Portugal - Overview:
Portugal is situated on the Iberian Peninsula in south west Europe and has a population of just over 10.3 million people. The country became a member of the European Economic Community in 1986 and adopted the Euro as its national currency in 2002. Membership of the European Union has brought massive investment for infrastructure and has strengthened the country's trading bonds with the other European countries. Almost half of Portugal's trade is with Spain, Germany and France.
Economy:
For much of the 1990s economic growth in Portugal has been above the European Union average. However, growth slowed in 2001 and 2002 and, according to the OECD may only be 1.5 per cent in 2003 and 2.5 per cent in 2004.
Portugal's economy has undergone dramatic changes in recent years, which have encouraged competition and helped to provide a stable environment for investment. Successive governments have privatised many of the state controlled firms and liberalised several key areas of the economy such as the financial and telecommunications sectors. In 1986, public sector enterprises represented approximately 20 per cent of GDP whereas by 2001 this figure had dropped to about 5 per cent. The government also established a Competition Authority, in 2002, charged with independent market regulation across all economic sectors.
In keeping with the rest of the EU, Portugal's economy has become increasingly based on the service sector, with particular growth in the financial, retail and telecom sectors. Figures published by the Economist show that the agriculture and fishing sectors, which accounted for 24 per cent of GDP in 1960, were responsible for just 3.3 per cent in 2001. However, according to the Employment Survey conducted by the Institute of National Statistics, employment in the agricultural sector during 2001 accounted for 12.7 percent of the total, which is much higher than the EU average.
Infrastructure:
Portugal has benefited from considerable investment from the EU and is due to receive a total of 22.8bn EUR of EU funding between 2000 and 2006. Such investment has enabled the Portuguese government to undertake large infrastructure projects and improve links with the rest of Europe.
Projects include the upgrading and expansion of the road and rail networks to improve connections between major cities, the upgrading of Lisbon's airport and the building of a new Lisbon airport, due for completion in about 2010, and the construction of a light rail system on the South bank of the river Tagus.
Workforce:
Figures from the Institute of National Statistics' Employment Survey show that Portugal's labour force totalled just over 5.2 million people in 2001 and the unemployment rate stood at 4.1 per cent. However, according to figures published by Eurostat, unemployment had risen to 5.8 per cent in 2002, which is one of the highest increases among the EU countries.
Portuguese employees are generally regarded as reliable, hard working, intelligent and ready to learn. A view that seems to be backed up by figures produced by the Organisation for Economic Cooperation and Development, which show that productivity growth in Portugal between 1995 and 2001 was nearly 3 per cent, well above the EU average of just over 1 per cent.
New Technologies:
The government is committed to the development of new technologies and has established two programs to encouraging research and development. The IDEIA program is managed by the Agency of Innovation and grants financial support for applied research projects in existing firms and is aimed at the development of new technologies, new products and patents. The NEST program is designed to support the creation of new technology based firms.
Figures from the European Commission also show that, throughout the second half of the 1990s, the growth in spending on research by Portuguese companies, at 14.1 per cent, was well above the averages for both Europe and the US, at 5 per cent and 6.4 per cent respectively.
Business Costs:
Labour costs in Portugal are extremely competitive. According to figures published by the US Department of Labour in 2000, the hourly cost of industrial labour in Portugal was well below the average for the European Union, at approximately $5 US. Industrial wage rates in countries such as Spain, Ireland, France and the UK ranged from about $10 US to just over $15 US. Furthermore, a report published by Eurostat in mid 2001 showed that the average wage rate in Portugal was only 7 Euro (6.30 USD) per hour, just less than a third of the EU average.
The corporate tax rate in Portugal is already one of the lowest in the European Union and is set to fall even further. The government has pledged to reduce the corporate tax rate to 25 per cent in 2004 and then to 20 per cent in 2006. There is also an investment tax credit currently available, which allows for a 20 per cent reduction in the amount of tax to be paid, as long as it is spent in fixed capital or research and development in the subsequent 2 years.
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