Panama is working to become an international hub specializing in Information and Communication Technologies (ICT). A new strategy is being executed by the institutional entity known as SENACYT and the Chamber of Information and Communication Technologies (CAPATEC), which are supported by national and international agencies. The plan "ICT National Strategy 2010-2014" is a strategy designed to develop the IT sector and turn the nation into a global center.
The PENCYT is divided into two levels. The first is constituted by the general institutional actions aimed at modernizing the scientific and technological base of the country with six lines of action.
These lines of action were developed by the National Secretariat for Science, Technology and Innovation (Senacyt), together with a team of international consultants who contributed their experience in similar processes in the country
profile of greater progress and development in South America, North America, Asia, Europe and from his experience in multilateral organizations.
Meanwhile, the second level consists of programs for scientific and technological sectors: agriculture, aquaculture, fisheries and forestry, life sciences and health sciences, basic sciences, social sciences, education, industry and energy and logistics and transportation.
Cross-cutting programs are: environment, ethics, information technology and communications, gender and innovation. Each program contains cross-sectoral and specific strategic projects to be implemented and financed jointly with other entities leading to the implementation of these initiatives.
Aiming to develop infrastructure, technology, personnel and support in both the governmental and private sectors for the acquisition, production, storage, processing, communication, recording and presentation of information contained in by signals of acoustic nature (sound), optics (imaging) or electromagnetic (alphanumeric data). In the area of trade services, using electronic means, for long distance commercial transactions or sales.
New Legal Framework for Electronic Commerce
Law 51 of July 22, 2008 defines and regulates electronic documents and electronic signatures, and the provision of technological storage services for documents and certification of electronic signatures.
In addition, other regulations are adopted for development of electronic commerce. It defines 37 terms in the field of e-commerce, from "electronic certification" to others as "storage technology media” and “brokerage services agent”.
Another aim is to regulate activities as described in Title IV, Chapter I, Article 43: "Every natural or legal person, domestic or foreign, conducting business as a technological storage of documents broker from third parties, must register with the Directorate General for Electronic Trade as Technological documents storage of documents agent.”
On the other hand, Article 69 (Chapter V) creates the General Directorate of Electronic Trade, at the Ministry of Commerce and Industry. Its responsibility is to ensure the smooth running of provision of technological storage of documents and certification of electronic signatures, using the internet as a tool for delivery of business services. This institution is empowered to regulate, monitor and discipline service providers of electronic signature certifications, registrations and / or cancel licenses to providers, in accordance to the law and regulations.
The purpose is to ensure that all systems are reliable and to perform every necessary action to provide services related to these activities. This Directorate will issue all technical regulations needed to meet the minimum technical conditions required by natural persons or entities that use the Internet for commercial activity.
This law also creates a special regime to ensure the confidentiality of information stored in databases to support operations within foreign countries or jurisdictions which are used by private and public companies. National or international entities are also included. Companies benefiting from this provision may operate its own database. Foreign companies wishing to conduct this activity may develop a branch or a subsidiary organized under the Panamanian law, with that sole purpose.
Why anyone should move its e-commerce activities to Panama?
a) Main Advantages
US dollar based economy
Earthquake free
No active volcanoes
No hurricanes
No taxes on foreign source income
Excellent living conditions
Fully bilingual certified engineers
Best submarine fiber optic access of the region
No pollution
b) Telecommunication infrastructure
Panama has the best access to multiple high-bandwidth continental fiber optic networks in telecommunications infrastructure. The extremely low risk of natural disasters (hurricanes etc.), gives the Panama telecom sector security
and reliability of service as well as a competitive advantage over other offshore jurisdictions.
c) Accessibility for installation and maintenance
Panama is extremely easy to access from almost anywhere, due to its central location in the middle of the Americas. Its proximity to large cities in the US and Europe makes it relatively cost effective to bring in specialist know how for installation and maintenance.
d) Relevant technical know how and human resources
Panama’s long history as a international banking and services jurisdiction, has resulted in the availability of technical know how in internet technology and information technology as well as sufficient human resources to install and maintain e-commerce operations.
e) Location
Accessing Panama is easy from anywhere in the world. Living conditions are very similar to the US, but the cost of living is one-half.
f) Favorable tax regime
Panama is a zero tax jurisdiction. There are no double tax treaties that can be used for commercial activities. No VAT is payable on good or services exported from Panama.
g) Hub for CyberCommerce
All the preceding advantages, incentives and infrastructure place Panama as an ideal location for:
Internet Service Providers
E-Commerce Providers
Applications Outsourcing ASP
Broadband Content Providers
New Media Content Providers
Exchange Traffic
h) Panama’s Continental Fiber-Optic Network Link
The MAYA and ARCOS ring systems link the continental Americas and the Caribbean Basin.
