Published February 4, 2009

Malaysia places discreet bets on gaming

10 more special draws quietly given go-ahead to boost govt revenues

By S JAYASANKARAN
IN KUALA LUMPUR

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LAST October, the government quietly awarded three Malaysian gaming companies 10 more special draws a year in a move to boost flagging government revenues ahead of a painful economic slowdown that could cost thousands of jobs.

The move came a month after Deputy Prime Minister Najib Razak assumed the finance portfolio and was probably not publicised as it would have invariably been attacked as unIslamic by the conservative opposition Parti Islam SeMalaysia (PAS).

The number forecast operators involved are Magnum, Tanjong and Berjaya Sports Toto, and the award should boost their sales. Each draw typically adds RM16-21 million (S$6.7-8.8 million) to total sales, analysts said. The government benefits from gaming and pool betting taxes on each draw, and special draws come in for an extra 10 per cent tax on net sales.

Analysts estimate that Kuala Lumpur could rake in over RM130 million in extra revenues from the additional draws - cold comfort to a government facing sharply declining revenues from oil and palm oil sales. Gaming firm executives expect Kuala Lumpur to allow even more special draws going forward in an effort to wring out as much revenue as it can.

The award and the manner in which it was carried out - its stealth and its potential political consequences - illustrate the seriousness of the looming downturn and a belated confronting of the facts by the government. Since last October, Kuala Lumpur has assured its citizenry that Malaysia could pull through the slowdown unscathed and did not revise downwards its original forecast of 3.5 per cent GDP growth for 2009.

Not any more. Mr Najib is expected to announce a RM7-10 billion stimulus package this month, the second since a RM7 billion raft of measures was announced last November.

Malaysia is getting squeezed between falling exports and sharply slowing investment. To prevent greater job layoffs that could erode public consumption, Mr Najib is looking at greater public spending to maintain consumer demand, which has been one of the key drivers of the economy for the last nine years.

But the downside is a sharply widening budget deficit, a point echoed by Fitch Ratings on Monday when it downgraded the ringgit on precisely those concerns. The agency expects the deficit to balloon to 7.4 per cent in 2010 - which is why Mr Najib has his hands full trying to maintain revenues.