Macao can enhance its role as a financial plataform
Macao Magazine spoke with Pedro Cardoso, CEO of Banco Nacional Ultramarino.
1- The Macau government has argued that Macau can be a financial platform for Portuguese-speaking countries and a business center in CNY. In your opinion what kind of platform would that be?
It is known that Macau is strategically positioned as a platform to promote the economic cooperation between China and the Portuguese-speaking Countries (PSCs). This mission is leveraged by Macau having not only historical friendly relations with the PSCs as well Portuguese being one of the official languages in the Territory. Also, on this area PSCs companies can take the advantage of Macau’s privileged geographic position in the Pearl River Delta and its proximity to Guangdong, one of the provinces with higher contribution to China’s GDP. The setting-up of Free Trade Zones in Nansha and Hengqin lately offers even more opportunities on this area.
The longstanding trust and friendship between Chinese and Portuguese make Macau an excellent melting pot that fosters an even closer trade relation between China and PSCs. Mutual trust has been well established through the Macau connection for centuries, which makes the platform a unique place for exchanging, understanding and experiencing the difference in culture among Chinese and PSCs, plus trade, investment, and many forms of cooperation beyond the current horizon.
Macau adopts a simple and low tax system and is a place where multinational businesses focused events are being held annually with the presence of PSCs companies’ representatives. These events are designed to promote trade and business partnerships with Chinese companies and to take advantage of given opportunities in terms of trade cooperation and investment in China. An important example of these is MIF with one pavilion is usually dedicated for the Portuguese-speaking Countries.
Macao’s service platform role is also enhanced by the territory’s participation in the Fund for Co-operation and Development between China and Portuguese-Speaking Countries and the launch of three strategic centers’ initiative: a business and trade service center for the SMEs in Portuguese-Speaking Countries; a distribution center for Portuguese-Speaking Countries’ goods; and a convention and exhibition center for economic and trade cooperation between China, Macao and Portuguese-Speaking Countries.
Macau has been regarded by many companies originating from PSCs as a platform to enter into the Chinese market. In addition, this approach is often complemented through partnerships, strategic alliances and privileged contacts with local companies. Various Macao financial institutions and enterprises have established networks in PSCs. Enterprises from PSCs have also set up offices and/or contact points in the city to market their products to the Mainland by enjoying the preferential treatment under Macao and Mainland Closer Economic Partnership Arrangement (CEPA).
The CEPA agreement which was further enhanced in June last year lowers threshold for locally incorporated companies to enter into certain industry of the China market and receive the same treatment as a local national entity. This makes Macau in a very good position to allure the interest of PSC companies when considering entering into the Chinese market. For example, Macau banks, like BNU, can start operating RMB business once its branch is authorized and established in China, which is very different from the regulation in the past.
2 – As an issuing banks in Macao and privileged relations with the PLP as see the possibility to enjoy this business platform?
BNU has been present in Macau for over 114 years, and one of the Issuing Banks and Treasurers of Macau Special Administrative Region. BNU is one of the main Macau commercial banks that has around 220 thousand customers, around one-third of Macau’s population.
Throughout its history, BNU has been contributing to economic and social development in Macau in its note issuer Bank role or by supporting Macau’s large infrastructure projects. BNU remains increasingly committed to this role, with specialized teams in supporting the international trade, large corporations, SMEs and retail customers.
On the other hand, BNU plays a crucial role in supporting companies from PSCs to do business in the territory and China, whether by facilitating contacts or providing financial services, particularly in the trade finance area. This also counts on CGD’s group exposure and presence in 23 countries including seven PSCs. With our long history, knowledge and experience in this region, BNU is well positioned to bridge the gap and assume a facilitating role of these contacts, thus being naturally active in support for trading and investment for companies in China, Macau and PSCs.
3 – We consider that BNU is an ideal partner to realize the government’s project to make Macau a business platform between China and PLP. What has BNU does that others do not?
As I´ve mentioned BNU is part of the CGD Group, with an extensive global network present in 23 countries, spread across Europe, Asia, Africa, the Americas and PSC countries. CGD Group has been very active in supporting trade between China and PSCs.
The CGD Group is directly present in seven Portuguese-Speaking Countries, with a leading position in five of them. In China, we are present in Macau, Zhuhai, Shanghai and in preparation to open a new BNU Branch in Hengqin by end of the year, thus establishing an even stronger platform connecting the Portuguese Speaking Countries to China.
