Opening a casino on Penang island, which sells itself as the "Pearl of the Orient," could help the country compete for tourist dollars with nearby Singapore, which is expected to open its first casinos in 2009, said Wong Mun Hoe, a Penang state legislature member. "The word `casino' may cause apprehension about gambling and strike fear in people's minds," Wong said Friday, "but we should open up our mindset about what's good for us."

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Malaysia currently has one casino in the Genting Highlands resort near Kuala Lumpur. The location is one of Malaysia's main draws for tourists from mainland China, Hong Kong and Singapore, attracting millions every year to its casino and amusement parks.

Penang, the only one of 13 Malaysian states with a majority of non- Muslim ethnic Chinese, relies mainly on manufacturing and tourism. It is popular for its beaches and cultural sites that date back from its history as a British colonial trading hub.

Wong said Penang lawmakers had still to discuss the proposal and decide whether to go to the federal government to seek approval. A recent survey by Penang's State Tourism Board showed many residents support the idea for a casino and other entertainment facilities on one of Penang's islets, he said.

"This could become a fantasy island, with hotels, chalets, a theme park and a casino to cater to visitors, especially from markets such as China and Thailand," he said.

Wong claimed the proposal is not meant to promote gambling, saying officials could restrict the casino to foreigners only. But Muslims will definitely be barred from entry, he added.

Gambling is legal in Malaysia in forms such as lotteries and horse racing, but it is forbidden for Muslims.

Still, illegal gambling, such as betting on football, is rampant. The Malaysian government approved a plan in 2003 for a resort that would include 250 slot machines, but the proposal was scrapped amid objections from Muslims, who comprise some 60 percent of the population.

Ethnic Chinese - mainly Buddhists and Christians - are the biggest minority.

Asia's casino industry is worth an estimated US$20 billion (HK$156 billion) annually.

ASSOCIATED PRESS