OPINION – Back to the 70s

By António Lobo Vilela

Lawyer based in Macau and the author of the Macau Gaming Law Book (www.macaugaminglaw.com)

Macau Business | January 2022

As I explain in my book, “the gaming promoters, also known as “junkets”, appeared in Macau in the 1980s, when the most significant marketing policy of the STDM consisted of making travel arrangements for high-rollers to come to play at their casinos.

To benefit, in particular, from the right to travel to and from Macau and stay in Macau, the high-rollers acquired special gaming chips (called ‘junket chips’ or ‘dead chips’) that were characterized by not being directly redeemable in cash, that is, they were intended to be used for playing and prizes paid in regular gaming chips or directly refundable in cash. These special gaming chips were purchased through agents who organized the trips, who were paid through commissions on the number of gaming chips sold (averaging about 1.25%). 

To implement such a marketing policy, the STDM created a special room at the Casino Lisboa aimed at high-rollers, where the minimum limits of bets at the gaming tables were considerably higher, and chose a significant number of agents to organize those trips (mostly Thais, since it was from Thailand that most of the high-rollers came), to whom different color gaming chips were given to enable the calculation of the commissions due at the end. Most of these agents were businessmen who frequented Macau casinos and therefore enjoyed some credibility with the concessionaire.

The success of this initiative was considerable and led to an increase not only in agents but also gaming tables allocated to high-rollers (from 3 to 11) and, in 1988, the opening of two new special rooms at the Casino Lisboa (the Diamond Room and the Peacock Room), this time with the management of activity in each of them entrusted to two of the most outstanding agents. The results achieved with these new rooms led to the emergence of proposals from other agents for the allocation of rooms, which was followed by the opening of over 40 special rooms in various casinos in Macau during the 1990s.”

The activity of promoting casino games of chance is regulated, for the first time, by Administrative Regulation No. 6/2002, of 1 April. The regulatory option was intimately tied, on the one hand, to the importance of this activity to Macau’s economy (particularly in terms of turnover) which, until that time, has been done informally without regulations, with the complacency or tolerance of regulatory authorities. On the other hand, it is also tied to the goals of the Macau Gaming Law to ensure “[t]hat those involved in (…) operating casino games of chance are suitable to the performance of these functions and assumption of these responsibilities” and that “casino games of chance operate and function (…) free from criminal influence” (see Article 1(2), subparagraphs 2) and 3)). 

The boom of the Macau casino industry stems from the sophistication of the junket operation allied to the growth of visitors from Mainland China. In 2002, the VIP Baccarat accounted for 73.7 percent of the GGR, reached its peak in 2003 (77.4 percent), and started to decline from 2017, accounting for less than 50 percent for the first time in 2019.

The imbroglio that the gaming promotion finds itself in is pushing the gaming promoters out of the gaming ecosystem. Unless they explore new/old avenues to find wealthy players from other geographies, VIP gaming will barely survive. Premium mass-market gaming will likely follow the trend (who will be collecting the gaming debts?). The mass-market gaming will always continue to depend on the greater or lesser indulgence of the Mainland authorities in allowing a considerable number of its citizens to visit Macau. As a friend of mine put it smartly, Macau will cease to have gaming and only have children’s games.

The agonizing gaming promotion activity associated with to an increase in the unemployment rate almost on a daily basis, the unsustainable government’s persistence on the COVID-zero policy – when not accompanied by an effective vaccination campaign – and the Court of Final Appeal’s ruling confirming the Court of Second Instance’s decision that gaming operators are jointly and severally liable for the repayment of the funds on deposit with gaming promoters will have a snowball effect in sinking the fragile and governmental-subsidy-dependent, SMEs-based socio-economic fabric.”

A return to the 1970s is on the horizon!

But why worry?

As sagely stated by the Secretary for Economy and Finance, the local gaming sector is moving towards a “healthy and sustainable development” (whatever that means…). The government’s very sensible and no less Orwellian announced policy to attract talent to build a more diversified local economy by bringing loads of Nobel Prize laureates and Olympic-medal-winners may be the way to go. They will be eager to settle down in a city stepping back in time, probably not to help in the diversification work but to build an economy from scratch.

Indeed, when one doesn’t have or lose the sense of reality, the sky is the limit!