Feature

The Big Bet

Everyone is trying to cash in on China's gambling addiction. But does Beijing have an ace up its sleeve?

The Taiwanese islands of Matsu do not seem like an ideal spot for one of the world's biggest casinos. Although they are ringed by rocky beaches and azure water, only about 10,000 people live on the 19 tightly clustered flyspecks, some 126 miles away from the main island of Taiwan. An Associated Press reporter who visited in 2012 described Matsu's few shops as "a complex of decaying concrete structures that are most notable for their low-wattage gracelessness." Besides a small tourism industry, the islands' chief draw is a sorghum-based liquor that, to the uninitiated, smells like embalming fluid.

Matsu is best known in the United States as a footnote of Cold War history. China and Taiwan fought a battle there in 1958 -- Chiang Kai-shek's Nationalist forces had held onto the islands in their 1949 retreat from the mainland -- causing U.S. Secretary of State John Foster Dulles to float the idea of dropping a nuclear weapon on the People's Republic in order to defend Matsu and the nearby island of Quemoy from communist incursion. As recently as 1999, tensions were high enough that Taiwan, fearing an invasion, ordered troops stationed on Matsu and Quemoy to cancel their holidays and remain at their posts.

Relations between China and Taiwan have improved markedly since then -- in June, the residents finally cleared the last land mine from Matsu -- and so have prospects for holidays on the islands. In 2009, in an attempt to encourage tourism and revitalize economic growth, the Taiwanese legislature passed a law allowing the outlying islands to vote on whether to legalize gambling. The idea is to take what has historically been one of the islands' greatest vulnerabilities and turn it into a strength: At its closest point, Matsu is just a few miles from China -- and its legions of big-spending gamblers.

Gambling is illegal in the People's Republic, but its residents are some of the world's highest rollers, both domestically, where they wager billions of dollars annually on underground games of chance, and abroad, where over the last decade a growing number of increasingly wealthy Chinese have driven a huge boom in casino construction and profit. Spurred by the success of Macau, the world's hottest gaming spot, casinos have mushroomed in Singapore, the Philippines, and Australia. The consulting firm PricewaterhouseCoopers forecasts that the Asia-Pacific gaming market will net nearly $80 billion in 2015, more than double its take in 2010 -- and investors and gaming companies are looking for the next best spot to capture Chinese clientele.

William Weidner, owner of an eponymous resort development company and former chief operating officer for gambling giant Las Vegas Sands, wants to make Matsu that spot. He first considered building a casino in Taiwan's nearby Penghu archipelago, but after that island county's referendum to allow gambling failed, he turned his attention to Matsu. As part of his charm offensive, Weidner has said he will spend $2.5 billion of the project's $8 billion budget to upgrade the islands' infrastructure and turn Matsu into a "world-class" resort. In addition to a casino, the project envisions elevated causeways linking Matsu's two main islands, a university campus, a golf course, a ferry terminal (complete with luxury high-speed ferries), an expanded airport built on reclaimed land, boutique hotels, and Mediterranean-style villas for the visitors, the majority of whom the developers expect to be Chinese.

In April 2012, Weidner Resorts posted a slick Chinese-language public relations video (since been made private) on its YouTube channel, seemingly to impress upon Matsu's residents the venture's cosmopolitan nature. The video features glamour shots of Weidner with celebrities ranging from George W. Bush to Sylvester Stallone and promises Matsu locals "the opportunity to realize their dreams, create history … and create wealth for their future generations." To sweeten the pot, Weidner said in July 2012 that if the casino opens and hits its targets, he'll pay each resident $609 a month -- a sum that will rise to $2,670 after five years. The Matsunese bought the pitch, and that month the islands became the first Taiwanese territory to approve gambling.

Yang Sui-Sheng, the magistrate who oversees Matsu, is optimistic that the casino will be built, but he has no illusions as to why Weidner chose his tiny corner of the Pacific. "If casinos were legalized in China, there would be no chance that investors would come here," he says. This raises an interesting question: Why doesn't China, with its growing wealth, consumption-driven economy, and huge unmet demand, take advantage of its own gaming market?

CHINA, WHERE NO VICE is legal but every vice is tolerated, has a complicated history with gambling. Like opium, it was rife in the early 20th century. Gen. Chiang Kai-shek, the country's nominal leader in the 1930s and 1940s, saw gambling as a threat to his army's morale and unsuccessfully tried to curtail it. After Chiang and his supporters made a run for Taiwan and Matsu in 1949, Mao Zedong took power in China and swiftly outlawed gambling, as well as other vices. But in the years following his death in 1976, drugs and prostitution re-emerged, and by the 1980s and 1990s, Chinese people could be found betting on everything from horse racing to soccer matches to cricket fighting.

