Inside Asian Gaming

October 2013 | INSIDE ASIAN GAMING 9 COVER STORY The handful of small casinos catering to the Colombo tourist trade operated for years as “recreation clubs” before their existence was formally recognized by legislation passed in November 2010 just months after Mr Rajapaksa, hammer of the Hindu Tamils in the north of the island, champion of the Buddhist-Sinhalese majority nearly everywhere else, narrowly won a second termas president.Tourist arrivals surged 46% in 2010, that first full year of peace following the defeat of an armed Tamil revolt that had battered the country for a generation. It’s when Mr Rajapaksa and his brother Basil, the minister of Economic Development, began to look at the gaming industry in the bigger picture. At a billion dollars, there will be no masking the destination-scale casinos John Keells and Crown are contemplating, and it’s precisely this that distinguishes His Excellency’s approach. It could change the game for South Asia. “I think the main thrust of the government is they see this as a potential revenue generator for them as well as a big driver for tourism into Sri Lanka, and a large part of that focus would be to get Indians to come across and gamble in the casinos because of the close proximity,” says Manav Thadani, who heads the Indian office of HVS, based outside New Delhi. “Right now, if you look at the tourist arrivals into Sri Lanka, Indians dominate that, and the thought process is that that number could go up significantly if they had casinos because casinos are something which currently are prohibited in India.” “Not a bad move,” as an analyst at Melbourne’s Karara Capital sees it. “The Sri Lankan government is making a lot of changes,” Akshay Chopra, a portfolio manager with the firm, told Reuters after Crown’s US$350 million resort plan was approved about a month ago. “You’ve got China investing a lot of money in Sri Lanka, building a lot of infrastructure, and you’re close to India and a big gamingmarket there.” How big? It’s impossible to say exactly. Rakesh Jhunjhunwala, the billionaire investor known as the “Warren Buffett of India,” has observed that “Indians are prone to gambling as much as the Chinese.” So it must be pretty big. KPMG in a study from a couple years back estimated that US$60 billion was wagered on the subcontinent in 2010, most of it through various black markets, the dimensions of which can be surmised from the scandals that erupt regularly in the betting on cricket, the national pastime. There are no legal casinos outside the tiny Arabian Sea state of Goa, and elsewhere they’re allowed only in Daman and Sikkim. The rest of the country— around 750 million adult-age Indians—are limited to state lotteries and horseracing. Mr Jhunjhunwala is so enamored of this tremendous disconnect between demand and supply he bought a chunk of Mumbai- based resort and property developer Delta Corp., whose three floating casinos on the Mandovi River in Goa qualify it as India’s largest operator and the only publicly traded company in the space. Goa is India’s smallest state and the wealthiest on the basis of GDP per capita, and what drives that is tourism. About an hour by air from Mumbai it is the country’s most popular domestic getaway, hosting in a year well more than twice as many visitors as its population of 1.4 million, and 80% are Indians.Theofficial stance toward the casinos that generate a good deal of this business— five offshore, about a dozen in tourist hotels in and around the capital of Panaji— tends to swing between ambivalence and hostility, the latter served up more for local consumption than anything else since the prospect of walking away from the US$45 million or so in taxes and fees accruing annually from the casinos is not something anyone is seriously considering. It does, however, make it difficult to get a fix on the actual size of the market. Recent results posited with the Legislative Assembly have annual turnover at 900 to 1,000 crore— roughly $145 million-$160 million—but the state has a political interest in soft-pedaling the industry’s impact, and sources cited by national newswire IANS say the real numbers are way higher. The tax haul alone would suggest as much. Besides the boats, Delta owns three non- “Right now, if you look at the tourist arrivals into Sri Lanka, Indians dominate that, and the thought process is that that number could go up significantly if they had casinos because casinos are something which currently are prohibited in India.” Manav Thadani, HVS South Asia