Why we shouldn’t be surprised if Packer makes a little jaunt to Colombo

Joint opposition lawmaker Weerakumara Dissanayake on Wednesday told journalists that Australian gaming  mogul James Packer, who once said he wanted to make Sri Lanka a gaming Mecca, was in town. Dissanayake addressing a news conference urged the government to disclose the purpose of Packer’s visit.

Dissanayake’s claims on Packer’s visit are yet to be verified for their accuracy. But if one analyses the recent developments surrounding Packer, it makes sense for him to take a little jaunt to the island nation. Likewise, it makes sense for Sri Lanka to encourage him to make a return trip, at a time when the country is looking for more foreign investments.  

Background

Sri Lanka is currently facing difficulties in its finances and is awaiting a lifeline from the International Monetary Fund (IMF) to avert a looming balance of payments (BoP) crisis. But the 3-year funding line, which comes as an extended finance facility to the 2009-2012 US $ 2.6 billion IMF bail-out package, comes with a number of tough-to-implement fiscal reforms. The upward tax rates revision by the government to prop up its revenue can be considered a precondition the government had to fulfil for the IMF funding. The government also plans to bring the budget deficit down to an ambitious 3.5 percent of the GDP by 2020. The creation of one million jobs is another promise the coalition government has to keep.

In this backdrop, the government looking for additional ways of raising revenue is natural. Though the United National Party (UNP)campaigned against the setting up of casinos when they were in the Opposition, the current circumstances may now lead them to think otherwise. Also, as a political party, whose underlying thought process is biased in favour of  liberal economic policies, it is difficult to believe that even when they opposed the casinos, they did it for any idealistic reasons. Besides, Sri Lanka already has casinos operated by local parties.

Packer’s side of the story is that his Crown casino empire is currently not enjoying the rosiest time with the Chinese economic slowdown. Foreign media reported that he was cutting his exposure to Melco Crown Entertainment Ltd in Macau. According to Bloomberg, revenue in Macau, the world’s biggest gaming hub, fell for a 23rd straight month in April, hurt by China’s slowing economy and the Chinese government’s crackdown on graft. The Macau slump evidently appeared to have dented Melbourne-based Crown’s finances, as the company’s first half profits fell more than expected.  In this setting, it won’t be a surprise if Packer tries to mark his presence in the Indian Ocean to capitalize on the aspiring Indian middle class.

Ideal location

If the circumstances are ripe for both Packer and the Government, where exactly will the casinos be located? The incumbent government is unlikely to try what the previous Rajapaksa regime tried -- setting up a designated area for ‘sin’ businesses in mainland Sri Lanka. Instead they are most likely to look at the Chinese-funded Port City, off Galle Face, to house the casinos. Prime Minister Ranil Wicremesinghe has already announced that the Port City would be an exclusive economic zone governed by British Company law. At the same time, though the Port City is technically Sri Lankan territory -- a freehold land promised to Chinese investors it is unlikely to be given -- the exclusivity of the landmass in the sea would make it convenient for the Government to justify its move and entail less political costs. Despite the Rajapaksa regime having close links with the country’s Buddhist and nationalist movements, the move to allow new casinos faced much opposition from them. Since the present Government evidently has no such hold, it remains to be seen how it handles the possible political and social backlash that could arise from a decision to allow gaming.