Today, signs of gambling are nearly ubiquitous in mainland China. Tables for the rummy-like game of mahjong dot street corners around the country, while more serious wagering takes place in parlors that, like Chinese brothels hiding behind foot-massage signs and barber chairs, make little attempt to hide their purpose. "If you don't play for a profit motive, it's legal -- but if you play to make money, that's illegal," explains Chen Haiping, a researcher at Beijing Normal University's lottery research center. But there are also much, much bigger games: In June, 17 people were indicted in Shanghai for the crime of opening an online casino into which they allegedly funneled $13 billion in bets.

There's a rich Chinese tradition of legitimizing morally questionable behavior like gambling -- you just call it something else. In the sixth century B.C., Confucius established his theory of the "rectification of names." He believed that social disorder stemmed from the failure to accurately perceive reality, and the solution was describing things as they are. Ever since then, the Chinese have tried to subvert Confucius's dictum: Feet shaped by the excruciatingly painful process of foot-binding, for example, were called "golden lotuses." The communists under Mao were notoriously good at euphemisms. The famine caused by the collectivist government program known as the Great Leap Forward, which killed tens of millions of people, is referred to as "the three years of natural disasters." And euphemism remains the key to vice in China. Because a percentage of state lottery proceeds accrue to the Ministry of Civil Affairs, the lottery is not considered gambling but a legal, even beneficial, "social welfare" project.

Foreign gaming companies have tried to use this trick in their fitful efforts to penetrate the Chinese market. In 1993, for example, a Malaysian company opened a slot machine parlor in the dreary northeast city of Harbin, but because it paid out "gifts," not cash, it was licensed for "entertainment," not gambling, according to Hong Kong's South China Morning Post. Harbin tolerated foreign slot machines for a little while -- a 2010 article in a provincial newspaper described 1994 and 1995 as "the craziest era for gambling" in the city -- until it formally banned the machines in January 1996.

In 1993, another Malaysian company said it had obtained a license to operate "electronic and electrical entertainment machines" in the nearby city of Dalian -- an experiment that appears to have fared worse. Soon after the company announced the agreement, the city's then-mayor, Bo Xilai -- now best known for a 2012 political scandal involving coup rumors, attempted defections, and murder -- said he was not aware of any such deal. He added that gambling was strictly prohibited and disapproved of by the central communist government, according to a report in the Straits Times, a Singaporean newspaper. "If a club with betting machines should open its doors in Dalian, it would be immediately closed, and you can consider that an official statement," a Bo aide said in July 1993.

That doesn't mean that people in Dalian and Harbin actually stopped gambling or that enterprising businesspeople stopped providing them with illicit opportunities to do so. As China's economy has grown, however, the stakes have gotten higher. In 2003, the disposable income of the average urban resident was about $1,000; in 2012, it was roughly $4,000. Chinese with the means to scratch the gambling itch go overseas; last year, Chinese people took 83 million trips abroad, on which they spent more than $100 billion. "The Chinese are now the partygoer everyone wants to invite," says Ben Lee, managing partner at IGamiX, a gambling consultancy in Macau.

Macau has laid out the red carpet -- nearly 90 percent of its visitors are Chinese, says Martin Williams, Asia editor of GamblingCompliance, a market analysis firm. The tiny former Portuguese colony borders southern China's Guangdong province; with the right travel permit, it is an easy ferry, rail, or plane trip from the mainland or Hong Kong. Once a sleepy backwater, Macau allowed foreign companies to open casinos in 2002. In just a decade it has become the world's undisputed gaming capital, with revenue six times greater than Las Vegas. On the day that the Sands Macao, that territory's first Las Vegas-style casino, opened in 2004, more than 20,000 people swept in, literally ripping the doors off their hinges. Over the next three years, gaming companies will build at least six more casino resorts in Macau, at a cost of $20 billion.

Most countries that abut China have built casinos to cater to the country's legion of gamblers. Myanmar, Vietnam, and Laos host gaming resorts near the border "that exist just because of China," says Andrew Klebanow, co-founder of the consultancy Gaming Market Advisors. Singapore, which only allowed casinos to open in 2010, already hosts the world's two most profitable, with 2012 gaming revenues of $5.9 billion driven by Chinese punters -- just under the combined haul of all of Las Vegas's dozens of casinos. Even Kazakhstan has gotten in on the game. The Astoria Club, for example, a gambling resort in a lakeside town outside Almaty, provides "a Chinese-language book of rules and tutorials," says the casino's event manager, who asked to go by his first name, Batikhan. "Chinese visitors are welcome here, for sure!"

