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New incentives for small and medium companies


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NAPOLEON used to joke that Britain was a country of shopkeepers, but it was the ability of her small companies to embrace the industrial revolution and place manufactured goods on the world market that made her great.

Now in the throes of the information and technology revolution, Portugal is a country of small and medium sized enterprises, or SMEs, and the success of these companies in competing and placing their goods within both the European Union and world markets is crucial for the success of the country as a whole.

Dr. Jaime Andrez, the President of IAPMEI, an institute that supports the small and medium sized enterprises, believes that good business practises, innovation and an entrepreneurial spirit are all vital for small and medium sized companies to succeed.

In fact, innovation is the key phrase for SME Week, Semana das PME, which runs between December 2 and 8 in Porto and is promoted by IAPMEI as part of Portugal’s Presidency of the European Union.

But what defines a small and medium-sized company? It is a company in a phase of development that has all the characteristics and potential of a larger company.

“In this respect, it is rather like a child compared to an adult,” said Dr Andrez at a joint Chamber of Commerce lunch last week organised by the French Chamber of Commerce in partnership with the British and German Chambers of Commerce.

Individual small and medium-sized enterprises usually employ less than 250 people, but there are 23 million in the EU, representing 99 per cent of all the EU’s enterprises and 57 per cent of the Union’s total economic added value, and as such, being responsible for such a large percentage of the EU economy’s turnover, the impact of SMEs on employment, wealth creation and growth is considerable.


That is why, in Portugal, it is important to help SMEs at a governmental, European Union and regional level, through incentives, grants and through public and private partnerships and mixtures of the two, through bank project financing and low interest loans for high technology and modernisation investment, as well as venture capital partnerships for innovative new companies that need capital in order to develop and expand.

SMEs have a relevant and important role in the Portuguese economy: they generate employment, create goods and services for export, form valuable research and development links with institutes and universities, and keep the population stable in regional areas.

In Portugal, 75 per cent of employment is generated through SMEs and 50 per cent of the volume of all exports and business abroad comes from small and medium companies.

Not only this, 40 per cent of all expenditure in Portugal on research and development is directly linked to SMEs.

In order to grow, SMEs need favourable conditions from the government – less bureaucracy and more incentives because they face greater challenges with regards to growth and competitiveness in regional, national and international markets than larger companies.

In short, SMEs face discrimination because of their size which normally has to do with their ability to function and compete in markets, their access to technology and access to investment funding.

They face stiff competition and are vulnerable to globalisation, have more difficulties in accessing markets and private funding.

Another aspect is encouraging companies through financial incentives and low interest loans to ‘go green’ and adopt sustainable energy solutions.

IAPMEI and the government – more specifically the Ministry of the Economy and Innovation is promoting a ‘mix’ of incentives ranging from traditional subsidies to guaranteeing bank loans and venture capital.

Also important is the so-called QREN, Quadro de Referência para a Estratégia Nacional, the National Strategy Reference Framework, 2007-2013 which is making available 21.5 billion euros of EU funding and aiming it at three strategic pillars: 1) social inclusion, educational programmes and employment creation schemes. 2) Innovation, new technology development and investment, competitiveness and ecology. 3) Regional policies – helping companies to expand nationally and internationally, diversify, and improve quality.

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