Total investment for the two fiber--optic trunk systems is targeted at $217 million, and is to be divided between a mainly 14-member consortium, including world-class carriers such as AT&T, CTC Mundo, France Telecom, MCI, SPRINT, Star Telecom, Swisscom, TelMex WorldExchange and Cable & Wireless.
The MAYA-1 ring features relays in Florida, Mexico, Guatemala, Costa Rica, Panama, Colombia, Puerto Rico, Jamaica and Grand Cayman Island and, in addition to its own communications structure, provides a restoration path for the Pan-American cable. The ARCOS-1 trunk spans Florida, Mexico, Belize, Guatemala, Honduras, Nicaragua, Costa Rica, Panama, Colombia, Aruba, Puerto Rico, the Dominican Republic and the Bahamas.
The GLOBAL CROSSING project connects Asia, the US, goes through the Panama Canal, the Caribbean countries, and Europe.
These submarine networks give Panama four (4) international connections via high-bandwidth, fiber-optical trunk routes, superseding the current satellite link--feed system that is now in operation. This in turn is already enabling fast and reliable connections for B2B, banking, e-commerce and other businesses as well as additional high-speed consumer activity units.
The OXYGEN network links the US Caribbean, goes through the Panama Canal, and connects to the Pacific ocean within Colombia, Perú, Ecuador, Chile, Brazil and Europe.
Ultimately, the main benefit of MAYA, GLOBAL CROSSING, OXYGEN, PANAMERICAN and ARCOS will be lower international prices for consumers. In addition, these new cables incorporate New Wave Division Multiplexing Technology that will allow extraordinary ultra high speed bandwidth applications, such as multimedia and digital video.
The MAYA 1, GLOBAL CROSSING, OXYGEN and ARCOS-1 projects represent yet another building block in Panama’s quest to become Latin America’s Telecom Hub, which the United Nations Education, Science and Culture Organization (UNESCO) has predicted will occur within the next few years.
In Panama, there is an electronic commerce law that ordered the creation of the Electronic Commerce Directorate of the Ministry of Commerce and Industry. It also establishes that the Comptroller General is the certifying entity in the
transactions that are made with the State. Other issues to which this law refers to are the electronic signature of documents and the certifying entities.
Other Domestic Innovation Projects
PanamaTramita
Is aimed at reducing, simplifying and integrating a large variety of administrative procedures that different government entities demand from citizens and providers. Another goal of this project is to relieve entities from having to undergo face-to-face procedures, offering modern, comfortable and quick options, as well as a single access point 24/7.
By the end of May 2006, the "PanamaTramita" Portal was officially launched. It currently holds information on 2,500 administrative procedures and contains more than 400 forms, thanks to the collaborative joint efforts with government entities. Since it was launched, the "PanamaTramita" Portal has recorded a total of more than 40,000 visits worldwide.
Tax Payment Certificate on Line
In order to increase national competitiveness by improving the quality of services and dealing with administrative procedures conducted by citizens at public institutions in a more expedite manner, the State offers citizens a new system that grants natural and legal entities an electronic Tax Payment certificate in a simple, fast and easy manner, that is as valid as the one issued by government institutions, guaranteeing their authenticity thanks to state-of-the art technology.
The National Authority for Government Innovation jointly with the Traffic and Land Transportation Authority, the National Water and Sewage Institute, the Municipality of Panama, the General Revenue Directorate, the Social Security Fund and the Public Registry of Panama offer citizens this novel tool that generates free certificates in electronic format. Citizens will also be able to know if they have any delinquent payment with said institutions.
