Iberian hub is China's bridge to the world

By 2011-6-27 22:14:54

<div>Iberian hub is China’s bridge to the world</div>

Vice president, Portuguese-Chinese Chamber of Commerce and Industry

Warm Sino-Portuguese bilateral relations show renewed vigor for exchange and partnership.

A beautiful country situated on the farthest corner of southwest Europe, Portugal is one of the continent’s oldest states.

Enjoying 1,793 kms of coastline on both the Atlantic and the Mediterranean, and a temperate climate, the country is best-known for its superb tourism, excellent hospitality, food, wine and quality of life. And, with the paradise islands of Madeira and the Azores, two thriving cities—Lisbon, the capital, and Porto—and the beach strip of the Algarve, Portugal has long celebrated a niche among sun-seekers looking for a place to live or stay.

What is not perhaps so well known is the country’s innovative prowess in the areas of energy, finance, technology and industry and the wealth of expertise that exists among its 10.7 million population.

Portugal has become a diversified, primarily service-based economy since it joined the European Community—the EU’s predecessor—in 1986, with key areas of the economy now privatized.

It qualified for the Economic and Monetary Union (EMU) in 1998 and began circulating the euro on January 1, 2002. Although the economy grew by more than the EU average for much of the 1990s, it fell back between 2001-08, and contracted 2.6 percent in 2009, before growing 1 percent in 2010. Gross Domestic Product per capita now stands at roughly two-thirds of the EU-27 average.

Strategic advantages

Because of its location, Portugal is ideal for those looking to supply European markets or expand their businesses to other parts of the world, thanks to state of the art logistical and communications infrastructures. As well as excellent connections to major cities by air, land, sea, road and rail, Portugal also offers some of the most advanced telecommunications in the world.

The country’s highly skilled and talented workforce is also attractive for businesses choosing to set up there, with the universities and colleges providing a healthy supply of trained professionals and vocational workers every year.

Portugal is an innovative country with an enabling economic environment. A wide range of services are available to investors online and through chambers of commerce and investment agencies, with professionals and business tools available to advise on the best location for particular projects.

Current priorities

After attempting to implement a series of austerity measures in January this year to reduce the budget deficit from 9.3 percent of GDP in 2009 to 4.6 percent in 2011, which included a 5 percent salary cut in the public sector, and a 2 percent increase in VAT, the government was forced to ask for financial aid from the European Union and the International Monetary Fund.

José Sócrates stood down as prime minister on March 23, and ratings agency Fitch has estimated Portugal needs €60 billion ($85 billion) in funding to stay afloat through to the end of 2013.

In the meantime, the government, led by President Aníbal Cavaco Silva, has prioritized boosting exports primarily in automotive industry, equipment, machinery, minerals, fuels, metals, chemicals, plastic and rubber, and implementing labor market reforms in order to raise growth and increase Portugal’s competitiveness in Europe and beyond.

Historic ties with China

With a strategic world location, Portugal is superbly placed for investors needing a platform from which to do business with Europe, Africa and the Americas. Its links with the Portuguese-speaking (Lusophone) countries of Angola, Brazil, Mozambique, East Timor, Cape Verde, Principe Tome and Macau offer particular benefits for Chinese investors wishing to have a presence in Africa, Asia and South America.

The Portuguese have enjoyed a long and fruitful relationship with Asia. Indeed, as the first Europeans to establish a presence and start commercial and diplomatic relations in the territories that today correspond to India, Sri Lanka, Thailand, Malaysia and Japan, it is sill possible to find descendents in those areas with Portuguese surnames.

Portugal’s relations with China began in 1513 in Macau , which was a key city for trading with Japan and for silver, gold and silk route traffic. Macau continued to be a contact point between China and Portugal, before it was returned to Chinese sovereignty in 1999.

Building on these five centuries of familiarity and cooperation is therefore beneficial for both countries China and Portugal, as the Asian giant expands its industrial activity and enters new markets, especially the Lusophone African countries.