But Almaty is quite a trip for the roughly half of China's population that lives along the country's east coast -- the Kazakh city is some 2,000 miles from Beijing -- and investors and developers are looking for the next big opportunity to draw those visitors. Major casino projects have recently been announced in the Philippines and Vladivostok, the largest city in the Russian Far East, which is a short flight for many of the 120 million people who live in northeast China. Currently, their nearest legal gaming option is in the basement of the Yanggakdo International Hotel, on an island in a river in the middle of Pyongyang, North Korea. (South Korean casinos are somewhat farther but a lot more inviting.) If it is built, Weidner's Matsu casino would be the closest option -- and a much swankier one -- for tens of millions of people in southeast China.

OF COURSE, BUILDING a casino in China would presumably be the most convenient option, but doing so has proved difficult.

In 2005, fresh off the success of opening the Sands Macao, American gaming magnate Sheldon Adelson announced in a statement that the nearby city of Zhuhai had selected his company, Las Vegas Sands, to "proceed with master planning" for a resort on the city's Hengqin Island, and in January 2007 the company issued a news release noting that the local government had formed a committee to "advance the development" of the project. The island is right next to Macau, but unlike its neighbor is part of mainland China, so Chinese can fly or drive there without having to worry about Macau's sometimes onerous visa regulations.

The resort might have been a good testing ground, serving as a beachhead that could eventually host a casino, if laws changed. But by 2008, with the economic climate worsening and the Hengqin project still not approved, Las Vegas Sands announced it had suspended its plans for the resort. In August 2012, the New York Times reported that a contractor hired by the Sands was the focus of a U.S. federal investigation for bribery; early this year, the company's annual regulatory report acknowledged that it may have violated the Foreign Corrupt Practices Act, the U.S. law that prohibits bribing foreign officials. The company remains under investigation by the U.S. Justice Department and the Securities and Exchange Commission. (A Sands spokesman declined to comment.)

Gambling operations in China may have a greater chance of success a few hundred miles to the southwest in Hainan, China's smallest province -- principally composed of a large tropical island that administers the Spratlys and the Paracels, archipelagos whose ownership China disputes with several Southeast Asian countries. "It's a linchpin to China's regional policies," says Lee, the IGamiX consultant, so the central government wants it to be economically healthy. "They want to see Hainan succeed." Sanya, Hainan Island's southernmost city, "has a number of large resorts," says Adam Pliska, president of World Poker Tour, which hosts and manages poker tournaments. "If you look [at them], they look like any nice casino in Las Vegas -- minus one thing. There are no table games and slot machines, but it's certainly ready."

Hainan has been flirting with legalizing gambling since at least January 2005, when four delegates to its provincial legislature submitted a resolution to legalize gambling to "increase employment and boost local economic revenue," according to an article in Beijing Youth Daily, a Chinese newspaper. That resolution didn't pass, but in 2009 nearly 60 Hainan government officials suggested a partial easing of gambling restrictions. And in 2010, in a little-noticed report, the State Council, China's cabinet, approved a resolution allowing Hainan Island to function as a "testing ground for China's lottery and gambling industry." In December 2012, Pliska's company was allowed to host a poker event, "which looks very much like what the government has prohibited in the past," he says. The event was held at the MGM Grand Sanya, a massive new resort built by the American gaming and hospitality company now called MGM Resorts International, which had tried but failed to build a casino on Hainan in the 1990s.

The closest Hainan has come to legalizing casinos came this past February, when Zhang Baoquan, a Chinese property tycoon, told Reuters about a cashless casino bar in his Mangrove Tree resort in Sanya. There, gamblers could exchange winnings for items like luxury goods, jewelry, artwork, and accommodations. Zhang told the reporter that China was not yet ready to legalize casino gambling, "but my personal opinion is, in future, there is a big possibility that they will have."

Two days after the Reuters story was published, Chinese authorities said they had shut down the casino. "We are investigating it, and so far it looks like they have violated their operating regulations," Chen Guangfa, the deputy director of the Sanya Culture and Sports Bureau, told the wire service for a follow-up article. In a July 23 interview, Chen told Foreign Policy that Zhang's bar got shut down because "it offered entertainments that went beyond what our permits had allowed." Zhang declined an interview request. Chen added that the bar is now closed and "undergoing reorganization."

