DISCOVER WHY PORTUGAL IS OPEN FOR INVESTMENT
the labor market, education and justice systems and to the tax frameworks for people and companies. “Ongoing reforms, combined with the quality of our infrastructure workforce and the continued proficiency in English, have made us much more competitive internationally,” Frasquilho says. “We have come a long way and we will continue to work and improve.”
Industries innovate and adapt
PORTUGAL: EUROPE’S TRENDY HOT SPOT HITS GLOBAL INVESTMENT MAP Foreign investment, technology and innovation are transforming the Portuguese economy
P
oised confidently on the westernmost edge of Europe, Portugal throughout its long history has been a pioneer of globalization, opening up new trade routes to Asia, Africa and the Americas as far back as the 15th and 16th centuries and bringing the Portuguese language to every corner of the planet. In the 21st century, this outward-looking and forward-thinking country is now on the frontier of the global technology revolution. From the bustling start-up scene in the capital city Lisbon, to family-owned businesses in cork and agriculture, to giant multinationals in construction, aerospace and automotive industries, investments across all sectors and technology have put Portugal on the frontline of economic transformation. “Portugal is now widely seen as a country that is at the forefront of innovation and entrepreneurship,” says Miguel Frasquilho, President of AICEP, the country’s trade and investment agency. “We have built a very strong start-up community and ecosystem. We are also seeing technology in more unexpected sectors such as food, fashion, clothes and shoe-making, as well as in the more obvious industries like aeronautics. “Today, technology touches all sectors of activity and segments of our lives. In Portugal we feel this impact significantly.” Portugal’s emergence as a global technology hub was sealed last November when Lisbon hosted Web Summit 2016, one of the largest technology conferences in the world. Some 55,000 entrepreneurs, tech professionals, investors and other industry professionals descended on the capital city to share their vision, discover start-ups, raise funds and make deals. This year and next, they will be doing it all over again. “The Web Summit exceeded all our expectations,” Frasquilho says. “It was by far the biggest edition of the event. There was a Portugal before the Web Summit, and there will be a Portugal after the Web Summit. And it is already helping to change the dynamics of the economy.” Pride of place at the Web Summit went to technology start-ups and venture capitalists from Portugal itself; more than 10% of companies at the event came from the host nation. High-flyers from Portugal at the Web Summit included Unbabel, which uses artificial intelligence to translate customer service, Codacy, which automates the process of reviewing
25th easiest country in the world for doing business (World Bank)
16th country in the world with better infrastructures (World Economic Forum)
78% of students learn 2 or more foreign languages
software code, and Kinematix, which has developed TUNE, a sophisticated wearable device for runners. Providing increased support to start-ups and entrepreneurs is one of the cornerstones of the government’s economic growth strategy. An official four-year plan, Startup Portugal, is focusing on three key areas. Firstly, the program is enhancing the country’s ecosystem for start-ups, by encouraging business incubators, fab-labs and design factories as well as cutting red tape and making it easier for companies to invest in the research, development and production of new technologies. Foreign employees of science and technology-based companies may also be eligible for special fast-track visas. Secondly, Startup Portugal aims to improve the access of new companies to financing, including public finance. Rather than having to rely on bank loans, businesses will find it easier to use crowdfunding and peer-to-peer lending to raise capital. At the same time, the government is strengthening Portugal Ventures, the country’s official venture capital fund, designing new tax incentives for entrepreneurs and creating vouchers for incubation services. Finally, the program is also internationalizing the country’s start-up sector, both by promoting Portuguese companies at overseas trade fairs and tech events and also by attracting foreign start-ups, investors and incubators to the country. “Obviously, we like investors to come to Portugal whatever their specialist sector, but of course it’s © APCOR preferable to have investments that can create more value, wealth and employment,” Frasquilho says. “We are very open to attracting investment in innovation and technology.” Portugal’s official investment incentives are increasingly geared towards high-value projects, projects which bring cutting-edge technologies and processes to the country and which help internationalize the economy. Significant funds are also available from the European Union’s Portugal 2020 program, which is designed to enhance the country’s competitiveness and human capital. “In certain areas the value of our incentives can reach 25-30% of total investment, which is an extremely competitive level,” Frasquilho says. As well as strengthening incentives for high-value investors, successive governments in recent years have pushed through broad-based reforms in
22nd country in the world with highest availability of latest technologies (World Economic Forum)
