Introduction
Sri Lanka is betting big on casinos to revive its struggling economy. With the launch of the $1.2 billion City of Dreams integrated resort in Colombo, the government has placed tourism at the heart of its recovery plan. The target is ambitious increase tourism’s contribution to GDP from 4% in 2024 to 10% in 2025, alongside a goal of attracting three million tourists this year. But can casino-led tourism deliver the promised growth, or will it expose the country to new risks?
Why Casinos Are in the Spotlight
Tourism has always been a pillar of Sri Lanka’s economy, but political instability and the 2022 economic crisis devastated the sector. Casinos are seen as a way to attract high-spending tourists from India, China, and Southeast Asia. Unlike traditional leisure visitors, casino tourists spend more on hotels, dining, retail, and entertainment.
Globally, integrated resorts; combining gaming, luxury hotels, shopping, and live entertainment are proven revenue engines. Macau, Singapore, and Manila have transformed into gaming hubs, generating billions in annual tourist income. Sri Lanka now wants a share of that market.
The City of Dreams Colombo
The City of Dreams Colombo is the centrepiece of this strategy. A joint venture between Melco Resorts (Macau-based) and John Keells Holdings, it is designed to rival Asia’s top integrated resorts. The development will feature luxury hotels, a state-of-the-art casino, entertainment venues, and retail zones.
According to government projections, the project could attract millions of foreign visitors and generate significant tax and levy income. Beyond gaming revenue, the project is expected to create thousands of direct and indirect jobs in construction, hospitality, food, and retail.
Government Strategy
The government is attempting to control the casino sector by restricting licences to large integrated resorts only, discouraging proliferation of small, standalone casinos. Officials argue this ensures better regulation, tax compliance, and international investor confidence.
Revenue expectations include:
- Gaming levies and licence fees
- VAT from tourism services
- Corporate income taxes from operators
By positioning Colombo as a premium tourism corridor, policymakers hope to reposition the country as a world-class leisure and entertainment hub rather than just a transit stop or beach destination.
Opportunities for Sri Lanka
- High-Value Tourism: Unlike budget travellers, casino tourists typically spend more per day, boosting forex reserves.
- Employment Creation: Jobs in construction, management, hospitality, and support services.
- Boost to Ancillary Sectors: Restaurants, retail outlets, airlines, and event management firms gain spillover benefits.
- Urban Rebranding: Colombo could emerge as a modern Asian capital for nightlife, entertainment, and luxury experiences.
Challenges and Risks
Despite optimism, there are major risks in relying on casino-led growth.
- Social Risks: Gambling addiction, money laundering, and moral objections from civil and religious groups.
- Policy Instability: Past governments have alternated between encouraging and rejecting casino projects, creating uncertainty for investors.
- Economic Dependence: Over-reliance on casino tourism could leave the economy vulnerable to global downturns, travel bans, or regulatory changes.
- Reputation Management: Without strict oversight, casinos may reinforce negative perceptions rather than enhance Sri Lanka’s brand.
Lessons from Asia
- Macau: Once the world’s largest gaming hub, generating seven times Las Vegas’ revenue at its peak. But it became overly dependent on Chinese high-rollers. When travel restrictions hit, revenues fell by over 70%, proving the risks of relying on one market.
- Singapore: Offers only two casino licences; Marina Bay Sands and Resorts World Sentosa. Strict regulation and entry levies for locals limit social harm while maximising per-visitor spend. Singapore’s success shows that quality over quantity works in the casino business.
- Philippines: Manila has seen rapid growth in its Entertainment City zone, driven by looser regulation and aggressive foreign investment. However, it has also faced criticism for weak oversight, links to organised crime, and money-laundering scandals.
For Sri Lanka, the lesson is clear: adopt Singapore’s model of regulation and compliance, while avoiding over-dependence on one source market like Macau and steering clear of Manila’s oversight pitfalls.
Local Economic Context
Sri Lanka’s push towards casino tourism comes against a backdrop of heavy debt obligations and fragile forex reserves. In 2024, the country relied heavily on IMF support and external borrowing. Policymakers believe casinos can inject stable foreign exchange inflows that reduce reliance on remittances and debt rollovers.
The government also views large casino resorts as catalysts for infrastructure upgrades; roads, airports, utilities spurred by the demands of international investors. For example, improvements to Colombo Port City, hotel clusters, and nightlife districts are being linked to the casino push.
Employment is another key factor. Official estimates suggest that large-scale resorts could directly employ 10,000–15,000 people across operations, with another 50,000 indirectly supported through tourism supply chains.
Political and Social Debate
Not everyone supports this strategy. Religious groups and civil activists argue that casinos promote addiction and social decay. Opposition parties have also accused the government of “selling morality for dollars.”
There are also concerns about money laundering and financial crime. Without robust compliance mechanisms, such as strict Know Your Customer (KYC) checks, anti-money laundering rules, and independent regulatory oversight Sri Lanka risks becoming a haven for illicit flows.
Despite these criticisms, business leaders argue that Sri Lanka cannot afford to reject high-value tourism. They point out that Thailand, Singapore, and the Philippines have all faced similar debates but managed to balance regulation with growth.
Long-Term Impact
If managed well, casino-led tourism could accelerate economic recovery by:
- Diversifying forex inflows away from remittances and debt.
- Strengthening Colombo’s real estate market through large-scale developments.
- Improving investor confidence by signalling openness to international partnerships.
However, without a robust regulatory framework, the sector risks becoming a liability. Success depends on Sri Lanka’s ability to ensure transparency, compliance, and social safeguards.
Conclusion
Sri Lanka’s gamble on casino-led tourism is bold. The City of Dreams Colombo is a high-stakes bet on attracting wealthy international visitors and boosting GDP growth. The opportunities; jobs, revenue, and international positioning are real, but so are the risks of over-reliance, social harm, and policy inconsistency.
The country must regulate the industry tightly, learn from global examples, and align casino tourism with broader development goals. Only then can casinos become a sustainable driver of economic growth rather than a risky short-term fix.
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