The President of the Macau Association of Gaming and Entertainment Promoters, Kwok Chi Chung, speaks with IAG about the headwinds facing Macau’s junket industry and what the future might hold for the once dominant VIP sector.
Inside Asian Gaming (IAG): It’s been an eventful few months for junkets, starting with the arrest of some senior figures within the industry. What has been the reaction of other junket operators to these events? Are they worried that something similar could happen to them?
Kwok Chi Chung: I don’t want to comment on any specific case. Some of their business, according to the cases, was conducted outside the Macau jurisdiction and they engaged in some illegal activities in mainland China. According to the news we read, these illegal activities are not so related to the Macau promoter business. However, because the people involved in these cases are the industry’s senior figures, it came as a big shock to the industry.
Everybody knows that before, many VIP gamblers in Macau were from mainland China. If Macau promoters continue this business model, they will probably do something illegal [according to] mainland Chinese law. So Macau promoters’ reaction has been to re-evaluate [their business operations].
IAG: The junkets overseen by Alvin Chau and Levo Chan, who are both detained in Macau awaiting trial, were licensed by the DICJ for 14 years. Does this create confusion over what is permitted by law in Macau?
KCC: I won’t comment on how other people think. From my point of view, I emphasize again that these cases are related to business conducted outside Macau jurisdiction. The cause of these cases is the illegal business in mainland China. I think when you do business legally, you won’t feel the issue is so shocking.
IAG: We had already seen the industry contracting in recent times with fewer junkets licensed by the DICJ. This has now been accelerated with the recent developments. How much further do you see the industry contracting in the coming years?
KCC: At its peak, there were 200 to 300 promoters in Macau, but after the recent big adjustment, there are only 46 promoters left. Of these 46 promoters, some still don’t have a contract with operators, so some of them are hibernating. I think there are not many promoters operating in practice. It is such a large adjustment for the market.
What promoters face now is not only the recent shock of the cases [of Suncity and Tak Chun] but also the bad economy and lack of clients. Business is very difficult. You need to check if there is enough production line, and if not, you will be out of this business naturally.
IAG: Is there still a future for junkets in Macau? How do they need to change the way they operate?
KCC: The business model of junkets is gone and we are back to the starting line. The promoters will work like they did before the gaming market opened [in 2002] by doing chip rolling and earning a commission. If any promoter thinks this business is still profitable, they can keep going. Like I always say, nobody would run an unprofitable business.
IAG: Traditional junket operations have also been heavily targeted under proposed amendments to the gaming law. Generally speaking, how do you feel about these amendments?
KCC: After I read the contents of the gaming bill, I realized it will force a big change to the business model of gaming promoters. In the future, there will be no Macau promoter operating junkets. I want to emphasize one thing: when the rules of a game need to be changed, you can decide on your own whether to continue playing.
There is no right or wrong when there are so many problems. If this business model is causing so many problems and is giving schemers and thieves more of a chance, then under those conditions it is not a bad thing for the government to review the law and manage the problem.
Afterwards, if you think there is no survival space for this business, then you should leave the business for good. To say it simply, the new law is just illuminating some bad events. During the fast development of junkets, some problems did emerge, people [stole and] ran away with a lot of money. Now the government is reviewing the law to make the industry healthier. I don’t think that’s a bad thing.
The only problem in the details of the new gaming law: should we give more space to the promoters? This point I think we can discuss.
IAG: Under the proposals, junkets will only be allowed to deal with one concessionaire but agents can deal with more than one. What are your thoughts on this and is there a better solution?
KCC: Under the new gaming bill, the regulations for promoters and agents, as I see them, are very strange. Now the government admits the existence of promoters and also admits the existence of agents who bring business to promoters. But this business is about gaming revenue, so why can the agents deal with more than one promoter while each promoter can only deal with one operator? I don’t know what the intention is. I just feel that it is strange, as many others do too. Shouldn’t it be the opposite? Anyway, there is no right or wrong. As I said, we need to adapt to the new law if we want to continue our business.