4.2% export growth in 2017 (Ministry of Finance forecast)
5th most peaceful country in the world
8th place on the global quality of life index
(Global Peace Index 2016)
(Numbeo)
Far away from the pitching, cocktails and networking of the Web Summit in Lisbon, Portugal’s more traditional industries are undergoing their own technological revolution. Nowhere is this more visible than in the country’s cork industry, long the world’s largest producer and exporter. Cork companies are responding to the competitive challenge of screwcap bottles and plastic stoppers by finding innovative new applications for this most traditional and sustainable of materials. Cork from the historic forests of the Alentejo region has become an increasingly popular choice with architects, fashion designers and interior decorators around the world for floor and wall coverings. At the same time, the material is playing a key part in the US and European space programs. A highly effective flame retardant and thermal insulator, it is Portuguese cork that protects spacecraft from the high temperatures they encounter when entering a planet’s atmosphere. “Cork can be used everywhere,” Frasquilho says. “Our cork industry is investing a lot in innovation and supporting numerous start-ups and cork projects. It’s revolutionary.” Two of the most dynamic industries in Portugal—aerospace and automotive—make intensive use of local cork for insulation and interior design. In these two industries, the quality of the country’s workforce and its infrastructure have helped attract some of the world’s largest businesses, ranging from airplane manufacturers Airbus and Embraer to car makers Toyota, Peugeot Citroën, Volkswagen, and Mitsubishi. Additionally, many car and bus manufacturers have built factories in the country and Portugal is home to a thriving supply chain of component producers, including businesses that produce dashboards, batteries car doors, cockpit consoles, fuel tanks and wing components for airplanes. “In both the automotive and the aerospace sectors we have built strong communities of suppliers and industrial clusters,” Frasquilho says. “It is Portugal’s compelling combination of cutting-edge technology and skilled labor that attracts the world’s largest aerospace and automotive brands to the country,” Frasquilho says. Portuguese companies in these industries do much more than supply basic parts and fittings; Airbus uses fiber optics sensors made in Portugal in its aircraft, while NASA and the European Space Agency both use Portuguese software to detect and correct flaws in their mission-critical systems. Back on earth, the Portuguese genius for design and innovation is helping companies in sectors as varied as fashion, furniture, textiles and food emerge as world-beaters. Technical textiles produced in Portugal helped power Usain Bolt and Michael Phelps to new heights, while brands such as Burberry, Kenzo and Dior have brought Portuguese quality to the catwalk. Buildings as iconic and as daring as the Rockefeller Center in New York and the Sagrada Família in Barcelona rely on Portuguese construction materials to turn their
The Web Summit has found a home in Portugal. As well as being a very good calling card, it will also be an excellent catalyst for growth.” Miguel Frasquilho President of AICEP
architects’ dreams into reality. Meanwhile, Portuguese wines, olive oils and preserved foods are winning ever greater international acclaim. In services sectors such as life sciences and communications technology, Portugal is also punching above its weight. In recent years, the country’s medical researchers have made major breakthroughs in areas such as neurology, oncology, degenerative diseases and pathology, and have developed two new medicines for the treatment of Parkinson’s disease and epilepsy. In the telecoms industry, some 150 mobile carriers from all over the world use Portuguese technologies in their operations. Meanwhile, the quality of Portugal’s workforce and infrastructure and the country’s strategic location—just a 3-hour time difference from both São Paulo and Moscow—have made it a leading location for Shared Services Centers and Business Process Outsourcing. More than 450 companies, including Altran, Cisco Systems, BNP Paribas, Europcar, Fujitsu, Xerox and IBM have installed SSCs in Portugal. “Not only is there already a very strong presence of SSCs in Portugal, but they are also becoming more and more advanced,” Frasquilho says. “Innovation in the sector is increasing, and of course the Web Summit will empower this trend.” Businesses investing in Portugal come not just from traditional partners in Europe but from an increasingly diverse range of countries. AICEP itself is now present in more than 60 countries, up from just over 50 in 2014, after opening new offices in strategic global cities including Doha, Mumbai, Riyadh, Seoul, Sydney and San Francisco. While the US is still the country’s largest trade partner outside the EU, in recent years Portugal has cemented a particularly close economic relationship with China. AICEP has opened offices in Beijing, Shanghai and former Portuguese colony Macau, while Chinese companies have made major investments in Portugal, in the financial services industry and above all in the electricity sector. “We are very happy with the presence of China,” Frasquilho says. “We are an open and multicultural country and we are ready to use all our experience and know-how to help global businesses grow, wherever they come from.”
