macau casinosJunket operators in Macau may soon have to increase their capital requirements 100-fold as a result of a new governmental proposal. The two-year long slump in Macau’s casino industry, triggered by the vigorous anti-corruption campaigns by the Chinese government has resulted in the VIP gambling segment to plummet which in turn has threatened the survival of junket firms.

Junket operators typically bring in wealthy Chinese gamblers to casinos in Macau and loan them money to gamble. Since the downturn, many operators have found it difficult to survive as a result of the reduced VIP inflow into the city as well their mounting bad debts.

The president of Macau’s Association of Gaming & Entertainment Promoters, Kwok Chi-chung stated junket operators are currently collecting only twenty percent of the money lent to VIP gamblers. This cash crunch has made it difficult for junkets to operate, resulting in many either scaling down and reducing the scope of their operations or being forced to shut down their businesses.

Junkets are also facing increasing scrutiny in Macau. The Macau government has been exploring ways to increase oversight of the junket industry and improve transparency. Last year, the government introduced new rules requiring junket operators to submit accounting reports for review every month. The latest proposal states that the capital requirement for junket operators would be raised from $1.3 million to around $13 million. The new rules will also require one shareholder of the operator to be a resident of Macau. These new rules are expected to be levied only on new junkets, not the existing ones.

In the current scenario, market analysts expect very few junket companies to set up new business operations in Macau. CLSA gaming analyst Aaron Fischer said that the Macau government is likely to crackdown on junkets and ensure compliance with all the regulatory requirements. Kwok in fact foresees more closures in the junket industry due to ongoing adverse conditions.

In a statement, Kwok Chi-chung said

The current situation is like the aftershocks following an earthquake. After some time, some VIP rooms may have seen the number of customers that they receive is not enough to support their operations. As such, they may prefer shifting some of their resources and focuses from Macau to other places in order to decrease their operational costs here

Junkets have been looking at other countries like Cambodia and Malaysia in a bid to improve revenues and if Macau does decide to implement these new policy changes, more junkets are expected to close up their Macau operations.

Categories: Casino News

Posted on: 18th April 2016 by: Gary Beachley