Policy measures should ensure Portugal’s labour market remains attractive to investors, while reforms facilitate the entry of investors and promote competition in “key sectors”, the OECD said in a report released Monday on the regulation of foreign investment.

Although Portugal has a “relatively open” regulatory framework for foreign trade and foreign investment, compared to other OECD countries, “certain regulatory barriers remain in some service sectors that provide strategic support to so many other sectors of the economy, including those that are priorities for the government,” the report points out.

Foreign investment in some professions “is currently limited due to restrictions on the participation of unlicensed professionals in the capital of companies and limitations on access to the profession by foreign professionals,” the report adds.

According to the report, “a recently approved reform aims to open up the ownership and management of these companies to unlicensed professionals, including foreigners.”

However, the “remaining obstacles in transport and logistics services, such as certain requirements about the transport of goods by road that go beyond the requirements required at EU level, limitations on maritime cabotage by vessels flying foreign flags and the non-competitive award of concessions for auxiliary port services, may restrict competition in these activities and affect” domestic and foreign companies in downstream sectors, it stresses.

For example, “in customs, investors cite practical obstacles such as the limited opening hours of customs in ports, excessive documentation requirements and the insufficient degree of digitisation of procedures.”

The OECD makes four recommendations, including “rapidly implementing reform to allow investment in professional services firms by unlicensed professionals, including foreign investors”.

It, therefore, advocates “reviewing the statutes of professional associations as part of the implementation process,” which “provides an opportunity to also address other barriers to the entry of foreign professionals.”

It also recommends lifting obstacles in the transport and logistics sectors to increase competitiveness: “For example, opening up the maritime cabotage market to foreign-flagged vessels and adopting more pro-competitive rules for the award of concessions for ancillary port services, to bring the regulatory framework into line with more open EU countries.”

Promoting the efficiency of customs procedures and “consider removing the obligation for foreign companies, which are active for more than one year in the country, to appoint a legal representative resident in Portugal to facilitate cross-border digital sales of companies established abroad” are two other recommendations.

Regarding the policy measures needed to ensure that the labour market remains attractive for investment, the OECD makes three recommendations.

The first is to “make investors aware of incentives to train workers, namely in digital skills and technologies”, reinforcing “the alignment of this training with the needs of companies and Portugal’s strategic objectives.”

Improving the “efficiency of the immigration authority” with a view to “facilitating the hiring of talent from outside the EEA [European Economic Area], for example, by using digital tools and allocating more resources to processing applications,” is another recommendation.

It also suggests continuing “efforts to reduce labour market duality by further reducing the gap between open-ended and temporary contracts.”

The OECD recommends “considering increasing flexibility by making performance-based dismissals of workers on open-ended contracts an effective possibility, as is done in most benchmark economies, while continuing to ensure strong protection against unfair dismissals.”

The OECD report compares the regulatory framework for investment in Portugal with a group of peer European economies, identifies possible barriers to investment and assesses to what extent a more favourable business environment can help attract more Foreign Direct Investment (FDI) into the country. In addition, it proposes several reforms that the government of Portugal could consider to increase the level of FDI in the economy.

(Alexandra Luis | Lusa.pt)