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PAM Panel on External Trade and Investments in the Mediterranean TOWARDS A SUSTAINABLE ECONOMIC DEVELOPMENT IN THE MEDITERRANEAN REGION 28 June 2012.

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Presentation on theme: "PAM Panel on External Trade and Investments in the Mediterranean TOWARDS A SUSTAINABLE ECONOMIC DEVELOPMENT IN THE MEDITERRANEAN REGION 28 June 2012."— Presentation transcript:

1 PAM Panel on External Trade and Investments in the Mediterranean TOWARDS A SUSTAINABLE ECONOMIC DEVELOPMENT IN THE MEDITERRANEAN REGION 28 June 2012

2 aicep Portugal Global Investment promotion – attraction of FDI to Portugal; Trade promotion – support to internationalization activities, specially of SMEs; 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

3 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 60s and 70s; social and economical cost of decolonization; Currency devaluation as basis for competitiveness; 80s and 90s 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

4 Exports of goods and services Ongoing structural changes – product diversification

5 Exports of goods and services Ongoing structural changes – market diversification

6 Exports of goods and services Closing the trade deficit – Jan/Apr 2012 EU Third Countries Record high exports; Record low trade deficit; Surplus with Third Countries; 160% coverage in Services; 96% coverage in total exports.

7 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; SMEs: 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

8 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

9 Current situation Assessment: The number of companies pursuing international businesses is increasing; Young talent entering SMEs, 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 SMEs 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

10 Structural Reforms Competition 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

11 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) Troikas 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.

12 (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 201120122013 Q1 Air transport Television broadcasting (1)(2) Q3Q2 (3) Q4 Structural Reforms


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