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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

OCTOBER 22, 1999 VOL. 25 NO. 42

Manila Rolls the Dice
In quest of foreign investment and jobs, Estrada lays out the red carpet for Macau tycoon Stanley Ho
By CESAR BACANI and RAISSA ESPINOSA-ROBLES Manila


Macau's Stanley Ho got to ring the bell at the Philippine Stock Exchange last week.
Edwin Tuyay for Asiaweek
You would think a head of state was visiting. Some 500 senior government officials and businessmen crowded the grand ballroom of Metro Manila's New World Hotel last week to feast on Peking duck, abalone and shark's fin soup. Vice President Gloria Macapagal Arroyo came in elegant black. Executive Secretary Ronaldo Zamora read a speech by President Joseph Estrada, who sent his regrets. The guest of honor beamed. After a dust-up with then-president Ferdinand Marcos in the 1970s, Macau gambling king Stanley Ho Hung-sun has returned to the Philippines. "Very shortly, I'm going to bring a floating restaurant that can seat 2,000 customers," the 78-year-old tycoon told Asiaweek after dancing the tango. "One floor could be a casino. All lit up, it can be moored in Manila Bay, an excellent attraction for the new millennium."

Welcome back, Stanley - and hello to other Asian magnates, or so Estrada says. "The son of Mr. Li Ka-shing, who was not able to make it [to Manila], will also invest here," the Philippine leader told reporters earlier that day. "This goes to show that they [Ho and other foreigners] have confidence in my administration." Not quite. "Neither Li nor any of his [two] sons are involved," responded a Li spokeswoman in Hong Kong. Says the powerful billionaire's younger son, Richard Li, who heads the hot Internet venture Pacific Century CyberWorks: "I don't know where [the suggestion] came from. I have rejected many proposals on Net gambling. I'm not prepared to do it in the virtual world, let alone the real one."

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But Ho (estimated net worth: $2 billion) is definitely in. He became chairman of BW Resources Oct. 11, having bought a little over 10% of the listed company. "I shall also invest in other projects like socialized housing, hotels and high-speed ferries," says Ho. "And I'm going to introduce dog-racing. We are not speculators. We are here to develop tourism, gaming, recreation and leisure in the Philippines." His Philippine partner Dante Tan, who is an FOE - friend of Estrada - says BW Resources will become "one of the biggest companies in the country." A little-known businessman until Estrada became president, Tan controls a lucrative nationwide on-line bingo operation.

Manila says everybody wins. The country will get needed infrastructure and big-spending tourists. Pagcor, the government-controlled agency that has the exclusive franchise to run casino and other gambling operations, will reap more revenues - it will get a slice of BW's gambling proceeds in return for granting the company the right to operate casinos on its behalf. Tell that to the Catholic Church. "A culture of gambling will lead us to a generation of lazy adults who depend on suwerte [luck] rather than hard work," thundered Cardinal Jaime Sin. Critics also fear a rise in organized crime - gangland violence involving triads is almost routine in Macau - and an investor backlash against the perceived return of cronyism in the Philippines.

"We are the most misunderstood and mistreated company in the Philippines," complains BW Resources president Eduardo Lim. The Securities and Exchange Commission says it will investigate allegations of full-disclosure violations, insider trading and price manipulation. From less than 2 pesos in January, BW's stock soared to an intra-day high of 127 pesos before profit-taking pared the price to 68 pesos or $1.70 on Oct. 12 - up 3,300% in less than ten months. "The company is worth more than 100 pesos a share," says Lim, a son of the chairman emeritus of the Philippine Stock Exchange, Eddie Lim. In addition to Ho's casinos and dog-racing, BW plans to acquire Tan's bingo operations.

As Lim tells it, Tan and his partners have been planning the move to gaming as early as three years ago. It was hard going, because gambling proponents needed Pagcor's go-ahead and Fidel Ramos, who was president then, was mindful of the Church's objections. But he backed the establishment of government-regulated lotto betting, citing the need to stamp out the illegal and fraud-ridden jueteng numbers game. Estrada, who became president in 1998, is pushing the envelope further. Belle Corp., which until recently had Estrada running mate Edgardo Angara (now agriculture secretary) on its board, won Pagcor's agreement to hold jai-alai tournaments - Filipinos like to bet on the outcome of the Basque ballgame.

Earlier this year, Tan snagged a Pagcor license to operate on-line bingo. The operation was placed under Tan's private company, Best World Gaming and Entertainment, but the expectation was that it would be folded into BW. The stock soared higher as the company teamed up with property company Megaworld Holdings on a hotel-casino complex to be fully completed in 2001. Ho's entry sent BW Resources to the stratosphere. Tan is determined to keep it there. BW will merge with Best World Gaming "before the end of the year," he says. The company also plans to buy 20 bingo parlors in shopping malls. And there is market buzz about Internet gambling as another Tan firm, listed Armstrong Holdings, signed up with New Zealand's Savoy Group to explore e-commerce opportunities.

The icing, of course, is Ho's involvement. The tycoon's casino monopoly in Macau ends in 2001, and the talk is that it may not be renewed. China resumes sovereignty over the Portuguese enclave midnight of Dec. 19. "After the return of Macau to China, I'll be able to find time to come more often to the Philippines," says Ho. His three floating restaurants in Hong Kong lost $2 million in the first half of 1999 because of a tourism downturn, so it makes sense to turn one of them into a Manila casino. Ho will also put up gambling tables in Sheraton Marina, part of the hotel-casino complex BW is building in Manila. "We're going to turn the Sheraton over to Pagcor on or before Dec. 31," says Lim. "They will do the interiors and the finishing and occupy six floors. Ho is going to put up a casino on three floors for foreign high-rollers."

All this explains the sky-high valuation the market is placing on BW Resources and Armstrong Holdings. Punters call them "Erap stocks" - Erap is Estrada's nickname - because of their owner's closeness to the president. That friendship has been amply demonstrated. In March, Pagcor chairman Alice Reyes told Congress that Best World Gaming was granted a bingo license "because it had the endorsement of the Office of the President" - despite the fact that the company had yet to register with the Securities and Exchange Commission and no public bidding had been held. When Tan's bingo operation was launched in June, guest-of-honor Estrada lauded the company for "creating job opportunities for thousands."

Predictably, the Catholic Church and the opposition are up in arms. The gambling rush "will aggravate a culture of laziness, leading to millions of man-hours lost, false hopes and a dangerous cycle of unproductive frustrations," says Sen. Rodolfo Biazon. Even some in government are worried. "I'm not questioning the motives of the administration, because it is really looking for investments to fuel the economy and create jobs," says Alex Melchor of the Presidential Anti-Organized Crime Commission. "But it should not be this way. There is a very close interaction between triad activity and gambling. Some triads have already been looking at the Philippines because of crackdowns in other countries. This process started long ago because of the perception that our anti-crime and moral fiber are very weak."

The government says Ho will bring in other foreign investors. The tycoon says he has yet to speak to Li Ka-shing, but adds that Cheng Yu-tong of Hong Kong's New World Development is joining him. Manila has a lot riding on this bet. To leverage Pagcor's increasing profitability, the government plans to securitize the agency's future earnings to back a bond issue whose proceeds will help plug a yawning budget deficit. Given the high stakes, BW Resources seems to have everything going for it. The bingo operations alone are estimated to generate annual revenues of $25 million. Ho's cash and extensive casino experience and contacts can top that up with millions more. But if crime and cronyism become more pronounced and the vaunted investments do not materialize, Filipinos are bound to ask themselves who the winners really are.
- With reporting by Alejandro Reyes and Yulanda Chung / Hong Kong

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