In addition, Portugal holds unique skills in the fields of health management, infrastructure construction —particularly dams, railways and hospitals — and hotel management and tourism, all of which can help China as it expands its reach and opens itself up to the rest of the world.

Celebrating this common past and establishing partnerships for the future is a winning strategy that pundits believe will guarantee a further five hundred years of successful relations for China and Portugal.

Official visit bears fruit

Portugal’s trading relationship with China was officially cemented in 2005, when the countries signed a Trade and Cooperation Agreement, and strengthened again in November last year, when China’s President Hu Jintao made an official visit to Lisbon.

Speaking at a meeting with Portuguese President Aníbal Cavaco Silva, President Jintao announced that China and Portugual need to make cefforts to boost their strategic partnership to better benefit their peoples.

The Chinese Premier outlined a four point proposal that called on the two sides to strengthen mutual political trust and strategic cooperation by bolstering high-level exchanges and broadening communication between governments, legislatures, and political parties of the two groups.

He also called on the two countries to step up people exchanges and double bilateral trade by 2015. President Silva, for his part, agreed with Hu’s proposals, calling for the establishment of a comprehensive strategic partnership between the two countries in 2005 “a milestone in China-Portugal relations,” adding that he wished both sides to further achieve the potential to enhance trade and investment with each other, and expand pragmatic cooperation in various fields.

President Silva also paid tribute to China’s impressive economic development and praised its successful hosting of the Shanghai Expo.

Speaking shortly after the visit, caretaker Prime Minister José Sócrates said: “This visit was positive on two levels: it will increase Chinese investment in Portugal and also increase our business relationship in several areas in which we are competitive: port infrastructure, information and communications technology (ICT), tourism, industrial and banking sectors. “We have signed cooperation agreements that will certainly bear fruit.

“But the most interesting thing we found was that China’s relationship with Portugal would radiate throughout the world: in the European Union, and in the Portuguese-speaking countries in South America, Africa and Asia.”

Using its platform as intermediary, the Portuguese government appointed a forum in 2003 in Macau to develop trade policies between Portuguese-speaking countries. The agreements signed between Portugal and China are good evidence of the will of the Chinese to trust in Portugal’s economic development.”

Leader in e-government

As the EU’s leader in e-government, Portugal has proven the maturity of its technological prowess. It exports more technology than it imports and is one of the fastest countries in the world in which to buy a house and register a business: its Empresa na Hora, or “Company in one hour” initiative has made it extremely competitive in terms of business friendliness.

These factors alone make Portugal an attractive prospect in view of its business environment and the modernization of a business sector that wants to compete in sophisticated global economic activity.

The Macau Forum

The countries also share a link through Macau, which has maintained certain elements of its European heritage, including the Portuguese language.

Macau has traditionally played a relevant role for the approach of the Portuguese and Chinese business community. Since 1992, the Portuguese-Chinese Chamber of Commerce and Industry (CCIL-C) has had a branch office in the territory and signed several collaborations agreements, including the Macau Trade and Investment Promotion Institute (IPIM), Macau Chamber of Commerce, World Trade Center and the Macau Young Entrepreneur Association.

The government of the Special Administration Region of Macau supports and encourages the CCIL-C delegation to play a leading role in sustaining a network of Portuguese interests in Macau and in China.

Following a ministerial meeting between China and the Lusophone countries held in Macau last November, Manuel Amante da Rosa, deputy secretary-general of the Permanent Secretariat of the Forum for Economic and Trade Cooperation between China and Portuguese-Speaking Countries (known as the Macau Forum), observed that the new agreement would have “a wider scope”.

Media, culture and the financial sector are the new areas in which China and the Portuguese-speaking countries will attempt to cooperate during the next three years.

Chamber of Commerce

The Portuguese-Chinese Chamber of Commerce and Industry has been instrumental in building trade relationships between Portuguese companies and China, providing its associates contacts and relationships and strategic consulting to strengthen trade relations.

