Essential Points: Main proposals for the economic recovery plan

in News · 21-07-2020 14:35:00 · 3 Comments
Essential Points: Main proposals for the economic recovery plan

The economic recovery plan prepared by António Costa Silva, a government consultant, estimates that the Portuguese economy may fall 12 percent in 2020 and moves forward with a set of proposals for the various sectors of activity.

In a 142-page document, entitled "Strategic Vision for Portugal 2020-2030 economic and social recovery plan", António Costa Silva leaves the alert: it is not worth having "illusions", adding that "the health crisis caused by the disease covid-19 brings with it a deep economic recession that has global characteristics and that will deeply hurt" the economy.

Costa Silva recalls that the forecasts for the Portuguese and world economy have been revised and adds that Portugal "may face one of the worst crises in its history" and that "the fall in GDP [Gross Domestic Product] in 2020 may come at 12 percent", a figure that is much higher than the recession forecast by the Government in the Supplementary Budget recently approved by the Assembly of the Republic and which predicted a drop in GDP of 6.9 percent, but which the executive also admits to review.

António Costa Silva, who was invited by the Government to prepare the document, also warns that "as of September, the situation of many companies may deteriorate significantly", considering that it is "fundamental to have an aggressive programme on the ground to prevent the collapse of profitable companies".

Here are some of the main proposals for the economic recovery plan prepared by António Costa Silva:

Sovereign fund and development bank to support companies

António Costa Silva suggests a series of instruments to help companies' treasury, including a "sovereign fund", aimed at export-based companies. The consultant justifies that "Portuguese companies are very decapitalised and it is essential to create conditions for the reinforcement of equity through appropriate fiscal and financial policies".

It proposes the creation "of a fund, publicly based, of capital and quasi-capital, open to private funds, for operations preferably in co-investment, aimed at companies with an export orientation and potential for the exploitation of scale".

Costa Silva also calls for the "creation of a promotional bank [like Banco do Fomento], defining a clear matrix of the operation around the segments of companies with greater dragging capacity and not in a logic of assuming risky operations that the conventional financial system is not available to accept".

Network culture, decentralised and betting on digital

Portugal must invest in networks of cultural and artistic creation equipment and in "areas still insufficiently explored" linked to digital. Culture - one of the sectors "most penalised by the health and economic crisis" - will have to go through the decentralisation of cultural activity, the creation of network work and focusing on "the new generations, the emerging talents".

Among the concrete proposals presented, to cover "insufficiently explored areas", there is the creation of a public fund for digital creativity, "for innovative projects that combine art and technology", installation of "incubators for creativity and digital art", with connection to universities and technological centres.

The intention is that these networks - Rede Nacional de Cineteatros e Cineclubes, Rede Nacional de Arte Contemporânea and Rede de Residências Artísticas - respond to cultural agents who "do not have spaces to create".

Support programmes for craft activities, "based on tradition" and the rehabilitation of cultural and natural heritage for future "eco-artistic programmes" are also advocated.

Reinforcement of investment in the Defence cluster

Reinforcing investment in the Defence economy 'cluster' should be a priority because it works as a "lever for the country's technological development".

Costa Silva points out that this 'cluster' "today represents 3 percent of the national GDP and brings together the Armed Forces Technological Centres, with a network of national and international companies, Universities and Research Centres", also involving "more than 200 exporting companies" and covering the aeronautical, space and defence industries.

The consultant considers that "projects related to urban aerial mobility, with micro launchers and microsatellites, with innovation in the design and manufacture of aeronautical structures, with maritime surveillance, command and control, cyber defence, submarine systems" should be supported.

Portugal should assume itself as an Atlantic player

Portugal must reinforce geopolitical and economic cooperation in order to become an Atlantic player, not just a European one.

