Chinese records of Macau date back to the establishment in 1152 of Xiangshan County under which Macau was administered, though it remained unpopulated through most of the next century. Members of the South Sung (Song) Dynasty and some 50,000 followers were the first recorded inhabitants of the area, seeking refuge in Macau from invading Mongols in 1277. They were able to defend their settlements and establish themselves there.

The Hoklo Boat people were the first to show commercial interest in Macau as a trading center for the southern provinces. Macau did not develop as a major settlement until the Portuguese arrived in the 16th century. Portuguese traders used Macau as a staging port as early as 1516, making it the oldest European settlement in the Far East. In 1557, the Chinese agreed to a Portuguese settlement in Macau but did not recognize Portuguese sovereignty. Although a Portuguese municipal government was established, the sovereignty question remained unresolved.

Initially, the Portuguese developed Macau's port as a trading post for China-Japan trade and as a staging port on the long voyage from Lisbon to Nagasaki. When Chinese officials banned direct trade with Japan in 1547, Macau's Portuguese traders carried goods between the two countries. The first Portuguese governor was appointed to Macau in 1680, but the Chinese continued to assert their authority, collecting land and customs taxes. Portugal continued to pay rent to China until 1849, when the Portuguese abolished the Chinese customs house and declared Macau's "independence," a year which also saw Chinese retaliation and finally the assassination of Gov. Ferreira do Amaral.

On March 26, 1887, the Manchu government acknowledged the Portuguese right of "perpetual occupation." The Manchu-Portuguese agreement, known as the Protocol of Lisbon, was signed with the condition that Portugal would never surrender Macau to a third party without China's permission.

Macau enjoyed a brief period of economic prosperity during World War II as the only neutral port in South China, after the Japanese occupied Guangzhou (Canton) and Hong Kong. In 1943, Japan created a virtual protectorate over Macau. Japanese domination ended in August 1945.

When the Chinese communists came to power in 1949, they declared the Protocol of Lisbon to be invalid as an "unequal treaty" imposed by foreigners on China. However, Beijing was not ready to settle the treaty question, requesting a maintenance of "the status quo" until a more appropriate time. Beijing took a similar position on treaties relating to the Hong Kong territories.

Riots broke out in 1966 when the procommunist Chinese elements and the Macau police clashed. The Portuguese Government reached an agreement with China to end the flow of refugees from China and to prohibit all communist demonstrations. This move ended the conflict, and relations between the government and the leftist organizations have remained peaceful.

The Portuguese tried once in 1966 after the riots in Macau, and again in 1974, the year of a military revolution in Portugal, to return Macau to Chinese sovereignty. China refused to reclaim Macau however, hoping to settle the question of Hong Kong first.

Portugal and China established diplomatic relations in 1979. A year later, Gen. Melo Egidio became the first Governor of Macau to visit China. The visit underscored both parties' interest in finding a mutually agreeable solution to Macau's status; negotiations began in 1985, a year after the signing of the Sino-U.K. agreement returning Hong Kong to China in 1997. The result was a 1987 agreement returning Macau to Chinese sovereignty as a Special Administrative Region (SAR) of China on December 20, 1999.

Macau's economy is based largely on tourism, including gambling, and textile and fireworks manufacturing. Efforts to diversify have spawned other small industries, such as toys, artificial flowers, and electronics. The clothing industry has provided about three-fourths of export earnings, and the gambling industry is estimated to contribute more than 40% of GDP. More than 10 million tourists visited Macau in 2001. Although the recent growth in gambling and tourism has been driven primarily by mainland Chinese, tourists from Hong Kong remain the most numerous. Recently, gang violence, a dark spot in the economy, has declined, to the benefit of the tourism sector.

Macau depends on China for most of its food, fresh water, and energy imports. Japan and Hong Kong are the main suppliers of raw materials and capital goods.

Over the longer term, the relocation of manufacturing operations from Macau to the neighboring Chinese province of Guangdong will extend to textiles and garment production as China's entry into the World Trade Organization (WTO) gives the mainland increased direct access to international markets. Mainland competition, along with the phasing out of Multi-Fiber Arrangement (MFA) quotas, which provide a near guarantee of export markets, over the next few years, will eventually spell the end of Macau's low-end mass production of textiles, which comprise the bulk of the SAR's merchandise export earnings. The best opportunities may lie in providing services--shipping, finance, legal--to facilitate mainland exports through Macau to the rest of the world, and conversely inflows of goods and investment to the mainland. Gambling tourism is also an important area of potential economic growth and foreign-exchange earnings.