To implement this, CCIL-C has formed institutional relations in China with the China Council for the Promotion of International Trade bureau, federations of industries and commerce, Chinamex, IPIM, Macau Forum China –Portuguese Speaking Countries, and has signed several cooperation agreements with many other Chinese official institutions.

Ilídio António de Ayala SerÔdio, Vice President of CCIL-C, notes how members are spread across all sectors, including Power, Contractors, Engineering/Environment Consultants, Banks/Financial Institutions, Airlines and Investment Companies, to name a few.

“Portuguese imports from China reached $1.65 billion compared with exports which reached $483.5 million,” he said. “Trading between China and the Lusophone countries accelerated 50 percent in the first 11 months of 2010, over the same period in 2009, totalling $8.9 billion.”

In 2010, Portugal’s import and export figures to China showed an increase of 32.4 percent and 60.7 percent respectively. By November 2010, trade between the two countries amounted to $2.9 billion, 38 percent more than in the same period in 2009.

Portugal’s China-based financial and legal firms can help businesses expand to new territory.

Banking and legal partnerships are thriving

Portugal’s banking and finance sector gained importance in the 1990s, as the economy shifted to focus on services.

Following the gradual but thorough privatization of state banks that had begun in the late 1980s, Caixa Geral de Depósitos remained the only state-controlled financial services firm in 2000, and the government continues to rule out its privatization for the time being.

In recent years, the Portuguese government has had to implement successive measures to shore up the banks and big business from the crisis. In late 2008, it approved state guarantees worth €20 billion to avert a banking crisis, and shortly after, announced a package of over €4bn would be available to banks to help resolve problems arising from a lack of liquidity in the system.

As a consequence of the global financial crisis, Portugal’s leading banks are now focusing on improving relations with both corporate clients and individuals, as well as consolidating overseas expansion as a means to boost ailing profit margins. The major players are Banif, Banco Espírito Santo, CGD, Millennium BCP, BPI and The Crédito Agrícola Group.

Rodolfo Lavrador, a board member of Caixa Geral de Depósitos (CGD) and chairman of the Banco Nacional Ultramarino (BNU) outlined his view on Portugal’s current financial challenges.

“First, it is important to know that Portugal’s financial system was not exposed to the same instruments that caused the global financial crisis of 2008,” he said.

“It is not, for example, feeling the burst of the real estate bubble that was felt in some important markets. Non-performing loans also do not suggest any abnormal indicator.

“The current crisis should be understood in terms of an adjustment to the Euro Zone. The Euro is much more than a monetary process; it is also a political process that should promote cooperation and social progress between countries with common borders but different cultures.”

As the esteemed chairman notes: “There is a change in the international geostrategic system with the transfer of economic and political power to the emerging countries. It is clear that the financial system follows this trend.

“Despite this, CGD was voted safest bank in the world in 2009 by Global Finance, and ended 2010 with a Tier 1 close to 9 percent.”

Portugal’s caretaker Prime Minister José Sócrates announcement in May that up to 15 percent of Portugal’s €78 billion ($115.7bn) rescue package would be used to stabilize the country’s banks, with up to €12 billion injected into lenders that fail to achieve new higher capital ratios over the next 18 months under their own steam, brought some relief.

Under the terms of the European Union-International Monetary Fund bail out deal, banks that fail to hit a 9 percent core tier one capital ratio, a measure of financial strength, by the end of the year, and 10 percent by the end of 2012, will be recapitalized with government money.

Innovation is key

For CGD, it is business as usual. Investment in research and development has always been a vital part of the bank’s strategy, Lavrador asserts, and he intends to keep products and services at high quality levels.

“The 2010 EU Industrial R&D Investment Scoreboard, released in October last year, presents information on the top 1,000 EU companies and 1,000 non-EU companies investing in R&D in 2009. CGD is in 262nd position,” he said proudly.

“We have always tried to promote this attitude through our clients, promoting a forward-looking attitude and the importance of investment in innovative products and services. The results have been extremely positive.”