Panamá Emprende
The objective of "PanamaEmprende" is to foster the creation of enterprises both with national as well as with foreign capital which helps to promote a business environment with efficiency and transparency, by using available technologies.
With the creation of Law 5 of January 11, 2007, which streamlines the process of opening businesses, enacted on Thursday January 11, 2007, and that created a figure called Notice for Operations, that will be the only process required for beginning a trade or industry-related activity in the Republic of Panama and includes, but is not limited to, a unique number called “Registro Único de Contribuyentes” ( Single Taxpayer’s Registration) recorded at the General Income Directorate of the Ministry of Economy and Finances. All the information contained in the Notice for Operations will be stored in the "PanamaEmprende" system and will have full legal validity.
Panamá Compra
The "PanamaCompra" System is part of that larger Project for redesigning the State. The Project includes the modernization of public procurement, as well as the legal framework that allows for a more transparent and efficient administration.
This initiative relies on the new Procurement Law (Law 22 of June 27, 2006, enacted on July 27, 2006) whose main innovations are the following:
The creation of an autonomous entity that has authority for regulating, interpreting and overseeing. Assessment to state institutions regarding contractor selection processes.
The creation of an electronic catalog of goods and services, a virtual window that contains all the products regularly and broadly used by entities.
Creation of an Administrative Procurement Tribunal to guarantee balance and transparency in public tenders for purchasing goods, acquisition of works and services, in addition to disposing of State assets.
Last Domestic Investments
The Panamanian government invests millions of dollars in Technologies of Information and Communications Technology (ICT’s) to modernize and innovate all its institutions, these investments are evaluated and approved by the National Innovation Government (AIG).
At the end of 2010 projects have been evaluated for over three hundred thirty million dollars (B/. 330 million) of which have been approved over one hundred and seventy-nine million Balboa (B/.179 million) in goods and IT services.
Modernization projects and government innovation are aimed at reducing the digital divide in the country, and provide a government focused on the public access service providing fast, accurate and reliable, providing society with the ease of access for electronic processing of government procedures, avoiding high levels of manual intervention, shrinking processing times, the lack of coordination between agencies and the cost of paper.
For example the project "Panama Paperless" is the program seeks to renew the way they handled the citizen to the state so that all procedures made swiftly and transparently. This initiative seeks to optimize the performance of government functions to improve service delivery to citizens, allowing for greater transparency and quality of services all Panamanians, exempting a submission on information residing on a digital database of the state, bringing more convenience and a significant reduction in administrative costs.
On the other hand MuNet (Efficient and Transparent Municipalities) / e-Government Panama supported by the Organization of American States (OAS) and the Canadian International Development Agency (CIDA-CIDA) aims to improve three key aspects of municipal operation:
• Transparency
• Efficiency
• Participation of citizens
The formulation of the strategy for local governments cover the 75municipios comprising the country and begin the execution of one phase of Municipal E-Government Transformation, generating savings and benefits to citizens, efficiency and transparency in municipal management and new business opportunities for providers of local governments.
Infrastructure and Incentives
International Technopark of Panama
Innovation, entrepreneurial culture and competitiveness: three ingredients of economic development that have materialized in the International Technopark of Panama (ITP), CDS's management area in charge of the entrepreneurial component.
ITP is an entrepreneurial park oriented to innovating culture and to the development of Technologies, as well as to more daring projects that can create and materialize the transfer of knowledge and technology among universities, research institutions, companies, and markets. For this purpose, collaboration with other CDS departments provides ITP with an environment that sets it apart from other entrepreneurial parks.
Technopark's clearly innovating spirit delineates the kind of organization that gets incorporated to ITP and forces us to provide high-quality value services and spaces. Thus, the City of Knowledge is the ideal place for developing your project or for your company to grow. If innovation is your driving force, we are your strategic partners.
The Technopark is a mixture of commercial space, offices, technical facilities and ancillary residential properties. The government is supplying 20 hectares of land with complete infrastructure and buildings worth an estimated $50 MM.
Since the Technopark project was unveiled in August 1999, 45 companies have signed up as tenants and more than 40 have expressed interest including: Oracle, Cisco, Microsoft, and C&W. Panama is a country with a long list of advantages such as low cost of living, good quality of life, no pollution, to name a few.