The market-based economy was fueled by textile and garment exports, along with tourism and gambling. The economy grew approximately 5 percent during the year. Per capita gross domestic product (GDP) was approximately $14,300. The population was approximately 450,000.

On December 20, 1999, Macau reverted from Portuguese to Chinese sovereignty and became a SAR of the PRC. The Basic Law--the mini-constitution--provides for freedom of conscience, freedom of religious belief, and freedom to preach and to conduct and participate in religious activities. The July 1998 Freedom of Religion Ordinance, which continued to apply after the handover, provides for freedom of religion, privacy of religious belief, freedom of religious assembly, freedom to hold religious processions, and freedom of religious education. The Macau SAR Government generally respects these rights in practice although there was at least one exception. There is no state religion.

According to 1996 census figures, of the more than 355,000 persons surveyed, 60.9 percent had no religious affiliation, 16.8 percent were Buddhist, 6.7 percent were Roman Catholic, 1.7 percent was Protestant, and 13.9 percent were "other" (a combination of Buddhists, Taoists, and followers of Confucianism). The number of active Falun Gong practitioners declined from approximately 100 persons to about 20 after the movement was banned in the PRC in July 1999.

Members of the Government, the judiciary, and the civil service belong to a wide range of faiths.

Missionaries are active in Macau, and represent a wide range of faiths with a majority being Catholic.

Relations among the various religious communities are amicable. Citizens generally are very tolerant of other religious views and practices. Public ceremonies and dedications often include prayers by both Christian and Buddhist groups.

The crime rate in Macau is low in compared to more developed countries. An analysis was done using INTERPOL data for Macau. For purpose of comparison, data were drawn for the seven offenses used to compute the United States FBI's index of crime. Index offenses include murder, forcible rape, robbery, aggravated assault, burglary, larceny, and motor vehicle theft. The combined total of these offenses constitutes the Index used for trend calculation purposes. Macau will be compared with Japan (country with a low crime rate) and USA (country with a high crime rate). According to the INTERPOL data, for murder, the rate in 1998 was 5.4 per 100,000 population for Macau, 1.10 for Japan, and 6.3 for USA. For rape, the rate in 1998 was 1.00 for Macau, compared with 1.48 for Japan and 34.4 for USA. For robbery, the rate in 1998 was 120.2 for Macau, 2.71 for Japan, and 165.2 for USA. For aggravated assault, the rate in 1998 was 34.00 for Macau, 15.40 for Japan, and 360.5 for USA. For burglary, the rate in 1998 was 189.00 for Macau, 187.93 for Japan, and 862.0 for USA. The rate of larceny for 1998 was 208.33 for Macau, 1198.13 for Japan, and 2728.1 for USA (Data for Macau are from 1995). The rate for motor vehicle theft in 1998 was 26.6 for Macau, compared with 28.37 for Japan and 459.0 for USA. The rate for all index offenses combined was 584.53 for Macau, compared with 1709.88 for Japan and 4615.5 for USA. (Note: data were not reported to INTERPOL by the USA for 1998, but were derived from the Uniform Crime Report for 1998)

Between 1995 and 1998, according to INTERPOL data, the rate of murder increased from 2.14 to 5.4 per 100,000 population, an increase of 156.3%. The rate for rape decreased from 2.8 to 1, a decrease of 64.3%. The rate of robbery decreased from 145.95 to 120.2, a decrease of 17.6%. The rate for aggravated assault decreased from 78.33 to 34, a decrease of 56.6%. The rate for burglary decreased from 272.86 to 189, a decrease of 30.7%. The trend in larceny could not be computed due to unavailable data; therefore, data for 1995 was used for both years. The rate of motor vehicle theft decreased from 197.38 to 26.6, a decrease of 86.5%. The rate of total index offenses decreased from 907.79 to 584.53, a decrease of 35.6%.

