Portugal an investor’s heaven for (insur)tech businesses?
Portugal, a small country at the south western tip of Europe, has since the turn of the decade, year on year, attracted increasing international attention from tourists and investors, reaching a record 12.8 million foreign visitors in 2018, for a population of just over 10 million. So what explains how Portugal became Europe’s Best Kept Secret for foreign investors in 2014, as defined by KPMG?
In part this evolution has been driven by the government, which in 2009, introduced a range of tax benefits for both EU and non-EU citizens, which made attaining residency quick, easy, and financially lucrative. The aim was to encourage direct foreign investment and help get the economy back on its feet after the Global Financial Crisis.
The influx of tourists, on the other hand, has offered Portugal a unique opportunity for showcasing the country’s best qualities, attract new business ventures and make Lisbon one of Europe’s best cities to create innovative companies. As a result, investors have come from all over the world.
The Portuguese government’s Golden Visa (a fast-track for foreign investors from non-EU countries) and other schemes like urban renewal projects have further helped establish Portugal as an attractive destination for foreign research and development companies, entrepreneurs and investors. Lisbon has become something of a creative and tech startup hub while Portugal is perceived as a stable place to do business and is ranked 29th out of 190 in the World Bank’s Doing Business ranking.
Portugal promotes the creation of startups through the Startup Visa, a hosting program for foreign investors who wish to develop new projects in Portugal. The City of Lisbon secured the Web Summit for the next 10 years and created Hub Criativo do Beato, a new business incubation project in the centre of Lisbon that will house innovative and technology-driven companies. Factory Berlin, one of Europe’s largest incubators, Mercedes-Benz and Web Summit are among the first companies to secure a place at Hub Criativo do Beato.
Moreover, tech startups and digital development centres are being set up all over Portugal and hiring qualified local workers. Google has opened a support centre on the outskirts of Lisbon and creating 500 tech jobs for skilled workers, as well as BMW, Mercedes, Volkswagen, BNP Paribas, Natixis, Zalando, Bosch and Siemens, Euronext, among many others.
As a result, EY assessed that for the second consecutive year, Portugal leads Europe in investors’ perceptions about attractiveness and their short-term investment plans.
Although within Europe, Portugal represents a smaller percentage in Foreign Direct Investment (FDI) captured, the country is among those with highest scores, occupying the ninth place, with a 61% increase in FDI projects, with the USA, France, the UK and Spain leading FDI in Portugal.
Between 2008 and 2017, sectors claiming larger amounts of foreign investment were electricity, gas, water and construction. ICT activities have also experienced a substantial increase of 291%, growing from €2b to €6b during the same period (GEE).
All of this hype about Portugal and its tech capacity doesn’t just come from the country’s natural resources, recent governmental programs and good marketing. The fundamentals for this ecosystem have their root in the quality of education that permit being ranked 9th and 10th out of 61 and 63 countries, respectively in the availability of qualified engineers as per IMD World Competitiveness Ranking 2017 and in Communication technology digital and technical skills in World Digital Competitiveness Ranking 2017. Proficiency in the English language, a geographic and cultural proximity with the rest of Europe combined with a cost of labour that is lower than average in Europe, explain why many companies have considered and decided to invest in Portugal.
This is how Portugal has turned into an investor’s heaven for (tech) businesses. Will it eventually contribute to foster a greater number of InsurTechs and fintechs? The question remains to be answered.