INVEST IN PORTUGAL RIGHT CHOICE RIGHT TIME
Miguel Frasquilho President of AICEP
How would you describe Portugal in terms of innovation? and it is currently performing very well due to a lot of investment in inPortugal is now seen as a country at the forefront of innovation and novation. Corticeira Amorim, for example, invests in startups looking for entrepreneurship. Technology and innovation are present in all segments of different uses for cork. our lives and throughout all economic sectors. We have very good examples Cork can be used in fashion, agri-foods and several other areas that you of innovative and diverse companies, from the most traditional, to the most would not have thought of or imagined before. Did you know that you can advanced as well as several startups. These companies range from fashion use cork to help make yogurt? And that you can even apply it in a more and luxury to finance, music, golf, and even apps for androids, etc. sustainable refrigerator? Cork really can be used everywhere, it is such a We have an excellent startup ecosystem and it has been growing versatile product! organically. The Web Summit in Lisbon was a great opportunity to promote ourselves even more Which sectors are making the most internationally. We have several Portuguese startups AICEP has two progress and being globally competitive? that got their financing in London, New York and inter-related goals, Portuguese exports have been performing very San Francisco and today are seen as success stories. one is to promote and well for the last six ot seven years and 2016 was reThe technologically advanced automotive and aerosupport exports, and cord-breaking. Sectors that are doing well include nautics sectors have also been extremely innovative in the other is to attract machinery, automotive, aeronautics, cork, agri-food Portugal and these clusters are contributing to our deinvestors to Portugal.” and fashion. velopment and internationalization. In Portugal, we We probably became more competitive due to support a lot of innovative projects with global potential, those that favor exports the crises we experienced. It made the domestic market shrink, so compaand job creation, especially in R&D and internships. Innovation needs to create nies had go out and get into the global market place to survive. That’s why more value, wealth, and jobs. This is the ideal scenario. our exports have grown from less than 30% of GDP in 2010 to more than 40% at the current time. However, if we compare Portugal to our peers in How much is Portugal investing in R&D? Europe of the same size such as Austria, Belgium, the Netherlands, Czech Many companies in Portugal are strengthening their position through Republic, Slovakia, Denmark, or Ireland, you will see that their exports to R&D and innovation. Very well-known corporations are expanding their GDP ratio is more than 50%, while we are still at 40%. We have come a long investments in R&D and building strong partnerships with universities. way, but we still have to improve. Bosch, for example, is working together with the University of Minho. Industrial companies in northern and central Portugal are conducting The recovery of the Portuguese economy is ongoing and research programs with the University of Aveiro. This also applies to GDP is now growing at a moderate pace. What are the universities in Lisbon and Porto. So R&D is definitely on the agenda of most remaining challenges that you believe the government Portuguese companies nowadays. needs to address? Growth is still not as strong as we would like it to be, but I believe the What is your assessment of the Portuguese work force? conditions are there for the GDP growth rate to accelerate. Our work force is highly qualified, which was not the case 20 or even Many reforms have taken place in recent years: in the justice system, labor 10 years ago. They are extremely competent and Portuguese engineers, market, rental market, tax policies, de-bureaucratizing public administration, businessmen, managers, etc. are constantly hired by international education, health, etc. But we still need to implement new measures to improve companies because they are very competitive. our competitiveness. One of the areas where I think we are less competitive is regarding taxes: tax incentives, corporate and personal income tax. We should How is innovation boosting the cork industry, one of the reform our tax system, especially when it comes to direct taxes. traditional leading sectors of the Portuguese economy? We still have severe constraints in the financial area though. Our Our cork industry was in decline, but we have managed to turn it around, 2016 budget deficit will be only 2% and should foster a good economic
environment, making us more competitive and interesting to investors. However, we are doing well in comparison to other countries when it comes to infrastructure and a qualified work force. The quality of our infrastructure such as roads, railroads, etc., is excellent. And the level of proficiency in English here is exceptional compared to other European countries. This is important since English is the international language in business. And this is not only in Lisbon, but throughout the whole country.
