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Casino crisis: First major revolt within Rajapaksa regime
The UPFA Government this week cleared the last hurdle for what it calls three different ‘integrated resorts’ to be set up at a total cost of US$ 1.4 billion (more than Rs. 182 billion) but its costlier political fall-out is sure to have its effects for months and years. This is because many, including some seniors in the Government and Opposition political parties, believe the controversial move, disregarding concerns of the Buddhist clergy, encompasses the establishment of casinos. Not that those casinos do not exist now. This is the first time, they believe, they are being set up with foreign collaboration to place Sri Lanka on par with Las Vegas or Macau in the world map of casinos.
Opposition activists protesting Government moves to set up casinos Pic by Indika Handuwela
The first project for US$ 300 million (over Rs 39 billion) from Queensbury Leisure Ltd., which received strategic enterprise status through a Gazette notification, was passed by Parliament on Thursday. The man behind the project with foreign collaboration reportedly from Macau is Dhammika Perera, a local casino operator. He is also Secretary to the Ministry of Transport, a public servant. At least officially, the project is for an “Integrated Super Luxury Tourist Resort Facility which consists of 500 rooms including high end shopping malls, high quality residencies and office spaces/service spaces with associated facilities.”
There were two other projects originally listed in a Gazette notification to include gaming. One is the Lake Leisure Holdings (Private) Limited in a project for US$ 350 million (more than Rs. 45.5 billion). It is backed by Ravi Wijeratne, a local casino operator in a tie up with billionaire Australian casino tycoon James Packer. He heads a casino empire that stretches from Australia to several world capitals including Las Vegas. The project is for an “Integrated Super Luxury Tourist Resort Facility which consists of 400 rooms including high end shopping malls and high quality residencies and office spaces/service spaces with associated facilities.”
The other is Waterfront Properties Ltd., a project by John Keells with foreign collaboration for US$ 650 million (more than Rs. 85.5 billion) in two stages. It is for an “Integrated Super Luxury Resort Facility which includes high end shopping malls and high quality residencies and office spaces/service spaces with associated facilities.” A well-placed Government source said the latter proposed to use a licence issued to a Sri Lankan citizen but a company representative said “no such arrangement was in place.”
The Sunday Times (Political Commentary) of December 22 last year revealed that the Cabinet of ministers approved (on December 19) a memorandum from Investment Promotion Minister Lakshman Yapa Abeywardena to allow the three concerns to engage in ‘integrated resort” projects. That account noted: “….. two establishments were in the news since they proposed to establish casinos in the resorts. Though no specific mention was made of them, the draft Gazette notifications circulated to ministers clearly makes provision. Identifying these projects as ones which come under the Strategic Development Act, the projects to establish Super Luxury Tourist Resort facility, the notification says, “includes high end shopping malls and high quality residencies and office spaces/service spaces with associated facilities. A high ranking UPFA source who did not wish to be identified said under “associated facilities not only casinos but anything else that is connected could be established in these resorts.”
However, those Gazette notifications were abandoned amidst widespread protests. On January 30, fresh notifications were issued leaving out references to casinos. The three companies, in accordance with the Strategic Development Projects Act, were given ten-year tax holidays and other lavish concessions. They include exemption from income tax, tax on dividend, withholding tax, PAYE (Pay As You Earn) tax for employees, Value Added Tax (VAT), Ports and Airports Development levy and Customs levies. The Act requires that the concessions be gazetted and such notification is approved by Parliament. This saw the issue playing out in Parliament this week.
The first Gazette notification, concessions to Queensbury Leisure Ltd., came up for discussion on Thursday. Two different agencies dealing with their parliamentarians – the Office of the Leader of the House (post held by Minister Nimal Siripala de Silva) and the Office of the Chief Government Whip (post held by Minister Dinesh Gunawardena) issued directives. All UPFA parliamentarians including Ministers and Deputies were told to return to Colombo and be on hand to vote on Thursday and on Friday. Even those abroad were sent messages. The two Ministers were carrying out a directive from the UPFA leadership to ensure their two-thirds turn-out in the House. This was to show they have stood in unison to vote in favour in the light of strong criticism. They also wanted to deliver a countrywide message that there would be “no casinos.”