The chief executive is appointed by China's central government after selection by an election committee, whose members are nominated by corporate bodies. The chief executive appears before a cabinet, the Executive Council, of between 7 and 11 members. The term of office of the chief executive is 5 years, and no individual may serve for more than two consecutive terms. The governor has strong policymaking and executive powers similar to those of a president. These powers are, however, limited from above by the central government in Beijing, to whom the governor reports directly, and from below (to a more limited extent) by the legislature. Edmund Ho, a community leader and banker, is the first China-appointed chief executive of the Macau SAR, having replaced General de Rocha Viera on December 20, 1999. Ho's first term expires in December 2004.

The legislative organ of the territory is the legislative Assembly, a 27-member body comprising of ten directly elected members, ten appointed members representing functional constituencies, and seven members appointed by the chief executive. The Legislative Assembly is responsible for general lawmaking, including taxation, the passing of the budget and socioeconomic legislation. In the last election, held in September 2001, pro-Entertainment industry groups won 3 of the ten directly elected seats, pro-democracy groups won two seats, while pro-China parties won four; pro-business groups took the remaining seat. The next election will be held in 2005. The city of Macau and the islands of Taipa and Coloane each have a municipal council.

The legal system is based largely on Portuguese law. The territory has its own independent judicial system, with a high court. Judges are selected by a committee and appointed by the chief executive. Foreign judges may serve on the courts. In July 1999 the chief executive appointed a seven-person committee to select judges for the SAR. Twenty-four judges were recommended by the committee and were then appointed by Mr. Ho. Macau has three courts: the Court of the First Instance, the Court of the Second Instance, and the Court of Final Appeal, Macau's highest court. Sam Hou Fai is the President (Chief Justice) of the Court of Final Appeal.

The police force is under civilian control. After peaking in 1999, serious organized crime-related violence appeared to have been curbed, and police reported a marked reduction in violent crime. A People's Liberation Army (PLA) garrison of 800 soldiers stationed in Macau played no role in internal security.

There were no reports of arbitrary or unlawful deprivations of life committed by the Government or its agents.

There was one report of a suspicious death in custody. In May a prisoner was taken from his cell and transferred to a police station for interrogation. While at the station he became ill and was taken to a hospital, where he died. A postmortem examination by the hospital found that he died of acute renal failure caused by assault with blunt force and had suffered from severe hepatic cirrhosis. The police carried out an investigation of possible police wrongdoing and passed their report to the Public Prosecutions Office; an investigation by the Public Prosecutions Office was pending at year's end.

There were no reports of politically motivated disappearances.

The law prohibits such practices, and the Government generally respected these provisions in practice; however, there were reports of police brutality during the year. In February two officers allegedly assaulted two Hong Kong journalists who sought to enter Macau to cover the visit of Li Peng, Chairman of the NPC. The police denied the allegations. Results of investigations into the incident conducted by the police and Procurator's Office were not available at year's end.

The law prohibits arbitrary arrest and detention, and the Government generally respected these provisions in practice. An examining judge, who conducts a pretrial inquiry in criminal cases, has a wide range of powers to collect evidence, order or dismiss indictments, and determine whether to release detained persons. Police must present persons remanded in custody to an examining judge within 48 hours of detention. The accused person's counsel may examine the evidence. The law provides that cases must come to trial within 6 months of an indictment. The average length of pretrial incarceration was 3 months. Judges often refused bail in cases where sentences exceed 3 years. This practice contributed to overcrowding in prisons.

The law provides for an independent judiciary, and the Government generally respected this provision in practice. According to the Basic Law, the courts have the power of final adjudication over all cases that are within the autonomy of the SAR. The courts also may rule on matters that are "the responsibility of the Central People's Government or concern the relationship between the central authorities and the (Special Administrative) Region," but before making their final (i.e., nonappealable) judgment, the court must seek an interpretation of the relevant provisions from the Standing Committee of the NPC. When the Standing Committee makes an interpretation of the provisions concerned, the courts, in applying those provisions, "shall follow the interpretation of the Standing Committee." The Standing Committee must consult the NPC's Committee for the Basic Law of the Special Administrative Region before giving an interpretation of the law. This Committee is composed of 10 members, 5 from the SAR and 5 from the mainland. The Chief Executive, the President of the Legislative Assembly, and the President of the Court of Final Appeal nominate the SAR members.

