cases have on the population?
I’m not sure if it is on the population themselves, but in the government departments now, everyone is scared of making decisions. The people who could carry out their work faster don’t because they’re scared that they’ll be accused of favouring one or another.
I’ve even heard that instead of the bosses disagreeing with the clerk’s reports, they tell the clerks to change their reports. Nowadays they all want to agree with each other, so they just tell the clerk to change the report. And the clerk, because he’s scared of losing his job, changes it. So no one is responsible except for the clerk. The lowest in the hierarchy is the one who takes the blame.
It’s really bad in the administration, and there’s another thing that is worrisome: a lot of public departments with few employees – they actually work a lot but in the end there’s no results. There are public services that have lost a lot of employees and they’re not being replaced, and there are people whose jobs are more demanding than 15 years ago.

So if we continue at this pace, the government has announced they want 40 million tourists per year by 2025, will that be possible?
I think it’s possible, thanks to the initiatives by the private sector. What the government does is pull backwards, whereas the private initiatives continue to push forward. The problem is knowing whether these people who come here want to come back, if there are conditions for them to return.
That they’ll come once, I’m sure, but if we can sustainably maintain this, that is the question.