SVA: Macau Casinos Attractive for Terrorist Attack: Vickers

GGR ASIA

Macau’s casinos could be an “attractive target” for Islamic terrorists wanting to attack Chinese, U.S. and Jewish interests, warns a new report from a Hong Kong-based specialist political and corporate risk consultancy.

“Terrorism remains a concern in the Asia-Pacific region, with traditional venues at risk,” Steve Vickers and Associates Ltd wrote its ’2016 Asia Risk Assessment’ report, released on Wednesday. It added: “A further concern could be a spectacular attack on a soft target such as a mall in Australia or a casino in Macau.”

The firm noted that a Macau casino target could attract Islamist terrorist groups “given the nexus of Chinese, American and Jewish interests in the [city’s] gaming sector”.

U.S.-based firms control three of the six Macau licensed gaming operators. Sands China Ltd is a subsidiary of Las Vegas Sands Corp, a company headquartered in the United States and headed by Sheldon Adelson. Mr Adelson is Jewish and a strong supporter of the right-wing Likud government in Israel. He is also a large donor to the U.S. Republican Party.

The other two U.S.-based casino operators with Macau subsidiaries are Wynn Resorts Ltd, chaired by Steve Wynn; and MGM Resorts International, via a venture with businesswoman Pansy Ho Chiu King, daughter of Macau casino tycoon Stanley Ho Hung Sun.

China’s central government is said to be concerned that Islamic terrorist groups are moving into western China, specifically Xinjiang province, where Muslim Uighurs in the past have joined Islamist terrorist groups like al Qaeda. Violence in Xinjiang involving Muslim Uighurs and local authorities has resulted in hundreds of casualties over the past few years, creating a major security concern for Beijing.

‘Harder times’

The report from Steve Vickers and Associates identified other risks for the Macau gaming sector in 2016, saying the city’s casinos “face harder times”.

Risks highlighted include changes in policies by the Chinese central government, “including an anti-corruption campaign that has spooked [gamblers], action against the junket promoters and their triad society associates, and limitations on capital exports”. The consultancy also mentioned “an increase in the risk of corruption investigations”.

China has been cracking down on underground banks, offshore company accounts and other illegal means of transferring cash commonly used by junket operators to move money between mainland China and Macau. There are also reports of a crackdown in mainland China regarding junket marketing operations to recruit VIP gamblers.

The Macau government has vowed to increase oversight of the city’s gaming industry. A total of 35 junket operators did not have their licences renewed for failing to submit information required under stricter accounting rules for the sector enforced this month. In September, Macau’s Secretary for Economy and Finance, Lionel Leong Vai Tac, said the city’s gaming operators should “enhance” supervision of VIP promoters that operate in their casinos.

“Links with junkets have become a liability,” stated the report from Steve Vickers and Associates. “This situation will not reverse in 2016,” it added, noting this presents “huge challenges” for casino operators, given the importance of VIP gaming in Macau still today.

In the three months to September 30, VIP revenue accounted for 53 percent of all Macau casino revenue – a reduction from the boom years of the VIP segment when it provided 60 percent plus of the city’s annual gross gaming revenue.
The report from Steve Vickers and Associates also recalled that each of the six casino operators pledged to invest billions of U.S. dollars in new projects in Cotai “on assumptions that the junket model would thrive and, furthermore, that the government would provide each concessionaire with 500 new tables.”

The consultancy added: “Those assumptions now seem very wrong; the two casinos that opened in 2015 received only 250 tables each. Questions are thus looming about the structure of the debt behind these huge investments.”

Two big new Cotai developments that opened last year – Galaxy Macau Phase 2, bundled with its sister property Broadway at Galaxy Macau; and Studio City – each received on aggregate 250 new-to-market units.

The report concluded 2016 might prove “wrenching” for the Macau gaming industry. The consultancy said casinos “must now find a new model, even as the regulatory climate heightens the risk of investigations”.

It stated: “The less nimble may struggle to do so, and could face a liquidity crunch; and in the longer term one of the six concessionaires could even lose their licence.” Steve Vickers and Associates did not explain which operator or operators could face the risk of losing their licence and the reasons for why that could happen.