"The objective here is to transform Portugal into an average power of 'soft power', linking diplomacy, the international solidarity missions of the Portuguese Armed Forces, technology and the need to combat global threats, to pave the way for creation of collaborative platforms that can solve problems and open new avenues for geopolitical and economic cooperation", reads in the document prepared by the manager António Costa Silva.

The document evokes solidarity missions in different African countries in which the Armed Forces have participated, which "give credibility to Portugal, promote international solidarity and open doors in the world".

"All this extraordinary work by the Armed Forces and the Portuguese diplomatic network, which is important to open lines of geopolitical and economic cooperation, must be strengthened, expanded and integrated, in order to transform Portugal into a 'player' not only European, but Atlantic", he says.

Periodic evaluation of regulators

National regulators should be assessed "periodically" and their weaknesses identified.

The document emphasises that it is necessary to "pay attention to the need to increase the effectiveness of regulators, which are essential for the market to operate in an open and competitive manner, taking into account the central role of regulation, which must be simple, unbureaucratic and active."

Thus, a review of the work of regulatory agencies in Portugal should be made and that means and mechanisms to improve all their action should be identified. The consultant calls for the identification of "weaknesses in terms of human resources" and to bet "on their qualification, endowing them [regulators] with the knowledge appropriate to the exercise of their functions".

Portugal should assume the role of ‘Factory of Europe’ in Health

The plan proposes to transform Portugal into a "European factory" in the area of ??medical devices, such as ventilators, and to consolidate the range of personal protective equipment, reviewing the certification systems.

He defends an investment programme to transform Portugal into a "factory in Europe", which will lead the country to organise basic research, technology transfer and conditions to develop and consolidate high technology companies.

The plan recalls that the means of individual protection "will continue to be sought, even after the effects of the pandemic are over" and that it is important for the country "to review the certification system for this type of medical equipment so that companies and technology centres that created them are able to export them and consolidate a new export chain in the country".

Eliminate reporting period for tax losses

The Government must eliminate the limit of years that banks and companies have to deduct tax losses from IRC.

The way to solve the problem would be through "a measure aimed at eliminating the period for reporting tax losses in IRC, in line with what happens in other European countries", a measure that should be "extended to companies, in especially micro, small and medium-sized enterprises".

With these measures, in addition to allowing banks to operate in Portugal on equal terms to those operating in other European countries, another objective of the economic recovery plan would also be achieved: supporting the treasury of economically viable companies.

For the latter objective, consideration should be given to the creation of a mechanism that would allow the "deduction of tax losses generated in 2020 and 2021 from the profits of the last years and use incentive mechanisms and tax credits to encourage the revitalisation of companies and their growth".

Creation of Universidade do Atlântico in the Azores

Portugal should create a "great University of the Atlantic" in the Azores, with a hub in Madeira, for the study of the ocean, climate, land and atmosphere, in cooperation with higher education and research centres.

The University of the Atlantic should promote oceanographic and climatological research, "vital information for mapping ecosystems and developing a consistent strategy for their protection".

The idea is to transform the Azores into a technological platform, creating a hub linked to Atlantic International Research, based on a network of national and international institutions, which can attract "multiple financing".

Expansion of the Lisbon and Porto metros, new bridge over the Douro

The plan recommends the expansion of the Lisbon and Porto metro networks, including the construction of a new crossing of the Douro upstream of the Arrábida bridge, and a bet on electric mobility.

The Metropolitano de Lisboa network should be extended "to densely populated areas of the city and its immediate periphery".

Still in relation to Lisbon, it is recommended to introduce new forms of transport, as well as more efficient, attractive and sustainable public transport.

In Porto, the document points to the reinforcement of the offer and the expansion of the light metro systems in the metropolitan area, in areas where demand justifies, and the construction of a new bridge for the metro "upstream of the Ponte da Arrábida".

In medium-sized cities, such as Braga, Guimarães, Aveiro, Coimbra, Leiria, Évora or Faro, public transport systems should be developed, increasing "the supply of public passenger transport that leads to a reduction in the dependence on individual transport".