Alas, that was not to be. There were Ministers, Deputies and MPs who defied the two different whips. If that was a slap in the face of the Government, for the first time, one of its partners the Jathika Hela Urumaya (JHU) voted against. Its parliamentary group had met earlier on Thursday and taken the decision. This was after members raised apprehensions over the wording of the Gazette notification which speakers said was only a cover for setting up casinos. They feared this would pave the way for the proliferation of prostitution like it happens in casinos in other parts of the world. Whilst other JHU members kept away, parliamentarian Ven. Athureliye Rathana Thera, who was in the House, voted against.
At least ten cabinet ministers were not present at voting time. They were National Freedom Front (NFF) leader Wimal Weerawansa, JHU General Secretary Champika Ranawaka, UPFA General Secretary Susil Premajayantha, Sri Lanka Muslim Congress (SLMC) leader Rauff Hakeem, Sumedha Jayasena, Rishard Bathiuddin, P. Dayaratne, Gamini Lokuge and Rajitha Senaratne. Six deputy ministers and some 18 UPFA MPs were absent. They included Namal Rajapaksa. There were also 20 MPs absent from the Opposition benches.
Earlier on Thursday, Investment Promotion Minister Lakshman Yapa Abeywardena and his deputy, Faizer Mustapha fielded questions at a meeting of the Government Parliamentary Group in Committee Room One of the Parliamentary Complex. One of those who asked some searching questions was JHU’s Minister Patali Champika Ranawaka. Pointing out that a previously annulled Gazette Notification had referred to gaming; he wanted to know whether the removal of the word casino meant there would be no gaming. Mustapha replied that there was no need to mention the word in the notification. He said no concessions would be given to such activity. However, under the existing law anyone can run a casino if he has a licence. In the light of the Board of Investment having concluded agreements with three investors in question, Ranawaka also wanted to know whether the necessary amendments would be made. Mustapha said there would be a supplementary agreement but that would not change the contents in the one already in place. He reiterated that there would be no concessions. Mustapha also hurriedly summoned a news conference in Parliament on Friday to declare there would be no casinos under the projects already Gazetted. This came in the backdrop of some ministers and MPs not voting in favour on Thursday.
National Freedom Front (NFF) leader and Minister Wimal Weerawansa is widely regarded as a strong voice of the UPFA leadership. He is often known to defend policy decisions of the Government. This time, he not only abstained from voting but raised a question at the parliamentary group meeting. He asked Minister Abeywardena what his response was to an amendment proposed by the Opposition. The Opposition had wanted to specifically exclude the opening of casinos by amending the Gazette notification. Minister Abeywardena was to reply that there was no provision for such amendments to be made to the Gazette. Leader of the House, Minister Nimal Siripala de Silva was to endorse the Minister’s view. JHU’s Ven. Athureliye Rathana Thera noted that whatever was said about the notifications, it was quite clear that there was room for casinos. He urged that he be given an opportunity to make a statement in Parliament. The venerable Thera was later heard to complain that despite an assurance given by Economic Development Minister Basil Rajapaksa, he was stalled from making that statement. He said he would have placed not only his views but those of the Maha Sangha over the casino issue if he were given an opportunity. That was because he was the only the Buddhist monk who wanted to make a statement in Parliament that day.
On Friday, the two remaining projects for which Gazette notifications were issued — Waterfront Properties (Pvt.) Ltd and Lake Leisure Holdings (Pvt.) Ltd. — were approved. The votes were taken separately. The former was passed by 112 voting in favour and 44 against. The latter was passed with 109 voting in favour and 44 against. The two votes which were less than a simple majority in the 225-member house prompted a UNP parliamentarian to remark rather sarcastically that “if we go by Prof. G.L. Peiris’s logic, we have won today. The majority in the House did not vote for these two Gazette notifications.” He was alluding to the External Affairs Minister’s remarks after the Human Rights Council vote in Geneva last month where he claimed Sri Lanka had won. This was when the votes against the US-sponsored resolution and abstentions were added together.
On Friday too, the JHU voted against. Present in the House were Minister Ranawaka and Ven. Rathana Thera. Among the Ministers who were not present were Wimal Weerawansa, Rauff Hakeem, Mahinda Amaraweera, Dilan Perera, Rishad Bathiuddin, Rajitha Senaratne, P. Dayaratne, Bandula Gunawardena and Piyasena Gamage. More than 50 UPFA Government MPs also refrained from voting.
