Kedah’s 4D outlet ban a step down slippery slope for Malaysia and investors, say economists

GEORGE TOWN, Nov 16 — Kedah’s ban on numbers forecast operators will have far-reaching consequences for Malaysia’s larger economy and its reputation as a moderate Islamic country, according to economists. 

They warned that the move should not be seen only as a state issue, but one that would have ramifications on federal coffers at a time revenue was shrinking, on investor confidence in the middle of economic downturn, and which would fuel illegal activities.

Aside from the predictable results of driving gambling activities underground and causing the federal government to lose out on tax revenue, the state’s move would also affect how Malaysia was viewed both by its own citizens and foreigners, they explained.

Senior Fellow of Singapore Institute of International Affairs Oh Ei Sun said the move would invariably hurt investor confidence not only in Kedah but also the country as the same political party was part of both the state and federal governments.

"Taken together with the recent Timah incident, the banning of liquor sale in some Kuala Lumpur outlets and so on, it paints a uniformly intolerant image of the country that would no doubt make foreign investors think twice about committing investments here," he warned. 

Oh was referring to the controversy over local whisky brand Timah that had initially been forced to change its name due to claims by Islamist party PAS, among others, that it could confuse Muslims.

Coincidentally, Kedah announced its 4D gaming outlet ban on the same day the federal government said that Timah”has been allowed to retain its name.

According to former deputy secretary-general of the Treasury Tan Sri Ramon Navaratnam, Kedah’s sudden decision not to renew the licences of gaming outlets in the state would fuel concerns about the creeping Islamisation in Malaysia.

"It will serve as a warning sign to investors who will now suspect that there is more Islamisation to come, with more restrictions, more narrow minded and parochial rules," he said. 

When tabling the state budget on Sunday, Kedah Mentri Besar Datuk Seri Muhammad Sanusi Md Nor — the official behind the effective ban on the 4D outlets — said the state was aiming to attract RM10 billion in investments next year.

However, Ramon explained that Sanusi’s unilateral move would give investors, both foreign and local, pause about sinking funds into the state or country that could unexpectedly alter its policies according to the religious sensitivities of its officials.

Such a signal was also unlikely to only affect Kedah, he stressed when saying all of Malaysia would be tarred with the same brush.

"It will deter not only international investors but also domestic investors as domestic investors will have to bear with the Islamisation and they might decide to go elsewhere with their investments too," he warned. 

Ramon also believed such a policy direction could also worsen Malaysia’s brain drain and capital flight if domestic investors and companies decide to relocate elsewhere to avoid any additional religious-motivated restrictions.

Sunway University Business School economics professor Yeah Kim Leng also concurred that foreign investors will see this as an increasing trend towards religious conservatism in Malaysia. 

He said investors will also be concerned on whether the investment environment will become more restrictive due to this trend heading towards conservatism. 

"Malaysia was always known as a moderate country but this will surely catch the eye of investors as they would be concerned on whether such conservatism will increase and impact on their investments here," he said. 

Aside from the indirect consequences to Malaysia’s economy and society, the economists also argued that tax revenue from the gaming industry was a crucial source of income for the government, to be spent on infrastructure benefitting all communities.

Ramon said the issue at hand is no longer about the banning of 4D lottery shops in Kedah, but a holistic approach to taxation and economy that should not be tinkered with using a religious tint. 

"Kedah state had taken action without thinking about its consequences and this was projected on the whole country," he said.

Yeah echoed Ramon's views that the banning of 4D lottery shops in Kedah will only drive these activities underground and cause a loss in revenue for the government. 

"These shops were legalised to reduce the shadow economy but by banning it, it will only serve to increase the shadow economy and the government will only serve to lose tax revenue," Yeah said.

Ramon advised the Kedah government to review its decision, saying that the loss of revenue and potential harm to the state and country’s economy would directly hurt the interests of the communities it was claiming to protect.

He also said those who may gamble should be allowed to do so as long as they are not breaking the law while there should be strict enforcement to stop Muslims who are prohibited from doing so.

"Don't deprive others of something they can enjoy that is within the law just because another group is prohibited from it," he said.

On Sunday, Sanusi reportedly said he has directed local authorities in the state not to renew the business licences of 4D gaming outlets, effectively banning these from operating in Kedah legally.

He claimed that the move was to address problems related to gambing and said those who must patronise the gaming outlets “can go to Penang.”

Sanusi is a member of the PAS Islamist party while Penang state government is headed by DAP’s Chow Kon Yeow. The two political rivals have frequently engaged in public disputes.