THE BENEFITS TO BEIJING of legalizing casinos are plain to see. Macau's economy, for example, has grown dramatically in the last decade, and its citizens have hit the jackpot: The territory now boasts an annual per capita GDP of $78,275 -- considerably higher than the average American's income and more than 12 times that of the average Chinese. But while Macau captures an average of roughly $1.4 billion a month in tax revenue, according to Williams of GamblingCompliance, the central government in Beijing gets none of that windfall. With China's economy expected to continue its recent slowdown -- annual GDP growth dropped from 9.2 percent in 2011 to roughly 7 percent in 2013 -- casinos could be a helpful source of revenue. "Of course I hope the government will open up the market for gambling," says Wang Xuehong, executive director of Peking University's China Center for Lottery Studies. She believes legalizing gambling would help create jobs, bring in tax revenue, and allow Chinese enterprises "to participate" in the industry. Li Hai, associate dean of the School of Management at Shanghai University of Sport, agrees. "People's demand is there. It's a choice between blocking it and channeling it," he says.

But officials worry about the downside. Throughout Chinese history, there has been a fear that the central government will not be able to maintain its grip on power and that the provinces might go their own way (a sentiment captured by the centuries-old expression "The mountains are high and the emperor is distant"). Legalizing casinos would help provincial officials not only increase local tax revenues but also strengthen their power bases -- something Beijing doesn't want.

What's more, high-ranking Communist Party officials are ardent students of their own history. Gambling was a major social disruption in the 19th and early 20th centuries -- causing bankruptcies, breaking up families, and spurring other vices like opium use -- and they fear that legalizing gambling would revive those problems. "The government's main concern is its potential to disturb social stability and harmony," says Li. "It is a very sensitive subject." The Communist Party is also aware that casinos often attract organized crime -- as they did in Macau, as well as Las Vegas, which for decades was controlled by the mob.

Teresa Du, a communications manager at MGM Grand Sanya, doubts there will be any "significant policy changes" for at least the next five years, which is "frustrating," she said. "Everyone knows MGM specializes in operating casinos, but the only thing we can do is send petitions to the government." (A spokesman for MGM Resorts International said Du's comments "don't accurately reflect the company's views.") For investors, then, the key may be "to put your chips where they're supposed to be," says Desmond Lam, a marketing professor and gambling expert at the University of Macau. That way, if gambling is legalized in China, "they are in a good place."

William Weidner appears to be taking the other side of that bet. "We think the likelihood of China allowing casinos, even in Hainan, is very low," says Jennifer Lee, vice president of Weidner Resorts Taiwan. But Matsu has its own complications. Although relations are much better than in the past, tensions between Taiwan and mainland China still flare up occasionally. In June, Taipei deployed a multiple-launch rocket system in Matsu to fend off a potential Chinese amphibious landing. The irony, one imagines, is not lost on Weidner, who's hoping for a different sort of Chinese invasion.

Other obstacles stand in the way of this flood of tourists. Unlike traveling to Hong Kong and Macau, it's actually not that easy for Chinese to travel to Taiwan. And in February, testy Chinese officials in nearby Fujian province suggested they might ban residents from visiting the Matsu casino. (Lee said such comments are standard and not cause for concern.) Yang, the magistrate for Matsu, admitted that officials are still trying to work out the visa situation.

The Matsu project has been met with skepticism by many in the industry. Lee says that other companies have looked at building casinos on Matsu but admitted, "As far as I know, their interest has not been very high." Steve Tight, president of international development for Caesars Entertainment, which has been eyeing the more-developed Quemoy as a potential casino site, says his company rejected the idea of trying to build on Matsu because it was not as "attractive" a spot for investment. "There's no way [Weidner] can spend $8 billion on a small island," says one gaming analyst, who asked to speak anonymously. "That's insane! He could spend that money, but there's no way he could make it back."

In January, Weidner announced that he plans to build clusters of 30-floor hotels that would offer 26,000 rooms -- as many as Macau's total capacity and 13 times the number in Weidner's original proposal for Matsu. Three months later, Weidner Resorts posted a new video on its YouTube Channel titled "Weidner's Destiny, A Gem Now Awakening -- Matsu, The Mediterranean of Asia." The video opens with old images of artillery fire, describes the economic benefits that a casino resort will bring, and ends with a statement from Weidner himself. "It's time to change," he says forcefully. "Matsu is my destiny."

Chris McGrath/Getty Images

Feature

Fluid Markets

Deep in Congo's violent east, the business of beer meets the ugliness of war.

It's a June night in Kinshasa, and rapper JB Mpiana's weekly VIP bash is just starting to heat up. Toned groupies splash like mermaids in a sunken pool. Middle-aged businessmen perch on the ledge above to watch. A minute before midnight, JB runs onstage among a huge posse of gyrating dancers in sunglasses. He rips into some of his biggest hits; a bombastic performer, he glides across the stage with a beefy grace, dressed in a hunter-orange jumpsuit and matching cap.

Most songs deal with the usual material, girls and gangbangers, in the Democratic Republic of the Congo's Lingala language. But when JB starts to chant the lyrics of his biggest hit of the night, the real purpose of this party -- festooned with yellow-and-blue banners advertising Primus, the beer that everyone would be drinking anyway, even at this lush downtown wine bar -- becomes obvious.

