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Russia may have only government-run lotteries again soon

December 06, 2012, 17:45 UTC+3 Alexandrova Lyudmila

MOSCOW, December 6 (Itar-Tass) —The Russian government is pushing ahead with its years-long policy to reform the gambling market. The slot machine business has already undergone fundamental reforms and lotteries are next in line. As the daily Vedomosti has learned, the government plans to outlaw all lotteries with the exception of two that are state-run­--Sportloto and Gosloto, in the hope that these will start yielding far larger benefits. In the meantime, Russian people are not very fond of trying their luck in lotteries these days. The lottery market is small with very modest yields.

Beginning in 2014, all private lotteries will be banned, according to a protocol recently signed by First Deputy Prime Minister Igor Shuvalov. An exception will be made for those lotteries operating as incentives for the purpose of advertising a commodity or a service. Vedomosti quotes the document as stating that regional and municipal authorities will also be stripped of the right to hold lotteries. Shuvalov has ordered draft amendments to the lottery law specifying that only national lotteries would be held under government decisions. The Ministry of Finance and the Ministry of Sports will be the only two authorized lottery organizers.

A spokesman for Shuvalov’s office told Vedomosti that this measure was crucial for protecting consumers, saying that the existing practice of holding lotteries is not transparent. Another reason is low revenues.

The proposal to ban all non-federal lotteries came from the Economic Development Ministry, which hopes that the federal budget’s quarterly revenues may grow from one billion rubles to 10 billion. Additional money raised could be used to support athletics and prepare for the 2018 Soccer World Cup in Russia.

This is not the first attempt by the government to reform the gambling market. In fact, in 2009, Russia outlawed all slot machines and casinos and gambling facilities can only operate legally in four special zones. But as of now, none of these regulations has taken real effect. Occasionally, the police report that they have closed down another bootleg gambling joint--including some in the center of Moscow.

Russia currently has three federal lotteries under government control – Sportloto (operated by the Finance Ministry), Gosloto (under the auspices of the Ministry of Sports) and Pobeda (literally meaning ‘Victory,’ run by the Spetsstroi building agency). The other lotteries are not considered to be government-sponsored and are held either by private or state companies. It is the Pobeda lottery that is about to be abolished.

This is the second proposal in the past year for expanding the government’s presence in the lottery business. In April, the state-run company Russian Lotteries addressed Deputy Prime Minister Arkady Dvorkovich with a proposal for a not-yet-created government lottery corporation. The company hopes to eventually take over about 85 percent of the market.

Although in Russia there are more than 4,000 private lotteries, public interest in this kind of gambling is lower than in Eastern Europe and far less than in the United States.

In 2011, according to the largest retail savings bank, Sberbank, as follows from a publication on the Lenta.ru news portal, the average Russian spent only $1.5 a year on lotteries. In contrast, the average person in Poland spent $30 dollars a year and the average western European shelled out $420 annually.

Sberbank estimated the lottery market in Russia at $6-7 billion (nearly one trillion rubles). The U.S. economy is about ten times the size of Russia’s, while lottery revenues there are 100 times larger.

Analysts believe the reason that lotteries in Russia are so unpopular is not indifference – the fortunes wasted in casinos and slot machine rooms before gambling reform point to the opposite – but because Russian people do not trust lotteries. The roots of this distrust are in the Soviet past, when the government literally forced people to purchase lottery tickets. Moreover, in recent years the government has done little to persuade people that lotteries in Russia are transparent. As an example, one can mention the revival of the Gosloto lottery, which has been at the center of several high-profile scandals over the past seven years.

Experts’ opinions of the new government lottery plan vary. A senior Finance Ministry official is quoted disapproving the new measures. “There will be no major benefits for the budget,” he said. “Besides, some licenses, issued for five years, will be still valid in 2014, so they will have to be annulled.”

Lotteries in many countries are privatized because monopoly never leads to anything good, according to director of Interlot Alexander Zibrov.

“There is no openness or transparency of the market,” said Zibrov. “All owners of the companies that operate state lotteries are hiding in off-shore zones.”

Gosloto CEO Anton Shapiro argues that the combined model, by which the state has the monopoly on lotteries, held by private operators, is quite common around the world— everywhere incomes from lotteries are used as a source to fund social programs. “In Russia there is practically no control of private lotteries and it is very unclear what social programs up to 10 percent of their revenues are spent on,” said Shapiro.

Whatever the case, according to the Levada Center an overwhelming majority of Russians support the idea of reviving traditional government lotteries. As many as 53 percent of those polled agree to a certain extent that “government lotteries and government control of them makes the industry more transparent and honest.”