Inside Asian Gaming

inside asian gaming June 2016 32 billion. Through commissions on betting and revenue share deals, junkets receive roughly half of that revenue in exchange for supplying players – predominantly from mainland China where currency transfers outside the country are restricted – and giving credit to them. Gambling debts remain uncollectable through China’s legal system and sources estimate collections currently run as low as 20%. The MGIA and AMJEM are in talks with the DICJ and individual junkets to create a debtor database that would be accessible to industry members. The Macau government has agreed that a debtor database can be created within current statutes, says the AMJEM’s Mr Kwok, who is a lawyer. “They have considered this issue thoroughly to make sure it’s done legally and respects privacy,” he explains, noting that the gaming industry, rather than the government, would operate the database to increase its flexibility and timeliness. BROADER HORIZONS The MGIA is also working with its “stakeholders across the spectrum,” to uncover new opportunities for junkets. “MGIA is a means for the industry to find good venues far outside Macau,” Mr Tong says. These efforts come as Macau’s junket sector continues to contract and consolidate. In a report last month, investment bank Sanford Bernstein estimates the top five junkets control 70% of the market, with SunCity Group alone holding a nearly 40% share and the top 10 combining for 85%. While the top players offer extensive international travel Illegal Froth Government figures indicate a strong connection between mainland China’s corruption crackdown and Macau VIP revenue. But it’s not a direct connection, Macau junket association leader Kwok Chi Chung says. “Since the 2002 liberalization, the junket sector has had a huge space to develop,” explains the Macau Gaming and Entertainment Promoters Association (AMJEM) President in reference to China’s rapid economic growth. Now, amid the downturn, there’s been a tendency to overrate the junket sector’s reach and influence and to exaggerate its negative aspects. “There’s an indirect connection between VIP revenue decline and the anti-corruption campaign,” he contends. “Before that [crackdown] there was some corruption prevalent, leading to easy money.” As Mr Kwok sees it, Macau’s phenomenal growth wasn’t because corrupt officials made a beeline for junket rooms but because the proceeds of corruption had a multiplier effect across the entire mainland economy. The anti-corruption campaign, along with slowing economic growth, has taken that froth out of the mainland market. “A declining economy makes it harder for cash to flow,” he explains. He also believes that, while not everyone is corrupt, everyone is scared due to the anti-corruption campaign. “There are a lot of factors, but the declining economy is the main reason for declining junket revenue. With a better economy, there will be better revenue,” he says. Despite the current downturn, Mr Kwok agrees with MGIA Vice Chairman Tony Tong’s stance that junkets still matter greatly in Macau, albeit not as much as they used to. “Junkets have become less important as the government puts more emphasis on the mass market,” the former senior member of Macau’s police force and civil service security official says. VIP share of Macau’s total revenue has fallen from above 70% early this decade to about 54% last year, but it’s still equivalent to US$16 billion. By Muhammad Cohen Junket group head explains corruption link Features MGIA Vice Chairman Tony Tong with AMJEM President Kwok Chi Chung