Competitiveness In Portuguese Regions

Introduction:

The aim of this report is to investigate the competitiveness of the �poorest’ region, defined as the lowest level of Gross Value Added (GVA) per Capita in 2008, in Portugal.

Using data from 1980 to 2008, this report will compare the tendencies of convergence and divergence amongst the regions in Part I. An analysis of the extent to which prosperity was affected by productivity and employment levels in the poorest region will follow in Part II. Lastly, in Part III, 2 scenarios are developed for the poorest region looking 2 decades into the future.

Below in table 1 is a regional breakdown of levels of GVA per Capita in 2008, including the national GVA level and the GVA level of the Continente (mainland Portugal, excluding the autonomous regions of the Acores and Madeira):

Table 1: National and regional breakdown of GVA per Capita

Country/Region Name GVA per Capita (2008)

PT Portugal 9.30

PT1 Continente 9.33

PT11 Norte 7.16

PT12 Centro 7.59

PT13 Lisboa e V.do Tejo 12.72

PT14 Alentejo 7.83

PT15 Algarve 9.82

PT2 Acores 7.08

PT3 Madeira 10.40

The poorest region for the criteria explained above is Acores (PT2).

Part I

Section A

This section of part one outlines the extent of convergence and divergence of the Portuguese Regions.

Figure 1 below shows overall divergence of Portuguese regions (excluding the Continente) based on average GVA per Capita growth rates from 1980 to 2008.

Figure 1: Divergence of Portuguese Average % Regional Growth Rates (1980 to 2008)

Below in table 2, the average growth rates of the regions, between 1981and 2008 are shown. PT14 has grown the least in the last 27 years, while the autonomous region of PT3 has grown the fastest (in terms of GVA per Capita).

Table 2: Regional breakdown of average growth rates (1980 вЂ" 2008) and prosp[erity levels (in terms of GVA per Capita, 2008)

Region Name GVA 1980 Growth 80' - 08' GVA per Capita (2008)

PT11 Norte 12913 2.815953439 7.16

PT12 Centro 6181 2.976264393 7.59

PT13 Lisboa e V.do Tejo 21045 2.832099428 12.72

PT14 Alentejo 2427 1.872330082 7.83

PT15 Algarve 1411 3.964443241 9.82

PT2 Acores 765 3.224902606 7.08

PT3 Madeira 820 4.452186392 10.04

From looking at table 2 we see that the region with the highest level of prosperity, PT13, is the fifth fastest growing region. Regions such as PT15 and PT2, with lower levels of prosperity, are growing at a faster rate showing convergence with PT13.

The fastest growing region, PT3, has overtaken larger (in terms of area) regions in the Continente, such as PT15 (the third most prosperous in 2008), PT11 and PT12 (second and third last in terms of prosperity, respectively).

Section B

In this section three measures are used to illustrate how the Acores region diverged with the (unweighted) National Average:

First, in Figure 2 below, we see how the prosperity levels of the Acores region and the National average compare and show divergence.

Figure 2: Comparison of Acores and National Average in terms of levels of prosperity.

The directions of the trendlines show an increasing gap between prosperity levels.

In figure 3 below: this gap is exaggerated and it becomes apparent how little the Acores region contributes to the total prosperity of Portugal (and the autonomous regions). Though figure 2is the best indicator of divergence.

Figure 3: Comparison of Acores and National Average in terms of Total GVA

Below, in figure 4, the employment/population ratios of the Acores region and National Average are compared. It shows convergence вЂ" employment levels are growing at a faster rate in the Acores region. However, when considering the previous two figures this highlights the issue that GVA per Capita employed (the measure of the level of prosperity) is increasing but at a decreasing rate. Each new worker adds less to GVA than previous.

Figure 4:Comparison of Employment/Population Ratios of Acores and National Average (1980 вЂ" 2008)

Part II

Productivity levels in Acores diverged from the country average more so than any of the other regions. Acores displays favourable demography but the region has the lowest per capita GVA in the country compared to Lisboa e Vale do Tejo which not only enjoyed the highest productivity level but also the highest and the most favourable demographic structure. de Freitas et al (2005) highlights some reasons for the regions differences. Acores technological standing, which is similar to that of Norte, lacks the specific infrastructures to effectively support innovation and technology diffusion, and has a low industrialisation level. The autonomous regions of Acores and Madeira received greater funding, with specific priorities defined for these regions according to their needs. Other than this the share of business incentives for this region have been relatively insignificant and the support from the EU agriculture and fisheries policies are not creating the conditions required for sustainable development which results in these sectors suffering from low productivity and declining