And, he says, ties with China are bound to prosper.

“China is witnessing a high growth rate. Consumer spending is up, and there is a growing middle class. As such, many Portuguese businesses are going to China to set up joint ventures with Chinese companies. These companies will need a bank to do business with in China.

“There is also new tourism and new technologies which make it interesting for SMEs to do business in China. China then benefits because there is increased trade, flow and investment, which obviously adds to the growth of their economy.”

Wholly owned by CGD, the Banco Nacional Ultramarino is a perfect example of smooth-running Sino-Portuguese relations.

In operation in Macau for more than 100 years, the bank enjoyed a jump in profits of 25 percent last year, on the back of Macau’s booming economy.

“It is a good moment for BNU,” Lavrador says. “It is recording strong growth. The government of Macau is promoting economic activity in the region, which has heightened business and trade there, which means more activity for the bank.

“BNU is an excellent example of the relationship of both countries. BNU can be a guide to Portuguese companies that want to invest in China and in Macau.

“It can also be a reference to identify investment opportunities in the Portuguese-speaking world in countries like Brazil, Angola, Mozambique, Cape Verde, and East Timor — just a few where Portugal has excellent commercial relations and trade. In fact, trade between Brazil, Angola and China has been rising significantly.

“In terms of goals, we want to extend our presence in the region, not only in Macau, but in Asia as a whole. It is a dynamic economy and it is vital that we are there. We have to stay involved, because there are many things to do.”

Artur Santos, CEO of BNU, takes up the story:

“Macau has handled the new investment in tourism very well,” he said. “Several hotels and resorts have been built there in recent years, and I think Cotai will be the area where growth will be the most rapid in the future. Macau could become a tourism and entertainment center not just for China, but also for other countries in Asia.”

BNU has played a key role in Macau’s development. In September last year, a new agreement was signed between BNU and the local government extending the contract for the issuing of bank notes for another 10 years, until October 2020. On the commercial side, it has been involved in the financing of new hotels and integrated resorts, as well as projects related to transport infrastructure and utilities. BNU is also supporting the investment plans of local businesses in Macau and in their relationship with mainland China and Portuguese-speaking countries.

“We will continue to improve our offering of retail banking products and the high standard of service we provide to our customers,” Santos says. “We will also continue to improve our distribution channels, namely the online distribution channel, making more products and services available through the Internet.”

A window to investment

Diversification is at the core of BNU’s personal financial management and a critical factor in influencing the growth of its investors’ wealth. Among its wide choice of investments are: Share trading in the Hong Kong stock market (available through BOOM.com or at BNU branches); A wide range of mutual funds; Investing online through BOOM.com, the website of a securities company incorporated in Hong Kong; and AHL Diversified, an alternative form of investment.

By investing in mutual funds offered through BNU, investors gain access to markets and financial instruments that allow them to diversify their investment portfolio. They also benefit from management expertise and low investment fees.

Legal enterprises

Meanwhile, Portuguese born and bred, Manuel Castelo Branco is the managing partner of one of the biggest law firms worldwide. Cuatrecasas Gonçalves Pereira (Cuatrecasas) now has 960 lawyers and 27 offices worldwide, in Portugal and Spain, and also New York, London, Brussles, Paris, Luanda, Maputo, São Paulo, Casablanca and now Shanghai.

Last year, Cuatrecasas was named Best Iberian Firm of 2009, by the UK’s Financial Times. “We concentrate on assisting companies on all matters related to company law, such as criminal, environmental, or tax matters among other issues and our typical firms are the strong Iberian firms that want to succeed worldwide.

“Our offices in Shanghai were opened because we felt our clients wanted to go and make business there by either installing their companies or having commercial relations with China. We felt we needed to follow them and be there in the market,” Castelo said.

“Now, our office in Shanghai is a strong window through which the local Chinese can look to our firm and say we are their partners for investment in any country that we have a base in.”

From www.chinadaily.com.cn