Two integrated resorts set for Sri Lanka have been dealt a severe blow during the final stages of approval. The ruling government has decided to postpone the projects worth a combined us$1 billion, after refusal from coalition parties to support the 10-year tax-free concession set for the operators.
Sri Lanka President Mahinda Rajapaksa made the decision after speaking with party leaders during a Parliament debate. Mounting opposition by Buddhist leaders and political parties has pressured the government to reconsider the tax concession clauses. Religious political groups, such as the Buddhist Jathika Hela Urumaya and the Sri Lanka Muslim Congress, which are part of the ruling coalition, have protested the casinos from the outset.
“The government felt that we should withdraw this bill because of the concerns raised by some of our own coalition partners,” informed Lakshman Yapa Abeywardena, Investment Promotion Minister. “There is a lot of misunderstanding and we want to address all that before we go to Parliament. We encourage proposals from party leaders on a way forward.”
Casinos do exist in Sri Lanka and there are about nine foreigner-only venues in the capital city of Colombo. They brandish well-known names such as Bally’s, the Bellagio and MGM, but have no association to their Las Vegas counterparts. They operate however, without a licensing system, and the government is eager to regulate the sector in order to open the market to integrated resorts and attract foreign investment.
At the tip of India, the Buddhist nation of Sri Lanka is seen as an attractive proposition to attract tourists and as a route to the Indian gaming market, being to India what Macau is to China. Since the civil war that tore Sri Lanka apart for 3 decades ended in 2009, the country has blossomed as a tourist destination. Celebrated for its opulent beaches and incredible wildlife, visitation has grown significantly over the past few years, especially from China, where tourist arrivals increased 72.3-percent year-on-year during the first half of 2013.
“Sri Lanka is now the fastest growing economy in South Asia,” advised Ajith Nivard Caraal, Governor of the Central Bank of Sri Lanka, earlier this year. “With impressive growth expected in key sectors such as ports, tourism, real estate, financial services and outsourcing industry, this is the most propitious time for existing and potential investors to capitalise on the business and investment opportunities.”
Crown Resorts, owned by Australian casino mogul James Packer, has pledged be to one of the first to unfold the integrated resort model in Sri Lanka, with a us$ 350m resort in Colombo. Minister Abeywardene is confident that removing the “tax holiday” would not prevent Packer from building. “He has expressed interest in investing in follow-up projects,” the Minister said, “but the Sri Lankan government is very clear that this will be the only casino he will get.”
“A Crown integrated resort would help redefine luxury tourism in Sri Lanka,” proclaimed James Packer, upon announcing the Crown casino plan, “and play a significant role in helping to drive increased international in-bound tourism, especially from India and China.”
Local development outfit John Keells Holdings, which declared its intention to develop a us$ 850m casino resort in a waterfront location in Colombo, joins Packer in wait of the government’s next move. Abeywardene suggested the government could impose a 5-percent tax of total revenue, instead of gaming profits alone. It was reported that the tax concessions would have amounted to around us$1 billion.
Both projects have already received Sri Lankan cabinet approval and the Minister inferred that the delay does not terminate the developments. “We’ll amend the bill,” Abeywardene explained to reporters. “We will describe how we are going to grant tax concessions, like if it is from the gross revenue or net revenue. We will base the tax on the gross revenue and not on the new profit. The tax concession is on investment and not on the hotel operation.”
Other major international casino operators closely watch movement in Sri Lanka. Within a four-hour plane ride from the major cities in India, a number of operators see Sri Lanka as a prosperous bet into the market. Las Vegas Sands is exploring investment options, after being snubbed by India. Caesars Entertainment and MGM Resorts have also been in talks with Indian Group Delta Corp., which owns a casino in Colombo and several facilities in India.
“Sri Lanka has huge potential to be a perfect gaming destination,” added Hardik Dhebar, Delta Corp. CFO. “There has been 27 percent growth in tourism year-on-year, and Indians, Chinese and Koreans are flocking in. It’s an extremely investor friendly country.”