President Mahinda Rajapaksa was asked about the future of casinos when he met national newspaper and electronic media representatives for breakfast at ‘Temple Trees’ on Thursday. He replied, “We are not giving permission to set up new casinos. We are giving concessions to put up new hotels. People are claiming casinos are coming up. There are no new casinos coming up. The regulations coming up in Parliament are the same old ones brought earlier. Please tell the people there are no casinos coming up.”
As is clear, Rajapaksa’s statement is guarded and is not categorical. He points out that “there are no new casinos coming up.” That clearly means that the new ventures could operate casinos using existing “licences.” Two of those behind the move, Dhammika Perera and Ravi Wijeratne, already have such “licences.” To ensure that casinos were categorically ruled out, the main opposition United National Party (UNP) wanted to move an amendment to the Gazette notifications. It was rejected on the grounds that unlike draft legislation, amendments could not be moved on such notifications tabled in Parliament. Parliament Secretary General Dhammika Dissanayake had explained it to Karu Jayasuriya (UNP – Gampaha District) who gave notice. Jayasuriya, Chairman of the UNP’s Leadership Council, is acting for the national leader Ranil Wickremesinghe who is away in the United States.
His amendment read: “Provided that under no circumstances and at no time shall any activity in the nature of gaming, gambling, casinos as defined under Section 5 of Casino (Regulations) Act No. 17 of 2010 and betting on horse and the like by whatever name be permitted to be carried on either directly or indirectly within the “project” or its branches or associated enterprises.”
Even if the factual position that no amendments could be moved to orders made in the Gazette is correct, there was nothing to debar the Government from issuing a fresh notification if it was pointedly committed to not having casinos. This was only a mere technicality. After all the first set of Gazette notifications which made reference to casinos were abandoned and the inclusion of a provision that none would be opened would have only helped the UPFA Government. That is if its assertion that there will be no casinos is the official policy.
This is what has drawn angry responses from the Opposition parties. The UNP’s Political Affairs Director, Mangala Samaraweera, told the Sunday Times, “Casinos are an integral part of the Rajapaksa project to make Sri Lanka into a premier centre for money laundering in Asia. “Casinos combined with ‘ Round tripping’ are convenient and time tested vehicles for money laundering.’Round-tripping’ is a term used in money laundering parlance to describe moneys deposited in a controlled foreign corporation offshore, preferably in a tax haven where minimal records are kept, and then shipped back as a foreign direct investment, exempt from taxation. Casinos provide an easy option for money launderers. They could walk into a casino with cash, buy chips, play for a while, and then cash in the chips, taking payment in a cheque, or just getting a receipt, claiming it as gambling winnings.
“It is in this context that the haste and enthusiasm of the Rajapaksa regime to push through the Strategic Development Project notifications — in the face of serious reservations even amongst its own ranks — must be understood. It is traditional for Parliament not to sit in the third week of April, if the party leaders agree. This was to be the case this year. However, when James Packer informed the powers that be that he will pull out his project if the regulations were not passed before the end of the month the Government gave into the threats and decided to have two sittings on April 24 and 25 merely to please and placate Packer. When the UNP presented an amendment to ensure that casinos will not be surreptitiously introduced at a future date, the Government fought tooth and nail not to allow this. The sovereignty of Parliament has been sacrificed to satisfy the international underworld and the greed of one family.”
Declared Janatha Vimukthi Peramuna’s (JVP) Vijitha Herath: “The Government is using these regulations to hide the real facts from the people and hoodwink them. The Government’s intention is to make casinos the cornerstone of the country’s economy. All of James’s Packer’s hotels worldwide have casinos in them. The regulations were first presented to Parliament in December last year. All agreements in this regards had been finalised in July last year. We demand that the Government table all the agreements in Parliament if it is transparent in its dealings. We have no problems in giving concessions to the tourism sector and opening of hotels.
