pam panel on external trade and investments in the mediterranean towards a sustainable economic...
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PAM Panel on External Trade and Investments in the Mediterranean
TOWARDS A SUSTAINABLE ECONOMIC DEVELOPMENTIN THE MEDITERRANEAN REGION
28 June 2012
aicep Portugal Global
Investment promotion – attraction of FDI to Portugal;
Trade promotion – support to internationalization
activities, specially of SME’s;
More than 7.000 companies, representing more than
90% of total portuguese exports, have a key account
manager at AICEP and are continuously supported in
Portugal and abroad, through offices in more than 40
countries.
Investment and Trade Promotion Agency
www.portugalglobal.pt
The road behind
• Political and economic isolation: reduced international exposure for companies, reduced entrepreneurship;
• Protection of local production, with a negative impact on international competitiviness;
• War effort in the 60’s and 70’s; social and economical cost of decolonization;
• Currency devaluation as basis for competitiveness;
• 80’s and 90’s economy depending on low cost, low skills products (textiles, clothing, shoes);
• Major increase in competition from EU enlargement (countries with low cost, high skills, proximity to larger markets) and China entering WTO;
• Low interest rates leading to investment in non-tradables and reduction of savings rates.
XXth century facts that hindered growth
Exports of goods and servicesOngoing structural changes – product diversification
Travel and TourismMachinery, Equipment
Other servicesTransportation
VehiclesTextiles
MineralsCommon MetalPlastics, rubber
Food, beverages, tobaccoPulp and paper
Other goodsChemicals
ShoesStone, ceramics and glass
Wood and corkLive animals, animal
productsVegetable products
Optics and precision0% 5% 10% 15% 20% 25%
Relative % weight in total exports
1986
2011
Exports of goods and servicesOngoing structural changes – market diversification
Spain
France
Germ
any
UK
AngolaUSA
Nether
lands
Italy
Belgiu
m
Brasi
l
Switzer
land
China
Other
0
2
4
6
8
10
12
14
16
18
20
Relative % weight in total exportsJan/Apr 2012
Exports of goods and servicesClosing the trade deficit – Jan/Apr 2012
Europea
n Unio
n
Exports
Imports
Balan
ce
Third C
ountries
Exports
Imports
Balan
ce-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
EU Third Countries
• Record high exports;• Record low trade deficit;• Surplus with Third Countries;• 160% coverage in Services;• 96% coverage in total exports.
1990
11.000 companies
2011
20.035 companies
Exports of goods
15.400 M € 60.660 M €
Exports
• The exporting base is growing significantly;
• Close to 60% of exports come from large companies, more immune to funding problems;
• SME’s: resilient through crisis; rapid recovery, to accelerate if working capital funding is available;
• Even small companies diverting focus to exports as a result of internal market outlook;
• Incentives schemes focused on innovation and tradeables are increasing results.
News from the battlefront – is growth sustainable?
> 50
25 to 50
106
140
1 to 25
< 1 M
3.289
16.500
47%
12%
36%
5%
M €
Exports#
Companies
%
Exports
Current situation
Assessment:
• Investment decisions depend essentially on micro-economical issues and the necessary attractiveness factors are present;
• Investors with access to international funding and that seek external markets have in Portugal a low cost, high skills, reliable infrastructure location;
• Existing foreign investors are maintaining investment decisions even through crisis.
Shortfalls:
• Overall image effects of macro situation are delaying investment decisions and creating difficulties that affect perceived atractivenness by new investors.
Investment
Current situation
Assessment:
• The number of companies pursuing international businesses is increasing;
• Young talent entering SME’s, with language and management skills is creating a large number of rapidly growing export companies, in high margin segments;
• A substantial part of total exports comes from large companies, with access to international funding, enabling export growth.
Shortfalls:
• Difficult access to funding for SME’s is not allowing working capital to meet the demand needs – stabilization of finantial markets will immediately result in added exports.
Exports/Imports – 96,2% in Jan/Apr
Structural ReformsCompetition
Structural Transformation of the Portuguese economy
Open to foreign investment and to the challenges of international competition
Competitive location for physical and human capital
Fully integrated in the Single European Market
Political consensus on reform program and stability culture
Labor market Business environment
Labour Market
0% increase in minimum wage (any increase will only take place if the economic and labour market evolution justifies it and upon agreement with the Troika partners)
An improvement in the professional qualification regimen
A reform of the firing regulations to allow the introduction of new rules for laying off with just cause
New rules for working hours, including the adoption of “bank of hours”.
Wages adjustments according to the company productivity
Business Environment
Making easier the usage of the “Single Balcony” and improve the assistance capacity to the SME
“Zero Licensing” replaces pre-approved permits by a start of activity statement.
Adopting the “Simplex Exports” programme, including measures to expedite the companies VAT exemption for exports and simplify the indirect exports procedures.
Reinforce the measures to improve the companies access to financing tools and exporting markets
Court House: measures to expedite the resolution of judicial process in the courts
Competition
More effective Competition Law
Easier access to the market, by auctioning new radio wave frequencies for wireless broadband and reducing the mobile termination fees
Adopting new measures to increase competition in the fixed-line telecommunication market
Reduction of rents in sectors shielded from foreign competition
Phased elimination of regulated electricity tariffs
Agenda
Confidence, credibility and justice
Openness, competition and competitiveness
Entrepreneurship, innovation and labor market flexibility
Limited State and economic democracy
First Evaluation(August 2011)
Second Evaluation(November 2011)
Third Evaluation(February 2012)
Troika’s assessement of the assistance program
Structural Reforms
Fourth Evaluation(June 2012)
• Local authorities aplying the reforms as recomended.
• Adjustment process faster than expected;• Unemployment is a concern.
(1) Sale of “Caixa Geral de Depósitos” participation of 1% (2) Concession (3) Expected completion date by “Caixa Geral de Depósitos”
Privatization program as a flagship in the agenda
Electricity distribution
Energy retail and production
Mail distribution
Water distribution
Air infrastructure
Railway logistics
Seguros
Insurance
Seguros
Energy retail and production
2011 2012 2013
Q1
Air transportTelevision
broadcasting
(1) (2)
Q3Q2
(3)
Q4
Structural Reforms
