Friday, Jul 20, 2018
Others | Europe | Malta

Malta – the gaming centre in Europe

4 years ago

Mr. Joseph Cuschieri, Executive Chairman of the Lotteries and Gaming Authority
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Mr. Joseph Cuschieri

Executive Chairman of the Lotteries and Gaming Authority

The Upper Reach Team interviewed Mr. Joseph Cuschieri Executive Chairman of the Lotteries and Gaming Authority, and asked him about the importance of the gaming industry in Malta. He spoke about the evolution of the gaming industry in Malta and outlined why Malta became the gaming centre in Europe. Upper Reach also discussed the LGA’s licensing program and its control methods, as well as the authority’s plans to orient towards the East in order to take full advantage of the new markets and opportunities emerging there.  

This is a year of celebration for Malta, not just of how far you have come in the last 50 years of independence but also many other celebrations. Many countries in the European Union are going through hard times, while Malta is doing very well. I would like to ask you, what is the recipe for success in Malta?

Malta managed to steer itself safely through the crisis. If we look back at 2008, I think one of the most important aspects of our economic dynamics is our banking system: 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.

The other aspect I think is the openness and diversity of our economy and the entrepreneurial spirit of many Maltese businessmen. The vast majority of the largest businesses in Malta are usually family-run businesses who are involved in different sectors of the economy including overseas investments. So, for example, you can have a group of companies which is involved in the automobile business, tourism, property and retail.  So if one sector is not doing well, there are other sectors that keep going hence compensating for the downturn in others. In other European jurisdictions if, for example, you are solely involved in the automobile business and the business experience a downturn, they will have no option but to lay off people to keep the business running.

Fast forward to today, we have a new administration which is very dynamic and business friendly. In fact, this year we will probably close the year with a 2.8% to 3% growth in our GDP, which is very good by any standard. Unemployment is at roughly the 6 percent level. Some of this unemployment is a result of the skills mismatch with the new economic sectors like remote gaming, ICT and e-commerce. In remote gaming, for example, two thirds of the people employed in this sector are foreigners. While there is nothing wrong in that, the fact is that there are jobs for the Maltese, but there isn’t the skill available to fill certain positions. In other sectors like ICT services, it’s the same thing. There are opportunities but the unemployed are people who either don’t want to work or don’t have the skills for these new growing economic sectors. I would call it artificial unemployment, because the economy overall is growing. 

You mentioned the openness of the Maltese economy. In fact, in 2004 Malta was the first EU country to establish the comprehensive legislation on gaming. Why did the government at that time decide to focus on that?

I will take you back 20 years to 1994. Twenty years ago Malta launched its first package of financial services regulations; there was an objective to make Malta a serious financial services centre. Malta did pretty well in financial services making it one of the major contributors to the Maltese economy. Remote gaming was a by-product of financial services for the simple reason that, given the fiscal incentives that we had in the financial services regime, there were some gaming companies that were being set up here to benefit from those incentives.

So, someone probably had the idea at the time and said: Listen, why don’t we make Malta a remote gaming centre as well? The robust ICT infrastructure available in Malta coupled with other attractive hygiene factors enabled the setting up of remote gaming companies in Malta hence doing with remote gaming what had been done with financial services.

So in 2004, Malta was the first EU member state to launch remote gaming regulations hence establishing a new legal/regulatory framework including the setting up of the Malta Lotteries and Gaming Authority. The ICT infrastructure that was developed over the years coupled with our standards of regulatory policy, education, skills availability, English speaking population, political stability and EU membership were critical success factors for Malta in this sphere.

Malta is a successful gaming centre not only because of the tax incentives, but also because of its credibility. What is your position on that?

Within a regulated framework, which no other country had in Europe, we were the first country to start regulating remote gaming. We have established a licensing regime, which is very transparent. We also have very stringent requirements for compliance, to make sure that anti money laundering procedures and consumer protection mechanisms are in place, that there is a compliance process to make sure the industry remains free from organised crime and for games to be fair whilst protecting the vulnerable players. We gained credibility because we started to get all the big names here; most of the big players are in fact here. And that placed Malta on the gaming world map

And how do you handle this competition? Because they will probably try to copy what is working well. 

