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During its 443 years of Portuguese rule, Macao was the first European outpost in the Far East in 1557, the leading gateway for European trade with China until the 1770s, and a hideaway for buccaneers and Chinese criminal gangs until becoming, more recently, a bawdy city of casinos and prostitution. The territory's road to reunification with the mainland began in 1987, when China and Portugal agreed that Beijing would regain control over Macao in 1999 and that the enclave would maintain its legal system and capitalist economy for 50 years.
Macao lacks the vibrant banking, real estate, and trading industries found in Hong Kong, just 40 miles to the east along the south China coast. Its economic fortunes have recently been tied largely to tourism and the casino industry as well as to textile and garment exports. Macao's economy slid into recession in 1995, partly because a surge in gang-related violence, including killings and attacks on several local civil servants and Portuguese officers, hurt tourism, which makes up 40 percent of gross domestic product (GDP). The violence pitted rival triads, or organized-crime groups, in battles for control of loan-sharking, prostitution, and protection rackets. The regional financial crisis that began in 1997 prolonged the recession, which ended in 2000.
Gangland violence tailed off significantly in the lead-up to the handover, which took place in December 1999. China reportedly helped Macao crack down on the triads, and the outgoing Portuguese jailed a major crime boss.
Despite concerns before the handover that China would renege on its pledges to respect Macao's autonomy, there have been few overt signs that Beijing is trying to pressure the administration of Edmund Ho, the territory's appointed top official. Nevertheless, these fears had been heightened by the fact that Macao's press and civic groups are powerless compared with those in Hong Kong. Moreover, under the 1987 Sino-Portuguese deal, Macao's chief executive, like Hong Kong's, is appointed by an elite committee rather than elected directly. Ho, a Canadian-educated banker, was the committee's consensus choice to be the chief executive. The committee's 199 members were themselves appointed by a Beijing-selected committee.
Concerns about Beijing's influence in the territory may have been allayed somewhat by the fact that Macao's sole pro-democracy party was the largest single vote-getter in the September 2001 legislative elections, the first since the handover. Led by Ng Kuok-cheong, the Association for a New Democratic Macao party took 2 of the 10 directly elected seats in the 27-member body. Business-backed candidates won four seats, and the pro-China camp won another four. Ten other seats, chosen by special interest groups, were uncontested. Ho appointed the remaining seven seats. Macao's legislature, in any case, has little influence under a political setup that puts most power in the hands of Chief Executive Ho.
In an expected move, the government in February 2002 broke casino magnate Stanley Ho's 40-year monopoly on Macao's $1.99 billion gaming industry by awarding him only one of three new licenses to operate casinos in the territory. The other two licenses went to two Las Vegas casino moguls. Analysts say that increased competition should boost an industry that already accounts for an estimated one-third of the territory's $6.2 billion GDP and about half of the government's annual revenues.
Residents of Macao cannot change their government through elections, although they do enjoy many basic rights and freedoms.
Observers question, however, whether the enclave's legal system is robust enough to protect fundamental liberties should they be threatened. The judiciary's development and future independence may be hampered by the need to translate laws and judgments into Chinese from Portuguese, and by a severe shortage of local bilingual lawyers and magistrates, according to the U.S. State Department's March global human rights report covering 2001. Only about 10 of the 94 lawyers in private practice can read and write Chinese, the report said. Moreover, the chief executive appoints all judges, with recommendations for judicial posts coming from a commission that the chief executive himself names.
Meanwhile, Macao's mini-constitution, the basic law, is "riddled with ambiguities," fails to guarantee several basic rights, and grants Beijing vaguely defined emergency powers, Amnesty International said in 1999. In addition, the basic structure of Macao's government contains few democratic checks and balances. Like the Portuguese governors who served in the waning years of colonial rule, Macao's chief executive is appointed and holds broad executive powers. The basic law, meanwhile, bars legislators from introducing bills relating to public spending, Macao's political structure, or the operation of its government. Bills relating to governmental policies must receive the chief executive's written approval before they are submitted.
The legislature elected in 2005 will have two additional seats, both of them directly elected. After 2009, the basic law allows the assembly, by a two-thirds vote and subject to the chief executive's approval, to draw up a new mix of directly and indirectly elected seats.
Outside of a handful of opposition politicians like Ng Kuok-cheong, Macao has few outspoken voices for greater political freedom or transparency in governmental and business affairs. Most of the enclave's 10 daily newspapers, including the top-selling Macao Daily, are pro-Beijing. None take an independent political line. The press also offers little coverage of people, groups, or activities that challenge Macao's conservative political and business establishment or that call for greater democracy. Meanwhile, human rights groups, such as the Macao Association for the Rights of Laborers and the New Democratic Macao Association, operate freely but generally have little impact on the territory's political life.
Practitioners of the Falun Gong spiritual movement, whose followers on the mainland have been suppressed ruthlessly, routinely perform their exercises in Macao's parks. Police, however, photograph practitioners and at times take them to police stations for checks of their identification documents that last several hours, according to the U.S. State Department report.
Critics say that Macao's dominant labor confederation, the Federation of Trade Unions, is more of a political front for Chinese interests than an advocate for better wages, benefits, and working conditions. Several small private (business) sector unions and two of Macao's four public sector unions are independent. Legislation protecting striking workers from dismissal is inadequate, and government enforcement of labor laws is lax, according to the U.S. State Department report. The report also said that foreign workers often work for less than half the wages paid to Macao residents, live in controlled dormitories, and owe huge sums to the firms that bring them to the enclave. Macao workers, meanwhile, complain that their bargaining power is eroded by the territory's many foreign laborers, who make up around 12 percent of the workforce.
Women are becoming more active in business and increasingly hold senior government posts. They are, however, still underrepresented in politics and the civil service. Traffickers continue to bring women from abroad into Macao for prostitution, although there are no accurate figures on the scale of the problem, the U.S. State Department report said.