The need to translate laws and judgments from Portuguese and a severe shortage of local bilingual lawyers and magistrates may have hampered development of the legal system. At year's end, 94 lawyers were registered with the Macau Lawyers Association, of whom 29 spoke Cantonese and 11 spoke Mandarin. The Government has instituted a rigorous postgraduate training program for magistrates who received legal training outside of the SAR. The judiciary was relatively inexperienced (the first law school opened in the early 1990s), and the lack of locally trained lawyers was a serious impediment to the development and maintenance of an independent judiciary.

According to the Basic Law, the Chief Executive appoints judges at all levels, acting on the recommendation of an "independent commission," which he appoints, composed of local judges, lawyers, and "eminent persons." The Basic Law stipulates that judges must be chosen on the basis of their professional qualifications. According to the law, judges may be removed only for criminal acts or an inability to discharge their functions. Except for the Chief Justice, who must be a Chinese citizen with no right of abode elsewhere, judges may be foreigners.

There are four courts: The Primary Court (with general jurisdiction at first instance); the Administrative Court (with jurisdiction of first instance in administrative disputes); the Court of Second Instance; and the Court of Final Appeal.

The law provides for the right to a fair trial, and the judiciary generally enforced this right. By law, trials are open to the public, except when publicity could cause great harm to the dignity of the persons, to public morals, or to the normal development of the trial. Such a decision must be revoked if those motives cease to exist, and the verdict must always be delivered in public. The Criminal Procedure Code provides for an accused person's right to be present during proceedings and to choose an attorney or request that one be provided at government expense. The 1997 Organized Crime Ordinance provides that "certain procedural acts may be held without publicity and that witness statements read in court are admissible as evidence." There also are additional restrictions on the granting of bail and suspended sentences in organized crime cases.

The judiciary generally provides citizens with a fair and efficient judicial process, but the average waiting period between the filing of a civil case and its scheduled hearing continued to be nearly 12 months, although it was reduced slightly during the year. Since 1991 all legislation has been issued simultaneously in Chinese and Portuguese. Laws issued between 1976 and 1991 have been translated into Chinese.
The Public Prosecutions Office (headed by a Public Prosecutor General) enjoys substantial autonomy from both the executive and the judiciary. The Basic Law stipulates that the Public Prosecutions Office's functions must be carried out without interference, and the law was generally respected in practice.

There were no reports of political prisoners.

Prison conditions met international standards, but in the last few years the prison population has more than doubled to 886 (including male and female inmates), almost two-thirds of whom are from the PRC. Facilities and personnel have failed to keep pace. In 2000 the Secretary for Security announced plans to hold talks with PRC authorities on a prisoner transfer agreement. The two sides had not reached an agreement at year's end.

The Government has permitted prison visits by human rights observers, but there were no such visits during the year.

The Government enforces criminal statutes prohibiting domestic violence and prosecutes violators. Police and court statistics do not distinguish between spousal abuse and other assault cases. If hospital treatment is required, a medical social worker counsels the victims of abuse and informs them about social welfare services. Until their complaints are resolved, victims of domestic violence may be provided public housing, but no facilities were reserved expressly for them.

Private and religious groups sponsored programs for victims of domestic violence. The Government supported and helped to fund these organizations and programs. The Bureau for Family Action was created by the Government as a subordinate body of the Department of Family and Community of the Social Welfare Institute. The Bureau helps women who have been victims of domestic violence, providing not only a safe place for them and their children but also advice regarding legal actions against the perpetrators. A special family counseling service performed an average of 150 family services per month, including receiving phone calls and conducting interviews. Two government-supported religious programs also offered rehabilitation programs for women who have been victims of violence. Through September, 19 cases of spousal abuse were reported to the Social Welfare Institute. Between January and July, the Office for Security Co-ordination received 143 reports of offenses against the physical integrity of female spouses. From January to September, the Government received two criminal complaints of statutory rape and one case of ill treatment. The law on rape covers spousal rape. During the year, their were 13 reported rapes.

Prostitution is legal, but procuring is not. Although there was no reliable data regarding the number of persons involved, trafficking in women was a problem. There is no law specifically addressing sexual harassment, although there is a law prohibiting harassment in general.

Women have become more active and visible in business. A Government survey indicated that, as of June, women comprised 47.1 percent of the labor force. Equal opportunity legislation that is applicable to all public and private organizations mandates that women receive equal pay for equal work, prohibits discrimination based on sex or physical ability, and establishes penalties for employers who violate these guidelines. However, there was wage discrimination in some sectors, notably construction. The equal opportunity legislation may be enforced by civil suits, but no cases alleging discrimination have been brought to court.

