Major online games developer Yggdrasil is closing its Malta studio and moving to Poland blaming lack of talent. Is the writing on the wall for the Maltese iGaming and tech industries?

Lack of human resources

The company, which develops content for online casinos, has said a lack of human resources means it will be laying off 30 employees in Malta and refocusing its studio operations on Poland and Sweden.

Yggdrasil, which has been operating in Malta since 2013, says it will retain a small office, employing fewer than 20 people, in the island for the foreseeable future.

A company spokesman said:

“the regretful decision was based on the fact that Malta has not been an optimal location for a fully-fledged end-to-end studio as the company has been relying on relocating talent instead of recruiting local talent”.

Malta in danger of losing the iGaming industry?

The news, which is just the latest in a string of worrying developments, could be a hint of things to come for the Maltese economy, which is heavily dependent on iGaming and associated tech and service industries.

Just last month, two Malta-based online gambling companies said they would be making almost 100 redundancies as part of restructuring. The Stars Group, which has been operating in St Julians, Malta, since 2017, said 80 local staff will be losing their jobs. While Multilotto, also based in St Julian’s announced plans to shed 15 jobs.

Warnings have gone unheeded

Despite Maltese politicians trying to gloss over the bad news, it will come as no surprise to many in the industry.

As one source quoted by the Times of Malta said:

“The industry has been sending out messages to the regulator and the government in general, that there is a lack of human resources and that it is not feasible any longer to rely on foreign imported human resources.”

And why is it not feasible to rely on imported human resources anymore? The answer is simple, and the industry, including us here at AYO.NEWS have been warning about it for over a year now; the rocketing cost of living, driven primarily be ridiculous rents.

See MALTA SHOOTS ITSELF IN FOOT? RISING RENTS PROMPT ANOTHER WARNING FROM GAMING INDUSTRY

And RISING RENTS & LIVING COSTS JEOPARDISE MALTA’S GAMING INDUSTRY

High rents and poor infrastructure keep foreign talent away

It really is a simple equation. A few years ago, companies could set-up in Malta, and easily attract and keep talented and enthusiastic workers from all over Europe and beyond – attracted to the island by sunshine, the English language and, perhaps most importantly, low living costs. This allowed companies to keep payroll costs reasonable, and have the pick of talent from all over the continent.

Fast forward to now, and many companies are finding it difficult to attract talent to the island, and even more difficult to keep it here. We’ve already seen unsustainable wage inflation as companies attempt to attract and keep the staff they need, but as fast as wages have risen, greedy landlords have raised rents even quicker.

The result; if you’re renting, which almost all iGaming employees are, staying in Malta makes little financial sense.

Add to this, the substandard quality of housing, problematic public transport and infrastructure, insane difficulty in accessing even basic banking services, often abrasive customer service standards, and growing frustration of those who feel they are being taken advantage of, and it’s not hard to see that Malta has a real problem on its hands.

Bigger than just the iGaming sector

It would be a mistake to believe this developing crisis is only affecting the iGaming sector too. Being so established, the iGaming sector really is the linchpin of the entire Maltese tech industry. From talent to services, the gaming sector has provided a foundation for the nascent fintech and blockchain industries in the country.

However, not only are these sectors also facing the same direct challenges as iGaming, but as the iGaming sector shrinks, so too will the immediately available local talent pool, as foreigners who have been here for a while decide to leave the country.

Summing things up in a Facebook post, Nikolai Livori, CEO and Founder at Yobetit ,said:

“Well I have repeatedly told government officials this. The problem we have is not iGaming related. It will reflect within any tech industry that we will attract. Stop thinking blockchain will save them world (it’s been a bit of a flop for now, besides we don’t have the tech infrastructure to cater for it in the short term). Also all this fuss about AI and Space and whatnot: we are myriads of years behind some other countries with this.

I have personally warned politicians from both sides that at the moment the only reason foreign companies are here is because of the unfair 5% tax advantage.

The MGA license is worth nothing at this stage (even less after Germany regulates in 2020). There are no Human Resources. We have to import staff which is proving to be costly.

There is still time to solve these issues, but first let’s remove the fluff and get an independent board together to get back on track in being a Tech Hub in Europe.”

Is home-grown talent the answer?

Of course, many Maltese commentators will inevitably ask why home-grown talent isn’t available. The answer is simple; scale. It is not to say there isn’t any Maltese talent, but rather that in such a tiny country (let’s remember that the whole country, in terms of geographical size and population, is smaller than the US city of Tucson), it is not realistic to expect local education institutions to be able to ever supply enough talent.

A country the size of Malta needs to realise that, in order to ensure prosperity in today’s globalised world, it absolutely has to ensure it stays attractive for foreign workers – and not just the super rich in the top jobs, but more critically, those lower and mid-level skilled workers that specialised industries depend on.

Too late?

One thing that needs to be kept in mind when talking about any online-based tech industry, is the speed with which it can relocate. Unlike older industries like manufacturing, which are heavily physically invested in locations because of facilities and machinery etc, gaming, fintech and blockchain companies can relocate virtually overnight.

So, lets be honest here. What is keeping the gaming industry in Malta? Right now, as Livori, observed, its pretty much just the corporate tax advantages. However, with pressure mounting on Malta’s government to end its tax haven policies, and other jurisdictions becoming increasingly competitive, offering tax breaks and incentives to companies, this too is becoming less of a pull.

If Malta wants to turn things around, and remain a tech hub, while also improving its standing in the international community, tackling corruption and eliminating dubious tax policies, the only option it has is to sell itself as a great place to live. That means living costs have to be competitive, standards need to improve, and the country need to concentrate on sustainability.

The country is already used to selling itself to tourists, and it needs to do the same to workers. However, as with tourism, any claims need to be backed up by realities on the ground.

Don’t miss: MFSA: HELPING OR HINDERING MALTA’S BLOCKCHAIN & FINTECH AMBITIONS?