Portugal’s ICT Sector: Missed boat or Golden goose?

1. Portugal’s ICT Sector
Missed boat or Golden goose?
Alvaro Santos Pereira

4. The Portuguese are perceived as being
innately technological

5. The Background
• Portugal is currently immersed in a serious
economic crisis
• Worst economic performance since the early 1900s
• Many of the country’s traditional industries display
several competitiveness problems, while other sectors
are no longer competitive

7. The success
• Still, Portugal was one of the most successful
countries in Europe in the postwar period
• The Portuguese economy had the second highest rate
of growth in Europe after WWII
• In spite of current crisis, the country is no strange to
success

8. The BIG questions
• What went wrong?
• What can we do to get an end to the crisis and
reinvigorate the success of the Portuguese economy?
• Can the ICT sector be the driving force behind
economic recovery?
• Can the ICT sector be a cluster of excellence in
Portugal?

9. What went wrong?
• The euro
• Globalization and new international
competitors in the traditional industries
• Previous economic model no longer viable
• Inadequate economic and fiscal policies

10. What can be done?
• Better economic policy
• Some improvement in the last few years
• Lower bureaucracy and reform of the Justice system
• Investment in the quality of human capital
• Improved incentives and better rewards to
innovation
• More incentives to entrepreneurship

11. Can the ICT sector be the driving
force for a brave new world?
• Some of the most successful (and more
interesting) examples of Portuguese
entrepreneurship emerged in the ICT sector
• Can these examples be emulated by others?
• How?
• What can the State do to help?

12. The FACTS
• Undeniably, some of the most interesting
examples of Portuguese entrepreneurship can
be found in this sector
• Undeniably, there has been great progress in
the last decade
• Undeniably, the idea of a Technological Plan is
a good one

13. However…
• Are we really sure that the ICT sector is
progressing as well as it could?
• Are we really sure that the State is helping the
sector as well as it should?

14. Taking a look at the Facts
• In spite of some improvement, Portuguese
ICT infrastructure still lags vis-à-vis its
European counterparts

15. % Internet access is still low

16. Broadband penetration still lags

17. E-commerce needs to become
more pervasive

18. • On a more positive note, the exports of ICTs
have increased substantially

19. Exports of ICT equipment have tripled in
the last decade

20. • Still, in relative terms, the performance of the
ICT sector is not so impressive

21. The share of ICT employment did
not increase
• The share of ICT-related occupations in the total
economy did not increase in the last decade:

22. ICT-related employment is still small

23. Portuguese high-tech exports are still
below the EU average…

24. Fast growth of high-tech products
seems to have petered out

25. The share of ICT in manufacturing value
added is low

26. And the share of ICT in total
manufacturing has declined

27. The share of ICT investment in total
capital formation has not increased in the
last 10 years

28. Venture capital is still insufficient
• Venture capital for early and replacement
investment has increased
• However, and in spite of the extraordinary
dynamism shown by ICT entrepreneurs,
venture capital is still inadequate for a sector
(and a country) that aims to become a golden
cluster.

29. Moral of the story
• The ICT sector is one of the most dynamic and innovative in
the Portuguese economy
• It exhibits an unusual degree of entrepreneurship for
Portuguese standards
• It is a sector that aims to compete internationally and is
able to do so
• However, it is still not a national champion, as it could be
– Technological Plan is not helping as well as it could

30. What can be done
• Continue to promote entrepreneurship within
the sector and to develop networking linkages
• Continue to innovate and compete
internationally
• Continue to improve human capital in order to
solve supply shortage of skilled individuals

31. What can be done (II)
• Constant pursuit of productivity gains
• Relative low wages cannot be sustained forever without the
threat of brain drain of most productive individuals
• Consolidate
• Sector is constituted mostly by SMEs
• Go Public
• In order to grow, companies need to enter stock markets
• Sector could attract more foreign and national venture
capital firms

32. Why the State has to help
• Although Technological Plan is a good start, so far, it has not
had a major impact in industry
• Focus of the Technological Plan should be redirected to
promote the emergence of more entrepreneurs as well as
to increase the support for start-ups
• If we really believe that the sector has a bright future
ahead, then the State should support and nurture its
development
• How?

33. Renewed
incentives/commitment
• ICT sector should be regarded as strategic as the
renewable energies cluster
• How can the sector be helped?
• Unprecedented tax breaks for exporting companies
• Unprecedented tax credits for companies that hire new
graduates
• Unprecedented tax and economic incentives for companies
• New lines of credit for ICT companies that want to compete
internationally
• Unprecedented labor market flexibility (national cluster of
excellence)

34. One last thought
• Portuguese success is certainly more
guaranteed if we decide to invest in the
knowledge highway rather in the construction
of additional highways