Happy Valentine's Day! Am I jealous of Stanley Ho?

[amoy]

from FT.com

China puts its own twist on casino capitalism
By David Pilling

It is just 10 times the size of New York's Central Park with a population of 450,000. Its economy has been growing at twice the speed of China's for several years. Its nominal gross domestic product per capita is roughly $40,000, about the same as Germany and higher than the UK. Place your bets: the city in question is Macao. Macao is China's gambling capital, the only place in a gambling-crazy country of 1.3bn people where it is legal to bet in a casino. It is an officially sanctioned safety valve. China's frustrated gamblers are corralled into a tiny peninsula, where they spend an average 1.4 days losing bucket-loads of money, principally on baccarat. Last year, they left about $23bn on the table (of which Macao's government takes a 40 per cent cut) some four times the amount Americans donated to the casinos of Las Vegas.
Macao has been in the news because of the extraordinary saga of Stanley Ho, the 89-year-old billionaire who made his fortune from a 40-year gambling monopoly granted by Macao's Portuguese colonisers. Mr Ho is in the midst of an unseemly tussle for his estimated $3.1bn fortune. Competing factions from at least 16 children Mr Ho has fathered with four "wives" are battling for a share of his wealth with all the venom one normally expects after a patriarch's funeral. Mr Ho is condemned to watch the spectacle while he is still alive. It's enough to give polygamy a bad name. But the fun and games surrounding Mr Ho's charming family are but a sideshow to the goings-on in Macao itself. The Portuguese established Macao as a trading post in 1557, some 300 years before Hong Kong became a British colony. Hong Kong's rise as a financial centre left Macao to specialise in vice: gambling, prostitution and loan-sharking. In the run-up to the 1999 handover to China, Macao remained a seedy place, with street shoot-outs between triad gangs a regular spectacle. Beijing took a strategic decision to clean up Macao. It would also develop it into Asia's premier gambling destination. Just as Hong Kong is China's banking centre, so Macao would become its baccarat hub. Both special administrative regions would show Taiwan it was possible to be part of China and free to do one's own thing. Almost instantly, Macao's violence ended. So, too, in 2002 did Mr Ho's monopoly. Two of the new licences went to the kings of Nevada, Sheldon Adelson and Steve Wynn. When, in 2004, Mr Adelson opened the Sands Macao, there was a stampede to get in. The casino, the first to cater to mass-market Chinese gamblers, paid for itself in eight months. Mr Adelson later added the 3,000-room Venetian Macao hotel and convention centre, the world's largest casino and one of the few places where you can take an indoor gondola ride. Mr Wynn added a higher-end, more discreet casino that proved equally popular. Macao derives four-fifths of its revenue from gambling (compared with less than half in Las Vegas), the bulk of it from high-rollers. Officially, Chinese citizens are allowed to exchange about $50,000 a year into hard currency. But many high-rollers spend much more than that. They can do so thanks to the so-called junket operators who provide gamblers' hard-currency stake in return for renminbi-denominated collateral. If the gambler wins, he keeps his hard-currency earnings. If he loses, he pays back in renminbi. Because such loans are not exactly official, and unenforceable in China's court system, they are collected the old-fashioned way. Analysts covering Macao insist that the bulk of money wagered – estimated by CLSA at $750bn last year – is legitimate gambling. But the opportunity for money laundering is also obvious. Of the debts settled by junket operators, CLSA writes reassuringly: "Note that the numbers of reported assaults or deaths associated with debt collection are surprisingly low." Beijing may well be hoping that foreign operators can further nudge Macao in the direction of convention business and mass-market gambling. That would make it far less dependent on the volatile, and potentially shady, world of the high-rollers. In the meantime, the former Portuguese colony is riding wave upon wave of money. Last year, its cash-flush government made a "wealth-sharing handout" of $750 to every Macanese. So long as its monopoly lasts, the exact source of gambling revenue may not matter too much. The dice are loaded in Macao's favour.

Sick in fortune
By Editorial

If Shakespeare were alive today, he would have had a good line in business books. Macbeth is a primer in how (not) to be a corporate wife; The Merchant of Venice is a cautionary tale about reckless lending. The play Stanley Ho should have read, however, is The Tragedy of King Lear.
It is not clear how the ageing king of Macao's casinos intended to divide his gambling empire among his progeny. Instead, as in the play, it became apparent this week that the kingdom Mr Ho had built – and thought was his to distribute – had already been lost. How sharper than a serpent's tooth it is to have a thankless child, as King Lear himself said.
Ingratitude, thou marble-hearted fiend, Mr Ho must have muttered when he discovered that the majority stake in his gaming and hotels business was already held by his third wife and five children from his second marriage. It would be understandable if Mr Ho, like Lear, had difficulty distinguishing confessions of devotion from the real thing. After all, he has had four wives and at least 15 children. But he shares the king's fate in now accusing his relatives of grabbing the family business.
Lear could have told Mr Ho to make clear and public provision for distributing his estimated $3.1bn fortune among "younger strengths". Instead, Mr Ho this week repeatedly changed his instructions. Storms raged around an anguished Lear; the jangle of slot machines must be clanging in Mr Ho's head.
Mr Ho's decades-long monopoly of the Macao casinos won him enemies as well as friends, but this is a sorry saga for a man "at the verge of life". King Lear teaches us not to hope for a sweet ending now – this is Shakespeare's ultimate tragedy that plays out in five painful acts. With teams of lawyers, 21st-century financial systems and far more progeny, the unfolding tale of Mr Ho's disappearing kingdom looks set to go on for far longer than that.