It also proposes to accelerate the electric mobility of cities, including providing public transport fleets with zero-emission vehicles, electric or hydrogen.

Attract students to engineering courses

Portugal must train more engineers and start by attracting secondary school students to the profession.

António Costa Silva considers that "it is vital for Portugal to reinforce its role as a European engineering centre" and that the country needs "engineers, not only 'software' or electrotechnics, but mechanical, civil, chemical, mining, technological physicists engineers, aerospace and others".

"It is strongly recommended to create pedagogical 'kits' illustrating the professions most needed to attract secondary school students."

In the plans for science, there is also the defence of "a new cycle of investment and development" to "cover weaknesses that still exist in the capacity of the scientific system" in the training of researchers and access to technologies.

Pact between State and companies

António Costa Silva defends a pact between the State and companies in which the latter does not limit itself to putting money in companies, but conditions them to efficient management, areas and products with higher profitability and job maintenance.

Companies must be recognised as the "real engine of growth and wealth creation", but the State must also demand that those who benefit from public capital commit themselves to improving management, prefer capital to debt, increase competitiveness (not for low wages, but for technological innovation) and internationalisation (first of all for cooperation among themselves to better intervene in the global market).

Economic and fiscal justice

Portugal needs economic and fiscal justice geared to the 21st century, with more use of alternative means of resolving disputes.

According to the document, "improving economic and fiscal justice is decisive for a healthier and more dynamic economy", since the system "is slow, responses to cases are slow, the management of justice processes is not the most appropriate" and the courts lack means and resources.

In order to improve economic and fiscal justice, it is recommended that the use of alternative means of dispute resolution be encouraged and that judicial operators be encouraged to use alternative means of dispute resolution, "taking into account that they are faster and less costly".

Bet on the qualification of the Portuguese

Portugal must continue to invest in strengthening the qualifications and skills of the Portuguese, from young people to the continuous training of less qualified adults.

Among the proposals presented for the qualification area, there is the creation of conditions to increase the number of young people who successfully attend higher education and the promotion of advanced training in all areas of knowledge.

Aid to commercial SMEs promoting national products

The consultant suggests a programme of direct financial assistance to retail SMEs that promote the offer of national products.

They also proposed the creation of the Portugal Repara Programme, of "incentives for equipment repair, aimed at facilitating the connection between consumers and repair service companies, essentially micro and small and medium-sized companies, taking advantage of existing synergies with service points spread over the territory and existing logistics networks".

The objective is "to combat programmed obsolescence and to promote the extension of the useful life of equipment, namely electrical and electronic equipment", as well as to promote employment in small and medium-sized companies related to equipment repair, "creating a national network of repairers within a quality of service recognition mechanism".

High speed resumption and new airport

The document proposes to resume the connection project between Porto and Lisbon by high-speed rail and the new Lisbon airport due to the need to "build a high-speed Porto-Lisbon rail axis for passengers, starting with the Porto-Soure section (where there are more circulation constraints)".

This connection "will enhance the affirmation of the two metropolitan areas of the country and their operation in a network", in addition to bringing "great environmental gains by dispensing with aerial connections".

"A later connection to Spain can favour the entire Portuguese coast and facilitate the financial balance of the exploration. The Porto-Vigo connection, as well as other 'Iberian moorings', should be considered in the medium term", said the consultant.

People-centred recovery, strengthening the social sector

The economic recovery plan must focus on people, identify and correct the vulnerabilities of the social sector, namely in the fight against poverty, unemployment and social exclusion.

A set of investment programmes are proposed to address problems ranging from social housing to the protection of the elderly.

Compliance with the European Ecological Pact

The economic recovery for Portugal from 2020 to 2030 has to fulfil the objectives of the European Ecological Pact.

The manager considers that "society recognises and demands a green recovery plan" and points out as objectives "more renewable energy, more gas and less coal, more electricity, more digital technologies".