"I love my Priiimus!" JB yells. The crowd yells back: "I love my beer!"

After the show, as his black Cadillac Escalade purred nearby, backup dancers waiting impatiently in the back seat, we asked JB about his lucrative contract with Bralima, the Heineken subsidiary that brews and distributes Primus. In return for writing numerous odes to Primus and featuring its trademark yellow-and-blue trucks in his videos, JB gets invaluable national exposure -- and some $300,000 a year.

The dream contract for any celebrity in the Democratic Republic of the Congo (DRC) is with Bralima -- better than any Kinshasa-based record company, it can guarantee its stars secure, stable careers and fame, even in places where a different rebel group takes over the radio station practically each month. Bralima even played peacemaker for JB's Biggie vs. Tupac-style beef with a local rival, convincing them to share the stage for Bralima's 90th-anniversary party. "There's so many advantages to being with Bralima," JB said. "They have reach all over the country."

Of course, in the DRC, "all over the country" includes some of the most dangerous places on Earth. The authority of the national government in Kinshasa does not extend to all of eastern Congo, which is largely run by a rogues' gallery of rebel groups, including the notorious M23, whose list of alleged crimes against humanity includes looting, murder, and rape. Congo's civil wars have been fueled by everything from blood diamonds to conflict coltan extracted from the country's abundant mines, which makes operating any sort of business in the east a morally dubious proposition. But that has not stopped Heineken and many other foreign firms, which see themselves as the country's best hope for postwar reconstruction.

Corporations from the East India Company to United Fruit did shady business in conflict zones for decades, inviting the wrath of diplomats and international watchdogs who accused them of war-profiteering. By the end of the 20th century, however, the rapidly growing international peace-building community -- including NGOs, the United Nations, development consortiums, think tanks, and some developed-world governments -- started taking a different tack. These days, an emphasis on economic opening and corporate social responsibility means that many of the world's most powerful organizations are actively encouraging corporations into conflict markets, hoping this will lead to peace. Sometimes, though, when Bralima's yellow-and-blue trucks hit those dusty Congo roads, the results can be messy.

IN 1923, A GROUP of European investors founded one of Africa's first breweries, naming it Brasserie de Léopoldville after Belgian Congo's colonial-era capital. Primus, its inaugural brew, did not fare particularly well, with drinkers preferring better-tasting and cheaper Dutch and German beers until the 1950s, when the company -- in which the Netherlands-based Heineken purchased a minority stake in the 1930s -- began expanding production. Over time, Primus became Bralima's marquee beer and a source of national pride: a workhorse pilsner with a taste satisfaction directly proportional to the bottle's coldness and the degree of grime built up inside your sinuses from a day of breathing Congo's diesel-fume-laden air.

Following Congo's independence from Belgium in 1960, Primus played a central role in the new country, even basing its logo on the national flag. Bralima -- as the company was now called, for Brasseries, Limonaderies et Malteries Africaines -- brewed a whopping 145 million gallons of beer in 1974, the year Muhammad Ali and George Foreman duked it out in the "Rumble in the Jungle." When dictator Mobutu Sese Seko banned imported beer for a time in the 1970s, he kept the Primus flowing, making it a core policy to maintain local production while other services and infrastructure crumbled and the state went bankrupt. Beer, he believed, was the magic ticket to keeping his citizens happy: If it ever ran out, his days would be numbered.

Ultimately, it wasn't beer that toppled Mobutu, but a 1997 uprising supported by neighbors Burundi, Rwanda, and Uganda. The country was given a new name, the Democratic Republic of the Congo, but its struggles continued. The current government, under President Joseph Kabila, has faced monumental challenges, from entrenched corruption and nonexistent infrastructure to raging conflict both within and around the country. Bigger than the U.S. Midwest, the DRC holds some 70 million people. But, by some estimates, nearly 10 percent of its population has died as a result of a series of fratricidal civil wars that began in 1996. Last year's mutiny by the M23 rebel group in the eastern city of Goma, as well as the ongoing violence since then, has displaced hundreds of thousands and killed hundreds. Rebel offshoots are now stockpiling weapons for a potential showdown with the world's largest U.N. peacekeeping force, which has been in the country since 1999 but has just been given an unprecedented mandate to take offensive action against the rebels.