The Government is committed to protecting the rights and welfare of children; it does so by relying on the general framework of civil and political rights legislation to protect all citizens. For example, the Criminal Code provides for criminal punishment for sexual abuse of children and students, statutory rape, and procuring involving minors.

School attendance is compulsory for all children aged 5 to 15 years. Basic education was provided in government-run schools and subsidized private schools and covers the pre-primary year, primary education, and general secondary school education. The Education Department provided assistance to families of those children that could not pay school fees. The children of illegal immigrants were excluded from the educational system. The Government provided free medical care for all children. Child abuse and exploitation were not widespread problems. Through September 15 cases of child abuse were reported to the Social Welfare Institute. Between January and July, the Office for Security Coordination received 20 reports of child abuse. From January to September, four criminal complaints regarding sexual abuse of children were received.

The law prohibits trafficking in persons. However, the SAR was both a transit point and a destination for trafficking in illegal aliens. It was also a transit point, and in the past has been a destination, for trafficking in women for the purpose of prostitution. During the year, the Government maintained that the current flow of women into the SAR for the purpose of prostitution was "a result of regional economic migration and not a corollary of trafficking in people."

Trafficking in persons is a crime established and punished under Article 7 of the Law on Organized Crime. The penalty for the crime of trafficking in persons is imprisonment for 2 to 8 years. This penalty is increased by one-third (within minimum and maximum limits) if the victim is under the age of 18 years. If the victim is under 14 years old, the penalty is imprisonment for 5 to 15 years. In cases in which a victim is raped by a trafficker, the two offenses are treated as different crimes.

In the past, there were credible reports that women from Vietnam were trafficked into Macau as mail-order brides, with the assistance of organizations purporting to be travel agencies, international labor organizations, or marriage mediating services. Women from Malaysia, who usually were ethnic Chinese, also reportedly have been trafficked into the SAR; law enforcement authorities in Malaysia believed that the women were trafficked by Chinese criminal syndicates. In some cases, trafficking victims from Malaysia were lured by promises of well-paying jobs and then were forced to work as prostitutes.

Prostitution is not a crime in the SAR, but living off the proceeds of prostitution is a crime. In January the police arrested a Taiwan-run gang that allegedly paid Russian prostitutes a small amount of money during the first 6 to 12 months of their employment contracts to force their continued employment.

There were no government assistance programs in place for victims of trafficking. There were no local NGOs specifically dealing with the problem of trafficking, but there were charitable organizations that provided assistance and shelter to women and children who were the victims of abuse.

Macau was a Portuguese dependency, which reverted to the People's Republic of China on December 20, 1999, when it became a Special Administrative Region of China similar to Hong Kong. Crime has already taken a toll on Macau's economy, which is heavily dependent on gambling and tourism; more than a quarter of the territory's gross domestic product comes from gaming. The government earns half its revenue from gambling taxes, which declined in April to a three-year low. Macau is conducive to money laundering because of strict bank secrecy laws. Asian organized crime and drug trafficking groups are suspected of using Macau's unregulated casinos to launder money. Russian organized crime has reportedly also emerged in Macau.

According to reports of January 1998, Macau is aiming to establish itself as a financial center by deepening and broadening the range of financial services it currently offers. However, the existing banking sector is unsophisticated, with none of the attributes of a modern financial center such as an independent capital market. A banking ordinance was passed in July 1992 allowing the establishment of development banks, and the sector was opened up to foreign competition. In 1993 six major international banks were granted full banking licenses, and three Portuguese banks were granted offshore banking licenses. By December 1998 there were 21 banks, eight of them local and the other 13 incorporated abroad.

Macau's Financial Systems Act of 1993 requires financial institutions to record suspicious transactions and to cooperate with police investigations. A proposed anti-money laundering bill reportedly pending in the legislature would impose prison terms of up to three years for money laundering.

Macau actively participates in regional meetings of the Asia Pacific Group on Money Laundering, despite not being an official member.

Macau needs to enact and enforce anti-money laundering legislation meeting international standards to protect against financial crime and money laundering.

Internet research assisted by Karine Rashid Mozerka