Despite repeated warnings from the gaming industry over the past two years, Malta seems to be determined to kill the goose that lays the golden egg – its iGaming industry.

Only yesterday the Times of Malta ran a story saying the tiny Mediterranean island nation is now a more expensive place to reside than Britain, Italy, Germany or Spain, with rents and the cost of eating out hurting the nation’s rankings.

So, what is going on in Malta – Europe’s iGaming hub and self-styled ‘Blockchain Island?’

Why Malta was the perfect place to base your iGaming business

Let’s rewind a few years, to say 2015-2016. The European iGaming industry is still largely an unregulated ‘Wild West’ and easy money is rolling in. To operators looking for a base, Malta looked great in terms of licensing, corporate tax, and costs.

It was extremely easy to attract young foreign workers from the Nordic countries, Germany, the UK etc. Heck, you just put some ads out online and in in-flight magazines, and ‘Bob’s your uncle!’ – a steady supply of bright, educated, native speaking (as in target market languages), enthusiastic workers able to power your iGaming business forward.

After all, the system worked: the gaming company pays you a modest salary (not the high salaries many native Maltese assume), but you can do a lot with it. Rent is affordable, people speak English, and having a good time is cheap.

But, despite iGaming becoming a central part of the Maltese economy, contributing massive amounts of tax (not just license fees and corporate tax, but also all the payroll tax, VAT etc of workers living and spending in Malta), local developers and businesses got greedy. Really greedy, really fast.

Malta today: expensive, overcrowded and crumbling

Fast forward to 2020, and despite a growing oversupply of properties thanks to the unbridled construction frenzy of the last two years (don’t listen to the rubbish the dysfunctional Maltese property ‘agents’ tell you), rents are still rising.

What’s more, its not just rents. Restaurants and bars are becoming noticeably expensive, as are other things. And, to top it all off, the quality of life in Malta is worsening, thanks to massive traffic issues, Europe’s worst noise pollution, abysmal public transport, dirty streets and inadequate infrastructure (we’ve all seen the sewers when it rains!).

In summer you can’t get near a beach, and the islands are starting to resemble something from a dystopian science fiction movie thanks to a complete lack of adequate planning processes and the tendency of Maltese developers to simply build the cheapest crap possible without thought for how it looks.

So, is it a surprise that we’re now hearing its almost impossible for gaming companies to recruit and keep the foreign talent they need? What Swede, Brit or German would say hey “sure, I’ll stay living in a country where I get paid less than at home, but it costs more to live!”?

And, let’s not even mention the insanity of trying to bank in Malta if you’re foreign!

The signs are everywhere

Just days ago we reported that LeoVegas, one of the biggest gaming companies in Malta, has abandoned plans to move into a larger premises – actually preferring to pay a heft penalty fee for cancelling the already signed contract. At the end of October, we shared how major online games developer Yggdrasil decided to close its Malta studio and move work to Poland, saying it just couldn’t attract the right talent to Malta anymore.

But they are just two high-profile examples of thing getting tough. Those of us working in gaming in Malta are also well aware that many companies are now finding it next to impossible to retain foreign staff – especially those with the skills needed to market and service key northern European markets.

Of course, many Maltese will argue this isn’t a problem, because “local people should have the jobs anyway.” This argument is, of course, utter nonsense. It is not insulting Malta to say that a country with a similar size population of the small British city of Nottingham (and, importantly, no ability to tap into a much wider population in neighbouring towns and cities that can commute in), is not ever going to be able to supply the majority, or even a sizeable chunk, of the human resource demands of an industry as specialised as iGaming – no matter how much it invests in education. In fact, Malta is already doing extremely well to provide the specialised workforce it already does – something the recently published skills gap report from the Malta Gaming Authority (MGA) illustrates.

As mentioned at the start of this article, over the past couple of years, the industry has been warning that things are unsustainable. But each time, it has been roundly ignored by a crisis-ridden self-absorbed government and wider society who seem to assume all people working in iGaming are rich and fair game. Sure, there have been some announcements of vague policies regarding rents, but as anyone on the ground here knows, its too little, too late.

The future

Of course, the Maltese iGaming industry isn’t going to disappear overnight. There will still be operators and suppliers based here in five years, but the boom is over. Furthermore, it is difficult to see how the same factors making life difficult for iGaming firms won’t also push away companies in the blockchain, emerging tech and esports sectors too.

Add to this the undeniable fact that, if it wants to remain part of the EU and wider international family, Malta is going to have to clean-up its act and bring its financial oversight and enforcement up to scratch. This, inevitably, means it can no longer count on the benefits of being an offshore tax and banking haven for the rich and dubious.

True, Malta still has tourism – but as the rapidly escalating coronavirus crisis is reminding us, relying on something as fickle as tourism to power your economy is extremely unwise.

This article features the opinion of the author and does not necessarily reflect the views of Pentagon Digital Limited.

All original content featured on this site is © Pentagon Digital Limited, 2020.