The Technopark opened in January 2000 and is located on what was once the US Army Base at Fort Clayton along the Pacific side of the Panama Canal, five kilometers from downtown Panama City and a few hundred meters from the fiber optic submarine cables crossing the Panama Canal.
Other participants include the Smithsonian Tropical Research Institute (STRI), and a special Technical Cooperation Agreement has been negotiated with the European Union, through which the organization has assisted in Technopark project development, strategic plan
definition and in identifying those niches in which Panama has a “comparative advantage”.
Additionally, a growing number of companies are based in the “Hi-Tech Incubator” which has been established with the intention of accommodating and stimulating the creation of technology start-ups. The new entrepreneurs receive seminars and workshops covering the development of business plans, thus attracting venture capitalists to finance their operations.
The Technopark is attracting interest from a diverse group of businesses that may be divided into three separate, but interconnected areas:
1. Biotechnology, Marine Resources, Reforestation, Tropical Medicine and Aquaculture.
2. Information Technology, Telecommunications, Geographic Research and Data Transfer.
3. Multimodal Transport, Automobile, Aviation and Marine Technology
A special legislation applies to all businesses operating within the Technopark. This legislation includes significant fiscal benefits, immigration advantages, and an established infrastructure requiring reduced startup investment. However, it is important to present the specific benefits that the Technopark offer.
The Panamanian Government granted the Technopark and all entities established therein, the following benefits for an extendable 25 year period:
Exemption of all taxes, contributions, duties or import fees on all machinery, equipment, furniture, vehicles, appliances, or materials necessary for the development of the project.
Exemption of the movable property transfer tax (VAT) on machinery, equipment, vehicles, appliances and material acquired and necessary for the development of the project.
Exemption of any tax duty, or lien imposed on the remittance of money abroad, when such remittance or transfer of funds takes place in relation to the purposes of the project.
In addition, special immigration rules are in place to promote the installation of hi-tech business in the Technopark. Special visas will be granted to expatriates who may enter the country with the purpose of participating in the development of listed projects.
Private Hi-Tech Parks
By means of Law 25 of 1992, the Export Processing Zones (EPZ’s) were created promote foreign investment by establishing a special regime to those companies exporting goods or services produced or processed within said zones.
EPZ’s can be created as Private Hi-Tech Parks to host an array of diverse companies. One important highlight is the granting of exclusive rights to EPZ developers to provide their own telecom and energy allowing the possibility of 24 hours redundancy and related services.
The most relevant incentives granted to High-Tech Parks are:
Exemption of all taxes, contributions, duties or import fees on all machinery, equipment, furniture, vehicles, appliances, or materials necessary for the development of the project.
Exemption of any national direct tax on capital.
Exemption of income taxes.
Exemption of any national direct tax on dividends and interests originated from securities issued by the company and traded in local or international markets.
Special immigration and labour regime.
Panama Taxation
The Republic of Panama is especially attractive to foreign investors for its tax benefits, particularly those referring to income tax. Income tax is levied on all revenues produced within the territory of the Republic of Panama, with the exceptions that the law establishes. This concept of territoriality is one of the determining factors making Panama a center of international operations.
For ecommerce, this is extremely important for companies planning where to set up a permanent establishment for their sales and payments for future tax planning.
Conclusions
Panama motivates potential investors to base their e-commerce operations in Panama as a virtual nation with an environment where international business is welcomed. Panama continues to encourage foreign capital to enter its domain. Of course, this imperviousness to change cannot be attributed to accident or chance, and there are, indeed, several most solid reasons on which the extraordinary stability of Panama as ideal basis for foreign investment continues to rest.
For example, a company can have its headquarters in the US, its manufacturing facility in Mexico, its distribution from the Colon Free Zone of Panama; its e-commerce and payment transactions out of Panama and its customers in North and South America, Europe, and Asia.
The extraordinary facilities afforded to any foreign investor in various hi-tech industries and immigration of technical and professional people, as well as in a wide variety of other activities from high-tech parks to continental fiber optic networks can be envisaged under investment incentives designed to prevail in a very competitive regional environment.
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