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Tech-savyy Malta earns 12% of GDP from online gaming

Article - January 15, 2015

Malta’s booming iGaming industry has increased the number of licenses issued by 25 per cent in 2014 and revealed plans of a €220 million business park development set to attract an array of international tech companies to the country

The European island nation has been active in the remote gaming industry since its inception more than 20 years ago, and the country is developing its legal and regulatory framework to accommodate further innovation and growth.

The sector is already the country’s second biggest contributor to GDP, with more than 12 per cent of its annual income coming through online gaming services, while an estimated 8,000 employees support over 250 licensed operators.

The Lotteries and Gaming Authority of Malta (LGA) oversees the industry and is largely responsible for both the direct and indirect economic benefits that have emerged as a result of the booming sector. It is now set to move into SmartCity Malta, an international business park that will provide a home to companies such as Microsoft and IBM and act as a hub for ICT and media companies on the island.

Much of this success has been built on Malta’s solid banking foundations, which enabled it to emerge relatively unscathed from the economic turmoil of 2008, according to Joseph Cuschieri, Executive Chairman of the LGA.

“It is a very conservative, robust and well capitalised banking system. The banks here do not take unnecessary risks. We also have a strong regulatory framework which keeps the banking system in check. So, unlike other countries, we didn’t have to use taxpayers’ money to re-capitalise banks like other countries had to do,” he explains.

Much of Malta’s gaming industry success has come as a by-product of its initial focus on financial services. Twenty years ago, the country enacted a series of regulatory changes to attract businesses to the country, making the most of tax incentives but also the country’s skilled workforce.

Malta then became the first EU member state to launch remote gaming regulations in 2004, stealing a march on its competitors by marking itself out as a credible place to do business. A transparent licensing regime was put in place, while consumer protection rules and anti-money laundering regulations were also introduced. Such foresight is now paying dividends, with the country expecting to post GDP growth this year of close to 3 per cent.

The former British colony is now in the process of refreshing its iGaming regulations in a bid to stay ahead in what has become an intensely competitive market.

“Right now we are going through a massive process of change, so that we ensure long-term sustainability,” explains Mr Cuschieri. “One of the main thrusts of this process of change is to future proof the gaming sector for the next decade and introduce new innovative and cutting-edge concepts in Malta.”

Malta is already home to 265 online gaming companies but Mr Cuschieri is keen to see this figure grow and changes to the LGA’s operations and the country’s regulations form a key part of his strategy. Plans are being developed to bolster its anti-money laundering regulations and the LGA is also looking to strengthen partnerships with institutions in other jurisdictions such as the Philippines’ PAGCOR, as well as building new relationships outside of Europe.

“Governments are realising that if you try to block gaming, people are going to play or gamble anyway with the high probability that they will play within unregulated or illegal sites, where the player is not protected,” explains the executive. “So the argument is: if you want to control online gambling, even land-based gambling, you need to regulate it well and only then will you manage to really control and protect consumers and prevent organised crime and money laundering.”

Entries into new markets across Asia and Latin America are also being considered while the regulatory scope of remote gaming licensing is being widened to include social and digital games of skill. As part of this drive, an independent entity – Gaming Malta – is being formed to market the country’s services while a Gaming Academy has been created to develop workforce skills.

Another key facet of the LGA’s strategy is the €220 million development of SmartCity Malta, which has been designed to provide a cluster of like-minded businesses operating close to each other to enable the industry has a whole to prosper.

“That is the principle of SmartCity,” explains the venture’s CEO Anthony Tabone. “It has been built with a backbone of infrastructure to support these kinds of companies with a number of different areas, including backup when it comes to Internet supply, when it comes to redundancy on electricity.”

“The properties are based on the success story of Dubai Internet City, Dubai Media City and Dubai Knowledge Village,” he adds.

The LGA is set to move into the park next year, a move that is expected to facilitate further growth for Malta’s gaming sector as it looks to strengthen its place on the global stage.