An institution like CGD with its wide presence in such diverse markets on different stages of development is a source that we can share with our customers. This excellent network and in-depth knowledge in these markets are incomparable by the others.
BNU has been promoting several initiatives seeking to emphasize the excellent connection between Macau and China. We have been actively involved supporting the initiatives of AMCM, IPIM, AICEP, and other official agencies with participation in events organized by these entities in China, Macau and PSCs.
BNU has promoted various meetings between government officials and businessmen, match making of entrepreneurs from PSCs and Chinese business delegations, participated in seminars in China with the aim of presenting CGD Group and supporting the movement of Macau entrepreneurs to PSCs, among others.
With such a dynamic approach in this area, a close link to the Lusophone Countries through the CGD Group, they can safely count on the full banking support of BNU at all times.
4- The next branch of the BNU in Hengqin and an increasing component in the connection of Portuguese businessmen to Macau and vice versa can contribute to a better performance of the bank. How?
BNU has already been authorized to start preparations for establishing a branch in Hengqin. The main business strategy of this branch is to follow our customers and provide support to CGD group’s customers who would like to invest or already investing in and trading with China. A significant number of our customers have investments in Mainland China, and in particular in Guangdong province. We believe that the economic development of Hengqin down the road will bring more opportunities to us.
On the other hand, the bulk of the trade and investment relations with PSCs is through Mainland China. Therefore, with the opening of our branch in Hengqin, BNU will play a more active role in promoting business among China, Macau and the PSCs.
5- The BNU signed with the Bank of China a cooperation agreement to act in the PLP. How it works and what benefits back to the bank?
In June 2015, BNU and Bank of China, Macao Branch, signed a protocol to promote business between China and the PSCs. The signing of this protocol, witnessed by CGD Board Members, represented the beginning of a deeper and more comprehensive cooperation relationship between the two Banks. Through the global CGD and BOC networks, a platform of communication and information channels is thus created to share market knowledge in China and PSCs in promoting cross-references of customers from different geographic areas, as well as to strengthen cooperation in various sectors.
Both sides agreed that a closer trade relationship would benefit Macau, enhancing the cooperation platform for business between the PSCs and China that will benefit for customers of both institutions.
It is possible today that any company operating in any PSCs, come to direct contact with a potential supplier who is operating in Mainland China, or vice versa, using this knowledge platform that CGD Group and Bank of China possess.
Another area that we are working very closely with Bank of China Macao Branch is to promote usage of Renminbi (CNY) as the settlement currency as Bank of China Macao Branch is authorized by PBOC Beijing as the CNY settlement bank for PSCs. CNY is one of the major settlement currencies in the world trade. It is expected that CNY will be more widely used in trade between these countries and China in the coming future. But what will give life to this platform are certainly relationships between companies and individuals operating in these markets that BNU can contribute.
6- BNU has created a business area for specific relations with the PLP. It was a wise move? There are concrete results?
Macau is an important platform between China and Portuguese-Speaking Countries. BNU has a unique position in this area and we do play a very active role and committed to this mission.
We have established an International Desk (iDesk) at BNU some years ago to further develop relations with our banking partners in those countries. Information is the key to success and consequently we have set up a specialized team to obtain information and develop new business opportunities between PSCs countries with China or vice-versa. We have been referring business opportunities to our banking partners in those countries and in China. Also we take advantage of our local market knowledge to identify potential partners, suppliers and / or potential customers for these companies.
Through CGD in Portugal, we seek to make contact as soon as there is the intention of the company to set up office in Macau, naturally providing the necessary information for Bank account opening and also informing and highlighting the favorable business conditions for investment in Macau. Besides, BNU is working closely together with CGD units in these countries, to support Chinese investors but also companies wishing to invest in or trading to the China market.
The iDesk team also works in conjunction with the commercial areas and other CGD units in developing different products to serve customers’ needs.
7- Does BNU has a portfolio of clients both in China and in the PLP to enable it to serve as a liaison for the establishment of partnerships to act in both influence areas?
Yes. BNU has been present in Macau for 114 years and we are part of the CGD Group. Our Group has a strong foothold in PSCs and based on our strong partnership with financial institutions in PSCs, BNU is always assisting clients referred by mentioned financial institutions for their investment and business development in China, including Macau.
