Four years on from the end of a bloody civil war whose wounds refuse to heal, Sri Lanka’s victorious government is looking anxiously to resort casinos to attract the foreign investment it needs to rebuild.

But opposition to gambling runs deep on this picturesque island of 21 million, the “Pearl of the Indian Ocean”, as it’s known, as deep as its religious and ethnic divisions. Last month (October 2013), the government chose to withdraw a bill authorizing an expansion of the industry rather than face an outcry in Parliament over the generous tax breaks it contains for casinos planned by Australian tycoon James Packer’s Crown Resorts and local hospitality giant John Keells Holdings. Upwards of US$1 billion in investment could go by the boards.
This is not something to which strongman Mahinda Rajapaksa is accustomed. In his eight years as president he has constructed around himself and his family an all but unassailable and swiftly moving policy machine. 

Champion of Sri Lanka’s ethnic Sinhalese and devoutly Buddhist majority, the 67-year-old is credited with orchestrating the military defeat of a Hindu Tamil insurgency that raged in the north of the island for the better part of a generation. He has installed his brothers Basil and Gotabhaya as ministers of economic development and defense. Brother Chamal presides over Parliament as speaker. One of his sons is a sitting MP. He has a nephew serving as a provincial chief minister, a brother-in-law runs SriLankan Airlines, the ambassadors to Russia and the United States are cousins. He continues to defy world opinion in refusing access to UN inspectors amid widespread reports that his Sinhalese-dominated armed forces committed atrocities in suppressing the Tamil revolt. The north remains under heavy military occupation. 
The country’s media he keeps on a tight leash. He vehemently denies allegations of ongoing human rights abuses against the Tamils. In protest earlier this month (November 2013), the leaders of Canada and India boycotted a meeting of Commonwealth nations convened in the capital of Colombo.
In regard to the latter especially this doesn’t bode well for government initiatives aimed at doubling foreign tourist arrivals to 2.5 million by 2016 and elevating tourism as the country’s largest source of foreign exchange earnings. Indians figure prominently in this, having returned to the island en masse only in the four years since the war ended. They are now Sri Lanka’s primary source of visitors.
It’s with one eye on the subcontinent’s hugely underserved gambling market, the other on the current boom in travel out of China, that the Rajapaksas hope to attract $3 billion in tourism-related FDI over the next three years. 
Crown’s plans call for a US$350 million, 400-room resort in partnership with Ravi Wijeratne, the biggest operator in the existing casino market and a boyhood friend of the president’s. John Keells Holdings, the country’s largest public company, is planning an 800-room resort priced at $650 million. Both will feature an array of dining, shopping, entertainment and leisure attractions and significant conference and meeting space. It’s the first-class hotel rooms the market needs more than anything to reach the visitor goals the government has set with the big-spending overseas visitors it wants. With its endorsement both projects have secured sites along popular Beira Lake in the heart of the capital’s tourist district.
This in itself is radical by Sri Lanka standards. The handful of small casinos of the type run by Wijeratne have been content for years to operate under the radar of the powerful Theravada Buddhist clergy as “recreation clubs” catering to the tourist trade in and around Colombo. 
Legislation formally recognizing them didn’t exist prior to 2010, and it was Rajapaksa who pushed for it. At the same time, in deference to the vocal and highly politicized monks, the government has quietly refrained from actually licensing the casinos or attempting to organize the market within any kind of regulatory framework.
Officially, the Crown and John Keells projects aren’t casinos at all but “mixed developments” of a type identified in broad-based legislation that aims to lure similar projects with 10-year exemptions on corporate income tax and other incentives. But as the Rajapaksas are learning there is no euphemizing investments of this scale. The United National Party, the main opposition in Parliament to the Rajapaksas’ governing coalition of secular and religious parties, have been trying for months to force a debate on the tax breaks. They consider the Crown and Keells projects, along with the existing industry, to be illegal. It’s not certain how far they’re prepared to push this. Earlier this year, Rajapaksa had the nation’s chief justice unceremoniously booted from office in a move the courts have declared unconstitutional. Her offense was to issue a ruling that delayed a major development bill floated by Basil Rajapaksa. 
The UNP did manage to stage an outdoor rally on 7 November in Colombo to protest the gaming expansion bill. But the government had already withdrawn the bill at that point, so clearly something had changed.
It’s with respect to the religious parties that the Rajapaksas know they must tread carefully. The monks have no desire to undercut their leader, fearful as they are of a resurgent Tamil separatism, but they’re not comfortable either with a gaming industry of the size the Rajapaksas say the economy needs. They’ve succeeded in legislating limits on the sale of alcoholic beverages, which is heavily taxed, and have forced the country’s liquor stores to close. In a similar vein they’ve warned the administration not to get too promiscuous with its casino favors. 
The government has sought to placate them with assurances that both existing and new casinos will be restricted to designated areas in Colombo and will be open only to foreign passport holders.
One of these parties, the influential Bodu Bala Sena, or “Buddhist Strength Force,” has railed against the “so-called democrats” it says are destroying the Sinhalese race, whose “unofficial police” it claims to be. The BBS was implicated in anti-Muslim riots earlier this year in which thousands took part. Mosques were firebombed, Muslim businesses attacked. It was reported in some instances that the official police stood by and did nothing.
Packer, who can do nothing but watch and wait, has remarked only that he is “hopeful” a bill will make its way to Parliament to allow his project to proceed.
“Sri Lanka is a beautiful and unique country,” he has said, “it has overcome a great deal of adversity and is growing strongly. I am confident it has a very bright future.”