Digital Transition in Recovery and Resilience Plans: Portugal

Portugal is one of the European countries most affected by Covid-19. This crisis not only has affected specific sectors more susceptible to the impact from the pandemic but has also highlighted persistent structural issues such as: low productivity from low levels of education; inefficient public administration and judicial system affecting innovation and growth; small average firm size and corporate tissue concentrated in low-productivity sectors.

The Portuguese RRP is designed to address these bottlenecks, towards lasting and sustainable growth, preparing the Portuguese economy for the challenges of the coming years. One of RRP’s main components is Digital Transition. Its focus is on improving digital skills of the workforce and in education, enhancing the efficiency of the public administration and judicial system, as well as a business environment, incentivizing research, innovation, and the digitalisation of firms.

The core ideas and concrete institutional actions are shared with “Portugal Digital”, the government’s action plan for the digital transition published in August 2020. Its vision has been designed to address Portugal’s specific digital weaknesses reported in multiple sources. One of them is the Digital Economic and Society Index (DESI), according to which Portugal’s main weaknesses lie in the low level of digital skills of workers and digital integration of firms. DESI does not consider, however, the level of digitalization of the public administration and the judicial system, the digital tools in primary, secondary, higher education and the digital skills of the young generation.

Portugal’s RRP consists of a total endowment of €16,644m (€13.9bn subsidies, €2.7bn loans), of which €3,678m are dedicated to investments in the digital transition (22.1%), divided into €2,460m (14.8%) for five Digital Components and €1,215m (7.3%) included in other (non-digital) components. The Digital Components are Enterprises 4.0, Quality and Sustainability of Public Finances, Economic Justice System and Business Environment, Digital Public Administration, and Digital School.

There is no explanation why the distribution of these amounts is the most adequate and effective for the challenges at hand. Indeed, 73.6% of the digital transition investment (of €2,460m) is allocated to the public sector, including schools. Each of these components is subdivided into reforms and investments, each accompanied by KPIs measuring their achievement, whose fulfilment is a requirement for further disbursement of RRF funds.

There are qualitative and quantitative KPIs. “Milestones” refer to the completion of activities such as entry into force of laws, contracts signed, purchase and delivery of items, while “targets” are quantitative goals. The achievement of all targets and milestones is subject to verification, usually through documentary proof such as reports or official documents. The targets, being numerical values, are of course precisely specified. It cannot be deduced from the Operational Arrangements on what basis these KPIs were chosen and which trade-offs they involve. Furthermore, they are often vague, imprecise or unclear, or focus on execution rather than effectiveness towards achieving the vision of the digital transition.

With the aim of assessing their quality more precisely, we attributed a score from 1 (lowest) to 3 (highest) in terms of how (C) concrete, (M) methodological, (E) effectiveness- and (4) vision-focused we judge each KPI to be, summarized in the table below.

Source: IPP – Institute of Public Policy

Overall, we find that the methodology is not well-described and that there is indeed a lack of measures that account for effectiveness and not merely execution. While there is wide variation between different responsible entities, the KPIs for the Ministry of Finance have the clearest methodology and accountability mechanisms, while public institutions responsible for the business environment (judicial system, public registers) have the lowest.

Different public websites provide information, each catering to a different audience: European Commission, “Recuperar Portugal” (strategic aggregates), “Portugal Digital” (action plan for digital transition), IAPMEI (funds to be provided to firms), and “Mais Transparência” (data on individual measures and beneficiaries). Using these, one could in principle follow the full path from strategic vision to individual concrete action and see how each amount is spent. We found that information available is at times incoherent between these sources. This may be due to different publication dates, diverging definitions, and different institutional focus.

Furthermore, it is unclear on what basis many target values were defined or how exactly certain sums of money are being spent in practice. “Mais Transparência”, the source describing in detail how funds have been allocated to different investments, does not cover how almost 30% of the digital transition budget will be spent.

As of May 2022, Portugal already reported the successful completion of the first set of targets and milestones, five in the digital area, to the European Commission, which then paid out the first semestral tranche of funds. Equally, according to “Recuperar Portugal”, 100% of funds for digital transition have been contracted with their direct recipients and intermediaries, all public institutions. Apart from the former, nothing has as of yet been disbursed to the final recipients, since the intermediaries have just started to open the respective competitive procedures. The next payment request will be made in Fall 2022.

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