“We have asked for the Gazette to be amended to include the words ‘associated facilities, except casinos and gaming,’ but the Government has refused this. Why is the Government not adding the amendment as proposed by us? The casinos will be used to clear illegally acquired money (‘Black Money’) while the underworld and prostitution will thrive. Sri Lankan women will be drawn into the prostitution rackets. Our culture too will be affected. The casino owners will have power and will also be able to determine as to who rules the country. We will continue our protest campaigns, though the Government uses its power to pass these regulations.”
Justice Minister SLMC leader Rauff Hakeem, told the Sunday Times, “President Mahinda Rajapaksa has categorically assured that the regulations made under the Strategic Development Projects Act will not lead to the setting up of casinos. However, there is doubt about the interpretation regarding the wording ‘associated facilities.’ Therefore, the SLMC did not vote when the regulations were taken up. As a political party we are fully opposed to use of immoral methods to attract investments. We will continue to oppose setting up of casinos.”
The mere deletion of the word casinos from the Gazette notifications does not come as any official assurance there will be no such gambling outfits in Sri Lanka. In fact, the laws relating to their conduct are either silent or not clearly defined. Different forms of gaming existed over the years only because the Police did not raid them and the operators paid taxes. They were functioning as “members only clubs” on a permit issued by the local authority in the area where the club is located. This is in terms of the Licensing of Clubs (Amendment) Act No 17 of 1985. According to this law, a Municipal Council is empowered to charge Rs 5,000, an Urban Council Rs 1,500 and other local authorities Rs. 300 to issue a permit. It was then President Ranasinghe Premadasa who issued a Gazette notification banning gambling, particularly through jackpot machines and ordered a Singaporean operator, Joe Sim to leave the country. After Premadasa’s assassination in 1993, the practice resumed. This time, the casinos were paying Business Turnover Tax (BTT).
It was President Chandrika Bandaranaike Kumaratunga who slapped down an annual levy of five million rupees on casinos. That came as the first de facto legitimisation of the casino industry in Sri Lanka. In 2011, President Rajapaksa who was Minister of Finance increased this annual levy to Rs. 100 million. This was whilst Gaming (Special Provisions) Act was introduced in Parliament to designate areas in which gaming would be allowed.
This later changed. Casinos assumed full legality after the Casino Business (Regulation) Act No 17 of 2010 was introduced in Parliament in December that year by the Mahinda Rajapaksa Government. It was certified by the Speaker making it law on December 7, 2010. However, as the Act requires, no Minister was placed in charge of the subject. In terms of Constitutional provisions, all non-assigned subjects fall within the ambit of the President. In terms of that law:
No person shall, from and after January 1, 2012 engage in the business of a Casino other than under the authority of a valid licence issued in that behalf by the Minister, and within a specific area to be designated by the Minister by Order published in the Gazette.
The Secretary to the Ministry of the Minister to whom the subject of Gaming is assigned shall cause to be published a Notification in a daily newspaper in the Sinhala, Tamil and English languages giving adequate notice to the public of the requirement of having to obtain licences for carrying on the business of a Casino,
Any person who carries on the business of a Casino in contravention of the provisions shall be guilty of an offence and shall on conviction after summary trial be liable to be punished with imprisonment of either description for a term which shall extend to five years or to a fine of rupees five million or to both such fine and imprisonment.
The Minister in charge of the subject of Casinos is empowered to discern the form of an application for a licence and the fees to be paid therefor “and the period for which a licence so issued will be valid in relation to the different games for stake, being played at a Casino and any appropriate supervisory measures.” The law requires that “every regulation made by the Minister shall be published in the Gazette and shall come into operation on the date of the publication or on such later date as may be specified.
More importantly, the Act also requires that every regulation made by the Minister, “shall, as soon as convenient after its publication in the Gazette, be brought before Parliament for approval.” It says that any regulation which is not so approved shall “be deemed to be rescinded as from the date of disapproval, but without prejudice to anything previously done thereunder.”
Despite the law remaining in the statute, one source said, what is being conceived as licence now is the fact that Casino operators pay the Rs. 100 million levy. They have certification of that. In addition, they have the Municipal permit. The question that begs answer is whether Deputy Investment Minister Mustapha did refer to this law when he spoke at the Government Parliamentary Group. Heeding the UNP’s call to make express provision there would be no casinos, if accepted, would have gone counter to this Act.