Heineken, which bought out Bralima in 1982, has maintained its investment in the DRC throughout the turmoil, anticipating major shifts in the global spirits trade, as giant conglomerates like Belgium's Anheuser-Busch InBev and London's SABMiller have moved away from reliance on stagnant European and American markets to snap up foreign brands. Heineken doesn't report profits by country, but Africa and the Middle East accounted for $873 million in profits and 14.4 percent of the company's revenue in 2012. Frontier beers like Bralima are emerging-country lottery tickets, chances to buy into a market before the country booms and drinkers develop new, more exotic brand loyalties. China, the big success story, saw a 1,000 percent explosion in beer sales in the 1990s that led to local brands like Tsingtao and Kingway Brewery being acquired by foreign companies and later encouraged odd imports like the luxury Chinese version of Pabst Blue Ribbon that sells for $44 a bottle. Since taking over Bralima, Heineken has acquired major stakes in other national classics like Egypt's Stella, India's Kingfisher, and Mexico's Sol.

Under guidance from Amsterdam, Bralima's market share in the DRC has rocketed from 30 percent in 1987 to 60 percent today -- with Primus as the flagship brand. Bralima's main plant in Kinshasa, one of its six in the country, churns out up to a quarter-million of the football-sized brown, dimpled bottles every day, alongside Heineken, Coca-Cola, Sprite, and Fanta. (Bralima is also the country's biggest soda distributor.) In addition to its contracts with celebrities, the brewery has exclusive deals with many bars in Kinshasa, which are festooned with Primus-branded tables, chairs, and ashtrays. Hand-painted signs for Primus seem to paper every surface in the DRC, many with the slogan "Toujours Leader!" ("Always the Leader!").

GIVEN THE VOLATILITY of the country's politics, remaining the leader in Congo can call for some tricky maneuvers. But you wouldn't immediately know that from visiting Bralima's Kinshasa plant, where tall Dutch managers in crisply collared shirts oversee operations from the bird's-eye-view walkways and negotiate employee contracts at the plant's on-site watering hole. Inside the main brewing complex, Congolese technicians wearing lab coats inject hops into a row of massive copper vats. At the loading dock out back, the stacks of empty crates reach 20 feet high as an endless procession of trucks waits for refills.

Sylvain Malanda, Bralima's Congolese communications manager, was in his quiet office in the building next door when we visited in June. Under a hand-painted mural depicting some of Bralima's charitable activities (grain handouts, people lined up at a free clinic) and the legend "Bralima: Sower of Growth," Malanda seemed surprised when asked about corruption in the DRC: "We can do some favors and give gifts [to] politicians if they get in trouble or ask us. But no corruption." Malanda says the help is mutual: "The government is helping us a lot. Congo is open for business!"

In the east, however, with its virtually nonexistent government presence and horrifically bad transportation infrastructure, it is the rebels who determine what stays open. Anyone driving through eastern Congo quickly becomes familiar with the experience of getting stopped at checkpoints and being asked to pay fees. The checkpoints are low-tech affairs, often little more than a wooden log or slack rope thrown across a muddy red jeep trail, perhaps with a shack nearby sheltering a couple of guys holding Kalashnikovs. Still, even a single checkpoint can bring in more than $700,000 per year and probably much more, according to a 2008 report by the U.N. Group of Experts on the Democratic Republic of the Congo.

The checkpoints are the primary revenue source for armed groups in the area and bring in more than enough to fund an insurgency in a country where the average wage is about a dollar a day and used AK-47s can run for as little as $50. And with automatic weapons as prevalent as they are, almost anyone can be a checkpoint "rebel" in the eastern DRC, including less-than-scrupulous police and armed forces trying to supplement their anemic wages.

M23 is one of the major players in the blockade racket. Formed by those unsatisfied with a 2009 peace deal that had only nominally integrated the Rwandan-backed rebels into the Congolese army, the group, which is estimated to have up to 6,000 members, wants greater autonomy in parts of North Kivu province. The United Nations sanctioned M23 late last year, accusing it of murdering, raping, and looting across swaths of eastern Congo in an attempt to intimidate its way to power. Longtime Rwandan-Congolese rebel general Bosco Ntaganda, currently at the International Criminal Court on charges of war crimes, rape, and use of child soldiers, is one of the founders.

Eastern Congo's levy bosses aren't exactly hiding from international retribution. In a surprisingly easy-to-arrange conversation, we spoke by cell phone in July with a taciturn Rwandan calling himself Mr. Damien, "tax collector" for M23. Damien said that he splits his time between M23's three primary checkpoints, overseeing operations at the Bunagana, Kibati, and Kiwanja stations. As matter-of-factly as if discussing tolls on the New Jersey Turnpike, Damien explained that he charges $38 for a van to pass, $300 for a medium-sized goods truck, and $700 for a fuel tanker, handing out official-looking receipts for payment. The three main checkpoints bring in most of the group's funding, enough money to purchase weapons, pay salaries and bribes, and even occasionally dole out social aid to eastern Congo's poor.

