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Opinion: A Casino Gaming Monopoly is Sri Lanka’s Best Option

Cinnamon Life - John Keells Holdings US$1bn property development project

December 13, 2022 (LBO) - Casinos in Sri Lanka have always been a subject of controversy, but also one that has transformational economic potential. With no casino industry of scale in South Asia, Sri Lanka has a unique opportunity to be the regional dominant player in an important industry.

Casino gaming comes with a host of social problems, which need to be traded off against the economic benefits. However, since Sri Lanka already has multiple functioning casinos, which have been open for decades, it is safe to assume that some form of casino industry is acceptable to the citizenry.

So if we are going to have a casino industry in Sri Lanka, the policy should be go big or go home. Sri Lanka should auction one monopoly casino license, for a fixed time period (say 5-10 years), with a fixed regulatory and tax structure.

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This license should have a floor bid of US$500mn, and until the auction can reach this bid level, we should hold out for the best global operator. After the monopoly period ends, then Sri Lanka can possibly give another license under even more lucrative terms once investors have evidence from an earlier successful operator.

Singapore executed this duopoly license structure, and Marina Bay Sands in short order became the most valuable gaming property in the world. Sri Lanka should model its casino industry after Singapore, which has been a massive economic success.

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If it is done properly, there can be a huge boost to the tourism industry, which will ripple through all sectors of the economy. This happened in Singapore and can happen in Sri Lanka.
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If Sri Lanka is able to create a fixed monopoly, regulatory and tax structure for gaming, the structure in itself has a commercial value. Global operators will be able to value it, and bid at a level which makes economic sense. This structure may have transformational value for the Sri Lankan economy as a whole, possibly generating billions of dollars in inflows.

In the next year, it is possible for Sri Lanka to execute this strategy. The 'Cinnamon Life' property development is approaching completion. The project is a billion dollar investment that will take 3 to 5 years for another operator to replicate. Because it will likely be the only property of scale for the next five years, it would naturally fit into a monopoly structure.

Sri Lanka's current casino industry provides little value to the Sri Lankan economy as a whole. Entrenched players are so small that they should be irrelevant when the considering how the country can best monetize the gaming industry. Sri Lanka needs a global operator. We need to go big or go home.

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