MACAU BUSINESS
the Macau market”. “I know the common wisdom is that it’s going to be turbulent but I don’t want people thinking that way,” said the executive of the parent firm of Sands China in a conference with analysts in April. “We shouldn’t only be concerned – our business is not built on money laundering or on a necessary junket profile.”
But the same thing could not be said for junket “There might only be some large
junkets left in the future [should the headwinds continue],”
says Kwok Chi Chung, president of the Macau Association of Gaming and Entertainment Promoters
10 from 2020, DICJ data show. The latest fall also marked the eighth consecutive annual decline since 2013, when a total of 235 gaming promoters were recorded. Secretary for Economy and Finance Lei Wai Nong has also stated earlier this year these junket operators in the city managed about 77 gaming rooms and 1,566 gaming tables — or one-fourth of the tables in the market — at the moment. In view of the continuity of the negative impact induced by the pandemic and other regulatory hassles, Mr. Kwok believes the shuffle in the sector might continue. “There might only be some large junkets left in the future [should the headwinds continue],” he adds.
Digital yuan
Besides the criminalisation code, another new hurdle for the segment looming over is the possible introduction of digital yuan in the city. Since the People’s Bank of China (PBOC) announced last year it has started pilot tests for the sovereignty digital currency – Digital Currency Electronic Payment (DCEP) – Macau has been flagged as one of the possibilities for pilot tests. In the latest session with the Legislative Assembly in April, Macau Chief Executive Ho Iat Seng confirmed the local authorities are working with PBOC about the feasibility of adopting the digital yuan here, adding the city also plans to amend its regulations on digital currencies. Incorporating artificial intelligence and big data, the digital yuan could be more effective in efforts “against money laundering, terrorism financing and tax evasion”, the Chief Executive added. Rob Goldsteinan, Chairman and CEO of Las Vegas Sands, regards the digital yuan as “an additional form of liquidity into the market” and “a very positive thing for
16 JUNE 2021
operators, as the digital yuan would allow Beijing to better trace and oversee how money is put into use in the gambling enclave. Brokerage Sanford C. Bernstein highlighted in a research note earlier this year that the DCEP would deal a huge blow to the VIP segment. “[I]t would also allow easier money transfer, [and] eliminate the need to use intermediaries (like junkets, underground banks or pawnshops),” the report read. “The ecosystem of the Macau gaming industry has long changed — from the strengthening efforts by Mainland China against cross-border gambling in recent years to the new criminal law this March,” says Zeng Zhonglu, a professor at the Centre for Gaming and Tourism Studies of Macau Polytechnic Institute. “These all have deterred high rollers from coming to Macau; the digital yuan will only further deteriorate the VIP segment.” In the perspective of the gaming scholar, the scope of the impact of the digital yuan depends on whether the virtual currency is the only avenue for the mainlanders to access to gambling chips. “Even if the digital yuan is introduced here, there will still be a long time when gamblers could opt for either the physical or digital currency,” he adds.
Venturing out
But junket operators do not take time for granted. Amid the deteriorating business environment, many major players have diversified their business empires, from investing in gaming operations overseas like Southeast Asian countries to tapping into the mass market and other tourism businesses. Alvin Chau Cheok Wa, boss of Suncity Group, one of the largest casino middlemen here, has been involved in the development and operation of integrated resorts in Vietnam, the Philippines and Russia in recent years with an aim of getting one of the three gaming licenses in Japan. Another junket boss Levo Chan Weng Lin of Tak Chun Group acquired about one-third of interests in Hong Kong-listed Macau Legend Development Ltd last year, which runs the entertainment and gaming complex Macau Fisherman’s Wharf on the Macau Peninsula. “Subject to heavy regulatory pressure, the junket
operators have been transforming their business models,” says Mr. Lam, the veteran junket investor. As the city’s six gaming licenses will expire next year, he adds: “There will be no surprises some junket operators might bid for a license during the renewal process, either by their own or through collaboration.” Albeit the efforts by the authorities in clamping down the segment, he believes junket operators could still stay in business in the future. “Junkets have been crucial to the success of the [Macau] gaming industry throughout the years,” he adds.
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