Everyone gets stopped, even the Bralima trucks painted like big yellow-and-blue DRC flags. Damien explained that M23 takes $500 from the trucks hauling crates of Primus into rebel-controlled areas: "NGOs pay. People carrying charcoal pay. Women going to the market pay. Everyone pays! We don't do preferential treatments. So, of course, those who transport beer also pay." Drivers leaving for rebel areas are given extra cash to cover the payments, a security officer at one of Bralima's main distribution depots in eastern Congo told us. By the time the brown glass bottles reach their remote village destinations, prices can rise to four times the $1 they cost in Kinshasa.

We took Damien's numbers and multiplied them by the thousands of trips per year that Bralima runs through eastern Congo's rebel-held regions. Extrapolating from Bralima's DRC market share and per capita rates of beer consumption elsewhere in rural Africa, we estimate that approximately 16 million bottles of Bralima beer, or about 2,000 transport vehicles' worth, must pass through checkpoints each year. Assuming, based on our low-end estimates, that these trucks are fortunate enough to be stopped only once per journey at the dozens of blockades along the region's few transport links, manned not only by M23 but also other road and river rebel sentries, Bralima distributors could be paying upward of $1 million a year to rebel groups.

When we presented Heineken with our figure this summer, John-Paul Schuirink, financial communications manager, said that due to the complexity of the situation in the DRC and the use of local distributors, the amount and the payments were difficult for Heineken to verify. But Schuirink said that in response to Foreign Policy's inquiry, the company was in the process of investigating and, as a precaution, had "immediately suspended all payment of third party distributor invoices in the area." Schuirink also noted in an email that "this area represents far less than 1% of our total volume in the DRC and that the vast majority of our deliveries in the area are outside of the territories that are under the influence of M23."

Bralima outsources its distribution to local independent operators, a common way for corporations working in militia- or cartel-controlled zones to keep space between themselves and the road. Heineken has denied that it uses local distributors to immunize the company, pointing out that it operated this way for decades before the rebels occupied the area. But the structure has certainly allowed Bralima to keep running in the east as warlords have come and gone.

Bralima had breweries in cities under control of the rebel group RCD-Goma during its occupation of eastern Congo between 1998 and 2003, explained Jason Stearns, who in 2008 headed the U.N. Expert Group on Congo, conducting a special investigation into violence in the country's east. "So the choice they would have had at that point -- and that any local businessman had at that point -- was to disengage and to leave and stop business, or to continue," Stearns said. Bralima's decision, along with those of other companies that continued to operate in the region, was extensively documented in the "Lutundula Report," the Congolese parliament's 2005 assessment of conflict profiteering. Although the widespread payments to rebels are common knowledge, the Congolese government hasn't followed up the Lutundula Report with further investigations, and business has proceeded as usual ever since. "It's not just Bralima that continued, but it's every single Congolese company in the country," Stearns said.

Given beer's almost mythical status in Congo, shutting down Bralima in the east, though it could dry up some funds going to M23, would do little beyond driving up prices and encouraging smuggling. (Last year, a logistical problem disrupted the flow of beer in Goma for just under two weeks, leading to a 50-cent increase per bottle, according to members of Bralima's distribution staff, who said that thousands of Congolese took to the streets to riot throughout the city. As locals say: "You can bomb a hospital, but not Bralima!") Beer trafficking would potentially provide an even more lucrative source of income for rebel groups than the blockades do today. Imagine Prohibition-era Chicago, transposed onto one of the planet's least stable regions.

The international community has placed some checks on companies that do business, either directly or indirectly, with the rebels. U.S. Executive Order 13413, a 2006 directive, penalizes any American corporation or its subsidiary found "to have materially assisted, sponsored, or provided financial, material, or technological support" to any anti-government militants operating in the DRC. U.N. Security Council Resolution 1493, adopted in 2003, also sanctions assistance to rebel groups in the region. But the sanctions are extremely difficult to enforce, especially given that most companies in eastern Congo work with local partners. Stearns, whose experts group had a role in monitoring violations of U.N. sanctions, said, "We were able to prove that individuals and small local companies were liable, but while companies above them in the supply chain were morally negligent, it is often far more difficult to prove legal liability." Despite all best efforts, in a place like eastern Congo, once a corporation goes in, it can become difficult for anyone -- whether local governments, international observers, or far-flung corporate executives -- to control exactly what goes on there.

ACCORDING TO MALANDA, Bralima's communications manager, his bosses back in Amsterdam don't care much about how he makes money -- so long as it gets made. "For Heineken, what matters is our sales goals. If we make them, all is good. If not, big trouble!" Malanda said, laughing as he pretended to beat us with an imaginary stick. (Schuirink told us, "We do not recognize, nor condone these statements.")

