Last October, the government raised gaming fees and taxes on top of a 40% tax on profits. Opponents kept chipping away, creating uncertainty and winning concessions. Resistance to casinos never let up, though. The three properties would be clustered around Beira Lake, an urban tourism area that developers hope to transform into leisure and entertainment district the likes of Singapore’s Clarke Quay. Sri Lanka’s largest publicly traded company, John Keels Holdings arranged for Perera to transfer one of his licenses for its $850 million casino resort, which began construction last year. Sri Lanka’s richest man Dhammika Perera, who holds three of the four casino licenses, planned his own $350 million casino resort. James Packer’s Crown Resorts, Australia’s leading casino operator and a partner in Melco Crown Entertainment with casinos in Macau and now Manila, made a deal with local casino operator Ravi Wijeratne to build a $400 million, 450 room casino hotel. Sri Lanka attracted interest from both local and international casino operators, and President Rajapaksa was all for it. Last year, Chinese arrivals to Sri Lanka likely trailed only those from neighboring India, where only Goa has any form of legal casino gambling. Closer ties between the nations have led to big in Chinese visitation.

China has been aiding Sri Lanka with a host of projects to bring its infrastructure into the 21st century. Since the end of the civil war in 2009, international visitor arrivals have jumped from 438,000 to a targeted 1.5 million last year. Sri Lanka, often called the Pearl of the Indian Ocean, has everything for tourists from ancient temples to elephants. But Rajapaksa’s successor, President Maithripala Sirisena, canceling the three casino projects has made Sri Lanka a textbook example of political risk when it comes to investing in Asia’s emerging markets. The proposed, and partly under construction, US$1.6 billion in casino hotel development would make Sri Lanka’s capital, Colombo, a more attractive tourist destination. After winning the decades long civil war against Tamil Tiger rebels, Sri Lanka’s president Mahindra Rajapaksa thought upgrading the country’s handful of small casinos into international class properties could help win the peace.

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