Thursday, October 24, 2013

Casinos – Why transfer licenses, why not auction them to the highest bidder?


I wrote on the justification for and against Mega Casinos in Sri Lanka yesterday. I believe out of the comments I received there is a very important matter that has been forgotten on the arguments and debate, namely the value of a Casino license itself.

The Govt. is merely playing it safe pretending there are NO new Casino licenses being given, merely a transfer of the Casino from existing venues to the new Casino road of DR Wijewardene Mawatha as the new location for them!!

What does this mean? After all, Casinos are currently illegal in Sri Lanka despite one source in today’s newspaper that says there are 12 operational Casinos in Sri Lanka today. If there is a restriction of Casinos, the license to operate one has immense value. The Govt has decided it seems to permit 4 mega casinos on DR Wijewardene Mawatha, with Packers Crown being the first, then the JKH groups resort, and then Dhammika Perera’s Mega Hotel and Casino, that I know of.

Should the licenses merely be transferred, adding immense value to those who currently own them, such as Dhammika Perera, and Ravi Wijeratne and others I do not know? Like one of the comments made on the earlier entry, that Ravi Wijeratne’s Casino value was calculated at Rs10B because of how the share structure of the Crown Resort where he receives 45% of the shares for transferring his license to Crown, and him not having to put in any capital!!

This means that a license in an environment of only 4 Casinos being permitted, would value it at US$125M each! Of course the more Casinos permitted, the lower the individual license would be worth. Then should these licenses be auctioned to the highest bidder? One would argue that making a payment upfront is not practical for an investor who has to spend another $500M to build the resort. I would say then defer the payment to a later stage or stagger it, but nevertheless agree to a payment plan or forfeit the business.


I do not know how existing licensees got them, but if they lose them, they have already reaped the value paid and so have had a handsome return on their investments. They should not be upset at having lost them, especially as they were operating outside the law under special dispensation which effectively meant as long as one paid obeisance to the current rulers to permit Casinos.

Readers! any thoughts on this point, please feel free to air your views. Surely this matter should have been forefront of a public debate, and instead no one has raised it yet. Hope the Casino kings will not try to slit my throat putting a spanner in their carefully concealed plans by pulling the proverbial wool over our eyes!  

At least this is my legacy to the Nation!  

6 comments:

Anonymous said...

perhaps nobody brings this up as it is the expected way of doing business in Sri Lanka -- doling out licenses for this and that in exchange for political support. the stakes have just gotten much higher and Sri Lanka's politically connected are becoming mega-rich whilst riding on the post-war boom.

it's no secret that the JHU got a license to air Buddhist programming from the President for their support and it was handed off to one of their financiers who is trying to hawk it for a few million dollars (See the Sunday Leader article: http://www.thesundayleader.lk/archive/20070819/issues-1.htm)

I wonder if the JHU can be bribed again for their support on the casino issue, which is another angle on this casino imbroglio

Anonymous said...

I think it is merely a case of smart businessmen and dumb politicians who they have likes puppets on a string. The foolish Sri Lankan electorate has elected useless puppets who are just giving the Country over to a bunch of highway robbers and bandits.

SO who can we blame but the voter!! for their own stupidity.

Anonymous said...

well there's plenty of blame to go around:

1. the opposition parties that can't make a good argument about all of the ills of the country to move the public in a better direction

2. the immoral businesspeople that seek to make money without regard to public good

3. the corrupt government that is taking in money to allow immoral (some say smart???) businessmen to circumvent the public good

4. the self-interested government politicians that are not speaking about this patently unjust arrangement

i'd say that the hapless citizenry of the country fall below all of these entities as far as placing blame. they are sheep as in any other democracy and need to be herded accordingly.

i agree with the blogger that the license issue is a huge scandal, and windfall for the licensee, and this is unacceptable from a public perspective. the only entity that can do anything about this are political parties, and none of them are even bringing it up!!!

Anonymous said...

where are the commentators in the form of columnists on this, if one agrees politicians are dumb.

Like those who write to the FT, Institute of Policy Studies must write a paper on this impending Casino flood, and comment on its necessity and benefit or lack thereof to the economy.

It is an important enough subject to warrant a lot more public discussion.

Anonymous said...

i think we can all agree that these casino investments are going to be tremendous amounts of effortless income for the Sri Lankan partners, as the house always wins in a casino, and if the local partner is investing nothing it's a guarantee win for that person. there are fewer guarantees in business than something like this, and given the scarcity of the product, the gains will be windfall comparable to when the British enabled one family to control the alcohol trade under colonial rule. that family went on to become the richest family in the country in quick measure, and lived lavishly while the masses suffered hunger, disease, and the general ravages of life of the poor.

the best situation in such an instance of guaranteed money is for the state to take the partnership for itself, similar to a state oil corporation, and use the funds for public welfare.

an auction is only selling the rights to the free money off to the highest bidder, who does not have to bring any technical or capital resources to the project to make it successful -- just the government-issued piece of paper.

the current situation is the worst of all possibilities and should be challenged.

where is the opposition in this regard??

Mahesh Lakmal said...

What is the method of transferring a casino. What is the rule and method.