Panama IT Strengths and Weaknesses

Analysis: National IT Strengths and Weaknesses

The IT landscape of Panamá has undergone several important changes in the past five years. Although many significant advances have been made, improvements are still needed in many areas.

Strengths

1. Well Developed Telecommunications Infrastructure: as a result of privatization in 1997, and de-regulation in 2003 the market has changed dramatically. Although there is still a single local service provider, Cable and Wireless, individuals can now choose from different service offerings for their national long distance, and international calling needs. Cable and Wireless has made significant investments in the telecommunications infrastructure since it entered the market in 1997.

2. Increased Government Involvement in ICT Sectors: this year, the government started the introduction of a set of initiatives that intend to improve the ICT landscape of Panamá. The Panamanian government has developed a comprehensive plan, e-panama.gob.pa, that incorporates information and telecommunications technology, focuses on social and economic development, and seeks to increase participation of the population in issues of national importance. The e-panama plan includes e-government, e-education, e-economy, e-health, and e-democracy. This will provide lasting benefits regarding education, infrastructure, and investment incentives.

3. Low Cost of Labor: the cost of labor is much less than in developed countries such as the United States. For example, the monthly salary for a worker in a call center is between $500-600 per month.

4. Incentives for ICT Investments in the Country: the government will soon be formally establishing the Panamá-Pacific Special Economic Area that will provide tax incentives and benefits for ITC companies. Also, special laws have been passed, such as the one regarding call centers, in order to provide incentives for international companies to set up their call centers in Panamá.

5. FDI: FDI figures have increased dramatically in 2003, after experiencing a significant decrease for 2002.

Weaknesses

1. Lack of Trained Workforce: the workforce in Panamá is not trained in ITC specific areas. Also, the lack of individuals that have an advanced command of the English language is a weakness, since the government is trying to attract international companies in the ICT sector, such as call centers and help desks. The government is currently training about 3,000 individuals in advanced English in a time period of three months. This may continue in the future, especially as more companies establish themselves in the Panamá-Pacific Special Economic Area for ICT sector companies.

2. Low Computer and Internet Penetration Rates: Computing and Internet Diffusion are very low, especially when comparing them to countries like Costa Rica. Low computer and internet penetration rates may grow significantly after the e-panama.gob.pa initiatives are implemented.

3. No Domestic Production of Software and Hardware: currently, there is no significant domestic production of software or hardware in Panamá.

4. Legal Environment: there is a general perception of widespread corruption in the country. The legal system is not lacking in laws that protect the business community (such as copyrights and intellectual property), however the judicial system is slow and bureaucratic. Changes in this area are of vital importance if the country wants to be more appealing to international companies seeking to enter a Latin American market.

Source: Cecilia Stoute, INITEB site http://www1.american.edu/academic.depts/ksb/mogit/country.html