on attracting foreign investment. We identified three geographical areas where we believe we have better chances of attracting the attention of investors. They are North America (Canada and the US); Western Europe (Benelux, France, Germany, Spain, percentage of Switzerland and the UK) and Asia (China, Korea and exports that Japan). contributed to the We have been getting a lot of interest from GDP in 2016 Chinese investors who also bought stakes in privatized Portuguese companies. Some examples are China Three Gorges and their stake within our electric company EDP, the State Grid Corporation of Can you describe AICEP’s role in China in REN, our electrical network. They are also bringing in foreign direct investment investing in the banking and finance sector; Fosun AICEP global (FDI) and where it is present? International, for example, bought the insurance offices AICEP has two inter-related goals, one is to promote company, Caixa Seguros and is also present in and support exports, and the other is to attract inMillennium BCP. vestors to Portugal. China is the country where we currently have We believed that we needed to expand our overthe most branches with offices in Beijing, Shanghai seas network to increase exports and we are now and Macau – (we cover Hong Kong from Macau.) As present in more than 60 countries, compared to a soon as Portugal opens a consulate in Guangzhou, attendees at little more than 50 in 2014. The last three offices we will also have an AICEP representation there. It the Lisbon Web we opened were Bangkok, Buenos Aires and Sydney. is a sign of the times we are living in, where no one Summit 2016 We are present in all the CPLP (Community of ignores China. Portuguese Speaking Countries) countries, except We are happy to welcome these Chinese investors for Equatorial Guinea which is covered by our delas traditionally most of our investors came from egation in São Tomé and Príncipe. Being present Europe, but the truth is that now we invite investors throughout the CPLP is very important not only because of our historical from all over the world. We are a very open economy. and cultural ties, but also for economic reasons. It is a market of more than It is not AICEP’s role to export or invest, but it is our role to support and 250 million consumers and we want to maximize the potential of Portuguese work with companies that want to export and those that want to invest here. as a business language. We also opened our second US office in San Francisco in September Was the Web Summit a huge success for Portugal? 2015, the exact same week when it was announced that the Web Summit The Web Summit surpassed all our expectations! It was the largest event that would be coming to Portugal. we have ever hosted in Portugal and we think it is here to stay. The attendees We have also opened branches in Seoul, Riyadh, Doha, Zurich, and a were very happy with the event. The venues were great with lots of space second office in Mumbai (we were already present in New Delhi). We work and very good services, very closely with the ambassadors and consuls general in each country. The Web Summit has been growing each year; from 400 attendees seven Two recently opened branches are Havana and Tehran since the years ago to over 40,000 in Dublin in 2015 and around 55,000 in Lisbon international community is once again trying to reach out to those markets. in 2016. The startups present in Dublin in 2014 and 2015 raised more than This expansion was not in our original plan, but we need to adapt to current US$ 1 billion each year. We expect an even higher number for Lisbon 2016. economic trends. Our expansion plan needs to be dynamic and flexible We are hopeful that the participation of the Portuguese companies will also because things change from one moment to the next. increase. As far as bringing in more FDI is concerned, we needed to have a more There is the Portugal before the Web Summit and the Portugal after strategic presence abroad which is why we opened all these new offices. the summit. The impact has been impressive! AICEP is happy that it is We strengthened our teams with “FDI scouts” who are specialists focused contributing to the fact that Portugal can now be seen as a tech hub.
40% 60+
55,000
COMPETITIVE, EFFICIENT AND ADVANTAGEOUS Portugal punches above its weight across all sectors and is open to investment
3rd in
22nd
Portugal has a strategic position
to access key worldwide markets it is the nearest European country to the US and Canada
35th
country
in the world
2nd
Best City to Invest Financial Times 2014
Best
European country to visit USA Today 2014
in the world with highest availability of latest technologies 29th with the highest firm-level technology absorption and 21 in the world in the number of fixed-broadband subscriptions per inhabitant
reuse of user data in online forms
Great
infrastructure
The quality of its roads (9th), port infrastructure (29th), railroad infrastructure (28th) and air transport (28th)
6th
Digital Economy and Society Index 2016
5th most
peaceful country in the world
All mainland seaports are connected to the rail network to the Spanish border
country
in motorway network density
Global Peace Index 2016
15th
for availability of scientists and engineers
LISBON
country
services offered fully online 4th in
(out of 141)
1ST
in Trading Across Borders Rank 2017
19th
in the Enforcing Contracts Rank 2017
Travel & Tourism Competitiveness Report 2015
12th
most competitive country
within the EU-28, better classification than the Netherlands, France, Spain and Italy The World Bank
3rd in the
Fundacity’s Acceleration Ranking in 2014 measures number of startups accelerated
Investment (GFCF), Portugal
Exports, Portugal, Euro Zone
2010-2015, %
2010-2015, % Portugal Euro Zone
10 5
2.3
4.5
0 -5 -10 -15 -20
12 10 8
2010
2011
-0.9 -12.5
2012
2013 2014 -5.1
2015
11.3
9.5
6
7.0 6.5
4 2
7.0 3.4 2.7
2.1
2012
2013
0 2010
2011
6.5 4.5 4.3
6.1
2014
2015
portugalglobal.pt aicep@portugalglobal.pt
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