Foreign investment boosts economy, supports development, says OECD

  • Lusa
  • 20 March 2023

In 2020, it adds, "companies owned by foreigners represented only about 2% of companies in Portugal, but employed 18% of the national workforce" and were responsible for 46% of exports.

Foreign direct investment (FDI) “strengthens the Portuguese economy and supports its development”, says the OECD in the report on the impact of the regulatory framework in Portugal, pointing out that foreign companies account for 25% of R&D.

“Foreign investment plays an important role in economic activity and job creation in Portugal,” reads the report The Impact of the Regulatory Framework on Foreign Investment in Portugal, by the Organisation for Economic Cooperation and Development (OECD), released on Monday.

In 2020, it adds, “companies owned by foreigners represented only about 2% of companies in Portugal, but employed 18% of the national workforce and were responsible for 28% of total added value and 46% of exports.”

According to the organisation, by integrating Portuguese producers of goods and services into export-oriented value chains, “foreign companies help national producers to access new markets and improve the competitiveness of their products.”

In addition, foreign companies “contribute to job quality and gender parity”. This is because they employ more “highly qualified” workers than Portuguese companies in most sectors and “pay higher salaries” than domestic companies, the OECD continues, noting that in the case of highly qualified professions, these are “almost 7% higher”.

On the other hand, they pay women higher salaries than Portuguese companies: “In 2020, the median monthly salary of female workers in foreign companies was €972 compared to €796 in domestic companies.”

Moreover, in many sectors of activity, foreign companies “also employ a higher number of women in senior executive positions”, it stresses.

The OECD also highlights the role of foreign companies in innovation and digital and green transition efforts.

“Foreign companies are responsible for 25% of R&D [Research & Development] investments in Portugal,” it points out, mentioning that “they use more cutting-edge digital technology than national companies,” such as 3D printing, industrial robots, artificial intelligence (AI), among other technologies.

The training of workers in technologies “is more common in foreign companies”, with 62% having provided training in information and communication technologies (ICT) to their employees, compared to just over a third (36%) of Portuguese companies.

Renewable energy “accounted for 96% of international mergers and acquisitions in the energy sector in Portugal between 2012 and 2022 – a stark contrast to most peer economies, where the percentage of such transactions was 37%”.

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 the extent to which a more favourable business environment can help attract more FDI into the country. It also proposes a number of reforms that the Portuguese government could consider to increase the level of FDI in the economy.