With our presence in Shanghai since 2006 and a branch opening scheduled for this year, in Hengqin, BNU is reinforcing our position and adopt a more active role in promoting business between China and the PSCs, providing a range of banking services to companies from the PSCs countries to invest in China.
On the other hand, numerous companies from China and Macau are catching up business opportunities with companies from PSCs as well as to put up their own investment in PSCs. BNU maintains a significant portion of clients that involved in trading (import/export) and investment in PSCs.
8- How do you see the future development of this platform in the context of the relationship between China and the PLP with Macau as a hinge?
Macau can be used by these companies as a preparation platform and adaptation of products and services to enter into the Chinese market, through partnerships, strategic alliances and privileged contacts with companies located in the Pearl River Delta.
The role of BNU is crucial in supporting the implementation of companies of PSCs in the territory, whether by facilitating contacts or providing financial services, particularly in the trade finance area. We think the biggest challenge that may face will be the cultural and linguistic differences between the Chinese and Portuguese-Speaking markets. BNU is particularly well positioned for the knowledge that has both, to bridge the gap and assume a facilitating role of such contacts.
In relationship with China, the level of investment per GDP, Portugal was one of the main European markets in which PRC companies have invested in recent years. This fact alone shows the great confidence that China lays in Portugal and its development potential. We would like to see more Portuguese products in the Chinese market, and Macau can play an important role in establishing commercial relations with China companies taking advantage of not only cultural affinities but also the excellent fiscal conditions that the territory offers.
Macau’s Five Years plan which was widely consulted and to be published in September would very likely pinpoint Macau as a world center of tourism and leisure, supported by innovation and technology, with several investment sectors for diversification of economy on non-gaming activities and quality tourism. Last but not least, with the establishment of China’s “one belt one road” policy we have seen more and more cooperation between China and the Portuguese-Speaking Countries, not only in Portugal but also in African countries, for instance. So we are feeling quite positive in terms of business potential in that area.
9- BNU is installed in Southern China region, which currently represents one-fifth of the economy, one-third of its population and a third of GDP. Do you think it should be a priority area for action of businessmen and companies of PLP?
We absolutely agree. China, as most of the Asian countries, is in a developing stage, with motivated human resources and increasing qualified. Consequently, its economic growth potential is enormous, thus constituting diverse realities of Europe. China is a huge market and the level of development and its economic growth is much higher than the growth potential in Europe. We refer to realities in terms of GDP growth rates of approximately three to four fold higher than on average in Europe.
Also, Macau brings excellent business conditions to companies that are operating in these markets through mutual exchanges between the economic and commercial sector. Macau was rated by the World Trade Organization (WTO) as one of the most open trade and investment economies in the world for years.
Macau enjoys a Closer Economic Partnership Arrangement (CEPA) with mainland China – largely parallel to the arrangement Hong Kong enjoys with mainland – and can enhance its economic integration with PRC. Macau has an advantage as a free port and a separate customs territory, low taxation rates, free flow of capital and no foreign exchange control.
Southern China region, specifically Pan-Pearl River Delta (“PPRD”), represents one-fifth of surface area and one-third of population in China, which includes nine provinces/regions and two Special Administrative Regions, Macau and Hong Kong. With the support of PPRD Cooperation Framework Agreement and CEPA, over the last decade, Macau has utilize its advantages of simple and low tax system and the long term relationship with PSCs to attract businesses from overseas towards China as well as leading /assisting Chinese companies to invest in PSCs. Under the PPRD Agreement, by using Macau as a platform, companies from 9+2 regions could connect PSCs companies though lectures, exhibitions, forums and visits. This connection is essential to strengthen commercial and economic cooperation, as well as to refine and promote multilateral complementary advantages and common development, to achieve win-win vision of shared prosperity for both China and PSCs.
Macao currently maintains business relationships with over 100 countries around the world and is affiliated to over 50 international organizations, with particularly close relations with Portuguese-speaking Countries. Commercial activities are carried out in accordance with international practices, thus providing an ideal environment for investors choosing Macao to develop their businesses.
With all the above mentioned realities, of course Macau and Southern China must be prioritized by the PSCs entrepreneurs in their internationalization projects.