Real Reforms Are Worth The Gamble - Rethink Policy On Gambling Licences

Published by Free Malaysia Today, 27 May 2010.

By Gobind Rudra

So now a football-crazy nation is about to be presented with the "gift" of legalised betting. A gift to whom? To crony capitalism, it seems, back with a multi-billion-ringgit bang. A return to an easy-money culture so soon after the Najib administration loudly promised policy reforms to give Malaysia a world-class competitive edge.

The award of a sports-betting licence to Vincent Tan's Ascot Sports makes a mockery of those promises. It also makes a mockery of Barisan Nasional leaders' own honour and morality after they had mocked Zaid Ibrahim's personal values during the Hulu Selangor by-election in April.

And it makes a mockery of the personal morality of Najib Tun Razak, as finance minister and the one who issues the licence, in putting his stamp of approval on rent-seeking after having promised to end it.

Those with vested interests have been salivating over how Vincent Tan flipped the licence to his sprawling Berjaya group for a cool RM525m. Stock market punters and analysts, with commissions in mind, are already talking up the supposed benefits of a new cash cow in that corporate empire.

But those with a nasty turn of mind will ask what was the real behind-the-scenes deal.

Any way you look at it, the Ascot-Vincent Tan licence decision stinks.

Wealth from pie-in-the-sky

Here's the government, supposedly acting in the people's best interests, handing over a lucrative new monopoly licence on the quiet. In effect, it's to an individual who had already benefited when handed Sports Toto on a platter by Dr Mahathir Mohamad in 1985 and going on to become a Forbes billionaire. That wealth was largely built on the RM1 or RM10 a week flung away by the common man hoping for a slice of the pie in the sky.

Mahathir's decision in 1985 was questionable, and remains questionable now, even as the Najib administration follows in his footsteps.

The first question is whether lottery and betting licences should be issued, as a matter of public policy. The second is on what terms, and with what conditions to safeguard the common good.

On both counts, past licence decisions stink, and not just for lack of clarity.

Lottery licences, as handed out by three Malaysian governments, are as good as permits to print money. It amounts to the government allowing the rich to tax the common man, and keep the takings, with small share for the government in the form of duties and gaming tax.

That stinks.

Unanswered questions

The Ascot-Vincent Tan licence is a monopoly licence, given, without competition, and on the quiet, to an individual who is already enormously wealthy after another such licence in the past. No terms have been made public. No safeguards in place to protect the public's larger interests. No one knows what political quid pro quo have been negotiated.

And that stinks.

Gambling revenue goes back to the British people

There is also the question of morality. Not whether it is right to gamble or to allow gambling, but a larger question on the morality of a government which, acting on behalf of all the people, gives away to its friends and allies valuable things that belong to all the people. And of how it leaves the common people short-changed, and tries to make a virtue of it.

On that score, all the Najib, Abdullah and Mahathir decisions stink.

Whether to gamble, or to allow others to gamble, is one for individual conscience to decide. It should not be answered in public policy. Pakatan Rakyat politicians, mainly in Pas and PKR, will try to do so anyway — they can't avoid it, out of conviction and for votes to be won there. But they would be just as morally wrong to impose religious views on public policy, affecting those who do not subscribe to their faiths.

It is only pragmatic to accept that gambling will exist in a pluralistic society, and if left unregulated will only feed the underworld. That calls for licensing, but with strong conditions to ensure that the common good is served, and not made a means to line the pockets of the wealthy or of the powerful.

It calls for a rethink of public policy on gambling licences. Measures already in place in other countries provide examples of how things can be done:

• A regulatory and enforcement body, accountable to Parliament, to issue licences and oversee gambling operations.
• Open, public competition for lottery and betting licences.
• Fixed terms for each licence.
• Discretionary powers of the finance minister removed and vested in the regulatory body. Judicial review restored.
• The bulk of all bets placed to be returned to the public as prize money, grants to worthy public causes, and taxes.
• A fixed proportion of takings to cover expenses and profit margins of licensees.
• An independent trust fund or other disbursement body to openly and fairly distribute betting revenue as grants to the arts, sport, heritage, culture, and for social welfare.
• Grants open to all, decided on by recognised bodies, and all grants made public.
• Power given to local communities, and not to bureaucrats or politicians, to approve setting up of lottery or betting shops within their area.

Gambling money used for worthy causes

The Malaysian public has little to show in return for having allowed licensed lotteries for half a century. Instead, giant corporate empires have grown on the flood of cash from the many thousands taking their weekly flutter. The privatisation of Sports Toto and the closure of the Social Welfare Lottery Board by the Mahathir administration, which led to this, left many questions still open.

Why the need to privatise Sports Toto, then already-profitable, in a quiet private deal?
Why shut down the profitable Social Welfare Lottery Board, instead of similarly privatising it?
What quiet deals were made behind the scenes?
How has the public interest been served by handing over Sports Toto, lotteries and sweepstakes to private firms?
What safeguards for the common good were put in place?
What public oversight is there on legalised gambling?
What does the Malaysian betting public get back from legalised gambling?
What terms were placed on all the licences issued so far? Why all the secrecy?

By allowing a select few to become enormously wealthy from licensed lotteries, the successive Umno-BN administrations and the Malaysian government have plainly shirked their fiduciary duty.

Sports Toto financial statement 2009

Profits and privileges

Sports Toto, for one, has never been held to public account for its contribution to sports, the reason Tunku Abdul Rahman originally allowed the lotto game to be licensed. Its last-known contribution to the National Sports Council in the 2008-09 financial year was RM62m, a laughable 1.7% of the year's takings from bets. Its profits were 15% of revenues.

Sports Toto also makes various contributions to charitable causes, but these appear to be merely part of the common "corporate social responsibility" of all companies. More often, they appear to be a form of corporate patronage, or occasions for cross-marketing within Berjaya group.

By contrast, the UK National Lottery last year took in £5,150m (RM24,900m); 50% is returned as prize money and 40% returned as grants for worthy causes and taxes to the government. Camelot, the UK lottery operator, takes only 10% of revenues, split between the operator and ticket-sellers.

Camelot works with a profit margin of about 0.5% of the lottery's revenues. Sports Toto in 2008-09 made pre-tax profits of RM558m, a 15% return, on betting revenue of RM3,571m.

Without real reforms in gambling licensing, what are the odds that we will all be collectively poorer off? And that the politico-commercial elite all the richer?

Still want to make a bet?