In terms of the Casino Business (Regulation) Act, No 17 of 2010, all casinos are now functioning without a legally valid licence under that law. This is because the Act makes clear that from January 1, 2012 it is the Minister in charge of Casinos, i.e. the President has neither assigned a Minister nor a Secretary to such a Ministry, to issue formal licences. Not one to be precise. Hence, no Gazette notifications have been promulgated on the issue of such licences nor tabled in Parliament for approval. Therefore, what is now being referred to as “licences” are the certification for payment of Rs. 100 million and the permit issued by the Colombo Municipal Council for Rs. 5,000. As for the payment of the tax levy, it does not signify legitimacy. The Department of Inland Revenue is empowered to impose taxes on sources that derive income whether it is legitimate or otherwise. It is thus clear that none of the casinos in Sri Lanka is legally empowered to operate. These casinos function both due to administrative arrangements and the goodwill they enjoy with the UPFA leadership. It is that “goodwill” which is the law that prevents the Police from raiding these casinos.
Just a day ahead of Parliament taking up the first Gazette notification on Thursday, Sri Lanka’s leading Buddhist prelates made a fervent appeal to the UPFA Government to prevent what they called “degradation of the people” through unethical projects. The prelates are Most Ven Tibatuwawe Shri Siddaratha Sumangala, Maha Nayaka Thera of the Malwatte Chapter, Most Ven Udugama Shri Rathanapala Buddharakkhitha, Maha Nayaka of the Asgiriya Chapter, Most Ven Davuldena Ganissara, Maha Nayaka Thera of the Amarapura Nikaya and Most Ven Napana Pemasiri, Maha Nayaka of the Sri Lanka Ramannya Nikaya.
In a letter to President Rajapaksa last Thursday, the prelates said:
“His Excellency the President
Do not pave the way for unethical conduct through the proposed projects coming under the Strategic Development Project Act
“According to the Parabhawa Sutta in Buddhism “if a person is addicted to women, alcohol and gambling, that is the beginning of his degradation. The degradation of people resembles the degradation of the whole nation, culture and race. Sri Lanka which was once a Dharmadeepa (isle of virtues) is now tainted with numerous murders, smuggling, sexual molestation and many other wrongdoings. This menace can further spread when any space is given to facilitate acts such as gambling which is supposed to boost tourism industry. This will lead to the national, religious, cultural and social decline in the guise of economic development of the country.
“Considering the historical right that Maha Sangha deserved to counsel the rulers of the country since past and the information presented by various religious organisations, we would like to bring the following facts to your consideration.
” It arouses doubts among all, as there is no definite interpretation of ‘Associated Facilities’ that comes in the Gazette Extraordinary No. 1847/35, 1847/36, 1847/37 dated January 30, 2014 under the year 2008 No. 14 Strategic Development Project Act.
“We believe that by inserting the phrase ‘Associated Facilities’ it provides room for immoral conduct such as Gambling, Alcohol, and prostitution. Since there had been countless cases previously in which people could escape from the law due to the flaws in wordings in Acts, this proposed project should include straight and clear interpretation that would not leave space for any kind of immoral activities as mentioned above. Therefore we kindly request you to take necessary measures to make needful amendments.”
This is easily the most turbulent week domestically for the United People’s Freedom Alliance (UPFA) in its ten year existence. It is no secret that a sizeable faction within the Government were not in favour of what they call moves to open casinos under ‘integrated projects.’ That included ministers who complained privately of widespread corruption. Some had no choice but to vote in favour and avoid disciplinary measures. Others boldly refrained. One of the main UPFA allies, the Jathika Hela Urumaya for the first time voted against the Government. The front line leaders of the Maha Sangha have found that their unified appeals have not been heeded in what appears to be a landmark development. That comes in the backdrop of skyrocketing living costs, a deteriorating law and order situation and mounting crime.
The UPFA leaders have thus placed their bets on the three multi-billion dollar ventures casting aside strong and formidable public opinion. That no doubt will be the beginning of a new chapter for the UPFA for its sharp divisions have surfaced this week over casinos. It will be no cake walk for President Rajapaksa when it comes to damage control in the months to come. At least some of those who stoutly defended his actions would not do so on the casino issue.