At Heineken's headquarters in central Amsterdam, a vaulted house perched across the canal from the firm's original brick brewery, global communications director John Clarke put the company's philosophy in quite different terms. "There's a view, a belief that you can help the most by being there, being present ... being a contributor to the local economy," he told us.

Heineken's approach in the DRC follows a business concept known as corporate social responsibility (CSR). Part social investment, part public relations campaign, and part community integration effort, CSR assumes that if big companies can align their self-interest with the interests of the countries in which they're investing, everyone benefits. Early versions, such as the charitable works of United Fruit, may have appeared to be little more than smoke screens for bad practices overseas. In 1970, Milton Friedman called mixing social welfare and profit little more than "hypocritical window-dressing," "a suicidal impulse" for businesses. But CSR is now a multibillion-dollar industry in its own right and an essential component of many major corporations, complete with beautifully designed websites and thick, glossy annual reports.

The Heineken Africa Foundation, for example, spent more than half a million dollars last year supporting programs for prenatal care, sickle cell anemia clinics, blood banks, and primary schools. Heineken's 304-page CSR report lists dozens of positive projects, ranging from its comprehensive AIDS program to the local sourcing of rice used at its production facilities. Bralima's foundation recently spent $90,000 building an orphanage. Almost all other international food and drink conglomerates operating in fragile countries, from Kraft and Mars to Pepsi and Nestlé, undertake similar outreach. "I have always believed that business could be a force for good," CEO Irene Rosenfeld said upon the release of Kraft's 2010 CSR report.

The most recent thinking about CSR holds that the mere presence of a major corporation in an unstable region is beneficial. A century of scholarship on the complicated ties between poverty and violence has argued that greater economic integration can help bring peace to chaotic parts of the world. According to the World Bank, this sort of corporate opening is "crucial for countries coping with and emerging from violence" and can lead to a more utopian future for local residents. Having Bralima in eastern Congo, so the theory goes, is a CSR activity in itself. It means better economic opportunities, better clinics, better educational prospects -- and in the long term, a less violent society as economic growth decreases the motivation to fight.

In reality, having Heineken in eastern Congo may boost GDP, but its payments to rebels fuel a conflict that leads the country in the wrong direction. Will Reno, of Northwestern University's Program of African Studies, succinctly described the dilemma: "Will you favor CSR and economic opening, or consider the payments a violation of legal statute? You have to pick. It can't be both." Heineken's troubles in eastern Congo, where just the cost of driving through the region poses ethical and legal questions, point out exactly what makes even the most socially responsible economic opening so fraught in vulnerable countries. Who will enforce international law if, as seems plausible, Coca-Cola's reopening of its plant in Mogadishu requires taxes paid on al-Shabab-controlled roads, if FARC offshoots in Colombia collecting money from SABMiller's Bavarian-beer distributors buy more guns with the funds, or if Boko Haram shakes down trucks laden with Nestlé and Unilever products in Nigeria? Companies expanding into post-conflict Afghanistan will almost undoubtedly find militia checkpoints awaiting them. It is hard to imagine that these companies will not in some way be implicated in the conflicts they are supposed to help end.

IN KINSHASA, some 800 miles away from the lawless eastern DRC, the difficulties -- and the benefits -- of bringing Primus to the people seem distant. Stealing away to his afterparty, JB was clear on the upside of trusting corporations in Congo: "I have faith in [Bralima], and they have faith in me. We have faith in each other." Sidestepping dozens of fans, JB jumped into the idling Escalade and rode off into the night, with his trademark motto, pelisa ngwasuma -- "light the fire" -- echoing through unpaved slum roads. Eastern DRC seems far from reaping the rewards of economic growth, or seeing peace. In fact, the latest peace deal has only created a bigger power vacuum, encouraging spinoff rebel franchises, like Raia Mutomboki, to follow M23's financial model, counting on the fact that delivery trucks will keep lumbering through the Goma mud on their way to new opportunities.

Back in Amsterdam, Heineken has greater ambitions than to be the DRC's liquid savior. There are always new markets to win. As the United States has eased sanctions on Myanmar over the past year, multinationals of all shapes and sizes have sprinted in to engage in heavy-duty economic expansion. Heineken, already in 178 countries, knocked out a $50 million joint venture with locally owned Alliance Brewery just this past May. Clarke, the Heineken spokesman, has high hopes for the company's global future. "Think Star Trek!" he told us. "There shouldn't be any frontiers for the enjoyment of a nice cold Heineken that's enjoyed responsibly."

Jason Miklian

Jason Miklian

Aubrey Graham

Aubrey Graham