It reaffirms the commitment "of carbon neutrality and the path of reducing emissions", fulfilling the 2030 targets of the national plans for energy and circular economy, such as the use of 80 percent of renewable energies.

Creation of clusters to develop the interior

An inland investment plan is proposed that provides for the creation of regional 'clusters' in various areas, from the forest to the biomedical sciences, in a logic of "decentralising the country".

The document attributes to the cohesion of the territory, agriculture and the forest a fundamental role to "mobilise the interior of the country" and "to contribute to the construction of a more just, balanced and inclusive economy".

As in other territorial management documents of the last decades, it is recognised that there is a significant challenge in terms of the property structure, "extremely fragmented", and the conversion of landscapes in order to improve the life of local communities and reduce risks such as of rural fires.

Centre for managing natural hazards and solutions for the water scarcity

The creation of a competence centre for the management of natural risks and the investigation of solutions to combat water scarcity are proposed in the preliminary version of the plan.

Evidencing a concern with the transformation of the landscape, in order to restore ecosystems, balance land use and combat desertification, the preliminary version highlights the need to create a competence centre for the management of natural and public health risks.

“Portugal may face significant risks in the future, not only in terms of new pandemics, but also in terms of seismic, energy, climate, cyber attacks, natural risks of various types. It is important for the country to invest in its capacities and human resources directed towards the identification and prevention of risk, and the development of response strategies and resilience of the territory”, he said.

International consortia to explore national resources

António Costa Silva argues that Portugal should create international consortia to take advantage of its strategic resources, such as fundamental minerals for the energy transition, and that for international markets, develop a green seal of the 'Marca Portugal' that differentiates the country.

Despite the improvements, Portugal has to reinforce the attraction of foreign investment, namely for strategic resources - such as mineral resources (lithium, cobalt, nickel, niobium, tantalum, rare earths) important in the energy transition (manufacture of new batteries, high-end electronics industry precision) and the sea - which “with a medium and long-term vision can become sources of wealth and value creation”.

The consultant defends that the country develops projects to attract foreign investment and develop international consortia to take advantage of these resources, learning from what Norway has done for the development of its oil and gas industry.

"The countries that are interested may be Germany (which has already competed in the Pacific to explore an area with polymetallic sulphides), France, the USA and Canada, in addition to Japan and India", says the document.

Avoid ghettos with social housing

The plan defends the creation of social housing in existing residential areas, to avoid the creation of ghettos, and the continuous recovery of vacant assets.

It highlights the importance of “public provision of housing, either by building a social housing root, but not by housing estates, or by recovering part of the vacant housing stock and its redistribution”.

The proposal stresses that the different vulnerabilities to contagion shown in the covid-19 pandemic make it even more urgent to end the weaknesses in access to housing, which is “a factor of social inequality and territorial segregation”.


Comments:

Excellent points Anna, you are right! Quite the "to do list." John should be on antidepressants.

By William from Other on 22-07-2020 09:50

John, thanks goodness you are not running the country! We are going in the right direction. The future is in investing in our best resource, our people and explore the sea by creating new technologies and industries of the 21 century. Let everybody else focus in going to Mars!
I’m pleased the whole Corona virus thing happen ( sad for the people that lost their lives) because this is forcing us to re-evaluate our strategy and speed up the industrialisation of our country.

By Anna from Madeira on 21-07-2020 11:28

This truely sounds quite depressing, because very few of these plans will have a long term positive impact upon Portugal itself. Is there really a demand for more high speed rail links or is this only interesting for German or French companies supplying the equipment. Considering how afraid people are of getting infected, how much sense does more public transport make (except the closing of small gaps in the system). Another university in the Atlantic will also not really help the counry economically. Portugal should enter into industries that turn waste (also imported waste) into energy or base materials. Portugal could be an ideal location for the aged care industry.

By John Dough from Lisbon on 21-07-2020 03:20
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