Evaluation of the Main Achievements of Cohesion Policy Programmes and Projects over the Longer Term in 15 Selected Regions : Case Study Norte (Portugal) : From 1989-1993 Programme Period to the Present

Salvador, Regina and Simões, Ricardo and Charles, David (2013) Evaluation of the Main Achievements of Cohesion Policy Programmes and Projects over the Longer Term in 15 Selected Regions : Case Study Norte (Portugal) : From 1989-1993 Programme Period to the Present. [Report]

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Abstract

This report presents the case study for Norte Region of Portugal as part of the study ‘Evaluation of the Main Achievements of Cohesion Policy Programmes over the Longer Term in 15 Selected Regions (from 1989-1993 Programming Period to the Present)’ which has been managed by the European Policies Research Centre and London School of Economics. Norte has probably faced the greatest challenge of adjustment during the last 25 years, of any of the EU regions with the exception of Eastern Europe. A mix of both external (textile trade liberalisation in the WTO, Single Market, EU eastern enlargement, change of monetary policy) and internal factors led to a considerable need for restructuring. In the 1980s the region was the most industrialised in the country with a specialisation in labour-intensive, low value- added, traditional industries such as textiles and clothing, footwear and furniture. Whilst there was potential for increased export to the rest of the EU on Portugal’s accession to Europe, this was swiftly challenged by competition from Asia and from the new Eastern European economies, with Norte failing to match the lower costs or to make an effective transition to higher value added activities. Despite considerable support for the conversion of the traditional sectors manufacturing employment has fallen consistently since the early 1990s. These fundamental changes in market conditions led many entrepreneurs to prefer investing in non-tradable sectors, which were profitable and secure, such as construction and public works. All these resulted in rapid deindustrialisation of Norte, accompanied by growing unemployment and a drop in purchasing power. Twenty-five years ago, the Norte region had a severe lack of basic infrastructure and social amenities, which was very similar to the rest of the Portugal. This meant external diseconomies and a lower quality of life than the rest of Europe. Human resources were the most critical factor in terms of potential development: Norte experienced the lowest levels of schooling in the country, high drop-out levels, incipient professional training, the lowest rates in terms of secondary and university attendance and low R&D investment. The present situation shows radical improvements in infrastructure, and the younger workforce is more qualified, creative and flexible. The region is home to several universities (which includes the largest university in Portugal – the University of Porto) and internationally reputed research institutes. The region has managed to develop a regional innovation system, particularly in enterprises. However, regional levels of GDP per capita remain the lowest in Portugal, significantly below the EU27, and unemployment has increased in the last five years. On the other hand, the present financial crisis has demonstrated the region’s resilience, with a relatively better economic performance than the rest of the country and a surprising capacity for export growth towards new external markets, mainly in traditional sectors.