Just like any other organisation, our philosophy is that we need to do it better than the rest and strive for excellence in everything that we do. We are transparent and serious and have no problem in showing how big the sector is in Malta. In fact, gaming is the second biggest economic sector after tourism. We are proud of our achievements. Right now we are going through a massive process of change, so that we ensure long term sustainability. 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. 

How many companies are established here today and what is the trend you envision for the coming years in terms of number of companies?

Right now we have 265 companies and 420 licenses in our portfolio. I am envisaging that Malta will be experiencing a solid growth trajectory in the coming years.

Tell us about your control methods.

We have established procedures and regulatory processes with which every licensee needs to comply on an ongoing basis. These include ongoing compliance audits and assurance checks. We focus a lot on compliance to make sure that all the licensees are meeting their license obligations. High on our agenda is consumer protection. On this front Malta is going to push the boundaries.   

The remote gaming sector is the most dynamic and the fastest growing sector in Malta. This has led to enormous success for the gaming industry in Malta. In terms of revenue, how does the Lotteries and Gaming Authority work with the operators?

First of all, the law provides for the imposition of gaming tax which the LGA collects on behalf of the Government. So government derives its revenue from this sector in both a direct and indirect way. The direct aspect is the gaming tax we collect, which is passed on to the government. This year alone we will be passing on 52 million in gaming taxes. But then, the government is also collecting income taxes from economic activities directly or indirectly related to the gaming industry such as employment, property rentals, office rentals, ICT services, consultancy services etc.  

What relationship do you have with other important institutions in other jurisdictions like PAGCOR or in the UK?

What we are trying to do is look at the big picture. We have many challenges within the European Union. Within the EU there is not an established practice and no European directive harmonising gaming. Previously, when we started in the early 2000, the market was not as restricted as it is today, and this started to change with the requirement of a national authorisation system regime being adopted on the premise of player protection and the prevention of money laundering.   Although Malta is a European Member State, a gaming operator duly licensed and regulated in Malta is not permitted to operate and offer services cross border in countries like UK, France, Italy and Belgium, who require an additional gaming license. There is no concept of mutual recognition of authorisations and worse off neither of processes conducted at the expense of operators who must face additional regulatory burdens and duplication of requirements. I am not happy about this fragmentation of the internal market and we keep arguing and upholding the fundamental freedoms enshrined in the European Treaty keeping all options open.. So my view is that we should explore non-European territories leaving all options open to foster further collaboration with other regulators who share our same ideology that of being regulatory entrepreneurs thereby allowing our gaming operators to operate in other markets by facilitating market entry (subject to collaborative agreements) in strict compliance of the law and to allow them to invest and improve their customer experiences in responsible ways.

So yes we are looking into new jurisdictions and markets and the summit that I attended this year opens your eyes to the new opportunities available. It is not easy, as in many countries remote gambling is prohibited. In China, for example, it’s illegal. But 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. 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. If you don’t regulate, the illegalities are going to be much bigger hence driving gaming activities underground. That is our philosophy and I think it is gaining ground, but it still needs more time until countries start opening up their markets to properly regulated remote gaming.

Last May you signed an agreement for Smart City, when are you moving to Smart City?

Probably around May or June 2015. We are all excited and looking forward to it very much.  

One of the titles we were thinking about for our report is: Proud to be Maltese. So, what does this phrase mean to you?

Given that we are 50 years old because September 21 2014 was our 50th birthday – you look back and say: Such a small country has achieved so much. I think that is why I am proud to be Maltese. We have made very big achievements with great entrepreneurial spirit of the Maltese people, from an economy that was dependent on the British forces to an economy that is now open to the global world and the new economy. An economy that in certain sectors, like remote gaming and ICT, is light-years ahead from much bigger countries. I believe that in the next 50 years, Malta's progress will proceed at a much higher pace than the previous 50 years.




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