Likewise, the Secretary for Economy and Finance (Lei Wai Nong) said a new Gaming Promoters Law will be launched, and the nature of promoters and agents and so on will be regulated by it. Since the details have not been made public yet, I cannot comment here. Let’s discuss this when the law comes into effect.
IAG: The gaming law amendments also propose the removal of dedicated VIP rooms from Macau’s casinos, and an end to revenue share arrangements. How can junkets overcome this?
KCC: I won’t comment on whether the junket business that has been operating for so many years is right or wrong. However, after all these years under the junket business model, the Macau SAR Government now thinks it leads to the unhealthy development of the gaming industry. I don’t think this is such a big deal, because business is like that. For example, property agents were not regulated by law in the beginning, then some speculation and unregulated commission problems happened in the property market and it affected the healthy development of the Macau property market, so the government regulated them with a Property Agent Law. Now all property agents need to be licensed.
To be frank, when promoters work as junkets, of course the business will be much bigger, but just because they now have to work as chip rollers doesn’t mean it is not profitable. It’s just that the revenue will be lower. You just need to transform yourself from a business with very high revenue to a business with less revenue, but it doesn’t mean there is no revenue.
IAG: Do casino operators still need junkets?
KCC: The gaming promoter industry is not unique to Macau. Even in the US you can see promoters bringing gamblers to play and earning commission in return. If the new law still allows this business to exist, it means this business still has value in it.
If you are asking if there will be any operator still willing to deal with promoters, the answer depends on the business model in the future, and whether the promoters really can bring benefit to the operators as well as gaming tax to the government.
IAG: Do you see junkets perhaps focusing their efforts outside of Macau in the future? Would they be better served focusing on jurisdictions with a greater reach to non-Chinese customers?
KCC: The Chinese government is always saying now that they are reviewing the law and to organize mainland Chinese to come to Macau to gamble is illegal. I want to emphasize that we promoters will not seek to bring mainland Chinese to Macau to gamble in the future, because we will not risk acting against the law.
However, besides mainland China, there are still clients in other regions. For example, Hong Kong. If not for the pandemic, Hong Kong clients would still be coming to Macau and their [contribution to] Macau’s GGR is not low. Now let’s see how big this cake is, how many promoters this cake can support and how this cake can be eaten legally. The promoters need to think about how to handle it.
In terms of taking the initiative, for me, I would only go to Hong Kong and Southeast Asia. However, just because I say I am going to Hong Kong and Southeast Asia does not mean I can easily go there and find clients, that depends on whether I am capable of doing so. But this is the direction – I would not go to China to find any client.
IAG: Are there any proposed amendments to the gaming law that you need either more clarification on or would like to see scrapped altogether?
KCC: There is one point I take seriously, and I need to understand it clearly before I will know how to adapt to it, and that is the issue of joint responsibility. According to the new gaming bill, operators, promoters and agents all share joint responsibility, which means that when an issue happens, these three parties will be responsible together. An example is the recent Wynn case (when Wynn Macau and junket promoter Dore Entertainment were found jointly liable for repayment of a HK$6 million debt owed to a VIP customer).
If this is the case, we can’t blame operators for not wanting to deal with promoters for fear that the amount involved could be very large. That could be a huge problem for them. This is like an activator that is making the junkets close one by one. After we calm down, we can think again about whether promoters should exist in the future. If we decide yes, then we need to look at how they can operate healthily.
Recently, many people have asked me questions regarding promoters’ future and my answer is that I am observing. First, the law has not come into effect yet, and second, we must come back to the starting line and start all over again. But we have not started to run yet.
Let’s be rational, the law review is a good adjustment for the long term. I just hope it can give some space to the promoters, such as removing the requirement for promoters to deal with only one operator. When the promoter has enough clients to share among the operators, why do we need to limit this development? When something is illegal, you can police it with the law, but when something is legal you can give some space and it won’t harm society. In the end, it is this gaming revenue that pays gaming tax to the government.