Insight SERBIA THE RAMIFICATIONS OF LOTTERY
PRIVATISATION IN SERBIA Vladimir Djukanovic, President of the National Lottery of Serbia, explores the legal and economic aspects of the potential privatisation of the State Lottery of Serbia
For many years now, the State Lottery of Serbia has been the subject of insterest, attracting both potentially serious investors and those who would like to enjoy the privilege that allegedly comes out of the operations related to lottery. Their common characteristic is the insufficient knowledge of the local market of the games of chance and the prevailing regulations so that they are often ready to believe that, as potential owners, they would make millions of Euros out of it. Let us make it clear from the start: big money is no longer made in the lottery business as there is an obvious drop of interest in the lottery games worldwide. For the most part, young people today prefer to play a ticket in the betting shop and the only real consumers of the lottery games remain the elderly, whose life span is slowly but inevitably drawing to the end. The problems that state lotteries around the world face today are very much alike. Regradless of the discussions on how to increase the interest in lottery games, no adequate solution has been found yet. On the other hand, the fact is that there is practically no country that decided to privatize the national lottery. The income, though being on the decline, remains safe and the adventure in the form of sale is out of the question for the time being.
The problem with the State Lottery of Serbia is reflected in the fact that many would like to enter the business with it, whether through tendencies to privatize the company or through some kind of public-private partnership. Whatever the case, the essence of the story is that they would like to get it for free. Especially if the potential public- private partnership is in question, all possible inestors come with a vibrant story that they will improve the operations and the marketing, but when asked how much they are ready to pay in advance and thus guarantee that they are serious about it, they suddenly withdraw and never ever continue the discussions.
The topic of this paper is whether the State Lottery of Serbia can be privatized at all so let us start with the account of the way the State Lottery of Serbia generally functions in order to come to a genuine conclusion.
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The problem with the State Lottery of Serbia is reflected in the fact that many would like to enter the business with it, whether through tendencies to privatize the company or through some kind of public-private partnership. Whatever the case, the essence of the story is that they would like to get it for free. Especially if the potential public-private partnership is in question, all possible inestors come with a vibrant story that they will improve the operations and the marketing, but when asked how much they are ready to pay in advance and thus guarantee that they are serious about it, they suddenly withdraw and never ever continue the discussions.
STATUS OF A LIMITED LIABILITY COMPANY The most common delusion created in the
discussions about the State Lottery of Serbia is the belief that it would be good to privatize it as the state can no longer finance the operations of public companies. Especially so, if we remember the fact that the company ended the year of 2012 in the red.
Anyone who is uninformed will agree with this thesis. However, when we consider the operations of the State Lottery of Serbia more profoundly, it becomes obvious that things are not black and white.
First of all, the State Lottery of Serbia is not a public company. On 24 May 2012, the Serbian Government by its Decision on changes of the Memorandum of Association of the State Lottery of Serbia defined this company as a single- member limited liability company whose founder was the Government of the Republic of Serbia. The Serbian Government performs foundation rights related to the State Lottery of Serbia. The Serbian Government is the 100 % owner of the State Lottery of Serbia with paid-in entered
startup capital of the company amounting to 79,341,000 dinars. The Company possesses no non-monetary capital.
The State Lottery of Serbia was founded with the aim to contribute to the budget and the Republic of Serbia, apart from the startup capital for the foundation of the company, has never paid anything to the State Lottery of Serbia. On the contrary, the State Lottery of Serbia is the one who contributes to the budget and the reason of its existence is to make money for the state and provide its own financial support from the percentage defined by the law, which at this moment is not profitable for the State Lottery of Serbia. Namely, under Article 34 of the Law on Games of Chance, the minimum prize fund from the money realized by operation of the basic classic games of chance is 50%. For some games, the prize fund amounts to 70%, but it cannot be less than 50% of the money realized by payments for a particular game. The rest of the realized money is divided between the state and the State Lottery of Serbia, which is defined by Article 35 of the Law on Games of Chance. According to this article, the state takes 60% from the rest and the State Lottery of Serbia gets 40%. After the calculation, 18% of the total income realized by the State Lottery of Serbia is left for the financing of its operations, which is insufficient according to the parameters and the State Lottery of Serbia does have problems to maintain current finances with these funds. Anyone who enters into any kind of business with the State Lottery of Serbia will surely require changes in the percentage in these articles, but it remains unclear why this change is not under its way while the State Lottery of Serbia is in this status as this would enable its better operation and it could provide the funds for further imrovement of its operations and thus the state would have more benefits. However, in the conclusion of this part of the text, it is most important to point out that the state is not financing the State Lottery of Serbia at all, but it only realizes income for the state budget from the organization of the games of chance, the income tax, the pension and social contributions, etc. Therefore, the question is what would be the
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